- Lego’s Profit Declines Amid Pandemic Sales Slowdown
- Challenges in China Market Despite Expansion
- Lego Invests in Sustainability and Maintains Dominance in Toy Industry
Toy manufacturer Lego saw a decline in profits during the first half of the year, as the sales boom experienced during the pandemic began to wane.
As households stocked up on toys and diversions to keep their children occupied during lockdowns, the Danish firm performed exceptionally well.
Since then, however, sales have stagnated, increasing by only 1% in the first half of the year.
The toymaker’s profits fell 17.7% to 5.5 billion Danish kroner (£634 million; $807 million).
The company’s prospects rested on China’s expanding middle class, which is eager to purchase Western goods.
Lego opened 58 stores in China during the first half of the year, as the world’s second-largest economy began its reopening after restrictions on COVID-19 were lifted.
However, countrywide sales have not been as robust as anticipated.
Lego’s chief executive officer, Niels Christiansen, stated, “The return to more normal conditions in China, where people are once again shopping and spending, has been slower than anticipated.”
Lego continues to view China as a “long-term growth” market, with additional store openings planned.
Already, the company has flagship stores in Shanghai and Beijing.
In addition to constructing two new factories in Vietnam and the United States, which will open in 2024 and 2025, Lego will extend its existing facilities around the globe.
After facing pressure regarding the quantity of plastic used in its products, it intends to increase its spending on sustainability.
To eliminate plastics made from fossil fuels, the company has pledged to triple expenditure over the next three years.
Mr. Christiansen stated that the decline in profits was due to higher raw material costs and increased factory expenditures. Despite the decline, Lego remains the dominant toy manufacturer worldwide.
Along with its flagship products, the Star Wars and Lego Icons franchises have contributed significantly to the company’s success.
It represents a significant reversal for the toymaker, which fell on hard times in the 2000s as sales plummeted and it accumulated a massive amount of debt. Analysts believed at the time that the company was excessively dependent on its legacy products and had not introduced any exciting new product lines.
Focusing on franchises and films, particularly Lego Batman, Harry Potter, and Ninjago, the privately held company, which is still wholly owned by the Christiansen family, recovered.
The introduction of Lego Architecture with replicas of the Guggenheim Museum, Burj Khalifa superstructure, and Robie House for older children helped Lego expand its target market. Additionally, it expanded by introducing the “Mini Doll.”
The success of the Lego films and theme parks around the globe contributed to the success of the products.
