Despite experiencing its slowest growth rate since 2017, Danish toy manufacturer, Lego, outshined its competitors in an extremely challenging toy market, believed to be the worst in the last decade. This was largely due to its successful collaborations with entities like Fortnite and the Harry Potter franchise. Revenue growth in the last financial year was reported to be two per cent at DKr65.9bn (equivalent of €8.9 billion), although there was a five per cent drop in net profits down to DKr13.1bn. Looking at the latter half of the year, revenues continued to grow by two per cent while net profits saw an increase of five per cent.
Niels Christiansen, CEO of Lego, discussed his satisfaction with the company’s performance, specifically noting that 2023 was a challenging period for the toy industry, the most negative in over a decade and a half. Despite challenging market conditions brought on by the pandemic, Lego managed to surpass its American competitors Mattel and Hasbro in terms of growth. Owing to the brand’s expansion into entertainment with films, TV series and theme parks, many believe it is becoming a serious contender to Disney.
Christiansen expressed his belief that 2024 will see an improvement in the toy sector, anticipating stable sales year-on-year as opposed to a decline. Lego’s sales are expected to grow by a single-digit percentage. A point to note is that last year was the poorest performance on record for the toy market globally.
Sadly, performance in China was not as positive, with the company witnessing a decline in sales. Economic pressure in China was cited as a contributing factor with customers appearing to be more reluctant to spend or opting for cheaper options. Considering competitors, Lego far outperformed Mattel and Hasbro, whose revenues were stuck at $5.4 billion (€5 billion) and decreased by 15 per cent to $5 billion respectively. Lego also vastly outperformed their profitability; Mattel’s net income plummeted to $214 million, whereas Hasbro reported a net loss of staggering $1.5 billion.
The Danish family-owned enterprise has initiated a partnership with Epic Games, according to Mr Christiansen. The inaugural engagement on the widely renowned Fortnite has received an enthusiastic reception. Lego has occasionally grappled with the creation of significant online games, such as Universe and Dimensions. However, they’ve recently tripled the count of digital staff to 1,800.
In addition to this, they are pouring considerable resources into the development of environmentally friendly plastics. This follows their decision to drop their most notable attempt to replace their existing fossil fuel-based substance. In the previous year, Mr Christiansen revealed that around 12% of their materials were either renewable or recycled. The company’s target is to reach a total of 100% by 2032 in a bid to cut emissions by 37% in comparison to the figures from 2019.
Mr Christiansen also noted that eco-friendly materials attract a significant financial surcharge. However, Lego is willing to bear the expense in an effort to foster an increased demand for these resources. – © The Financial Times Limited, 2024
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