Lego defies toy sector gloom as sales and profits rise

Lego overcame the twin challenges of coronavirus lockdowns and the general gloom in the toy industry to record increases in both sales and profits in the first half.

The Danish privately owned maker of plastic bricks said revenues in the first half increased by 7 per cent to DKr15.7bn while operating profit was 11 per cent higher than a year earlier at DKr3.9bn.

Chief executive Niels Christiansen told the Financial Times the momentum had continued into the first two months of the second half.

The world’s largest toymaker by both revenues and profits increased consumer sales by double-digit percentages in Asia, western Europe and the US thanks to investments in its online store as well as new products such as Monkie Kid, its first Chinese-inspired group of sets.

“We’ve done it despite Covid-19. Over the last 18-24 months, we’ve invested behind our product portfolio, ecommerce, and our brand. Fundamentally, this is paying off. It’s less connected to where stores are closed or there are lockdowns,” Mr Christiansen said.

Other toymakers such as Mattel and Hasbro have struggled this year with coronavirus coming on top of the problem of competing with digital devices for children’s attention. Mattel’s sales fell 14 per cent in the first half while Hasbro’s underlying revenues dropped 19 per cent. Both reported operating losses.

Lego overcame operating difficulties as not only were all its own-brand stores closed at one stage during the pandemic but its Mexico factory — one of three main global plants, used mainly for Lego sets in the US — was shut for two months.

Under Mr Christiansen, the Danish toymaker has invested heavily in its own ecommerce capabilities as well as opening a record number of Lego-branded stores to ensure its products are still widely available after the bankruptcy of Toys R Us and other retailers.

“Covid-19 has brought acceleration with ecommerce. What would have taken one, two or three years has gone much faster,” he said, stressing that Lego remained committed to opening 80 new physical stores in China alone this year. “We don’t believe this is a fundamental setback to stores. They are important for our brand experience,” he added.

Despite the new stores and Monkie Kid, Mr Christiansen said China was a long way from displacing the US as Lego’s most successful country. “It’s balanced compared with other brands. I don’t feel there’s a significant shift happening there. But it is one of the areas where we’re reaching many new children,” he added.

Lego, which is still owned by its founding Kristiansen family, has moved increasingly into play sets that involve children, and adults, building out of plastic bricks but also combining that with some digital activity. It recently teamed up with Nintendo to release Super Mario sets that expand upon this.

Mr Christiansen said Lego was still doing a “certain testing and learning” and its main goal was simply to have “a diversity” in its offering for boys and girls as well as different age groups.

He added that children had increasingly “packed agendas” where “they don’t have a lot of time for playing [and] when they play there’s a strong digital element to it”.

Asked if Lego’s success while the rest of the industry struggled meant that it looked to other companies for inspiration, Mr Christiansen replied: “How do you stay relevant? We believe in learning through play. Keep it relevant and exciting — that’s our concept. It’s less about a specific company and more about all the things that are competing for the attention and time of kids.”

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