Lego posted its slowest sales growth since 2017 but outpaced rivals in the worst toy market in more than a decade, as the Danish maker of plastic bricks reaped the rewards of tie-ups with Fortnite and Harry Potter.
The world’s largest toymaker said on Tuesday that annual revenue increased by 2 per cent to DKr65.9bn (€8.9 billion), while net profit fell 5 per cent to DKr13.1bn. In its more important second half, revenues rose by 2 per cent to DKr38.5bn and net profit increased by 5 per cent to DKr8bn.
“We are pleased with our performance given that 2023 was the most negative toy market in more than 15 years,” said Niels Christiansen, Lego’s chief executive.
Lego has enjoyed strong growth since the start of the pandemic, leaving listed US rivals such as Mattel and Hasbro far behind. Many analysts say the Danish group has become more of an entertainment brand, with films, TV shows and theme parks to rival the likes of Disney.
Mr Christiansen called last year a “correction” for the toy market after strong post-pandemic growth but said Lego had outperformed the broader sector by 10 percentage points. Last year was the worst on record since estimates for the global toy market started more than 15 years ago, he added.
He expected 2024 to be better for the toy industry, with sales flat year on year rather than declining, while Lego should see sales growth of “probably” a single-digit percentage.
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China was the worst-performing region, with sales falling last year. “That is where we are seeing consumers most hesitant to spend or trading down the most,” Mr Christiansen said. “The economic conditions overall in China are pressured.”
Lego outpaced Mattel and Hasbro, whose revenues last year were flat at $5.4 billion (€5 billion) and down 15 per cent at $5 billion, respectively. On profitability, Lego was in a different league, with Mattel’s net earnings down by almost half to $214 million, while Hasbro made a net loss of $1.5 billion.
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The Danish family-owned group has started a collaboration with Epic Games, and Mr Christiansen said the first tie-up on the popular title Fortnite had been “overwhelmingly positive”. Lego has sometimes struggled with its own efforts for big online games such as Universe and Dimensions but has in recent years tripled the number of people working on digital to 1,800.
It is also investing heavily in sustainable plastics after it abandoned its most high-profile attempt to find an alternative to its current fossil fuel-based material. Mr Christiansen said last year that it used about 12 per cent renewable or recycled material. It is aiming to have 100 per cent by 2032 as part of plans to reduce emissions by 37 per cent compared with 2019 levels.
Mr Christiansen said sustainable materials came at a “significant premium” but Lego was prepared to shoulder the costs in an attempt to increase demand for them. - Copyright The Financial Times Limited 2024
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