BNR – Lego, the toymaker from Denmark, has experienced a decline in profits during the first half of the year. This reflects a wane in the extraordinary sales growth witnessed during the lockdown.
The company enjoyed remarkable success as households sought entertainment through its toys and games while confined at home. However, it now faces a slowdown in revenues, with sales registering only a marginal 1% uptick in H1.
The impact of this has translated into a 17.7% drop in profits for the toymaker. As the pandemic loosened, Lego set its sights on China’s middle class, envisioning them as eager consumers of Western products.
China Expansion Faces Challenges
The company embarked on an aggressive expansion strategy in China, inaugurating 58 stores during H1. However, the sales performance in the country has fallen short of expectations.
Niels Christiansen, Lego’s Chief Executive Officer, said the transition to more typical conditions has been slower in China.
Despite the slower trajectory, China remains a pivotal long-term growth target for Lego, with further store openings ahead. The company has already established prominent flagship outlets in Beijing and Shanghai.
Lego Investment in Sustainability
Lego is also investing in bolstering its global manufacturing footprint, with plans to open factories in Vietnam and the US. It also aims to enhance sustainability by tripling spending over the coming years to reduce reliance on fossil fuel plastics.
Christiansen attributed the dip in profits to increased costs of raw materials and expanded investment in factory infrastructure. Nevertheless, Lego continues to hold the mantle of the world’s biggest toymaker, fuelled by its flagship product range.
This success signifies a substantial rebound from the challenges faced by the toymaker in the 2000s.
Lego’s transformation emerged through its emphasis on franchises and cinematic offerings, including Lego Batman, Harry Potter, and Ninjago. Additionally, the introduction of products like Lego Architecture, which replicated iconic structures contributed to expanding its audience base.
The company’s focus on sustainability and innovation has been further underscored by initiatives such as the “Mini Doll.”