Lego has experienced a decline in profits during the first half of this year, signaling a slowdown in the remarkable sales growth it achieved during the pandemic.
While the Danish company enjoyed substantial success when families stocked up on toys and games amid lockdowns, its revenues have since hit a standstill, with only a 1% increase in sales for the first half of the year.
Lego’s profits plunge by 17.7% to £634 million
The toymaker’s profits have encountered a significant drop of 17.7%, amounting to 5.5 billion Danish kroner (£634 million; $807 million).
The company had placed its hopes on China’s burgeoning middle class, aiming to capitalize on the enthusiasm for Western products.
Despite opening 58 stores in China during the first half of the year as the country emerged from pandemic-related restrictions, sales in China have not met the company’s expectations.
Lego’s CEO, Niels Christiansen, noted that the return to normal shopping patterns, particularly in China, has been slower than anticipated.
Despite this setback, China remains a long-term growth target for Lego, and the company plans to continue opening more stores in the region. Presently, Lego has flagship stores in Shanghai and Beijing, with further expansions planned.
In a bid to sustain growth and address environmental concerns, Lego is investing in sustainability initiatives. The company aims to triple its spending over three years to eliminate plastics derived from fossil fuels.
Lego’s success story is anchored in franchises like Star Wars and Lego Icons, alongside its flagship products. This achievement follows a period of adversity in the 2000s when the company faced financial difficulties due to plummeting sales and accumulating debt.
In response, Lego refocused on franchises, films, and innovative product lines like Lego Architecture and the “Mini Doll,” expanding its appeal to a wider range of consumers.
The company’s recovery was further bolstered by the popularity of Lego movies and theme parks worldwide.
While the pandemic’s unique circumstances provided a sales boost, Lego is navigating the challenges posed by shifting consumer behaviors and maintaining its commitment to innovation and sustainability.