Lego builds profit high-riser despite toy market gloom

The children's building blocks and figures maker has shrugged off the high streets woes, posting revenues and profits up 25% compared with the previous year.

by Michael Northcott
Last Updated: 19 Aug 2013

Despite a toy market suffering from the stricken wallets of parents everywhere, Lego is increasing earnings, brick by brick. It has just announced revenues of $4bn in 2012, up a quarter from 2011 and almost triple its 2007 sales. 

Chief exec Jorgen Vig Knudstorp described the Danish firms results as ‘satisfactory…and better than we expected at the beginning of the year.’ He said it was down to the firm’s ability to ‘launch products that children all over the world have put at their top of their wish lists in 2012.’ 

It’s worth noting that 60% of the sales in today’s figures were for new products and models, and the firm is increasingly managing to capture the imagination if girls (Lego has traditionally performed better with boys). In fact, the firm says that the number of girls with a Lego set in the US has tripled in the past 12 months, and there has been significant growth in Asia and Europe, too.

However, the firm added in a statement that it is expecting tougher times ahead. ‘Global economic developments are expected to continue to impact the market for traditional toys…however, the economic challenges in many European and North American markets are expected to result in lower growth rates for the company than achieved in recent years.’

To clarify, the firm is still expecting growth, and it is in the process of gradually shifting its manufacturing to cheaper locations – it has a new factory under construction in Hungary and is expanding a large one in the Czech Republic. Last month it also revealed that it is shutting down its packaging facilities at the HQ in Billund over the next two years or so.

In one way, it’s not surprising that Lego is doing well. Companies that provide products or services for kids aren’t recession proof per se, but there are many parents who, in tough times, will continue to spend on their kids while they make cutbacks on purchases for themselves.

Lego is also one of the more 'wholesome' toy brands; parents would far rather see their darling tot building a house or plane than blowing a zombie's pixellated brains out in a videogame. Indeed, IBISWorld data predicts that while the UK toy market will decline by 1.8% throughout 2013, the video games market shrank a massive 28.3% last year, with many expecting even steeper decline in 2013.

For further proof of the turn in the tide, just ask Game's administrators...

Find this article useful?

Get more great articles like this in your inbox every lunchtime

Upcoming Events

Subscribe

Get your essential reading delivered. Subscribe to Management Today