Flat global sales and corporate streamlining are behind an 8% drop in revenue for 2017, the Danish family owned Lego Group announced today.
Revenue for the full year fell after more than a decade of strong growth to DKK 35 billion ($5.8 billion) from DKK 37.9 billion ($6.3 billion) in 2016. The decline came despite a Lego movie and Star Wars merchandise tie-ins and the royal opening of the Lego House family attraction last year.
Net profit for the full year was DKK 7.8 billion ($1.3 billion) compared with DKK 9.4 billion ($1.5 billion) in 2016.
The toy giant said the decline was driven in part by its efforts to simplify and reduce the size of its organisation—“difficult actions” which were now completed. Lego cut its global workforce by 1,400 people (about 8%), mostly by the end of 2017.
There was change at the top too. Briton Bali Padda (61), the first non-Dane to head the family business, made way as chief executive last August for Niels Christiansen (51). The Dane was the chief executive former global industrial technology company Danfoss, itself owned by the Bitten and Mads Clausen Foundation and the Clausen family.
Jørgen Vig Knudstorp (49) as executive chairman pulled the lever on the C-suite switch. He was the first non-family member to serve as Lego chief executive when he succeeded Kjeld Kirk Kristiansen, the grandson of Lego's founder, in 2004. Knudstorp is credited for increasing five-fold the revenue at the struggling company to DKK 35 billion ($5.8 billion) in 2015.
Christiansen (pictured) said 2017 was a “challenging” year and the group was not satisfied with the financial results.
“However, we ended the year in a better position,” he said.
“In December, consumer sales grew in seven of our 12 largest markets and we entered 2018 with healthier inventories. In 2018, we will stabilise the business and invest to build sustainable growth in the longer-term.”
The group saw “strong potential” in China, where revenue grew high double-digits in 2017. In January, Lego signed a partnership agreement with Chinese internet company Tencent (pictured) and plans to expand in the Chinese market. The group plans to open an office in Dubai towards the end of 2018 to support expansion in the Middle East and Africa.
Lego was founded in 1932 by Ole Kirk Kristiansen, a carpenter who started making wooden toys. Kirkbi is the holding and investment company of the Kirk Kristiansen Family and owns 75% of Lego Group while the philanthropic Lego Foundation owns the remaining 25%.