LEGO Annual Results 2017: first annual sales decline in 13 years [News]

This morning in Billund, The LEGO Group has presented its full year financial results for 2017. Unfortunately, not everything is awesome for the Danish toymaker: the company has reported a decline in revenue and operating profit. Revenues declined 7 percent; global consumer sales remain flat.

Here are the highlights of the presentation:

  • Revenue for the full year decreased by 8 percent to DKK 35.0 billion compared with DKK 37.9 billion in 2016. Excluding the impact of foreign currency exchange, revenue for the full year declined 7 percent compared with 2016.
  • Operating profit (profit before financial items and tax) for 2017 was DKK 10.4 billion compared with DKK 12.4 billion for 2016, a decrease of 17 percent year on year.
  • Net profit for the full year was DKK 7.8 billion compared with DKK 9.4 billion in 2016.
  • Cash flow from operating activities for the year was DKK 10.7 billion compared with DKK 9.1 billion in 2016.
  • Decline in revenue was driven in part by clean-up of inventories across the value chain. Global consumer sales were flat and trended upwards in the final months of 2017.

Niels B. Christiansen: “2017 was a challenging year”

Niels B. Christiansen, the LEGO Group CEO said:

“2017 was a challenging year and overall we are not satisfied with the financial results. However, we ended the year in a better position. 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.

“During 2017, revenue in our established markets declined, primarily due to actions we took to clean up inventories. This decline impacted our operating profits. We also simplified and reduced the size of the organisation to meet current business requirements and these difficult actions are now complete. Our balance sheet, cash flow and profitability, remain sound.

“We started 2018 in better shape and during the coming year we will stabilise the business by continuing to invest in great products, effective global marketing and improved execution. There is no quick-fix and it will take some time to achieve longer-term growth.”

Decline in revenue in North America and Europe but great potential in China

While revenue in established markets in North America and Europe declined in 2017, total consumer sales across a number of these markets improved, particularly in the final months of the year. The LEGO Group sees opportunities to return to growth in these regions and will work closely with retail partners to bring LEGO® play experiences to more children.

The Group also sees strong potential in China, where revenue grew high double-digits in 2017. It recently signed a partnership agreement with one of the country’s largest internet companies, Tencent, and has plans to further expand its presence in this strategic market. The company also will open an office in Dubai towards the end of 2018 to support efforts to expand operations in the Middle East and Africa.

Across the LEGO portfolio, performance of classic LEGO ranges was satisfactory and LEGO® City, LEGO DUPLO®, LEGO Creator and LEGO Friends continued to perform well, demonstrating the timeless appeal of LEGO play. LEGO NINJAGO also benefited from the release of the movie in September. LEGO Star Wars(TM) products, released in the second half of 2017, performed in line with expectations.

All in all, The LEGO Group reported a decline in revenue and operating profit for 2017, but ended the year in a better position. Global consumer sales for 2017 were flat. In 2018, the Group will stabilise the business and invest to create a platform for sustainable longer-term growth.

You can read the full press-release in the Newsroom.

13 comments on “LEGO Annual Results 2017: first annual sales decline in 13 years [News]

  1. Darren J Callesen

    As an Australian, paying far more for LEGO than elsewhere, especially against what the USA pay, and with a range that is nowhere near what the rest of the world gets, I still buy a lot of LEGO, but I’d buy a lot lot more if we could get better pricing, and more variety.
    And bring back the small parts packs, supplemental packs, things like 6427-1Road Signs, 10-1Tree and Signs, 6317-1 Trees and Flowers, 9261-1 Sloped Bricks (Roof Tiles)
    and many others.
    The Creative Builder Box 10703 (Many Doors and Windows pack) has been very well received, I’ve bought 10 so far, and will be buying many many more.
    So maybe more basics packs rather than theme sets might just be the way to forge ahead to greater profits, after all, no royalties to pay to 3rd parties!

  2. James Hall

    I’d love to see a return to some of the classic Lego ranges, personally. I don’t have much interest in the licensed sets, fun as some of them are, and much prefer the more generic classic Pirates and Space themes to the more specialised offerings Lego currently seem to prioritise.

  3. Carlos Gottsfritz

    If in Australia the prices are high imagine in Brazil. We don’t get even the half of the releases and some entire lines don’t get here. Other than that we pay 4 times more than USA or Europe. We had a problem with the distributor, but when Lego Brasil assumed the operation, the prices just went higher and the variety went lower.
    The job Lego does in markets like Brazil, Argentina and other latin american contries is very bad, they simply disregards a lot of fans that live in poor countries.

  4. Nabii

    BTW, in Australia LEGO is cheaper than in Denmark, where it is designed and made, and comparable in price to the rest of Europe despite being half a world away from all The LEGO Groups factories and distribution centres.

    Unless you have the same population as the USA and the same distribution set up you should not compare where ever you live with the USA.

  5. Wunztwice

    They kinda hit the point I was thinking on, and that is they oversaturated their own market & strayed a bit from core values. Same as in the early 2000’s. I think they tend to forget that while new themes are neat, they eventually begin competing with themselves. It seems to me that doing one-off runs of licensed themes (like the recent POtC) is more costly to them than focusing on stronger evergreen themes & supporting with ‘service packs’.

  6. Brian

    Other than the modular creator expert sets and a few of the UCS Star Wars sets, I’ve been pretty disappointed with the new sets and series that Lego has produced in the past 2 years. I’m finding more interesting MOC instructions online that I prefer to purchase and build, which means most of the parts I purchase are not from Lego but from Bricklink.
    I would appreciate more traditional castle, pirate and western themed sets to return than the licensed sets.

  7. Urban Blocks

    In Dubai (where lego want to open an office) lego costs are incredibly high compared to US and Europe – for instance at the lego store in Mall of Emirates the Millennium Falcon cost 6000 AED or US$1700.Basically if it is a US$ price then add a zero to it for the AED price. For example the Lego Diner US$170 – In Dubai its AED 1700 around 460 $US.
    They want to secure the Middle East market they better start reducing prices because the chinese clones are already starting to get a foot hold and if they are not careful they will miss their chance – just ask Coca-cola they lost to pepsi because they didn’t pay enough attention.

  8. Talk to the brick

    Lego has an “idea” portal. On this portal, people submit entries. Then, lego users/fans vote for what they would like to build. And then Lego refuses them all. What do you think are the most common themes of those entries? Castle (not my theme personaly but there were numerous proposals that would have made their way to my house just because of building techniques and incredible aesthetics). Modulars are also largely represented but Lego is still doing a good job on that side – we get one a year and that’s fine. Train is also very popular, why not combine modular and train? (Grand Central Station?). They have Lego City, why not having Lego Industry? Steel mills, oil refinery (proposed in Ideas and doing fine I believe), saw mills, cement factory, Dam and power plant (all of those can have a one page explaining how they work in general for educational purposes) I’m sure parents working at those places would easily buy that to their children and AFOLs would have a more diversified city than what is available today (of course they can easily build it themselves but often time it’s good to have a starting point and from there you improve and expand on it). A LUT for the Saturn V is a no-brainer (but with System pieces not technic). Lego lovers are avid collectors (look at brickheadz). There was a proposal for the British Arrow plane, they could do a different national aerobatic plane per year for several years and people would collect them (preferably all at the same scale). Historical planes like Sopwith Camel (there are many more to choose from – Spirits of St-Louis anyone?) And many more theme that could become collectable and would also brings pieces in new colors which is always welcomed by modders and moccers. I’m not quite sure about apparels, watches and cake mold though. There you have it, a whole bunch of ideas that would sell very well and I’m not even charging anything to Lego for my consulting fee!

  9. Guido

    The profits are still titanic, and the Lego group has seen one of the most meteoric rises over the last 15 years – it was never going to be growth every year for ever.

    What does cleaning up inventories mean?

    I must say I’ve not been enamoured of many sets last year or this year, but I always assumed that this is personal taste. I think the fall in profit may have something to do with the fact that the last few releases of Lego’s Star Wars sets have not been very appealing, and have been on the high side price point wise – not appealing both because the sets aren’t great, and the movies themselves have been getting worse. Disney has been seeing a greater trend in massive toy sales decline in the last year as the film characters and vehicles are not appealing to the core toy buyers.

    People above I am assuming are AFOLs – everyone older wants a return to the classic themes of their youth or realistic city series. But AFOLs make up a tiny proportion of overall sales. Lego do a ridiculous amount of market research with Their products on their core market which is boys aged 6-12. They would be making classic themes if they sold or were appealing to young kids. I wish they would do it too! But I have no doubt that they have done their research – clearly kids have moved on in terms of interest.

  10. Krayt

    I doubt the recent price hikes in the UK will help for 2018 either. As a consumer who buys a large amount of LEGO I’ve had to be particularly conservative with my spending this year as even the smallest sets have had their prices raised. £20 sets are now £26 and even tiny battlepacks have had their prices increased. I can only imagine how such price hikes are affecting the target consumer group of young teenagers and children who buy with their pocket money. I suspect this activity will lead to a reduction in sales.

  11. Guido

    Depends if their market is elastic or inelastic! Anyone have an estimate of the elasticity of Lego products?

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