It’s been a few weeks since the news of Toys R Us making its exit from the industry in the most unfortunate way—total bankruptcy—after 70 years of operations, and even more heartbreaking to know that founder Charles Lazarus passed a mere week later, knowing that his legacy ended. We’re not here to debate or speculate what went wrong or what could have been done better, as there’s enough of that news out there to feed on. Instead, we wanted to hear from our fans on what it means to us as LEGO hobbyists, and how this may impact us moving forward. Toys R Us (TRU) is remaining open for business in several countries around the world, including Australia and Canada, so we’ve asked a diverse group of readers to join us in providing commentary that’s part retrospective, and part insight into how TRU affects the LEGO hobby, whether closing or continuing operations.
Last week LEGO released its annual financial results for 2017, and to some of us, it may have seemed like it was written in a foreign language. You know what it means to have a profit and loss, but to help cut through all the accounting jargon, we’ve simplified things a bit further for you. Note that we’re taking a huge amount of liberty with the complex details to keep it simple, but it should give you the right general idea.
Read our simplified break-down of LEGO’s 2017 financial results
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.
Read more about the annual results…
LEGO has dealt a major blow to counterfeiters in China by winning a court case against two companies that produce imitation LEGO products. This is the first case that LEGO has filed and won in China claiming unfair competition, following a ruling last month proclaiming LEGO to be a well known recognized trademark in the region.
The suit was filed against two Chinese companies including the company Bela Bricks that were producing sets nearly identical to those from LEGO’s Friends line as well as other top-selling products. According to the ruling from the China Shantou Intermediate People’s Court, the two companies must stop copying LEGO’s designs, packaging, and instruction books due to copyright infringement. Continue reading
According to their most recent press release, the LEGO Group’s revenue for the first half of 2017 is 5 percent down compared with the same period in 2016. Other key figures like operating profit as well as net profit are down too — 6 and 3 percent respectively. The board of management blames increased costs associated with investments in production capacity and organisational capabilities for causing mixed performance across various market regions. For instance, revenue has declined in the United States and in parts of Europe. On a brighter note, in growing markets such as China, revenue grew by double digits.
Commenting on the financial report, LEGO Group Chairman Jørgen Vig Knudstorp claimed that the company has already taken steps to change the situation for the better. The Group aims to bring the LEGO building experience to more children all over the world, and for this purpose the management is looking forward to resetting the company and revising and restructuring various internal processes.
Pressing the reset button includes some decisive moves which pursue a goal of simplifying the company’s elaborate global structure built during the past five years. “This means we will build a smaller and less complex organisation than we have today” said Knudstorp. As a result, the LEGO Group believes it would need to cut its total global workforce by around eight percent. This would impact about 1,400 positions. Currently the LEGO Group employs about 18,200 people.
One of the key goals of resetting the business is the development of innovative new toys. Knudstorp explains “We will find more opportunities to engage with kids and parents, including innovative ways to blend physical building and digital experiences, such as our successful LEGO Life social platform and LEGO Boost building and coding set”.
The full press release can be found on the LEGO Newsroom page.
Every year, the LEGO Group releases its financial results, providing an insightful look into the operations of the company. For 2016, the company reported the highest revenue in the company’s 85-year history at 37.9 billion DKK (approximately 5.38 billion USD), representing a 5.5 percent increase over 2015. Notably in the US, however, consumer sales were flat despite a significant increase in marketing spending from LEGO in the second half of the year.
After all expenses, that leaves The LEGO Group with a net profit of 9.4 billion DKK (approximately 1.34 billion USD), slightly higher than the year before. The net profit is calculated after subtracting all operating expenses, including costly construction projects like the LEGO House in Billund and a new manufacturing facility in China, which ate up nearly a third of LEGO’s overall net profits. Continue reading
The Brothers Brick publishes so many stories that we’re giving you the best of LEGO news and reviews. This is our Weekly Brick Report for the first week of February.
TBB SET NEWS & REVIEWS: What an insanely busy week with so many new sets revealed from BrickHeadz and Batman to Dimensions and beyond. But hey, we aren’t complaining!
TBB LEGO NEWS: LEGO has been busy too, celebrating a birthday, making waves in the business world, and launching a new social network for kids.
TBB INSTRUCTIONS & INTERVIWS: Cute ducks, impressive mechs and an interview with a builder of the strange and unique.
OTHER NEWS: There was a massive amount of LEGO news from other places around the web this week. Here are a few items we noticed and thought you might enjoy.
LEGO has been named the world’s most powerful brand according to Brand Finance’s yearly Global 500 rankings, unseating previous title-holder, Disney. The annual rankings are based on factors such as brand familiarity, loyalty, marketing investment, staff satisfaction, and corporate reputation.
Image courtesy of Bram Van Laere
LEGO has come a long way from wooden toys to plastic bricks and the licensing empire it is known for today. According to the report, LEGO’s brand strength is based on its appeal that spans generations, evidenced in the fact that LEGO bricks from 1958 are still compatible with their modern day iterations. That nostalgia and creative freedom, combined with a decade of solid marketing, financial gains and successful licensing product lines, helped take the company from near-bankruptcy in the early 2000s to its current number-one brand ranking.
Coffee giant Starbucks announced this week that it is adding Jørgen Vig Knudstorp, executive chairman of the LEGO Brand Group, to its board of directors. Knudstorp is generally credited with turning around LEGO during a difficult time for the global company over a decade ago.
It may be time to stock up on LEGO if you are in the UK. Due to the falling worth of the pound in the post-BREXIT world, LEGO has confirmed that all prices in the UK will increase 5% as of January 1st. While that is only a few extra coins on smaller sets, it represents an extra £20 on the Death Star, currently priced at £400.
The price hike was announced in a letter from LEGO’s UK and Ireland’s general manager and vice-president, Fiona Wright. The letter explains the increased prices are the “direct result of the continued devaluing of the UK pound,” and that prices may increase again in the “event of a further negative trend.”
For context, since the UK voted to leave the EU in June, the pound has decreased 16% against the U.S. dollar. Due to these fluctuations, many companies and manufacturers have been increasing prices across the UK, especially on imported goods.
Image created by TBB’s own Elspeth De Montes
LEGO is shaking up their box of bricks and appointing a new toymaker in chief.
Long credited as the man who saved LEGO in 2004, CEO Jørgen Vig Knudstorp will be replaced by Bali Padda, LEGO’s current chief operations officer, on January 1. Padda is British and will be the first non-Dane to lead the company. He has been with LEGO 14 years, starting in Enfield, Connecticut, and has in the past mentioned his desire for greater market expansion throughout the world, focusing on Asia.
Bali Padda will become the new CEO Jan. 1
Before you think that Knudstorp is off to take a well-deserved vacation, LEGO also announced the formation of a new parent-like LEGO Brand Group that he will head, as well as being named chairman of LEGO’s board of directors. The new group’s purpose is to increase brand cohesion and efficiency across all products, not just the interlocking bricks, and to pursue further partnership opportunities beyond its theme parks, Hollywood movies, television shows and video games. The new parent group will also serve as a way for the Kristiansen clan, Denmark’s richest family and private owners of LEGO, to become more personally active in all brand efforts.
Jørgen Vig Knudstorp, left, with Thomas Kirk Kristiansen, fourth generation owner of the LEGO Group.
Oddly enough, this reorganization leaves the new LEGO CEO with fewer responsibilities and more time to focus on plastic bricks and sets. It remains to be seen what kind of impact this move will have on the LEGO fan community, but 2017 is shaping up to be quite an interesting year.
Press releases after the break.
As much as some of us may have wished otherwise, The LEGO Group — and the toys it produces — needed to change if it was to survive the near-bankruptcy it experienced five years ago. Looking back today, from the throes of the most serious global economic crisis since the Great Depression, it’s hard to believe that LEGO is experiencing record profits. And yet it is.
Read Turning to Hollywood Tie-Ins, Lego Thinks Beyond the Brick in the New York Times to learn how the company charted a course to recovery. Oh, and look for the quote from me on page 4.
So, dear readers, how do you feel about the sacrifices that LEGO has made to survive in the modern world? Sound off in the comments.