With the news announced yesterday that falling sales has led the LEGO Group to axe 1,400, industry experts are weighing in with their analysis.
Bloomsberg has spoken to industry experts to find out why the LEGO Group is facing falling sales after a decade of growth, with the heavy weighting on licensing properties considered part of the problem.
“It’s in the action-figure segment that Lego is facing its problems,” said Lutz Muller, CEO of Vermont-based Klosters Trading Corp, a consultancy for the toy industry. In that niche, Lego “finds itself competing with some very experienced and strong U.S. players.”
Muller estimates that Lego toys based on action figures like “Batman” represent about 40 percent of its U.S. sales, up from 10 percent seven years ago. In that niche, Lego must face off against the likes of Mattel — with figures based on pro wrestling stars like The Rock — and Hasbro, whose expertise goes back to the heyday of G.I. Joe.
The LEGO Batman Movie is one of the licences considered to have under performed, as previously acknowledged by outgoing CEO Bali Padda.
Toys R Us Inc. CEO David Brandon said in June that the Danish toymaker’s sales were suffering from sluggish demand. “The Lego Batman Movie,” an animated film featuring the superhero and the company’s bricks, hasn’t generated the sales of spinoff merchandise that Toys R Us or Lego expected, he said.
The LEGO Brand Group CEO Jorgen Vig Knudstorp believes that the LEGO Group has grown in the wrong way, making expansion more difficult at a time when it needs to be more straightforward.
Knudstorp said that on his watch Lego had created an organization with “too many layers and overlapping functions,” that had hobbled growth. He declined to provide details of the performance of Lego Batman products, but said they had made “a positive contribution” to first-half results. Lego’s “Star Wars” product line “remains one of our top categories globally,” the chairman said. “But it has slightly declined for us this year.”
Information and analysis on the LEGO Group’s fortune will continue to be shared as the story develops.