LEGO’s growth slows and profit drops in the first half of 2023
The LEGO Group’s growth slowed considerably in the first half of 2023, leading to an overall drop in profits year-on-year – but the company says it’s still ‘satisfied’ with its performance.
Revenue for the first six months of this year grew by just 1% compared to the same period in 2022, while consumer sales increased by only 3%. Those numbers are dramatically down on last year, when revenue shot up by 17% and sales skyrocketed by 13% compared to the first half of 2021. The LEGO Group has cited a ‘challenging six months in the toy industry’ for its results, and says its performance is ‘in line with expectations’.
The company is also pointing to ‘exceptional’ results in the first half of 2022, and says a dip in profits – operating profit is down from DKK 7.9 billion (£912m) to DKK 6.4 billion (£739m), while net profit has dropped from DKK 6.2 billion (£716m) to DKK 5.1 billion (£589m) compared to the same period last year – is due to accelerating ‘long-term strategic initiatives’ such as ‘manufacturing, digital and sustainability’.
“We are satisfied with our performance; especially as it has been a challenging six months for the toy industry,” said LEGO Group CEO Niels B. Christiansen. “Demand for our products saw us outpace the industry and significantly grow market share.
“Our strong financial position allows us to invest for the long term, particularly in areas such as digital, sustainability and manufacturing. Overall, our performance is in line with expectations, after three consecutive years of extraordinary growth and we are grateful for our great colleagues who work each day to inspire children through play.”
Sales were strongest in the company’s established markets, such as the US, while performance in China – a market that has typically seen double-digit growth year-on-year – was apparently ‘impacted by a slower-than-predicted return to pre-pandemic shopping habits’. The LEGO Group has not disclosed specific growth rates in China for the moment, but those figures will likely be revealed in the full 2023 financial results next year.
Despite the slight downturn in profits and slowed growth, the LEGO Group is still far ahead of its results before the pandemic, and is now stabilising its position in the market. Revenue still sits at a healthy DKK 27.4 billion (£3.2bn), an increase of DKK 400 million (£46m) on the first half of 2022. The company’s free cash flow totalled DKK 1.1 billion (£127m), down from DKK 3.8 billion (£439m) as a result of investments into manufacturing – including its two new factories in Vietnam and Virginia, US.
“We remain fully focused on our ambition to inspire and develop more children around the world,” Christiansen added. “We are proud to be in a strong financial position to deliver on this mission today and invest to ensure we continue to deliver for many generations in the future.”
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