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Lego sales crumble as children turn away from the building bricks

Lego is shedding 1,400 staff as a decade long-run of sales growth ends after expansion failed to deliver expected sales growth.
The Danish manufacturer of toy building blocks said it is cutting 8pc of its global workforce after reporting a 5pc drop in first-half revenues to 14.9bn DKK ?(1.8bn), with net profit slipping 3pc to 4.4bn DKK.
The downturn is the biggest hit the business has suffered since coming close to bankruptcy 15 years ago.
Lego sales crumble as children turn away from the building bricks

Investment in greater production capacity has not been backed up by rising sales

Credit:
Bloomberg
Chairman J?rgen Vig Knudstorp said he was “pressing the reset button for the entire group” in a bid to arrest the declines, which came after investment to boost production capacity “to support higher expectations of revenue which failed to materialise”.
Lego is the world’s No 3 toymaker in the $90bn (?70bn) a year global market, behind Mattel and Hasbro, and the leading industry player in $15bn European market, according to data from analysts at NPD Group.
Lego sales crumble as children turn away from the building bricks

Chairman J?rgen Vig Knudstorp is cutting 1,400 Lego staff
It has consistently seen off competition from challengers, delivering near-constant double-digit growth for a decade, with the Bilund-based business adding increasingly technical products to its traditional building sets and mini-figures, as well as video games and franchise such as the Lego films.
Grown-up - known as AFoLs, or Adult Fans of Lego - have also been targeted with high-end products, and the company has also introduced a range targeted and females as it looked to tackle intense competition.
However, this was no longer enough to deliver steady growth and last month British chief executive Bali Padda - the first non-Dane to run the company - was replaced after just eight months in the role.
The departure of Mr Padda, a 15-year veteran of the toy company, was said by Mr Knudstorp not to be because of poor performance, with the 61-year old was only intended to hold the role for a short time because of his age.
In October control of the company will pass to Niels Christiansen, a former chief  executive of Danish industrial technology company Danfoss, with Mr Padda taking a special advisory role.
Lego sales crumble as children turn away from the building bricks

Lego executives have novel business cards - staff details are printed on mini-figures representing them 
Mr Knudstorp added the restructuring will result in a “smaller and less complex organisation, which will simplify our business model in order to reach more children.. and impact our costs.”
“The global toy market has grown at a rate of 3pc so far this year so Lego is going against the flow but 10 years of consistent growth is a very good record,” said Frederique Tutt, global toy industry analyst at NPD.
“The toy market is changing and it is not video games and the internet that is the big challenger,” she added.
“Collectibles which tend to be cheaper are very popular, and something Lego only really does with mini-figures.”
Ms Tutt added that the fastest growing segment this year is games and puzzles, while internet-connected toys represent less than 2pc of the market.
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