The LEGO Group’s latest financial results paint a picture of stability amid a declining industry – but reading between the lines, there are plenty of interesting takeaways buried in its mid-year report.
While the company’s sales growth has slowed dramatically – from a 36% jump in the first half of 2021 and a 13% boost in the first half of 2022 to just a 1% climb in the first half of 2023 – and operating profit has actually declined by around 17% from January to June this year, the LEGO Group has no real cause for concern. CEO Niels B. Christiansen has said he’s ‘satisfied’ with the company’s performance, and revenue for that period still totals DKK 27.4bn (£3.2bn).
Beyond pure numbers, though, there are certain broader conclusions that can be drawn from the mid-year financial report – and a few more nuggets of information we’ve learned directly from Christiansen in an earnings presentation. Here are six things we’ve taken away from the latest round of results…
6 – We’re buying fewer sets per person
The LEGO Group says its market share grew ‘significantly’ in the first half of 2023, though has not put a specific number or provided any other context. In layman’s terms, the LEGO Group now has a greater percentage of the toy industry’s sales – but its own sales have only increased by 1% in the first half of this year. That suggests the company is reaching more people, but LEGO fans (including established and veteran customers) are now collectively buying fewer sets per person.
5 – Disney may be the secret sixth best-seller
The five best-selling themes for the first half of this year are a familiar bunch: City, Friends, Star Wars, Icons and Technic were all in the list in 2022, too. Among them then was Harry Potter, which has dropped out this year. That could potentially be a result of the list shortening from six to five entries, but in his presentation to media, Christiansen specifically singled out the Disney 100th-anniversary range alongside the other best-sellers – and failed to mention the Wizarding World…
4 – LEGO’s adult strategy is still paying dividends
LEGO has always appealed to adults – you don’t need us to tell you that – but it wasn’t until 2020 that the LEGO Group made a huge, concerted push into that market with its ‘LEGO for Adults’ campaign. Three years later, that strategy is clearly still paying off, as Christiansen says growth of its adult market is keeping pace with growth of its traditional younger demographic.
3 – Profit has dipped thanks to increased investments
The LEGO Group’s operating profit year-on-year has dropped from DKK 7.9bn (£912m) to DKK 6.4bn (£739m), or by DKK 1.5bn (£173m). But its financial highlights one-sheet reports that ‘purchase of property, plant, equipment and intangible assets’ has risen by DKK 1.7bn (£196m) in the same period – accounting for that entire profit decline (and then some).
Much of that figure can likely be attributed to costs linked to the company’s new factories in the US and Vietnam, each of which apparently represents a DKK 6.7bn (£771m) investment. So while profits have dipped, it’s seemingly not a result of shoppers shying away from the company’s more expensive sets (sales have remained pretty much constant, after all).
2 – LEGO is seven times stronger than the toy industry
During the company’s earnings call, CFO Jesper Andersen shared statistics of the LEGO Group’s growth compared to the wider industry, illustrating the claim in its report that it’s ‘outperformed a declining toy market’. According to those figures, the LEGO Group has enjoyed a compound annual growth rate of 14% over the past five years – compared to just 2% for the toy market. That makes the LEGO Group seven times stronger than the rest of its industry.
1 – Unlimited growth is not sustainable
Despite its position among its peers, though, these results demonstrate that unlimited growth is not sustainable even for the LEGO Group. The enormous jumps in revenue the company experienced during the pandemic were never going to keep coming (just as similar boosts from The LEGO Movie in 2014 eventually tailed off), but revenues are still nearly double what they were in 2019 – so simple stability is not what anyone would call a problem, even with one eye on those increased investments.
Click here to check out the entire first-half financial results for 2023.
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