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Lego grabs bigger share of declining toy market

Published 08/30/2023, 03:01 AM
Updated 08/30/2023, 03:42 PM
© Reuters. FILE PHOTO: A customer shops in the 5th Avenue Lego store in New York City, U.S., September 28, 2021.  REUTERS/Brendan McDermid/File Photo

By Jacob Gronholt-Pedersen

COPENHAGEN (Reuters) - Lego continued to take market share in the first six months of the year even as the toy market declined and Chinese consumers returned to stores at a slower pace than expected, the Denmark-based toymaker said on Wednesday.

The family-owned company, known for its colourful plastic bricks, said sales in January through June rose 1% to 27.4 billion Danish crowns ($4 billion). By comparison, Lego grew sales 17% last year and 27% the year before.

"It has been a challenging six months for the toy industry," Chief Executive Niels Christiansen told Reuters. "But we've taken market share and have grown 10% faster than the market."

The company's consumer sales grew 3% in a market that declined by 7%, meaning it grabbed market share from competitors like Hasbro (NASDAQ:HAS) and Barbie-maker Mattel (NASDAQ:MAT).

However Christiansen adjusted his forecast for sales growth this year to "somewhere in the single-digits," having in March forecast growth of a "high single-digit percentage".

The best performing Lego themes included Star Wars, Technic, and Icons, showcasing the likes of the Eiffel Tower or the "Back to the Future" time machine, the company said.

The company did not raise prices for its Lego sets during the first half year and does not plan to do so, as freight and raw material costs had normalized, Christiansen said.

Lego's operating profit fell 19% to 6.4 billion crowns.

The company opened 89 new stores in the first six months of the year and plans to open around 150 in total this year, bringing the global total to around 1,050, Christiansen said.

He said he believes Lego can continue opening stores at the same pace for another five to 10 years.

Since taking the helm at Lego in 2017, Christiansen has pursued a strategy of investing in combining the physical brick products with the digital universe, expanding the product range, and opening hundreds of new stores.

More than half of the new store openings this year will be in China, where the total number of stores will exceed 500 by the end of the year, Christiansen said.

The company continues investing in the country even as Chinese consumers returned to stores after the pandemic at a slower pace than anticipated.

© Reuters. People pass a Lego store in Copenhagen, Denmark August 29, 2023. REUTERS/Tom Little

"The Chinese middle class, the amount of kids in China to potentially have the opportunity to play with Lego, is huge. We are underrepresented, so the investments and the building in China continue," said Christiansen.

($1 = 6.8870 Danish crowns)

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