Lego has announced extensive staff cuts after the first fall in global sales for more than a decade.
The company has not yet detailed exactly where the job cuts will fall, but is aiming to cut 1,400 jobs before the end of the year, in a bid to scale back the business after suffering its first drop in sales in more than a decade.
The company said it had been hit by weaker demand in established markets such as the US and parts of Europe and admitted that the organisation had become too complex over the past five years to support global growth.
Lego said the decision to cut the jobs – representing about 8% of its global workforce – was a difficult one, but one that had to be made as the company presses “the reset button”.
“We are very sorry to make changes which may interfere with the lives of many of our colleagues,” said Jørgen Vig Knudstorp, the chairman of the group. “Our colleagues put so much passion into their work every day and we are deeply grateful for that. Unfortunately, it is essential for us to make these tough decisions.”
In the first fall in sales since 2004, revenue fell 6% in the first half of 2017 while net profit was down 3%. Knudstorp said that despite double-digit growth in China in the first half of the year, the decline in established markets was disappointing, adding: “We have taken steps to address this. We added complexity into the organisation, which now in turn makes it harder for us to grow further. As a result, we have now pressed the reset-button for the entire group. This means we will build a smaller and less complex organisation than we have today, which will simplify our business model in order to reach more children. It will also impact our costs. Finally, in some markets the reset entails addressing a clean-up of inventories across the entire value chain. The work is well under way.”