Toys R Us bankruptcy impacts Lego earnings

Published on: 5th September 2018

Lego said its revenue dipped in the first half of 2018, with business in N. America hurt by changes in the retail industry.

The privately-held company says revenue fell 5% to 14.3b kroner ($2.2b) in January-June compared with a year earlier. Net profit dropped 10% to 3b kroner ($467m). The company also blamed the weakening of the dollar. At constant currency rates, it said sales were stable.

Lego says revenue growth in western Europe was in the “low single digits” while it declined slightly in North America. China continued to perform strongly, with revenue growing by double-digits.

It’s worth noting that the results were skewed by a strengthening of the US dollar. Sales rose 1% and operating profit was 4% higher on a constant currency basis.

“We are especially satisfied with our performance given the challenges of the changing retail landscape, including the closure of Toys R Us,” in the United States, Britain and Australia, CEO Niels B. Christiansen said.

“We have been able to move to other partners and take advantage of the void in the market and close it,” he added. This has been achieved by expanding online and “getting our full assortment better listed with other retailers”.

Lego is recovering from a slump in 2017, when its sales fell for the first time since 2004 from record highs. In March Lego reported its first annual sales fall in 13 years. More than 1,400 jobs were cut as the company admitted there would be “no quick fix”.

The Lego boss said some of the cost-savings were starting to filter through and could be re-invested because the company was debt-free. Nevertheless, he said Lego is not plotting a return to stellar growth.

“I don’t think anybody can aspire to be supernatural forever,” he said. “We would rather be on a curve like that than having unequal performance year-on-year.”

Niels added that the plan “is to stabilise the business,” and said the results “show we’re on track.”


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