Lego earnings plunge 19% in tougher toy market

Toy giant Lego has seen half-year earnings tumble by nearly a fifth as the boom in demand seen during the pandemic faded.

The Danish group reported a 19% fall in operating profits to 6.4 billion Danish krona (£738m) in the six months to June 30.

Lego saw sales growth slow to 1%, with revenues of 27.4 billion Danish Krona (£3.2bn) as it came up against “exceptional” trading a year earlier, with demand having soared during Covid-19 restrictions.

Revenues were flat with currency movements stripped out.

It marks a sharp reversal of trading seen throughout 2022, when revenues grew by 17%.

But Lego said it outperformed a declining toy market, with “significant” growth in market share and consumer sales up 3%, while the wider sector saw a 7% decline.

The group added that the fall in earnings was also as a result of increased investment, with the firm building new factories – in Virginia, US, and in Vietnam.

It said both sites were one billion US dollar (£790 million) investments.

The firm has also been ramping up production capability at its factories in Mexico, Czech Republic, Hungary and China.

Lego chief executive Niels Christiansen said: “We are satisfied with our performance, especially as it has been a challenging six months for the toy industry.

“Demand for our products saw us outpace the industry and significantly grow market share.

“Our strong financial position allows us to invest for the long term, particularly in areas such as digital, sustainability and manufacturing.

“Overall, our performance is in line with expectations, after three consecutive years of extraordinary growth.”

Lego said consumer sales in China were affected by a slower-than-forecast return to pre-pandemic shopping habits, with restrictions only lifted in the country earlier this year.

The company said it will continue to grow its store footprint and online offering across China this year.

It opened 89 new stores globally during the first half of 2023, taking the total to 988.