Lego, the popular Danish toy company, managed to increase its revenue by 2% in 2023, despite a decline in sales across the global toy industry. While the pandemic initially boosted toy sales, consumers later reduced discretionary spending due to rising inflationary costs and increased credit card debt. However, Lego remained resilient and reported revenue of 65.9 billion Danish krone (around $9.65 billion) for the year.
Lego’s ability to outperform the market by almost 10 percentage points, both in good and bad years, is commendable. CEO Niels Christiansen expressed his satisfaction with this achievement, highlighting the company’s consistent growth. Lego experienced significant gains during the Covid-19 pandemic and continues to dominate the toy industry by capturing market share. In 2021, its sales surged by 27%, followed by a 17% increase in 2022.
The company’s success can be attributed to its top-performing brands, including Lego Icons, Lego Technic, Lego City, Lego Harry Potter, and Lego Star Wars. These themed kits cater to various age groups and provide an engaging platform for children to develop building skills while offering a creative outlet for adults.
Despite the challenging economic conditions, Lego has managed to maintain a diverse range of products. In 2023, the company had 780 products, with around 50% of them being new items. This strategy ensures that Lego consistently offers fresh and relevant sets to cater to all consumers’ preferences.
However, it is important to note that Lego has not been completely immune to macroeconomic pressures. As consumers tightened their budgets, they opted for lower-priced sets, resulting in a decline in net profit by almost 5% compared to the previous year.
One of the key markets where Lego faced revenue declines was China. Christiansen acknowledged that Chinese consumers are holding back on spending, which impacted the company’s performance in the region. Despite this setback, Lego has been actively expanding its presence in China over the past few years by opening numerous retail locations. While the number of new store openings is expected to decrease in 2024, brick-and-mortar stores remain a crucial focus for the company, especially in smaller Chinese cities.
In addition to physical stores, Lego has been investing in its digital presence. The company partnered with Epic Games to launch Lego Fortnite, an open-world survival video game. By expanding its digital offerings and improving online experiences, Lego aims to compete for children’s attention and remain relevant in the ever-evolving digital landscape. The company’s team of digital experts grew by 27% in 2023, underscoring its commitment to enhancing the online shopping experience and creating engaging television and film content. However, Lego always strives to connect these digital touchpoints back to physical play, as their ultimate goal is to be on every child’s wish list during the holiday season.
In conclusion, Lego’s ability to sustain growth amidst challenging market conditions is truly impressive. The company’s focus on innovation, diverse product range, and expansion into new markets has allowed it to outperform the industry and capture market share. While facing some headwinds, particularly in China, Lego remains committed to maintaining its brick-and-mortar presence while also investing in its digital capabilities. With its strong brand reputation and continued dedication to providing engaging play experiences, Lego is well-positioned for future success in the toy industry.
