The LEGO Group has just released their mid year financial results and it experienced it’s largest global drop in profits since it’s flirted with bankruptcy in 2000.
The report goes on to reveal that the mid year revenue is down by 5% to DKK 14.9 billion from DKK 15.7 billion in 2016.
Operation profit is down by 6% to DKK 4.4 billion from DKK 4.7 billion.
Net profit is down by 3% to DKK3.4 billion from DKK 3.5 billion.
Cash flow increased from DK 3.9 billion in 2016 to DKK4.6 billion in 2017.
Here is a handy chart by BrickHello which illustrates the situation for those non-financial types (like me).
We are disappointed by the decline in revenue in our established markets, and we have taken steps to address this.
We are working closely with our partners and we are confident that we have the long-term potential of reaching more children in our well-established markets in Europe and the United States. We also see strong growth opportunities in growing markets such as China.
They have already plans to lay off up to 1,400 jobs over the rest of the year with 600 from the headquarters in Billund alone.
In the process, we have 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 is good to see that The LEGO Group is able to recognise the problem and take the steps to rectify the issues. I do hope to see more changes in the future especially with the emerging markets.
What do you all think might be the problem with the current situation? Drop a comment below to discuss!