Lego said it would lay off around 8% of its staff — some 1,400 — and revamp its business after reporting its first fall in sales in more than a decade.
The Danish toymaker announced a 5% decline in mid-year revenue a month after abruptly removing its chief executive, suggesting it is facing its biggest test since flirting with bankruptcy in the early 2000s.
Lego said it could not promise a return to growth in the next two years, a jolting acknowledgement for a group widely admired for embracing the digital era and tying up lucrative franchises from ‘Harry Potter’ to ‘Minecraft’.
“We have now pressed the reset-button for the entire group,” executive chairman Jorgen Vig Knudstorp said, acknowledging the business had grown too complicated.
He said Lego would seek a return to a leaner and more efficient organisation to respond to “losing momentum” which the company thought “could ultimately lead to stagnation or even decline”.
Lego said revenues had disappointed in its core markets of the US and Europe, after a decade of double-digit growth and launches spanning Lego sets, video games, movie franchises, robotics and smartphone applications. Sales related to its ‘Star Wars’ line declined slightly in the first half of the year, the company said.
It marked a sharp reversal for a company that managed to expand and respond to rising demand in Asia when Mr Knudstorp was chief executive, even as the global toy market shrank after the 2008 financial crisis.
Mr Knudstorp took the top job aged 35 in 2004, a year after Lego flirted with bankruptcy, and set about reviving Lego’s core business.
Bali Padda took over as chief executive in January, but he was removed just eight months later and replaced by Danish industrialist Niels B Christiansen.
Sales between January and June stood at $2.38bn (€2bn), still topping My Little Pony producer Hasbro’s sales of $1.82bn and Barbie doll maker Mattel’s $1.71bn.
Meanwhile, ‘Angry Birds’ maker Rovio Entertainment plans to sell shares in a Helsinki initial public offering, seeking funds to support its resurgence seven years after releasing its best-selling mobile-game title.
Rovio will offer about €30m of new stock, the company said. The IPO could value the firm at about $2bn.
This story first appeared in the Irish Examiner.