Lego's Resilient Growth in 2024: Diversifying and Sustaining Success
In the face of an inflation-fueled sales slump that has been plaguing the toy industry during the first half of 2024, Lego has managed to stand out and steadily expand its market share.
On Wednesday, the privately held Danish toymaker announced remarkable financial results. Its revenue during the initial six months of the year witnessed a significant 13% jump, amounting to 31 billion Danish kroner, which translates to approximately $4.65 billion. Niels Christiansen, the CEO of Lego, shared insights into the company’s performance with CNBC. He emphasized that Lego is experiencing strength across its entire product portfolio. In particular, lines like Lego Icons and Lego Creator have been performing well, and its partnership with Epic Games’ Fortnite has also been a major boost.
Last year, Lego observed a trend where consumers were “trading down,” choosing lower-priced sets while maintaining the same purchasing volume as before. However, this year has seen a positive shift. Christiansen stated that the trading-down trend has stabilized, and the growth the company is witnessing is predominantly driven by an increase in volume. In contrast to Lego’s growth, its publicly traded rivals have faced challenges. Mattel saw its net sales decline by 1% in the first six months of 2024. The company is dealing with tough comparisons, especially considering the high toy sales spurred by the “Barbie” craze in 2023. Hasbro, on the other hand, reported a more significant drop of 21% in its net revenue between January and the end of June, still recovering from its divestment of eOne. Lego has been leveraging its diverse range of products to build on the growth it achieved during the pandemic era. Its offerings cater to both kids and adults, going beyond the traditional sets tied to popular franchises like Harry Potter and Star Wars. The company has introduced innovative design options that allow consumers to construct flowers, succulents, famous works of art, and animals, appealing to a wide variety of interests. When it comes to geographical performance, sales in the U.S. and Europe remain robust. However, in China, the sales have been flat. Christiansen pointed out that consumers in the region are spending less on higher-priced items, and their purchasing frequency has decreased. Nevertheless, Lego is not deterred from expanding in China. The CEO believes there is still substantial “long-term potential” in the area. In fact, out of the 40 Lego stores that opened in the first quarter, 20 were located in China. Similarly, of the 60 planned store openings for the second half of the year, 20 are slated for China. Sustainability is also a key focus for Lego. So far this year, the company has nearly doubled the amount of renewable and recyclable materials used in its bricks compared to the full year of 2023. Christiansen hailed this as a significant milestone and a step in the right direction. He noted that the company is investing quite a lot in this aspect, primarily by purchasing more expensive materials, as mass balance materials come at a higher cost than standard ones. Importantly, Lego is not passing these additional costs onto consumers. Instead, by being willing to pay a premium for sustainable materials, the company aims to create an incentive for suppliers to develop such products and increase production capacity. Lego has an ambitious goal of sourcing half of its raw materials from sustainable sources over the next few years.
As Lego continues to navigate the competitive toy market, its ability to balance product diversification, geographical expansion, and sustainability efforts will be crucial in maintaining its growth trajectory and strengthening its position as a leading toymaker both globally and within various key markets.