Lego looks to rebuild with fewer workers
LEGO IS slashing 1,400 jobs as part of a company-wide overhaul meant to counter falling sales.
The move will effectively cut eight per cent of the Danish toymaker’s 18,200-strong workforce, the majority of whom will be let go by the end of the year.
Lego currently employs about 900 staff in the UK. The company said it was part of a “reset” for the group, which has become “increasingly complex” over the past five years, making it harder for Lego to grow.
Lego Group chairman Jorgen Vig Knudstorp said: “Our colleagues put so much passion into their work every day and we are deeply grateful for that. Unfortunately, it is essential for us to make these tough decisions.”
Affected staff will be offered redundancy packages and support as they move into new jobs outside Lego, the company said.
The toymaker made the announcement alongside its half-year results, which revealed a five per cent drop in revenue to £1.8bn.
It came as a double-digit sales jump in growing markets like China failed to compensate for declining sales in established markets including the US and Europe. Pre-tax profit dropped nearly three per cent to £543m.
Mr Knudstorp said the group was taking acton.
He said: “We are disappointed by the decline in revenue in our established markets, and we have taken steps to address this.
Lego said some of its bestperforming toys for the period included Lego City,
Lego Friends and Lego Technic, as well as products linked to the hit Lego Batman film.
Mr Vig Knudstorp said: “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 wellestablished markets.”
THEIR BUILDING blocks have been a staple of childhoods for generations but Lego’s foundations have been rocked by falling sales after following an “increasingly complex” business model over the past five years.
The Danish toymaker announced yesterday it is to slash 1,400 jobs as part of a company-wide overhaul, with eight per cent of its global 18,200-strong workforce due to be let go by the end of the year.
Lego, which currently employs around 900 people in the UK, has moved away purely from making its famous sets in recent years, with hit films released in cinemas and 14 specialist stores now open across the country.
Last November, the company opened the world’s largest Lego store in London’s Leicester Square, which included life-size models of William Shakespeare and a Queen’s Guard and was the subject of a Channel 4 documentary called A Big Lego Christmas.
But its global results this year have been relatively disappointing, with its half-year results revealing a five per cent drop in revenue to £1.8bn. But don’t fell too sorry for Lego – the company still made a pre-tax profit of £543m for the first six months of the year, down by less than three per cent on the year before.
But Lego Group chairman Jorgen Vig Knudstorp says those results have resulted in the need to make “tough decisions” as a double-digit sales jump in growing markets like China failed to compensate for declining sales in established markets including the US and Europe. It has led to the redundancies being announced as a “reset” for the group, which will see it go back to focusing on its classic products.
“The brick is the heart of our business and children of all ages love it,” he says.
Mr Vig Knudstorp says the group was taking action. “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 wellestablished markets in Europe and the United States. We also see strong growth opportunities in growing markets such as China.”
Lego said some of its bestperforming toys for the period included Lego City, Lego Friends and Lego Technic, as well as products linked to the hit Lego Batman film.
He says the aim for the company is now to run in a more simplified manner.
“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 will also impact our costs.
“Finally, in some markets the reset entails addressing a clean-up of inventories across the entire value chain. The work is well under way.
“We are very sorry to make changes which may interfere with the lives of many of our colleagues. Our colleagues put so much passion into their work every day and we are deeply grateful for that. Unfortunately, it is essential for us to make these tough decisions.”
But don’t write off Lego just yet. The company and its chairman remain determined to retain its traditional appeal while meeting modern-day expectations through things like Lego computer coding.
“Lego play encourages children to problem-solve, collaborate, discover and imagine. We have a powerful and loved global brand, a strong business and are confident we can reach more children around the world.”
The company plans to go back to basics to revive its fortunes after falling sales prompted it to announce it is cutting almost 10 per cent of its workforce. Chris Burn reports.