Lego’s chief seeks more digital toys amid sales slump

The man running Lego A/S wants to merge the toy maker’s iconic building blocks with digital gadgets to help revive slumping sales.

“We see this as a way of keeping children interested for a longer time, also for later age groups,” Chief Executive Niels B. Christiansen said in an interview. “We are doing a lot in this area and we want to do more.”

Christiansen, who became CEO in October, is trying to keep Lego relevant to a generation of children whose obsession with screens has left physical toys less popular.

On Tuesday, the company — Europe’s biggest toy maker — reported its first revenue decline in 13 years as it pays the price for letting its organization grow too big and complex.

Lego has had mixed results with its digital forays. The 2014 “The Lego Movie” and some of the company’s video games were successful, but its big 2010 bet on an online multiplayer computer game, “Lego Universe,” was a flop.

Christiansen says the basic Lego building block will still be the focus as the company designs new products. He pointed to “Lego Boost” (with which children can build their own toys and then program those toys to move using a smartphone app) as an example of what he wants to see more of.

“We need to get Lego focused on the right things,” he said. “We must have strong and innovative products.”

Christiansen took the reins just as Europe’s biggest toy maker hit a wall, ending a decadelong streak of surging revenue and profits. From 2010 to 2015, sales more than doubled as thenCEO Jorgen Vig Knudstorp returned record profits to the owners, the billionaire Kirk Kristiansen family.

But that growth took place at what the Danish company has called a “supernatural” pace, and the organization simply got too big. In 2017, sales and profit slumped as Lego had to reduce inventories that were based on excessively optimistic forecasts. It cut 1,400 jobs, about 8% of its workforce.

Christiansen says the reorganization is now over, with sales expected to start growing again next year.

2017 was “a challenging year and overall we are not satisfied with the financial results,” Christiansen said in a statement Tuesday.

Revenue in 2017 fell 8% to $5.8 billion, Lego said. Net profit dropped for the first time since 2007, to $1.0 billion from $1.2 billion a year earlier. Lego said the decline in revenue was partly due to a “cleanup of inventories across the value chain.”