LEGO posts mixed financial results

I blame Assault oh Hoth.

The fact that they've still managed double digit sales growth is impressive, but it's hardly a surprise that they've saturated the market in the US. Is there a major movie license out there that Lego doesn't own?

I suspect in a place like the US they're selling as many sets to children as they can. The current target seems to be us AFOLs. The Batman 66 batcave is a great example of something very few children are going to want but a lot of AFOLs will pick up. I think there's been a definite pick up in pace of those $350+ models (Helicarrier, Disney Castle, Hoth, etc) in the last few years. Better hang on to your wallets people.

I love the big $ sets, only if they are made good. The Tumbler and The Heli carrier are amazing while in my opinion the bat cave is not so good. So i didn't buy it. BUT if they put out more new minifigures in the superheroes lines i will spend money, 24/7

Increasing prices plus reduction in quality (both material and design--in perception if not actuality) equals lower sales? Who'd have thought it?

I wonder if falling sales in the US explain the cancellation of Bionicle and Models? If Lego was losing the market share, it makes since they would cut their losses before any damage was done.

so a 10% increase is considered "mixed"?

I feel that a big part of it is their pricing, with the Star Wars line being the most expensive of their licensed products. It's crazy to think that their two most recent Rebels sets, the TIE Advanced vs A-Wing and the Combat Frigate, have retailed for $90 and $110, respectively. It's also wild that there are two X-Wings available, both retailing for $80, and a TIE-Fighter retailing for $70. And don't get me started on sets like the Battle of Takodana and the Encounter on Jakku at $60 each.

As an AFOL, I'm torn because I feel most (I'm looking at you, Jakku) newer LEGO sets have never been better, but their price points have never been more ridiculous. More often than not I find myself waiting for a price drop on Amazon or at Target or simply buying parts off Brick Link because I can't justify buying a set at full price from LEGO.

Maybe I'm maturing, maybe I'm adhering too much to the "10 cents/piece" guideline, but I think it's obvious I'm not the only one who thinks prices are getting a tad out of hand.

Less employees in the US may mean a reduction in people getting paid and with less money to buy products.

Maybe the mixed reception from the D2C sets is a part of that figure.

An 11% increase is nothing to sneeze at! This may be just another indicator that the US economy is much worse than the politicians and talking heads would have us believe. Wishful thinking during an election season doesn't produce more disposable income for the rank and file.

That said, maybe TLG will try to get their US sales numbers back up by having some decent sales this Christmas season. It's been a few years since they've had any decent Black Friday or post-Christmas sales. Perhaps this is the year?

I don't usually complain about prices, but the new Technic Volvo excavator seems twice as expensive as it should be.

I wouldn't be surprised if the knock-offs from China played a role in the 2% reduction.
I have the feeling that knock offs are more "acceptable" now. There are sellers at huge conventions that don't even fear of getting caught because there is just nobody that cares.
Once people start buying them for $2 each, there is no reason for them to buy a whole set for $30 that includes that exact minifigure.

They really need to shy away from superhero movies sets, those always remain on the shelves for a very long time after the movies have come and gone. Compared to the Marvel sets based on comic books or the cartoons, which typically sell much much better.

As far as Star Wars, they should basically read the reviews and comments on this site, they would avoid making sets that sit and sit and lag in sales.

Angry. Birds. I think that's the biggest miscalculation LEGO has made in some time--I mean, the movie shouldn't have been made in the first place (or should have been made five years ago) but whichever LEGO exec decided that the movie would make for good LEGO sets was completely tone deaf.

Minecraft doesn't seem to be moving well either, at least at our local LEGO Store. They're pushing them hard, but kids would rather play Minecraft than play WITH Minecraft. And any AFOLs who would be into it have the extra brick to expand on their own.

Sure, there are the issues with overpriced licensed sets, but those sets are still selling, even with the grumbling. But some things just shouldn't have been made in the first place.

Just my $0.02.

@Nadana86

Live by the minifigure, die by the minifigure. LEGO has made a conscious effort the past half decade to dumb down set designs in favor of more minifigs with more variants and more detail.

If LEGO designed $30 sets to be desirable SETS and not just a few bricks cobbled together to sell overpriced minifigures, then perhaps the problem would be lessened.

^I agree with that point, lots of today sets are overpriced walls (Battle of Takadona) to sell minifigures.

@regularvince: If Star Wars sets are indeed overpriced, that's nothing remotely new. http://brickset.com/sets/4502-1/ cost $50 in 2004 (the equivalent of $65 in today's money) for 563 parts/.74kg. Compared to that, http://brickset.com/sets/75102-1/Poe-s-X-wing-Fighter at $80 for 717 bricks/1.1kg (27% more bricks and 49% more weight for a 23% higher price) and http://brickset.com/sets/75149-1/Resistance-X-wing-Fighter at $80 for 740 parts/1.05kg (31% more bricks and 42% more weight for a 23% higher price) both seem like a pretty fair deal.

In general, a lot of price increases in the United States can mostly be chalked up to inflation and sets getting bigger. We still have way lower prices for LEGO sets than many other parts of the world, and in many cases, lower prices for LEGO sets than we ourselves had in the past!

Overall, I don't see anything in this year's interim results that seems like cause for alarm. Particularly since next year there will be two new LEGO movies to revitalize demand.

The problem with always comparing sets and justifying it with inflation, is that most people over the same period have not seen inflation rises in their earnings. If anything, people have less money than before, but prices of Lego sets are increasing.

So the USA and Canada account for 22% of profits but enjoy a hefty discount on product over the rest of the world? How does that make sense?

*edit

Nevermind, one figure is turnover. Anyone know the profitability of the various markets? Would be interesting to see.

@dougts: Sorry, but that's ridiculous. There have been lots of extremely well-designed sets the first half of this year even below the $30 price point: http://brickset.com/sets/31044-1/ , http://brickset.com/sets/41116-1/ , http://brickset.com/sets/41172-1/ , http://brickset.com/sets/42045-1/ , http://brickset.com/sets/60117-1/ , http://brickset.com/sets/70313-1/ , http://brickset.com/sets/70601-1/ , http://brickset.com/sets/71310-1/ , http://brickset.com/sets/75113-1/ , and http://brickset.com/sets/75871-1/ , just to name some standouts from ten different themes. I wouldn't consider any of those "dumbed down", let alone suggest they only exist to sell minifigures. Several of them don't even include minifigures!

According to Fortune Magazine ( http://fortune.com/2016/09/06/lego-demand-north-america/ ), the main reason for flat sales in the Americas is something nobody here has mentioned: reduced marketing efforts in response to difficulty keeping up with the demand the brand has generated.

I attribute a lot of this to economy in North America, specifically the US. Don't let the figures fool you about employment and jobs. Many areas are really struggling, specific to energy, mining, and construction. Lots of layoffs, job losses, and general uncertainty cause many people to buckle down and hold as much cash in reserve as they can. It has definitely changed my buying habits considerably.

Good point @Aanchir. Some people believe that Lego only exists for Star Wars licence and tens of other themes don't count.

here is an article form the Washington post saying that LEGO was trying to reduce demand in North America because they could not meet the market demand.
https://www.washingtonpost.com/news/business/wp/2016/09/06/the-surprising-reason-lego-wanted-people-to-stop-buying-its-toys/

The simple reissue of Winter toy shop probably is that 2% reflection. Lazy = no profit for you! Don't mess with success; limit cycles to 2 years; feed the AFOL beast and kids short term memories alike. Designers are cheap and built into the system already.

@Aanchir
Obviously I am not referring to every single set, as my point was clearly one made about a GENERAL TREND in Lego marketing/design philosophy toward minifigures, at the (often) expense of set builds, which I think is pretty impossible to argue hasn't occurred. It also rears it's head most prominently in certain themes, and most especially in the SuperHeroes lineups. I can post a few dozen examples also.

My comment was also in response to a previous comment about minifigure counterfeiting - which obviously pertains to licensed themes.

Calling my comment "ridiculous" smacks of sycophantic LEGO apologism, and belies the obvious trend mentioned above that is undeniably true.

And a few of those examples:
http://brickset.com/sets/75915-1/Pteranodon-Capture
http://brickset.com/sets/75915-1/Pteranodon-Capture
http://brickset.com/sets/75141-1/Kanan-s-Speeder-Bike
http://brickset.com/sets/75139-1/Battle-on-Takodana
http://brickset.com/sets/76053-1/Gotham-City-Cycle-Chase
http://brickset.com/sets/76044-1/Clash-of-the-Heroes
http://brickset.com/sets/76010-1/Batman-The-Penguin-Face-off
http://brickset.com/sets/76050-1/Crossbones-Hazard-Heist
http://brickset.com/sets/76058-1/Spider-Man-Ghost-Rider-Team-Up
http://brickset.com/sets/76029-1/Iron-Man-vs-Ultron
http://brickset.com/sets/76041-1/The-Hydra-Fortress-Smash
http://brickset.com/sets/76015-1/Doc-Ock-Truck-Heist
http://brickset.com/sets/76016-1/Spider-Helicopter-Rescue
http://brickset.com/sets/76019-1/Starblaster-Showdown
http://brickset.com/sets/76008-1/Iron-Man-vs-The-Mandarin-Ultimate-Showdown
http://brickset.com/sets/76006-1/Iron-Man-Extremis-Sea-Port-Battle

obviously a lower price point, but the dozens and dozens of sets in these categories all clearly exist ONLY to promote/sell minifigures:

http://brickset.com/sets/tag-Battle-Pack
http://brickset.com/sets/theme-star-wars/subtheme-Planet-set
http://brickset.com/sets/theme-star-wars/subtheme-MicroFighters
http://brickset.com/sets/theme-DC-Comics-Super-Heroes/subtheme-Mighty-Micros

Also, to be clear, I think this is a good business decision for them. Clearly the majority of customers care more about minifigure than sets (heck, there is a growing population that care ONLY about minifigures), so it makes financial sense. But it also promotes a market that minifig counterfeiters are happy to try and exploit, which was the original point I was addressing.

@dougts: Superhero sets being minifigure-focused is unsurprising because superhero movies and comics in general tend to be intensely character-driven. Most superhero comics and movies are not known for their buildings or vehicles, they're known for the heroes and villains who star in them. This is much different than a brand like Star Wars, where the Death Star and X-Wing are about as memorable, iconic, and unmistakable as Luke or Vader.

Some sets definitely are more focused on minifigures than on the scenes they inhabit, of course, and this is nothing new — there were plenty of minifigure packs in the 80s and 90s that were roughly equivalent to today's "battle packs", like http://brickset.com/sets/6077-1/ . And I'd consider a lot of today's sets much less "dumbed down" than they were back in those decades, or even than they were ten to fifteen years ago. Compare http://brickset.com/sets/75081-1/T-16-Skyhopper with http://brickset.com/sets/4477-1/T-16-Skyhopper or http://brickset.com/sets/75080-1/AAT with http://brickset.com/sets/7155-1/Trade-Federation-AAT and it's abundantly clear that the newer ones have more actual building value and play potential.

you continue to debate the details, yet continue to neglect addressing the main point of this sub-conversation, which I will re-post in brevity for your response:

"...a GENERAL TREND in Lego marketing/design philosophy toward minifigures, at the (often) expense of set builds, which I think is pretty impossible to argue hasn't occurred.

Clearly the majority of customers care more about minifigures than sets (heck, there is a growing population that care ONLY about minifigures), so it makes financial sense. But it also promotes a market that minifig counterfeiters are happy to try and exploit"

A) are you actually trying to argue that LEGO has NOT trended toward an increased focus on minifigures the past 5 years?
B) do you disagree that the increased presence of licensed minifigures at high secondary market prices has created an opportunity for counterfeit manufacturers?

I blame video games. Gosh darn Call of Duty

@dougt: I'll acknowledge that there's been a trend towards more detailed and desirable minifigures. I disagree that it has led to any kind of decrease in the quality of sets in general. Rather, I feel like sets from most themes have been steadily increasing in quality. Of course there'll be a lackluster set every now and then, because there have ALWAYS been lackluster sets every now and then, and there probably always WILL be, but on the whole sets today tend to have amazing levels of detail and playability. Certainly way better than they had during my own childhood. Themes like Nexo Knights, Ninjago, Creator, City, Friends, and Elves continue to amaze me year after year, and even sets from the licensed themes like Super Heroes and Star Wars generally tend to far surpass similar sets that came before them. The only theme I often feel disappointed by is Disney Princess.

And sure, the popularity of licensed minifigures has made an opportunity for counterfeiters. I never disputed that. I would, however, say it's unlikely that has anything to do with a lack of sales growth in the United States. After all, there's still been quite healthy sales growth in Asia, where those counterfeits are most abundant.

"As an AFOL, I'm torn because I feel most (I'm looking at you, Jakku) newer LEGO sets have never been better, but their price points have never been more ridiculous. More often than not I find myself waiting for a price drop on Amazon or at Target or simply buying parts off Brick Link because I can't justify buying a set at full price from LEGO."

I couldn't agree more. The increase in prices EVERY SINGLE YEAR has become absolutely ridiculous. I'm losing interest when I have to decide between paying bills and buying LEGO.

I would love for LEGO to start producing more sets under the $50 mark, as opposed to fewer sets with a higher mark. It really puts a lot of stress on me as I can only get two or three sets over $100 a year. I am forced to choose between great sets, and it always leaves me with buyers remorse, not matter how great the set I got was. Oh well, such is the nature of LEGO.

@aanchir that's fair. I agree you can't compare todays sets to those from pre 2004 - it's no contest. I guess I can't help but think how they could even better if some of the effort, energy, and set budget currently being devoted towards minifigs could instead be diverted to the builds themselves

A lot of people have been chalking up the 2% reduction to one set, but I think it is a small decrease in many sets.

The licensed sets are getting too gosh darn expensive.

No one in the US should complain about expensive prices, as most Lego sets over at your end are cheaper, in many cases much cheaper than in the rest of the world. Differences in VAT already factored in by the way. So I am sure the general state of the economy will be an important factor, and a good indication - like has been mentioned - that said state is not as good as your government wants you to believe.

Economy aside, I am sure that a lot of the reduction is due to TLG's own mistakes. What surprises me more is why they have such an increase in the rest of the world. I mean, many of those mistakes they make affect all markets, but in other regions people seem to have different priorities/preferences. What a novel discovery ;-)

Oh and of course, the main driving down factor in the US surely must be Lepin et al... *rolleyes*

As long as TLG manages to report an 11% overall increase worldwide, under current economic conditions, I see absolutely no reason to call these results "mixed". "Mixel'd" perhaps :-)

I hope that the lower price points of the SWRO sets mean that Lego is decreasing the price of Star Wars sets. They have two relatively low priced sets in that wave($30 and $40) and the highest priced set is $100.

From a Canadian's perspective, I have to agree with a few of the American commenters. Although some of the newer sets are incredible (not looking at you Assault on Hoth) they are just becoming too expensive. I have been hoping for an updated UCS Falcon, but with these price trends it would likely be a $500 set... and even as a well paid AFOL, that is just too much.

I think fans are making a far bigger deal of these figures than TLG themselves. I also think that a 2% drop in growth is nothing to worry about for a company already making such staggering profits; sooner or later you are bound to hit a ceiling where you're selling all the little plastic bricks to all the people who want to buy the little plastic bricks. That's okay.

And, eventually, even the most dedicated enthusiast gets burned out. There's more to life after all.

Definitely the complimentary $25 gift card you got with the delay of the Porsche put a dent in revenue, as well as Assault on Hoth, and possibly even the Death Star later this month.

To me it looks like Lego is competing with itself with all the new sets and themes that they are cranking out. It's get overwhelming and some people may have to cut back due to space and money. That's probably why alot of collectors only want mini figures.

I would rather buy chinese bootlegs if I wanted to buy lego bricks made in china, I can get a Millennium Falcon for under $50.. why spend $150 from lego.. These bootlegs are driving the standard prices down and the resellers profits are dropping causing a loss in sales..

This is the first time You can find knock offs on Amazon & Ebay in the U.S.A. market. Unless you shop at Flea markets.. Outside the U.S. they are very common..

http://www.ebay.com/sch/i.html?_from=R40&_sacat=0&_nkw=1381pcs%20Star%20Wars%207%20MiniFigure%20Building%20Millennium%20Falcon&LH_Complete=1&LH_Sold=1&rt=nc&_trksid=p2045573.m1684