LEGO reported that its profits had fallen during the first half of 2017 and the full annual report has been published today. Unfortunately, this confirms a continuing decline in both revenue and operating profit when compared with the same period last year.
You can read the full report here and will find some of the highlights after the break...
- 2017's best selling themes include City, NINJAGO, Creator and DUPLO.
- The LEGO Group's revenue decreased by 7.0% in 2017 to DKK 35.0 billion against DKK 37.9 billion in 2016.
- The LEGO Group's net profit for the year amounted to DKK 7.8 billion in 2017 against DKK 9.4 billion in 2016.
- Revenue in most established markets such as Europe and North America declined.
- Revenue in China, on the other hand, saw double-digit growth in 2017.
- Decline in revenue was driven in part by the clean-up of inventories across the value chain.
- Global consumer sales were flat but trended upwards towards the end of 2017.
- The number of full-time employees working for the LEGO Group at the end of 2017 was 17,534 compared with 19,061 at the end of 2016. Approximately 1400 staff members were made redundant, in accordance with LEGO's report for the first half of 2017.
Niels B. Christiansen, the LEGO Group CEO said: “2017 was a challenging year and overall we are not satisfied with the financial results. However, we ended the year in a better position. In December, consumer sales grew in seven of our 12 largest markets and we entered 2018 with healthier inventories. In 2018, we will stabilise the business and invest to build sustainable growth in the longer-term.
“During 2017, revenue in our established markets declined, primarily due to actions we took to clean up inventories. This decline impacted our operating profits. We also simplified and reduced the size of the organisation to meet current business requirements and these difficult actions are now complete. Our balance sheet, cash flow and profitability, remain sound.
“We started 2018 in better shape and during the coming year we will stabilise the business by continuing to invest in great products, effective global marketing and improved execution. There is no quick-fix and it will take some time to achieve longer-term growth.”
This report does not make for pleasant reading but it would seem that appropriate steps are being taken to alleviate the issues which LEGO has been facing in recent months. Reducing the volume of products being sold to retailers certainly seems like a wise decision and I think simplifying the organisation as a whole will pay dividends, although it is regrettable that this came at the cost of jobs.
It is also worth considering the extent to which the disappointing performances of The LEGO Batman Movie and The LEGO NINJAGO Movie had an impact upon LEGO last year. Neither is mentioned in the annual report but I think it is interesting that LEGO has posted its first drop in revenue and profits since 2004 in the same year that two feature films were released.
What is your opinion of these results? Let us known in the comments.