Lego profits fall as Danish toymaker faces 'toughest market for over 15 years'

12 March 2024 , 13:06

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Lego has reported a drop in yearly profits (Image: No credit)

Lego has reported a drop in yearly profits, describing the current economic climate as the toughest toy market for over 15 years.

The company warned that its bottom-line profits might continue to be under pressure in 2024. The Danish toy giant recorded a 5% decrease in operating profits to 17.1 billion Danish krona (£8.1 billion) in 2023.

Net profits also dipped by 5% to 13.1 DKK (£1.5 billion), although the company noted a 7% growth in operating profits during the last six months of the year, which included the Christmas season. Sales slightly increased by 2%, reaching 65.9 billion DKK (£7.6 billion) over the year.

Lego anticipates single-digit sales growth in the coming year, which it believes will outperform the wider toy market. However, it expects net profits to "slightly" decline as it boosts spending on "strategic initiatives". Chief executive officer Niels Christiansen said: "We are pleased with our performance given that 2023 was the most negative toy market in more than 15 years."

He added: "Despite the external market conditions, we continued to invest for the future and made good progress on digital, sustainability and retail initiatives that will support long-term growth. We are grateful for our dedicated colleagues who remain committed to our mission to inspire and develop the builders of tomorrow."

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The group said that last year's fall in profits was "satisfactory". This comes after they increased spending on new products, retail platforms, new factories, IT and sustainability initiatives like developing new plastic for its bricks. Success came from a partnership with Fortnite maker Epic Games.

The first Lego Fortnite range released last year under the agreement proved popular - more than 2.4 million players were involved at launch time. The company said new items made up about half of its huge 780-item portfolio over the year.

Lego saw 2023 results impacted by a tough first half when earnings tumbled by nearly a fifth as the boom in demand during the pandemic faded. It was also knocked by difficult trading in China, where sales were affected by a slower-than-forecast return to pre-pandemic shopping habits, with restrictions only lifted in the country earlier this year and consumer spending also under pressure. China was its worst-performing region in 2023, with sales falling in the country.

Lego said: “Currently China is facing economic challenges and the market is underperforming, which is offset by growth in the US. The company expects the toy market to stabilise during 2024 and growth rates to normalise. Additionally, it expects shopper behaviour to return to pre-Covid buying patterns, heavier on in-season and in-store sales.”

Lawrence Matheson