The LEGO Group has announced earnings for the first six months of 2023. Revenue was DKK 27.4 billion, a growth of one percent compared with H1 2022. Consumer sales grew three percent, outperforming other leading toy companies and contributing to strong market share growth.
Operating profit was in line with expectations at a solid DKK 6.4 billion compared with an exceptionally strong DKK 7.9 billion in H1 2022. The company continued to accelerate spending in long-term strategic initiatives including manufacturing, digital and sustainability.
CEO Niels B Christiansen said: “We are satisfied with our performance; especially as it has been a challenging six months for the toy industry. Demand for our products saw us outpace the industry and significantly grow market share.Our strong financial position allows us to invest for the long term, particularly in areas such as digital, sustainability and manufacturing. Overall, our performance is in line with expectations, after three consecutive years of extraordinary growth and we are grateful for our great colleagues who work each day to inspire children through play.”
LEGO 2023 Financial overview
Continued demand for products and strong retailer confidence contributed to consumer sales growth. Revenue grew one percent as reported and was flat in constant currency compared with record first half revenues in 2022 despite the impact of retailers’ inventory management. Net profit was DKK 5.1 billion compared with DKK 6.2 billion in the first half of 2022.
Free cash flow was DKK 1.1 billion compared with DKK 3.8 billion in the same period last year which reflected planned investments in expanding manufacturing capacity globally and upgrading technology.
LEGO 2023 Market performance
Consumer sales in major, established markets such as Americas grew, while consumer sales in China were impacted by a slower than predicted return to pre-pandemic shopping habits. The company will continue to expand its retail footprint and online presence in China in 2023 and beyond to reach more children.
Portfolio and brand performance
The LEGO Group’s portfolio in 2023 will include more than 750 products which are designed to appeal to builders of all ages and interests. Around half of the portfolio each year is new, demonstrating the creativity and innovation of its talented designers.
The top performing themes in the first half were a mix of homegrown IPs and external IPs and included: LEGO Icons, LEGO Star Wars, LEGO Technic and LEGO City. LEGO DREAMZzz, the company’s new homegrown IP, was launched in March, with content featured across all major streaming and kids content platforms to build awareness before products went on sale in August.
The LEGO Group and Epic Games continue to make good progress on their partnership to create fun, safe digital experiences for children and expect to be able to share more information in the coming months.
· Expanding global manufacturing network
The LEGO Group broke ground on a new factory in Virginia, US, in April and continued construction of a new factory in Vietnam. Both sites are USD 1 billion (DKK 6.7 billion) investments and aim to be carbon-neutral run once completed in 2025 and 2024 respectively. Capacity was also added to LEGO factories in Mexico, Czech Republic, Hungary and China. These investments further strengthen the company’s global manufacturing network, which locates production closer to major markets to ensure a short, efficient supply chain able to respond to shifting consumer demands and reduce carbon footprint.
· Building a sustainable future
The LEGO Group continued to make progress on a wide range of initiatives to reduce its environmental impact. In the first half, the company continued its transition to paper-based pre-packs and announced a partnership with the company European Energy to produce e-methanol which has the potential to be used in future products.
The LEGO Group aims to triple spending over three years on activity to reduce its carbon footprint, including using more sustainable materials, expanding usage of renewable energy and working towards its target to reduce carbon emissions by 37 percent by 2032. It also pledged to achieve net-zero greenhouse gas emissions across its full supply chain by at least 2050.
· Transforming shopper experience through digital
As part of its digital transformation, the company introduced technology that has improved shopper experiences in the first six months. This included an instore point of sale app and new digital tools that flow orders between warehouses to reduce delivery times. The company continued its planned growth of its digital team and by the end of the year expects to have around 1,800 digital colleagues in four locations:
Billund, Copenhagen, London and Shanghai.
· Memorable retail experiences
The company continues to expand the global network of LEGO branded stores* designed to create memorable brand moments for shoppers. It opened 89 new stores during the first half of 2023, taking the total number globally at the end of the period to 988. The company has also continued to strengthen e-commerce capabilities and performance across its own and partner platforms.
Inspiring future generations
The LEGO Group believes that learning through play gives children the best opportunity to develop life-long skills that will help them achieve their potential. During the first six months of 2023, more than 4.3 million children benefited from product donations and local community engagement activities.
Niels B Christiansen said: “We remain fully focussed on our ambition to inspire and develop more children around the world. We are proud to be in a strong financial position to deliver on this mission today and invest to ensure we continue to deliver for many generations in the future.”