Lego profits fall amid ‘toughest toy market for over 15 years’

Lego has seen annual profits fall as the group said it faced the toughest toy market for more than 15 years and cautioned its bottom-line profits are set to remain under pressure in 2024.

The Danish toymaker reported a 5% fall in operating profits to 17.1 billion Danish kroner (£8.1 billion) in 2023.

Net profits also fell 5% to 13.1 DKK (£1.5 billion), though the group said operating profits grew 7% over its all-important final six months covering the Christmas season.

Sales edged 2% higher to 65.9 billion DKK (£7.6 billion) over the year.

Lego said it expects single-digit sales growth over the year ahead, which it said will be better than the wider toy market, but added that net profits will fall again “slightly” as it continues to increase spending on “strategic initiatives”.

Chief executive Niels Christiansen said: “We are pleased with our performance given that 2023 was the most negative toy market in more than 15 years.

“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.”

The group said last year’s fall in profits was “satisfactory”, given its move to ramp up spending on new products, retail platforms, new factories, IT and sustainability initiatives, such as developing new plastics for its bricks.

It hailed its tie-up with Fortnite maker Epic Games as a success so far, with its first Lego Fortnite release under the deal last year proving popular, with more than 2.4 million players in the game at the time of launch.

The firm said new products accounted for around half of its 780-strong portfolio over the year.

Lego saw 2023 results affected 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 under-performing, which is offset by growth in the US.”

It added that it expects the year ahead to see consumer buying continue to shift back to pre-pandemic trends.

“The company expects the toy market to stabilise during 2024 and growth rates to normalise,” Lego said.

“Additionally, it expects shopper behaviour to return to pre-Covid buying patterns, heavier on in-season and in-store sales.”

The group’s results showed it opened 147 new Lego-branded stores in 2023, ending the year with 1,031 sites.