Lego achieved 2% sales growth last year, even as the global toy industry saw a 7% sales decline, according to data from Circana.
Pandemic-era gains that fueled accelerating gaming industry sales growth are waning in 2023 as consumers cut discretionary spending amid rising inflationary costs and rising credit card debt. Meanwhile, Denmark-based Lego posted resilient sales, with revenue reaching 65.9 billion Danish kroner, or about $9.65 billion, it said Tuesday.
“To be able to outperform the market again by almost 10 percentage points, as we did the last couple of years, I think it's really good to see that we can do that in good years, and we can also do that in bad years,” the CEO said. Lego's Nils Christiansen told CNBC.
Lego was among the toy companies that saw huge gains during the Covid-19 pandemic and continues to outperform the industry and gain market share. The company saw sales rise by 27% in 2021 and 17% in 2022.
The toy maker's top-performing brands last year included Lego Icons, Lego Technic, Lego City, Lego Harry Potter and Lego Star Wars. These kits range in size and difficulty, with the company saying the themes make it fun for kids to learn building skills while providing a creative outlet for adults.
In 2023, the company had 780 products, about 50% of which were new products. This is on par with previous years and is part of the company's strategy to have new and relevant collections for all consumers.
Naturally, the company has not been immune to macroeconomic pressures, especially as shoppers tighten their wallets. Lego sells the same volume of products, but the company noted that customers “backed off” in 2023 and opted for lower-priced sets, Christiansen said.
Net profits in 2023 reached 13.1 billion Danish kroner, or about $1.92 billion, down approximately 5% from 2022.
In particular, the main Chinese market saw a decline in revenue.
“Chinese consumers are already holding back on spending,” Christiansen said.
Lego has been increasing its presence in China over the past few years, opening hundreds of retail locations. Although Lego first entered the country in 1993, it is only in the last decade that the brick manufacturer has begun a massive expansion in the region.
Of the 147 new Lego stores opened last year, 81 were in China. While Christiansen says that number will drop to about 40 new openings in 2024, brick-and-mortar remains a key focus for the brand as it moves into smaller cities in China.
Lego is also expanding its digital presence, partnering with Epic Games to launch Lego Fortnite, an open-world survival video game.
“We're basically competing for kids' time, attention and interaction,” Christiansen said.
Lego's team of digital experts grew 27% in 2023, the company said, as it pushed to improve online experiences in everything from shopping to TV and movie content. The goal is always to connect these digital touchpoints to physical play.
“At the end of the day, they might spend a little on Lego Fortnite or wherever, but I hope when Christmas comes around we'll be on their wish list,” Christiansen said.
