Lego Star Wars toys are on display at a Toys R Us store in Paramus, New Jersey on November 26, 2019.
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While other toy makers are struggling with falling sales due to inflation, brick by brick, Lego is posting positive results.
The privately held Danish toymaker saw its sales increase 1% to 27.4 billion Danish kroner, or about $4 billion, in the first six months of this year.
Meanwhile, listed competitors like mattel, Hasbro, Funko And Jack's Pacific All have reported double-digit sales and declines in sales so far this year.
“I think what makes me very happy is that we continue to grow faster than the industry,” CEO Niels Christiansen told CNBC. “The good thing for us is that we've been growing 10 percentage points faster than the market every year for the last four or five years…that means we've been consistently gaining market share and are continuing to do so, which is super important.”
Toy companies across the industry have seen huge gains during the Covid-19 pandemic as parents look for ways to keep their children occupied during lockdown. Adults also returned to the toy shelves to ward off boredom.
Lego built on pandemic-era growth fueled by a diverse product lineup for kids and adults alike, while outperforming the industry and gaining market share.
Of course, the company wasn't immune to macroeconomic pressures, particularly higher material, transportation, and energy costs.
Net profit for the first half reached 5.1 billion Danish kroner or around 742 million US dollars, down 17% from the same period in 2022.
Raw material costs were a big expense for the company in the first half of the year, but Christiansen said he expects that amount to decrease in the future as prices fall.
Lego has offset some of the higher shipping costs by locating manufacturing facilities near key markets. For example, the US sources its Lego products from a factory in Mexico. That supply chain will shorten over the next two years as the company opens a new plant in Virginia.
In addition, Christiansen said that strong demand for Lego's diverse range of building sets has helped fill the gap. Consumer sales rose 3% in the first half.
Christiansen cited the strength of the Lego brand and its diverse product line, which scores a multitude of “passion points” in 2023 due to its strong performance to date. These products range from themed Star Wars sets to buildable muscle cars and cityscapes.
The company is expanding its portfolio this year to around 750 products. About 48% of that portfolio will be new, Christiansen said. This is in line with previous years and is part of the company's strategy to offer fresh and relevant sets for all consumers.
The company is also benefiting from the opening of stores in new markets, particularly China. So far in 2023, the company opened 89 stores worldwide, including 54 in China. The region has been re-acquainted with the iconic building blocks and physical locations have helped teach adults and children how to play with Lego.
“We believe that we will end the year with a single-digit growth rate,” said Christiansen. “I believe that we can continue to be faster than the market.”