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Lego announces job losses amid declining sales

The iconic Danish toymaker is facing its biggest test since flirting with bankruptcy in 2003, announcing it will lay off 8 percent of its staff after reporting its first fall in sales in more than a decade.

Lego Group announced the loss of 1,400 jobs on Tuesday, part of an attempt to revamp its business in the face of a first fall in sales in more than a decade.

The unlisted company, which derives its name from the Danish 'leg godt', meaning 'play well', announced the job losses on the same day as it reported a 5 percent fall in revenue from the first half of 2016, down from 15.7 billion Danish krone ($2.5 billion or 2.11 billion euros) last year to 14.9 billion in 2017.

The biggest revenue and operating profit falls came in Lego's more established markets, such as in the United States and Europe, in sharp contrast to the group's performance in China, where it experienced double digit revenue growth in the first half of 2017.

Lego's disappointing fiscal results were announced less than a month after Bali Padda was replaced by Niels Christiansen as chief executive (CEO), a move seen at the time as indicative of the challenges the company is facing. Christiansen officially begins his tenure on October 1.

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Lego: A bundle of fun made by robots

Most famous for its colorful interlocking plastic bricks, Lego employs 18,200 people and the job losses of 1,400 amounts to 8 percent of its current workforce. The group confirmed on Tuesday that the job losses would come into effect this year, including up to 600 at its headquarters in Billund, Denmark.

Lego previously came close to bankruptcy in 2003, but it has been widely acclaimed for the manner in which it has embraced the digital era over the past decade and integrated itself successfully with global franchises such as Harry Potter and Star Wars. That has helped the group weather the storm the global toy industry met following the financial crisis of 2008.

Earlier this year, consulting firm Brand Finance named Lego as the most powerful brand in the world — an indication of its status as one of the top toy companies of all time — and executive chairman Jorgen Vig Knudstorp said on Tuesday that Lego had "pressed the reset-button for the entire group."

"We will build a smaller and less complex organization than we have today, which will simplify our business model in order to reach more children. It will also impact our costs. Finally, in some markets the reset entails addressing a clean-up of inventories across the entire value chain. The work is well under way,” he added.

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Block by block Lego expands in China

aos/uhe (Reuters, dpa)

 

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