TLG delivers double-digit growth during 1H 2020

[Lego David]

3 hours ago, Mylenium said:

Nothing to be confused about. People still have money and are staying home. Things will look totally different next year when moratoriums on evictions, bankruptcy and other things run out and a ton of people get unemployed. Also one mustn't forget that LEGO have fired out a ton of super-expensive sets across the board this year (and still do), most of which are even directly distributed by LEGO, so they can cash in fully on them. That's sure going to show up on your tabulation. So for all intents and purposes we may be seeing a lot of limited one-off effects. The real acid test will be next year.

They had to close several factories, all of the Brand Stores were closed for a few months, LEGO sets have been delayed, overall production is down, yet they still walked away from this pandemic completely unharmed? COVID-19 has had a devastating effect on the global economy, and it affected all corporations (some more than others, but still). Despite all this, they still managed to not only not be affected, but they even grew their profits compared to last year. How was this even possible? That's the confusing part to me. 

[MAB]

30 minutes ago, Lego David said:

They had to close several factories, all of the Brand Stores were closed for a few months, LEGO sets have been delayed, overall production is down, yet they still walked away from this pandemic completely unharmed? COVID-19 has had a devastating effect on the global economy, and it affected all corporations (some more than others, but still). Despite all this, they still managed to not only not be affected, but they even grew their profits compared to last year. How was this even possible? That's the confusing part to me. 

There was already stock in the system, which could be sold when factories were closed. They were able to shift European stock to the US. There is always slack stock in the system but this year that slack stock that would often need to be discounted was sold for normal prices.

I imagine they have been affected. Smaller production runs will still mean shortages of some sets. I imagine popular sets will be hard to find before Christmas as the lack of production earlier in the year will feed through. Luckily, there factories are highly automated and need very little staff presence, and social distancing is relatively easy in production.

 

[JintaiZ]

6 hours ago, Mylenium said:

It was also a rather costly set at 329 Euro

It's only 299 USD, so I guess it's called unfair pricing...

[MAB]

26 minutes ago, JintaiZ said:

It's only 299 USD, so I guess it's called unfair pricing...

Prices vary across Europe. It was 299 Euro in some countries. And remember that this price includes VAT / tax, whereas US prices do not.

 

[JintaiZ]

49 minutes ago, MAB said:

Prices vary across Europe. It was 299 Euro in some countries. And remember that this price includes VAT / tax, whereas US prices do not.



 

True. However, The US price is still cheaper after all...

[Mylenium]

4 hours ago, Lego David said:

They had to close several factories, all of the Brand Stores were closed for a few months, LEGO sets have been delayed, overall production is down, yet they still walked away from this pandemic completely unharmed? COVID-19 has had a devastating effect on the global economy, and it affected all corporations (some more than others, but still). Despite all this, they still managed to not only not be affected, but they even grew their profits compared to last year. How was this even possible? That's the confusing part to me. 

Nothing magic here. LEGO operates with a "rolling production system", meaning they're always several weeks or months even ahead. After all, it takes time to get stuff from the factory to your little corner shop, anyway. Also there was a lot of stock already in the pipeline, so for a while at least retailers had reserves to fall back on. Additionally you have to keep in mind that production is highly automated. A robot doesn't care moving from a two-shift to a three-shift around the clock production scheme and compared to other kinds of products they started out with limited personnel to begin with, allowing them to maneuver around certain restrictions. It's easy to uphold distancing rules when there's only two operators/ mechanics taking care of a hundred injection molding machines even under normal conditions. Their biggest hurdle likely was when borders were shut and they couldn't move stuff around from their production facilities e.g. in Billund or Bratislava to their packaging facility in Poland, which luckily resolved itself relatively quickly. Had this lasted longer, they sure would have felt it. Everything else is more or less a side-effect of the whole CoViD 19 crisis - prices are relatively stable, stuff is in high demand and there were a lot of expensive sets. Again, how substantial and sustainable this growth is will have to prove itself next year once all the negative factors of the current economy really will show.

Mylenium

[JintaiZ]

1 hour ago, Mylenium said:

Nothing magic here. LEGO operates with a "rolling production system", meaning they're always several weeks or months even ahead. After all, it takes time to get stuff from the factory to your little corner shop, anyway. Also there was a lot of stock already in the pipeline, so for a while at least retailers had reserves to fall back on. Additionally you have to keep in mind that production is highly automated. A robot doesn't care moving from a two-shift to a three-shift around the clock production scheme and compared to other kinds of products they started out with limited personnel to begin with, allowing them to maneuver around certain restrictions. It's easy to uphold distancing rules when there's only two operators/ mechanics taking care of a hundred injection molding machines even under normal conditions. Their biggest hurdle likely was when borders were shut and they couldn't move stuff around from their production facilities e.g. in Billund or Bratislava to their packaging facility in Poland, which luckily resolved itself relatively quickly. Had this lasted longer, they sure would have felt it. Everything else is more or less a side-effect of the whole CoViD 19 crisis - prices are relatively stable, stuff is in high demand and there were a lot of expensive sets. Again, how substantial and sustainable this growth is will have to prove itself next year once all the negative factors of the current economy really will show.

Mylenium

I see some negative factors of the economy, but more people will get building during the pandemic...

[Mylenium]

16 minutes ago, JintaiZ said:

but more people will get building during the pandemic...

Will they make up for potential losses due to other people not being able to afford stuff? That is quite literally the 100 million question. The simple truth of the matter is that CoViD-19 will have some ugly long-term repercussions and no matter how you spin it, a lot of companies are going to feel the impact. Will LEGO be among those? Hard to tell, but to me it seems certain that they need to change things up. Selling people a 400 Euro Diagon Alley, a 350 Euro Lambo, several expensive Star Wars sets and on top of it a 250 Euro pair of co-branded Adidas sneakers may not prove a viable strategy in 2021 and they may need to go back to frying smaller fish, meaning sell more smaller, more affordable sets in larger quantities rather than relying on short income peaks based on hype cycles for luxurious products.

Mylenium

[JintaiZ]

51 minutes ago, Mylenium said:

Will they make up for potential losses due to other people not being able to afford stuff? That is quite literally the 100 million question. The simple truth of the matter is that CoViD-19 will have some ugly long-term repercussions and no matter how you spin it, a lot of companies are going to feel the impact. Will LEGO be among those? Hard to tell, but to me it seems certain that they need to change things up. Selling people a 400 Euro Diagon Alley, a 350 Euro Lambo, several expensive Star Wars sets and on top of it a 250 Euro pair of co-branded Adidas sneakers may not prove a viable strategy in 2021 and they may need to go back to frying smaller fish, meaning sell more smaller, more affordable sets in larger quantities rather than relying on short income peaks based on hype cycles for luxurious products.

Mylenium

There's some cheap sets that almost anyone can afford...

[jxu]

From personal experience, my local mall (King of Prussia, a massive mall that has many luxury stores) is just as full as it was before, only with people wearing masks. The LEGO store looks just as busy as usual and even had a line forming at one point due to the social distancing regulations. And the store has Pick a Brick wall open, just you have to ask the employee to do it for you. So in my well off area, business in the mall and grocery stores is as if there were no pandemic at all.

Now I'm not really in touch with young kids nowadays but I have never seen kids ever talk about Ninjago. My parents and I always saw Lego City stuff as way overpriced. The most interesting were always the licensed sets and for me, Technic and Mindstorms (niche interest). Maybe my perception is warped but the licensed stuff like Star Wars always seemed more justifiably priced than Lego City (you pay for the recognizable characters).

 

Edited September 3, 2020 by jxu

[TeriXeri]

6 hours ago, jxu said:

Maybe my perception is warped but the licensed stuff like Star Wars always seemed more justifiably priced than Lego City (you pay for the recognizable characters).

City certainly is priced much worse in USA, but in Europe , varies per country, Star Wars (and some other licenses) sets are really much higher instead.

Edited September 3, 2020 by TeriXeri

[jxu]

I was reading the comments on the article, and some people said if TLG is doing so well, they should have no excuse for poor quality control, slow support response time, and out-of-stock items...

[MAB]

18 hours ago, Mylenium said:

 Hard to tell, but to me it seems certain that they need to change things up. Selling people a 400 Euro Diagon Alley, a 350 Euro Lambo, several expensive Star Wars sets and on top of it a 250 Euro pair of co-branded Adidas sneakers may not prove a viable strategy in 2021 and they may need to go back to frying smaller fish, meaning sell more smaller, more affordable sets in larger quantities rather than relying on short income peaks based on hype cycles for luxurious products.

Before the pandemic, they weren't selling 300 - 400 Euro sets to poorer people. I doubt that many richer people will be losing jobs after the pandemic.

[TeriXeri]

7 hours ago, jxu said:

I was reading the comments on the article, and some people said if TLG is doing so well, they should have no excuse for poor quality control, slow support response time, and out-of-stock items...

Quality Control is certainly a valid issue, the other 2 are caused directly by Covid.

[Mylenium]

4 hours ago, MAB said:

I doubt that many richer people will be losing jobs after the pandemic.

Don't be naive! Of course even people from upper middle to high-income ranges will lose jobs. Companies are culling jobs left and right already here in Germany and things will get much worse when protections on bankruptcy and all that run out. And the situation elsewhere in the world is even more severe, including the US. People are already fleeing NY because they no longer can't afford to live there and I would predict that things get a lot worse still. I doubt this will completely pass by LEGO then. Of course there will always be a very narrow margin of people who couldn't give a care in the world, but a bunch of billionaires isn't going to make up for all those middle-class people not being able to afford much...

Mylenium

[jxu]

High income jobs are usually white collar jobs that can be done from home, making layoffs much less common.

People are also fleeing US cities due to the current political situation and protests.

[MAB]

On 9/4/2020 at 4:15 PM, Mylenium said:

Don't be naive! Of course even people from upper middle to high-income ranges will lose jobs. Companies are culling jobs left and right already here in Germany and things will get much worse when protections on bankruptcy and all that run out. And the situation elsewhere in the world is even more severe, including the US. People are already fleeing NY because they no longer can't afford to live there and I would predict that things get a lot worse still. I doubt this will completely pass by LEGO then. Of course there will always be a very narrow margin of people who couldn't give a care in the world, but a bunch of billionaires isn't going to make up for all those middle-class people not being able to afford much...

Mylenium

OK, comparatively, I doubt many richer people will be losing jobs compared to poorer people. If a significant number of people in middle classes cannot afford to buy LEGO, then LEGO prices will drop. LEGO only really does two things - make bricks and sell bricks - and those two are strongly linked. If they cannot sell bricks as now, then they will have to come up with ways of selling them. If cost is prohibitive, then they will need to cut the prices.

 

[Mylenium]

On 9/4/2020 at 11:40 PM, jxu said:

High income jobs are usually white collar jobs that can be done from home, making layoffs much less common.

Not really. That's a myth. One bears no relation to the other. You know, you can't build airplanes from home and aeronautical engineers are among the best-paid jobs across the board, just to give an example. Even representatives from Google, Uber, Amazon, Netflix and so on keep repeating that they can't have people working from their home office for forever for simple practical reasons. That and Uber for instance navigating hard on the verge of total collapse. You can certainly spin this in a million ways, and there will always be winners and losers, but regardless, I think the target demographic for 200+ dollar sets is significantly going to shrink in the coming two or three years at least, not accounting for any long-term effects of the current crisis...

Mylenium

On 9/7/2020 at 12:39 PM, MAB said:

If cost is prohibitive, then they will need to cut the prices.

...but someone who has just been evicted isn't even going to buy a 50 dollar set. What was the number? 4.3 million under thread of eviction in the US in the next six months alone...? The numbers are staggering and you can find similar statistics elsewhere. And not to put too fine a point to it, but the UK has created its own extra big pile of poop with all the Brexit nonsense, which clearly is also going to hit some people where it hurts...

Mylenium