TLG's disappointing 2017 financial performance

[koalayummies]

3 minutes ago, fred67 said:

Well, I know I said $0.50 premium, but looking at it as just $0.50 is not the intention - it's looking at it as a premium relative to what the price should be. $0.50 on $3.00 (last time I cared, that's what they were going for) is 1 sixth, or more than a 15% premium.

Yes I understand that if that percentage of overpricing carried throughout the product range then that would be substantial especially for the higher priced items, but that I had not personally seen the stated overpricing so I couldn't really speak to it however simply adding to the discussion of overpriced items and lack of sales that I had seen and purchased some Lego on sale from them for ~41% off. I'll take the word that they overpriced. I must have skipped over all above MSRP items without really taking mental note of the amount of pricing disparity.

30 minutes ago, zoth33 said:

As far as Toy R Us in the US not all stores are closing.  They are keeping the one in waterbury CT open. 

The news being discussed is from the past ~48 hours and indeed they are looking at full liquidation, all stores, possibly as early as next week.

[fred67]

Yes - well, I only bought LEGO from TRU if it was on sale.  Some of the sets were MSRP.  Some were up-priced.  I avoided shopping there.

[Echo]

I definitely agree with the idea that they have self-cannibalized their own sales with too many products. Two oversized movie lines plus Nexo Knights plus Star Wars plus Superheroes results in a lot of action theme items competing with each other. Probably need to diversify the offerings a bit to make them different enough from each other to not compete with each other. The licensed stuff can't really be changed, so I'd recommend that the next non-licensed big bang theme be a constraction theme. I don't have any recommendations on the specifics of how it should be done, but constraction is an established successful model when it has the proper marketing and a well-conceived story and it is different from, say, Ninjago so it therefore would not be a competitor. Like, why buy Chima or Nexo Knights when the already established and popular Ninjago is already there with similar styles of sets and recognizable characters? Make something different. 

[MAB]

Constraction would compete with the licensed buildable figures in SW though. Although that may be a reason to get rid of them, as many Lego SW fans don't like them (aside from the non-human head ones like Vader and stormtroopers).

If there is a business case for a new constraction line, it could run alongside any other big bang themes anyway, as the fan base is different enough.

[x105Black]

TRU certainly charged a premium.  Depending on the set, I've seen anywhere from $0.50 - $5.00 upcharges.  They did often have sales and coupons, as well as their membership and credit card for additional discounts, but typically they were more expensive than other retailers.

LEGO could diversify their offerings by adding in a medieval line of products...  Maybe bring back Castle...

[r5-j2]

On ‎09‎/‎03‎/‎2018 at 4:47 PM, Blk69 said:

What....TRU is closing in the UK?  That's not good.  Keep hearing Lego is being sold for a discount, that is not true in the US.  Walmart and Target will knock a few dollars off some city sets, but nothing you really would want.  

My local store has huge areas of empty shelving taped off, almost like a crime-scene. There isn`t a single Lego brick left to be seen anywhere .What I noticed was some tatty looking old fashioned shelving , that I actually helped to assemble 14 years ago ,still sitting exactly as it was when I worked for them. So obviously Toys r Us U.K. truly liked to maximise their profits, not just thru pricing, but by also spending little or nothing on their outlets; ..which has ultimately led to their downfall !

Edited March 11, 2018 by r5-j2

[koalayummies]

Decided to swing by a TRU today as there may not be another chance. Lots of sales, buy 1 get 1 40% off, straight 20% off and so on.

Being a fan of Lego isn't synonymous with liking TRU but full closure is bad for Lego and thus bad for the fan. Will Lego survive, obviously, but its going to have an effect even if those ambivalent about the demise didn't shop there.

"Toys 'R' Us could go out of business next week. That's bad news for Lego and Barbie"

http://money.cnn.com/2018/03/09/investing/toys-r-us-closing-hasbro-mattel/index.html

[koalayummies]

Cleaning up that quotation conglomeration is a bit of a hassle; appreciate the effort to make the distinction between what you are responding with in bold but since its all in the same quote box attributed to my name there is still potential for confusion. Please take more care when quoting. You can quote the same post multiple times for multiple quote bubbles and delete the segments you want to respond to individually in succession as opposed to typing directly in the quotation box attributed to other members.

Like this:

3 hours ago, Blk69 said:

 Not in the Midwest, TRU (at the store) is consistantly 5 to 10% higher priced than the Lego Store for Speed Champions

You're quoting from a post from several days ago when the conversation has since progressed and since then I said: I'll take the word that they overpriced; while also having personally experienced rather fantastic sales. I can say I saw plenty of sales and rarely if ever noticed overpricing while you can say SC was overpriced. Both statements can be accurate. I wouldn't know about SC, I've only ever bought one and that section at TRU is rather small due to it being a rather small theme. Maybe they charged more for SC specifically because its not as big a seller in their stores in relation to the demand for shelving space and the other larger more in-demand themes.

3 hours ago, Blk69 said:

Lego is supposed to be fun.  Anything I post, moc or whatever is to be freely enjoyed.  If someone whats to copy one of my moc, and someone else what to buy it an enjoy it....great.  That is why I posted it in the first place.  This is a hobby. If you are a reseller or planning to make a living off of Lego...more power to you, just don't get you panties in a bunch when I am not that excited about paying stupid prices for retired sets or some plans that I could just figure out myself.  

Don't take it as a personal transgression when someone disagrees with you or shares information that asserts the opposite or points out a fact about one's actions that may cause a moral quandary, so ease up with the sexist microagression.

Edited March 14, 2018 by koalayummies

[Maple]

While I agree that a small sales slump from a HUGE growth period is not an issue and LEGO is over reacting, I'll bring up the point, sets suck.

The set designs are awful. Play and set design no longer matter, it's all about minifigures. There are too many wall sets that have just a wall and some figures. Power Puff Girls is he same, bad set designs, all about the figures. Jurassic World, random fences, a dinosaur and some figures.

NinjaGo used to be creative, the Movie sets are different, but then LEGO fell back and it seems the same as always again. Not as bad as license sets and their walls, but still boring.

Get back to basic set designs and less baout minifigures. Also the quality of pieces and figure printing is the worst I have ever seen it, LEGO needs to increase the quality again otherwise I will just buy knockoffs, which as really awesome and much cheaper.

[MAB]

16 hours ago, Blk69 said:

We will see, keep an eye on how TLG continues to react, they dropped a large percentage of their work force on a relatively slight downturn in product sales.  They wouldn't brace themselves like this if not predicting more hurdles in the near future.

1

It wasn't that large a percentage of their staff that they have dropped (roughly 8% on roughly 5% downturn). Of course, it is terrible for those that have been let go though.

 

But consider that they expanded staff numbers very rapidly in 2015-16 on their expected growth, and their staff numbers now are still larger than they were two years ago. I don't know which departments the staff are being cut from (probably multiple), but I imagine many of them wouldn't have been working there that long.

11 hours ago, Maple said:

The set designs are awful. Play and set design no longer matter, it's all about minifigures.

Get back to basic set designs and less baout minifigures. Also the quality of pieces and figure printing is the worst I have ever seen it, LEGO needs to increase the quality again otherwise I will just buy knockoffs, which as really awesome and much cheaper.

7

There are loads of excellent sets still, ranging from well designed sets with no minifigures through to ones that are mainly about the minifigures. The buyer has huge choice.

Figure printing (detail) is way better now than at any time I can remember, plus we have two colour molded arms and legs.

 

If you are a knock-off fan, then that's fine, buy knock-offs.

[Lyichir]

2 minutes ago, MAB said:

It wasn't that large a percentage of their staff that they have dropped (roughly 8% on roughly 5% downturn). Of course, it is terrible for those that have been let go though.

 

But consider that they expanded staff numbers very rapidly in 2015-16 on their expected growth, and their staff numbers now are still larger than they were two years ago. I don't know which departments the staff are being cut from (probably multiple), but I imagine many of them wouldn't have been working there that long.

Unfortunately, some of the areas that were cut were ones that focused on the AFOL community. Both Kevin Hinkle and Paul Striefler from the community team here in North America lost their jobs as part of the cuts (Paul, at least, was rehired for another job in the company).

I don't fault Lego for adapting to the downturn, but it sucks that even long-serving employees who were some of the greatest ambassadors of goodwill for the company got caught up in it...

[Maple]

1 hour ago, MAB said:

Figure printing (detail) is way better now than at any time I can remember, plus we have two colour molded arms and legs.

You act like everything you say is fact, like you are God of LEGO. Have you bought 2018 sets? The printing on minifigures is the worst I have ever seen it. There isn't enough paint. And I know it's not a one off thing because Jangbricks has complained about it a lot and even Brickset. And I will continue to by knockoff figures, thanks for the permission. Amazingly the printing on them is normally good, the print on the torso and hips actually match and don't have a gap, plus I don't need to spend $200 on Duckpool.

[MAB]

So if I say something is better now and you say something is worse than at any time, then I act like everything I say is fact, whereas you don't?

I agree print could be thicker, especially for white print on dark parts. But that is not new, it has been going on for years now. It is just that we see it more because of the increased number of colours they use in the detail prints.

And yes, the print on knock-offs is normally fine, although some can be terrible.

25 minutes ago, Maple said:

plus I don't need to spend $200 on Duckpool.

 

Which suggests it is a secondary market cost issue rather than a quality issue. If you can get a good enough fake for $1 instead of $200 then go for it, if you don't mind fakes. You can apply the same logic to a $50 secondary market figure, it is better to save $49 and get the fake. Same with a $2 figure, get the $1 fake instead.

1 hour ago, Lyichir said:

Unfortunately, some of the areas that were cut were ones that focused on the AFOL community. Both Kevin Hinkle and Paul Striefler from the community team here in North America lost their jobs as part of the cuts (Paul, at least, was rehired for another job in the company).

I don't fault Lego for adapting to the downturn, but it sucks that even long-serving employees who were some of the greatest ambassadors of goodwill for the company got caught up in it...

Yes, I had heard some community staff were going - I guess this is because LEGO feel they have enough community interaction with the staff they have left and also that they need to focus less in this area these days - they are essentially preaching to the converted here.

Similarly, I have heard of some retail staff going, but then when you see what some of the shop floor staff are doing in stores, it is understandable. Often there is a meet and greet type person, but occassionally three or four are standing around in the doorway not doing much, even when tills are short staffed and there are queues to pay or shelves to replenish. Probably the local manager's fault more than anything, but it shows excess staff or wrongly assigned staff.

 

[KotZ]

5 hours ago, Maple said:

You act like everything you say is fact, like you are God of LEGO. Have you bought 2018 sets? The printing on minifigures is the worst I have ever seen it. There isn't enough paint. And I know it's not a one off thing because Jangbricks has complained about it a lot and even Brickset. And I will continue to by knockoff figures, thanks for the permission. Amazingly the printing on them is normally good, the print on the torso and hips actually match and don't have a gap, plus I don't need to spend $200 on Duckpool.

I've been pretty happy with the printing so far in the past year. The details are very good, but MAB hit on the white paint which has always been an issue.

5 hours ago, MAB said:

Similarly, I have heard of some retail staff going, but then when you see what some of the shop floor staff are doing in stores, it is understandable. Often there is a meet and greet type person, but occassionally three or four are standing around in the doorway not doing much, even when tills are short staffed and there are queues to pay or shelves to replenish. Probably the local manager's fault more than anything, but it shows excess staff or wrongly assigned staff.

Absolutely a local issue. You can easily say the same thing about any store in any business. Luckily, my local LEGO store is well staffed on weekends when kids are running around.

[koalayummies]

On 3/13/2018 at 6:18 PM, Blk69 said:

Yes, glad we can agree Lego's in general are overpriced.

That is not what was said, you've missed the context of the ongoing conversation (which was quoted for the very reason of context). It was regarding TRU specifically, not Lego in general. I don't think Lego is overpriced, so no, we don't agree.

On the one hand there are some issuing the defense of supporting, praising and purchasing counterfeit products by arguing that it fosters competition while at the same time disregarding the impact on choice of vendor and pricing competition that will result when a company that represents at least 20% of the toy retail market is gone (now officially beginning liquidation) sending nearly a quarter of the toy market's sales to be divvied up among the three already-Goliaths of retail (Amazon, Walmart and Target), resulting in less competition, not more. Contradictory sentiments. Is it really about promoting competition or is that argument just a shroud for one being disappointed that they didn't get the deal they wanted on the specific City and Speed Champions items they wanted from that one retailer. Well it doesn't matter anymore because now there's one less option, vendor and thus less competition.

Edited March 15, 2018 by koalayummies

[Faefrost]

Press F to pay respects!it’s pretty much official ToysRUs is going to begin liquidation tomorrow morning in court. They let the employees know they are boned this afternoon. Stick a fork in it, it’s done. With UK already closing all and Canada and Europe in equally bad shape. They are hoping for a buyer for the profitable Asian operation. 

This will have a huge impact on Lego. It will be a loss of at least 15% of their sales channel. Plus figure a fairly good number of Lego employees were specifically tasked to TRU. The product managers doing the constant store walk through and insuring restocks, orderliness etc in the Lego aisles. The sales and distribution people that serviced TRU. As much as it sucks without another retail chain on the horizon, most of those will be looking at layoffs by months end. It’s not like Lego is going to get paid for anything from TRU anymore. The only employees they will have focused on TRU will be Lawyers. Some TLG employees may grab slots servicing Walmart, Target or Lego stores. Maybe Amazon sites. But none of those will need the shear volume of dedicated staff that TRU needed. 

[koalayummies]

25 minutes ago, Faefrost said:

Plus figure a fairly good number of Lego employees were specifically tasked to TRU. The product managers doing the constant store walk through and insuring restocks, orderliness etc in the Lego aisles. The sales and distribution people that serviced TRU.

I thought that's what I saw. A woman wearing a Lego logo shirt with a spreadsheet checklist organizing the Lego aisles at TRU with a shopping cart containing damaged/returned boxes. The Lego section never looked so perfect . I am saddened for them at this news as I am all TRU employees and the giraffe I grew up loving.

[TeufelHund]

Looks like Toys R US in Australia might be closing down too.

My kids both have their birthdays in late January (that's what happens when date night is the same time every year, I guess) – I went to find what they wanted at Toys R Us and the shelves were still bare weeks after Xmas. Ducked into the local Toyworld and they had already restocked with all the latest and greatest. Guess where my money went?

The loyalty system here in Australia at Toys R US is terrible (it works out to a $5 return for every $1000 spent!), no click and collect option ordering online, no free shipping until recently (although you need to spend $130 to qualify), some products sold above RRP and Lego exclusives often available in too limited quantities to meet demand. I'm not really going to miss them.

[BrickJagger]

52 minutes ago, Faefrost said:

This will have a huge impact on Lego. It will be a loss of at least 15% of their sales channel.

Lego is in trouble. Between pretty much all of what @Maple said being true and TLG's slumping financial performance, they need a big change, and quick. Personally, if they were to stop acquiring the newest garbage licenses just to pump out a wave or two and leave it at that, they would be selling more than they are now. None of Jurassic Walls: Fallen Walls interests me, nor do the Powerpuff Girls or Unikitty's brick-built series of manufactured creativity. This is going to bite them in the long run, and I wish more people took notice of that fact.

They've gotten so far away from their company message and values that 2003 is beginning to look like a company renaissance. If near-bankruptcy for a second time is what it takes to right the ship, so be it. Not trying to be a downer but even TLG still looks to be okay at the current moment, all signs are pointing to a sharp downward spiral. 

To me, TRU represents the biggest pillar of the toy industry. It is solely devoted to toys, and nothing else. There isn't even that much of an emphasis placed on video games or gaming consoles. Just regular toys. When TRU falls, the toy industry will not be in crisis but certainly will be in a danger zone. Lego, Mattel and Hasbro will survive for the time being, but smaller companies will all but go out of business because of TRU shutting down. Those Big 3 companies need to make sure that they don't get outflanked by technology and find a way to appeal to the newest generation of kids, or else they will all go under.

[Faefrost]

2 hours ago, TeufelHund said:

Looks like Toys R US in Australia might be closing down too.

My kids both have their birthdays in late January (that's what happens when date night is the same time every year, I guess) – I went to find what they wanted at Toys R Us and the shelves were still bare weeks after Xmas. Ducked into the local Toyworld and they had already restocked with all the latest and greatest. Guess where my money went?

The loyalty system here in Australia at Toys R US is terrible (it works out to a $5 return for every $1000 spent!), no click and collect option ordering online, no free shipping until recently (although you need to spend $130 to qualify), some products sold above RRP and Lego exclusives often available in too limited quantities to meet demand. I'm not really going to miss them.

I'm jealous that you friends down under still have a major competitor to Toys R Us to fall back on. Here in the US and Canada, ToysRUs was the last Toy store standing. They drove under Child World, Play World, KB Toys, Heck they bought FAO Schwartz once the worlds greatest toy store and destroyed it within a year or two. So all we had was TRU and it's stale sterile corridors of toys. (largely unoccupied by anything that might pass for a retail employee capable of operating the cash register...). I hope we get something rising in its wake. Maybe a group such as the Family Oriented Hobby Lobby could take a stab at building out a regional toy store using their HL model of taking over failed big box stores. 

2 hours ago, BrickJagger said:

Lego is in trouble. Between pretty much all of what @Maple said being true and TLG's slumping financial performance, they need a big change, and quick. Personally, if they were to stop acquiring the newest garbage licenses just to pump out a wave or two and leave it at that, they would be selling more than they are now. None of Jurassic Walls: Fallen Walls interests me, nor do the Powerpuff Girls or Unikitty's brick-built series of manufactured creativity. This is going to bite them in the long run, and I wish more people took notice of that fact.

They've gotten so far away from their company message and values that 2003 is beginning to look like a company renaissance. If near-bankruptcy for a second time is what it takes to right the ship, so be it. Not trying to be a downer but even TLG still looks to be okay at the current moment, all signs are pointing to a sharp downward spiral. 

To me, TRU represents the biggest pillar of the toy industry. It is solely devoted to toys, and nothing else. There isn't even that much of an emphasis placed on video games or gaming consoles. Just regular toys. When TRU falls, the toy industry will not be in crisis but certainly will be in a danger zone. Lego, Mattel and Hasbro will survive for the time being, but smaller companies will all but go out of business because of TRU shutting down. Those Big 3 companies need to make sure that they don't get outflanked by technology and find a way to appeal to the newest generation of kids, or else they will all go under.

The trouble is largely from things outside of Lego's direct control. But even with that they will have to trim sails a bit. There will be layoffs. As I said above the TRU supporting team is gonna be let go. This will repeat at Hasbro and Mattel, The nature of their products will have to change a bit to better fit the new retail Landscape. They have less shelf space to work with in Walmart than they did with TRU. Although that may change. The problem with TRU was not the bottom dropping out of the Toy Market. It was unsustainable debt. Loans they could not service. A $400 Million loan payment due in April. Other vendors can and will grab a piece of that. 

Lego is actually better situated then their competitors. They have a good direct market system of several hundred retail specialty stores, a robust web shop and good penetration of and integration with Amazon. Some of which is even supported by third party communities, such as Brickset.com's daily Amazon discount list and links. Lego will feel some pain. They will need to contract a bit. A lot of positions will be laid off sadly. But they will survive and expand back stronger. Hasbro is in a similar position to Lego. They have a bit more resources, but they have a lot of valuable IP to use for movies etc. So they have alternate paths to profit. Mattel is rather hosed I think. They need to merge with somebody. They are too big but lack Lego and Hasbro's alternate pathways to sales and profit. Their distribution channel is currently a mess and they are overextended in places. A huge amount of their product had become exclusive to TRU. And TRU owes them a ton of money. Plus they are publicly traded and their stock is in free fall. Of the other mid tier players. Nerf and Playmates will take a hit but survive on the backs of Walmart and Target. 

[Artanis I]

If I was formerly a TRU customer I would become a customer somewhere else. Apart from the immediate losses due to the bankrupcy, I don't see how TLG is really in such a bad long-term position over it. It's not like people need to walk into a dedicated toy shop to discover or remember Lego. All their products are available elsewhere too. Particularly in USA with so many Lego stores. Maybe business will go up in those.

An entirely different story for other companies & products.

 

3 hours ago, TeufelHund said:

The loyalty system here in Australia at Toys R US is terrible (it works out to a $5 return for every $1000 spent!), no click and collect option ordering online, no free shipping until recently (although you need to spend $130 to qualify), some products sold above RRP and Lego exclusives often available in too limited quantities to meet demand. I'm not really going to miss them.

Also, they wouldn't deliver to any islands. So for those who lived in the state that is entirely islands and has no physical store, even online purchases weren't possible. Remarkable.

[Robert8]

How do you think all this is going to affect the release of the LEGO Movie Sequel?

 

[Maple]

1 hour ago, Artanis I said:

If I was formerly a TRU customer I would become a customer somewhere else. Apart from the immediate losses due to the bankrupcy, I don't see how TLG is really in such a bad long-term position over it. It's not like people need to walk into a dedicated toy shop to discover or remember Lego. All their products are available elsewhere too. Particularly in USA with so many Lego stores. Maybe business will go up in those.

Also, they wouldn't deliver to any islands. So for those who lived in the state that is entirely islands and has no physical store, even online purchases weren't possible. Remarkable.

LEGO in a TRU was presented in a way that was special, at least at my TRU. Target and Walmart are just a few sets on a shelf, TRU had style. But right off the bat LEGO is losing millions from the fact TRU went bankrupt because TRU owed LEGO 26 million dollars (Someone look that up to double check that).

I hate TRU, it's run horribly. However we got store exclusives there, like the Brick-tober sets, the creepy giraffe about to eat the children set. Now what happens to that? Does Target or Walmart get the exclusive sets planned for this fall and next year or do we really get in trouble and now the sets will only be at S@H and never go on sale.

There is only one state that is a group of islands and not shipping there isn't as uncommon as you might thing.

[Carrera124]

On 6.3.2018 at 12:01 PM, AmperZand said:

 

It was already known that the company had had disappointing sales in North America, but the article also points out over-production issues. There is a connection between poor sales and over-production of course, but some of the excess stock may be in addition to lower-than-expected sales.

 

Imho, prices and quality don't match. Prices are rising and rising, but the quality doesn't improve.

Many sets use poor stickers instead of printed parts.
Tolerances of the parts are worse than in the 80s:
http://www.brickshelf.com/cgi-bin/gallery.cgi?f=12182
 

I guess that quite a rising number of people decided not to buy new sets because of these reasons. Or that they decided to buy sets only when they are for sale.

[MAB]

6 hours ago, BrickJagger said:

Lego is in trouble. Between pretty much all of what @Maple said being true and TLG's slumping financial performance, they need a big change, and quick. Personally, if they were to stop acquiring the newest garbage licenses just to pump out a wave or two and leave it at that, they would be selling more than they are now. None of Jurassic Walls: Fallen Walls interests me, nor do the Powerpuff Girls or Unikitty's brick-built series of manufactured creativity. This is going to bite them in the long run, and I wish more people took notice of that fact.

 

1

If they didn't do Jurassic Walls stuff, or Powerpuff Girls or Unikitty, what would they be selling in their place? I expect an in-house dino theme could replace JWFW, although it is likely then that another brick brand would pick up the license and have their licensed competing brand on the shelves next to LEGO's own dino series, making LEGO look like a knock-off of the "real thing" when the movies are out. It's not clear to me what would replace Powerpuff Girls or Unikitty though. If they didn't have PG, then they probably wouldn't be selling much else to the demographic that buys those. And Unikitty is an in-house theme, just with a cartoon. In that sense, no different to Ninjago - something deveoped in-house that is popular enough to warrant a cartoon, which in turn builds sales that might not otherwise occur.