LEGO half year financial report

[ArneNielsen]

LEGO just released their half year report. Substantial growth in sales, but also growth in expenses, mainly due to heavy investments in the Chinese market.

Of special interest is the statement, that the biggest sales are in 4 themes: LEGO City, LEGO Technic, LEGO Star Wars, and The LEGO Movie 2.

Link to a Danish news website (in Danish only): https://www.dr.dk/nyheder/penge/milliarderne-ruller-ind-hos-lego-men-der-bruges-penge-i-billund-som-aldrig-foer

[MAB]

https://www.lego.com/en-us/aboutus/news-room/2019/september/interim-results-2019/

In English here. hey also mention Friends, Creator and Ninjago. Plus specifically mention Marvel.

 

Top selling themes in the first half of the year were a mix of homegrown favourites and partner IPs.  In no particular order they were LEGO® City, LEGO Creator, LEGO Friends, LEGO NINJAGO, LEGO Technic and LEGO Star WarsTM. LEGO Marvel Avengers sets performed especially strongly and LEGO Movie 2 products also contributed to consumer sales growth.

Note that there is also some good news for Dutch fans - a Flagship Store in Amsterdam, coming December this year.

 

 

Edited September 3, 2019 by MAB

[Robert8]

I'm glad to see The LEGO Movie 2 was a top seller!

[TeriXeri]

LEGO Friends uses a Castle icon in the infographic , interesting choice.

[Lego David]

Apparently they won with 300 million less compared to last year... and it was the smallest profit from the past 6 years. 

And though sales have exploded in China, they got weaker in Western Europe and US.

So yeah, I am not entirely sure if they are doing incredibly well at the moment.

4 hours ago, ArneNielsen said:

Of special interest is the statement, that the biggest sales are in 4 themes: LEGO City, LEGO Technic, LEGO Star Wars, and The LEGO Movie 2.

They were listed in no particular order, so Ninjago and Marvel Super Heroes also count there.

Edited September 3, 2019 by Lego David

[Darnok]

10 hours ago, ArneNielsen said:

Of special interest is the statement, that the biggest sales are in 4 themes: LEGO City, LEGO Technic, LEGO Star Wars, and The LEGO Movie 2.

They were not listed in order. Also note that the statement on the Lego page is that "LEGO Movie 2 products also contributed to consumer sales growth". Well of course they did - with the first set sold they already achieve that! So specifically mentioning it, while also not singling it out as something special (unlike the SW line) rather suggests to me that the TLM2 sets did poorly, and this is just an attempt to gie it some last-minute attention.

 

I am pretty curious to see how TLG caters to the India market, if at all. They did some spectacular sets for the Chinese market, so we might see something similar for 2020?

[hagridshut]

I am glad that the City and Creator themes are doing well.  

Although I am mostly a Space fan, I think many of the City and Creator sets are well thought out and fun for kids.  Specifically, I like the Artic explorers, Mountain adventurers, and multi-configuration buildings in the 3-in-1 series (like the Skate Park and Sweet Surprises).  Really great models, and nice pieces for kids to create their own builds. 

Although I am not a huge Marvel fan, and I know that many of the Marvel sets have been heavily criticized here, I also think that these rate high on the kid "fun" scale.  I bought the Iron Man Hall of Armor, which has a very nice collection of pieces that I used to help construct a machine shop MOC.   I don't know any of the plot behind the Thanos Ultimate Battle and Molten Man sets, but I they look very interesting to me.  

[ks6349]

Hope the Chinese oriented creator expert modular buildings will be released soon.

Tired of the current style of creator expert building like diner downtown etc

[skinkfem]

If they consider this report bad just wait til they get the next one. Making controversial changes to the WIP program and fudging up the B&P/PAB parts of the site (possible all of the site) are bound to tank the numbers. (presuming Lego.com is a major part of their numbers that is)

[Mylenium]

On 9/3/2019 at 11:33 AM, ArneNielsen said:

Substantial growth in sales, but also growth in expenses, mainly due to heavy investments in the Chinese market.

Kind of a bubble effect. The rest of the numbers doesn't really look that sexy. If I was a shareholder, I'd begin to worry. This is the third year in a row with no substantially positive results so far and shrinking markets in Europe and the U.S., which in a thriving economic climate is not a good sign.

Mylenium

[hagridshut]

1 hour ago, Mylenium said:

Kind of a bubble effect. The rest of the numbers doesn't really look that sexy. If I was a shareholder, I'd begin to worry. This is the third year in a row with no substantially positive results so far and shrinking markets in Europe and the U.S., which in a thriving economic climate is not a good sign.

Mylenium

Fortunately for the company, it is still privately held and does not have to answer to public shareholders:

https://www.lego.com/en-us/aboutus/lego-group

"The LEGO Group is a privately held company based in Billund, Denmark.  The company is still owned by the Kirk Kristiansen family who founded it in 1932."

As far as I know, economies in Europe are stagnating, and the U.S. is still in a period of modest growth.  However, average Americans are financially not much better off than they were decades ago, and some segments of the population are doing much worse economically.  In this context, LEGO's relatively stable business with modest growth is ok IMO, considering that they make high-end toys.  

[ShaydDeGrai]

Just now, hagridshut said:

However, average Americans are financially not much better off than they were decades ago, and some segments of the population are doing much worse economically.

Yeah, there's been a lot of propaganda about how "great" the US economy is doing (and for a small sliver of the population who control 50% of the wealth it is) but large chunks of the population aren't seeing it. They brag about low unemployment while glossing over the fact that some people are working three jobs just to pay the rent.  They talk about how the _average_ household income has grown and hope that no one realizes that the _typical_ person has more than the _average_ number of legs for a human being.  Meanwhile debt (personal, corporate and national) grows at a ridiculous rate.  Oh well, how does that saying go - Lies, Damned Lies and Statistics...

I just hope the current president doesn't realize that TLG has factories in Mexico and China - he'd probably slap a 200% tariff on all Lego products until Denmark agrees to sell him Greenland. 

[Mylenium]

34 minutes ago, hagridshut said:

Fortunately for the company, it is still privately held and does not have to answer to public shareholders:

Regardless of how the company is incorporated, it should show some organic growth, not what can only count as stagnation. To use one of my favorite quotes from a TV series: "Stable ain't sexy." (and shrinking even less) ;) That's basically all I'm saying. Ultimately the point is that a floundering US economy hasn't had that much of a negative impact on LEGO in the past, so I would argue there might be something up, after all. Not much use debating the finer details. In the end LEGO is likely too expensive a hobby for many of us to begin with, regardless of economic status... :D

Mylenium

28 minutes ago, ShaydDeGrai said:

I just hope the current president doesn't realize that TLG has factories in Mexico and China - he'd probably slap a 200% tariff on all Lego products until Denmark agrees to sell him Greenland.

But then again, at the most basic level it's not even about the tariffs. Mr. T. will only use them as a punitive means to achieve his personal goals and what his gang of lobbyists tells him. In that scenario LEGO are simply not important enough nor are they economically particularly relevant in the grander scheme of things. Compared to other markets, selling plastic bricks is peanuts...

Mylenium

[hagridshut]

35 minutes ago, Mylenium said:

Regardless of how the company is incorporated, it should show some organic growth, not what can only count as stagnation. To use one of my favorite quotes from a TV series: "Stable ain't sexy." (and shrinking even less) ;) That's basically all I'm saying. 

Growth of 4% in absolute terms, and 2% when accounting for inflation, is still moving in the right direction.  The company's long-term investments in China and India should pay off in a few years.  The company's numbers and strategic actions do not reflect an organization that is stagnating. 

The reason I brought up the fact that LEGO Group is privately held by family owners is important.  Public corporations tend to chase short-term quarterly profits and near term growth in order to appease large institutional stock market investors, often at the expense of long-term company health and growth.  Private companies generally have more latitude to make decisions that are good for the long run, not just what Wall Street demands to pump up the next quarterly earnings report. 

Many family owned businesses make the decision not to expand beyond a certain point or beyond a certain rate of growth.  That is a legitimate business decision.  Should a family owned bakery shop keep expanding and expanding even if its owners have no interest in operations outside of their metropolitan area?  Should a veterinarian keep opening more and more animal clinics just for the sake of growing?  Expansion for the sake of expansion is not always a good thing if it comes at a cost to the people in the business, the environment, or other interests in society. 

[Lego David]

So yeah, besides opening more stores in China (which was a very smart move by the way), I don't think the company's recent marketing strategies have really paid off.

[MAB]

15 hours ago, hagridshut said:

Many family owned businesses make the decision not to expand beyond a certain point or beyond a certain rate of growth.  That is a legitimate business decision.  Should a family owned bakery shop keep expanding and expanding even if its owners have no interest in operations outside of their metropolitan area?  Should a veterinarian keep opening more and more animal clinics just for the sake of growing?  Expansion for the sake of expansion is not always a good thing if it comes at a cost to the people in the business, the environment, or other interests in society. 

LEGO are almost doing the opposite. They are expanding OUTSIDE of their traditional area (Europe and North America), but not expanding much inside. I imagine this is partially due to LEGO fatigue inside, they have probably reached a plateau in what they can sell in Europe and NA with little further growth possible. Whereas outside of Europe and NA, there is still plenty of growth as those areas become more wealthy and want these western middle class toys.

[Mylenium]

22 hours ago, hagridshut said:

Growth of 4% in absolute terms, and 2% when accounting for inflation, is still moving in the right direction.  The company's long-term investments in China and India should pay off in a few years.  The company's numbers and strategic actions do not reflect an organization that is stagnating. 

The reason I brought up the fact that LEGO Group is privately held by family owners is important.  Public corporations tend to chase short-term quarterly profits and near term growth in order to appease large institutional stock market investors, often at the expense of long-term company health and growth.  Private companies generally have more latitude to make decisions that are good for the long run, not just what Wall Street demands to pump up the next quarterly earnings report.

In so many words: Corporate BS. Sorry, but you need to read between the lines. LEGO aren't actually growing at all. All they are doing is invest a lot of money and in contrast to your claim, harvesting short term grosses from China in fact is the only thing that makes their financial report look kinda okay. Whether this will even pay off in the long-term is anyone's guess. And don't even get me started on this nonsense about traditional privately held family businesses. Those times are long past us. It's not like the Christiansen holdings would be small mom & pop shops to begin with. Their recent investment in Merlin, co-financed by Blackwater, alone should be proof enough that they are just as entangled in big finance as any other company out there with all the good and bad sides that has. Just because they're not trading publicly and the family is a majority stake holder doesn't mean anything in times such as these...

Mylenium

Edited September 5, 2019 by Mylenium
Fixed typing errors

[Toastie]

7 hours ago, Mylenium said:

Their recent investment in Merlin, co-financed by Blackwater, alone should be proof enough that they are just as entangled in big finance as any other company out there with all the good and bad sides that has.

And this is not a surprise at all, is it? A company of this size - with this amount of money they make (and toss around).

I believe that TLG is mostly concerned with: How do we secure revenues to a) stay in the market, b) pay the payrolls, c) with this product line. In that order. Well and let the big-shots buy what they want. And I sure hope, they will be able to do that for many, many decades to come.

And continuously hire people that dream the dream.

Best
Thorsten   

[BrickG]

I think there's just a bit of a bubble growing that might burst. They're really heavily invested in a lot of stuff. Some will work. I don't think others will work as well. Also the freakin' economy isn't that great in a lot of western countries.

I don't think it'll be that bad when it bursts. Nothing like that other LEGO bubble. Also it might not if the economy starts looking better (and we get rid of Trump and Brexit, getting political, whoops!).

[Mylenium]

8 hours ago, Toastie said:

And this is not a surprise at all, is it?

Sure. I never said anything different. Any company does it, even small ones.Though I have some serious doubts about how much they actually have to "toss around", given how literally every Cent is gobbled up by their fast expansion already...

Mylenium

[MAB]

1 hour ago, BrickG said:

I think there's just a bit of a bubble growing that might burst. They're really heavily invested in a lot of stuff. Some will work. I don't think others will work as well. Also the freakin' economy isn't that great in a lot of western countries.

I don't think it'll be that bad when it bursts. Nothing like that other LEGO bubble. Also it might not if the economy starts looking better (and we get rid of Trump and Brexit, getting political, whoops!).

I think it has probably already burst (in Europe and US), but they are still blowing hard enough that it doesn't show. To me, LEGO has already reached its peak popularity in Europe / North America and will not grow significantly here.

It would not surprise me at all if in ten years time there are less sets aimed at Western markets and more sets aimed at the Far Eastern market. Which might actually be a good thing for Western customers too.

 

 

[ArneNielsen]

1 hour ago, Mylenium said:

Though I have some serious doubts about how much they actually have to "toss around", given how literally every Cent is gobbled up by their fast expansion already...

You should differentiate between The LEGO Company, and the Kirkbi Foundation. It is not TLC who bought back Disneyland, it is the foundation - and the foundation DOES have a lot of money to toss around. Kirkbi gets the profits from TLC each year, as they (for tax reasons) are the actual owners of TLC, so Kirkbi has amassed a lot of money over the past 50+ years. In the years when TLC did badly, and lost money, it was Kirkbi who covered the losses, so TLC could continue.

[Darnok]

1 hour ago, MAB said:

It would not surprise me at all if in ten years time there are less sets aimed at Western markets and more sets aimed at the Far Eastern market. Which might actually be a good thing for Western customers too.

I for one would not complain at all, quite the contrary!

[Mylenium]

5 hours ago, ArneNielsen said:

You should differentiate between The LEGO Company, and the Kirkbi Foundation.

Yeah, sure, but that doesn't make the whole situation necessarily better for TLC themselves. It feels kinda messed up for all intents and purposes...

Mylenium

[Gomek]

1. I do not believe Lego Movie 2 was a top seller

2. In contrast I do believe the first Lego Movie racked up some huge sales (not only for LM sets but across the board). The big problem is it is unrealistic to think the numbers are going anywhere but down from there.

3.Lego continues to fuel the knock-off competitors by creating unreasonably priced mini-figs and unobtainable mini-figures. This will continue to take a small but noticeable bit from profits.

4. If VIP feedback is to be believed, this will also have a negative affect, though personally I don't think it will hurt them as bad as everyone else is predicting.