Building Profits With Bricks : LEGO Defies Global Meltdown
Amidst Doom & Gloom and negative results and share price meltdowns, one company has shown the way with impressive 2008 profits and growth despite its industry suffering heavily as consumer demand dropped.
Danish toy maker LEGO is that company and they have just announced their 2008 results with an impressive 32% increase in year-on-year profits and 19% increase in its revenue from 2007.
How did that come about ?
Lego said it saw strong sales in its City, Star Wars and Indiana Jones product lines, even though the global toy market declined because of the economic downturn.
The Telegraph elaborates on how this impressive result has been brought about by pointing to LEGO’s venture into well-known film brands and blockbuster movies :
Lego, which estimates that children spend 5 billion hours a year playing with its multicolored bricks, has bought licenses from movie makers including Lucasfilm and Walt Disney to fend off competition from electronic toys and computer games.
The article also highlights that some of the success in 2008 was derived, in LEGO’s own words, from the company having been through a major crisis some years before which had now put the company in a good position to weather the storm :
“We’re dodging much of the effect of the financial crisis, probably because we went through our own crisis a few years ago and now have a strong, streamlined company,” Chief Executive Officer Joergen Vig Knudstorp said.
The toymaker cut costs and more than 1,000 jobs after reporting its two biggest net losses in 2003 and 2004.
Lego’s share of the global toy market rose to a record 3.6pc last year, from 2.9pc in 2007, Mr Knudstorp said.
Global market share of the toy market rose to a record 3,6% from previous 2,9% and the company is also moderately optimistic when it comes to 2009 :
The company expects to increase its share further this year as revenue will grow between 3pc and 7pc amid a “moderate decline in the overall market, he said.
Lego’s royalty payments to license holders rose 32pc to 639 million kroner. The company also produces “Batman” and “Harry Potter” building block sets.
“We’ve had much success with ‘Indiana Jones,’ but now we’re looking for new license products,” Mr Knudstorp said. Lego will introduce its first building block sets based on a Disney Pixar animation movie in 2010, after signing a license agreement with Burbank, California-based Disney this month.
Profit next year will be “satisfactory compared with 2008’s level, when considering the global situation,” Mr Knudstorp said.
The Danish company remains privately owned and its main shareholder, Mr Kjeld Kirk Kristiansen, is according to Forbes.com now the 145th- richest man in the world with a net worth about $6.5 billion.
Not bad for a company that produces plastic bricks and who estimates that that children spend 5 billion hours a year playing with its multicolored bricks.