Lego A/S said it had shrugged off the Covid-19 pandemic and its disruption to global supply chains to strengthen its position as the world’s largest toy maker.
The Danish maker of colorful building-block sets on Tuesday reported a 46% rise in first-half sales to 23 billion Danish kroner, equivalent to $3.62 billion, while net profit more than doubled to 6.32 billion kroner.
Chief Executive Niels Christiansen attributed the company’s performance to improvements in Lego’s digital platforms and the opening of hundreds of new physical stores. Those investments over recent years had prepared the company for both the pandemic and the subsequent return of shoppers to malls and high streets, he said.
“The combined effort is starting to pay off,” Mr. Christiansen said in an interview.
The company responded to the pandemic by shifting marketing budgets to its online channels but didn’t make any significant strategic changes, Mr. Christiansen said, betting that an expanded physical retail presence would pay dividends once lockdowns began to ease.
Lego said popular themes of its tiny brick sets such as Star Wars and Harry Potter helped attract new customers, win market share and drive growth that outpaced the wider toy industry. Digital sales were up 50%.
Lego’s earnings set it apart from its competitors so far this year. Hasbro Inc. reported revenue of $2.43 billion in the first half of 2021, up 24% on last year, with profit of $93 million. Mattel Inc. lost $118 million in the Jan. to June period, though its revenues grew 43% year-over-year to $1.9 billion.
Covid-19 lockdowns and port blockages have buffeted global supply chains this year, and Lego plugged gaps by hiring new raw-material supplies at short notice, Mr. Christiansen said. The company also moved raw materials between its manufacturing bases to keep production working normally at all five of its plants, he said.
Lego is experiencing disruption on a daily basis but “we are coping,” he said. Despite concerns of shortages of toys and other goods in the run-up to the Christmas holiday period, Mr. Christiansen said Lego was confident of being able to meet demand in all its markets.
He also said that Lego wouldn’t put up prices despite global supply-chain issues.
In contrast, Hasbro Chief Executive Brian Goldner said earlier this year that the maker of Transformers, My Little Pony and Play-Doh toys had responded to supply-chain changes by raising prices.
Lego said its strong financial performance would enable the company to continue investing in its strategic priorities, including adding more bricks-and-mortar stores, and new store formats.
Mr. Christiansen said that investing in physical stores is central to its efforts to build the Lego brand, especially in markets like China where parents, unlike their European counterparts, probably didn’t play with Lego themselves as children. Two-thirds of the 60 stores the company opened in the first half of 2021 were in China, and 40% of its 737 global stores are now located there.
A new immersive retail format that made its debut at Lego’s New York store in June would be rolled out at 60 stores globally to continue the process of strengthening the Lego brand, he said.
The company will also further invest in its effort to use fully sustainable materials by 2030—a challenge for a company that makes plastic bricks.
In June, the company produced a prototype brick made from recycled bottles, but Mr. Christansen said it wasn’t yet clear how the company would meet its sustainability goal since the materials and technologies needed to achieve it are still in development.
Write to Trefor Moss at [email protected]
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