This episode Jeff and James look briefly at LEGO’s 2017 Annual Report and then discuss their top 3 sets from last year.
Here’s our show notes followed by a breakdown of our 2017 Top 3 that we discussed in this episode (don’t scroll down if you want to avoid spoilers!):
1 DKK (Danish Krone) = 0.17 USD
Revenue for the full year declined 8% to DKK 35.0 billion (approx $5.8 billion US) compared with DKK 37.9 billion (approx $6.28 billion US) in 2016.
For perspective, the LEGO Group earned:
Almost $15.9 million USD per day
$662 thousand USD per hour
$11 thousand USD per minute
$184 USD per second
At that rate, they would have earned more than $3500 since I started this paragraph.
In Denmark, the average household income is around $40,000 USD per year. In 2017 it took the LEGO group less than 4 minutes to make that money.
Clearly, even though sales are down, LEGO is doing ok.
Sales in China have continued to grow, but sales in most established markets in North America and Europe dropped, though they attribute this to internal actions the company took to reduce inventories overstock. Overall consumer sales were at 2016 levels for most of the year, and trended upwards in the final months of the year.
I get why the LEGO group is trying to make their supply chain leaner, and not have old stock on store shelves as long as they have been on the past, but it has frustrated me to see mostly empty shelves at the big box stores I shop at, not to mention no more clearance prices on old stock. Better for the stores to sell what they have at full retail, but for the AFOL looking for a deal, it’s been bad out there, at least in my market.
This clean-up of the supply chain has resulted in some human cost, as the LEGO Group reduced their global workforce from 19,061 at the end of 2016 to 17,534 in 2017. An 8% reduction in full time employees. You will note, 8% is the same % drop in revenue over 2016, and gives us a pretty good look at how tight a ship LEGO runs. LEGO is expecting low single digit sales growth worldwide for 2018, though continued double digit growth in China. The current staffing levels are designed to support that growth.
Each year 60% of the LEGO Group’s sales to consumers comes from new launches. To create these new products, LEGO employs more than 250 designers in more than 40 different countries, though most are based in Billund. The LEGO Group also invests in trend spotting an anthropological studies to aid in the development of specific studies and campaigns.
The LEGO Group is also involved in studies on new technology and children’s play.
The top selling lines in 2017 were, City, Ninjago, Creator, and Duplo. They also note that, “LEGO Star Wars performed in line with expectations.” Which is an odd statement, as Star Wars always has the most sets released in a year, so it has to be the top selling line, right?
Profit wise, the LEGO Group took a big hit in 2017, dropping from DKK 9.4 billion ($1.5 billion US) in 2016 to DKK 7.8 billion ($1.3 billion US).