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An inflation-fueled sales slump hit the toy industry in the first half of 2024, but one company is gaining market share brick by brick.
On Wednesday, Lego said revenue during the first six months of the year jumped 13%, reaching 31 billion Danish krone, or about $4.65 billion.
Niels Christiansen, CEO of the privately held Danish toymaker, told CNBC that the company is seeing strength across its portfolio, especially with Lego Icons and Lego Creator, and through its partnership with Epic Games’ Fortnite.
Last year, Lego saw a trend of consumers “trading down” or opting for lower-priced sets, while still buying the same volume as the year before. This year, volume is up, Christiansen said.
“To the extent they traded down last year, they’re not trading further down,” he said. “So that has stabilized. And we see almost all of the growth is actually growth in volume.”
Meanwhile, publicly traded rival Mattel saw net sales fall 1% in the first six months of 2024 and Hasbro reported that its net revenue fell 21% between January and the end of June. Mattel is facing tough comparisons from toy sales fueled by “Barbie” in 2023, and Hasbro is still reeling from its divestment of eOne.
Lego has continued to build on pandemic-era growth with a diverse slate of products that cater to kids and adults alike. In addition to sets tied to popular franchises such as Harry Potter and Star Wars, Lego also has innovative design options for consumers to build flowers and succulents, famous works of art and animals.
Sales in the U.S. and Europe remain strong, Christiansen noted, while China sales are flat. He said consumers in the region are spending less on bigger-ticket items, and their frequency of purchasing is down.
However, Lego is not giving up on expansion in China. Christiansen said there is still “long-term potential” in the area.
Of the 40 Lego stores that opened in the first quarter, 20 were in China. Similarly, of the 60 planned openings in the second half of the year, 20 are set for China.
Sustainability
Christiansen also touted Lego’s sustainability efforts. So far this year, the company has nearly doubled the amount of renewable and recyclable materials it uses in its bricks compared to full-year 2023.
“That’s a good milestone,” he said. “That’s a good step forward. [We are] spending quite significantly on that in a couple of ways, primarily in buying material that is more expensive, because mass balance material is more expensive than just standard.”
Christiansen noted that Lego is not passing that cost on to consumers.
“By actually being willing to pay a premium to get to this product, we also created an incentive for [suppliers] to actually develop the kind of products and to establish more production capacity for these type of products. We are working really as an industry need to try to put more speed on that entire process.”
Over the next few years, Lego hopes to source half its raw materials from sustainable sources.