Customers at a Lego store in Shanghai, China, on February 3, 2024.
Costfoto | Nurphoto | Getty Images
The repercussions of inflation will affect the gaming industry in the first half of 2024 due to declining sales, but one company is gaining market share brick by brick.
Lego said Wednesday that its revenue in the first six months of the year jumped 13% to 31 billion Danish kroner, or about $4.65 billion.
Niels Christiansen, CEO of the privately held Danish toy maker, told CNBC that the company is seeing strength across its portfolio, particularly with Lego Icons and Lego Creator, and through its partnership with Epic Games' Fortnite.
Last year, Lego saw a trend of consumers “ditching” its sets or opting for cheaper ones, while continuing to buy the same quantities as the year before. Christiansen says that volume has increased this year.
“For the level that stock prices have fallen to over the past year, they're not trading at lower prices. So prices have stabilized. And we see almost all of the growth is actually volume growth,” he said.
Meanwhile, publicly traded rival Mattel saw its net sales fall 1% in the first six months of 2024, and Hasbro reported a 21% drop in net revenue between January and the end of June. Mattel faces tough comparisons from Barbie-fueled toy sales in 2023, and Hasbro is still reeling from its sale to E1.
LEGO has continued to capitalize on its pandemic-era growth with a diverse range of products that cater to both kids and adults. In addition to sets tied to popular franchises like Harry Potter and Star Wars, LEGO also offers innovative design options for consumers to build flowers, succulents, iconic artwork, and animals.
Christiansen noted that sales in the United States and Europe remain strong, while sales in China remain stable. He said consumers in the region are spending less on higher-priced goods and their purchasing rate has slowed.
However, Lego has not given up on expanding into China. Christiansen says there is “long-term potential” in the region.
Of the 40 Lego stores that opened in the first quarter, 20 were in China. Similarly, of the 60 stores planned to open in the second half of the year, 20 are scheduled to open in China.
Sustainability
Christiansen also praised 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 all of 2023.
“This is a good achievement, a good step forward,” he said. “We are spending a lot of money on this in several ways, primarily by buying more expensive materials, because mass balance materials are more expensive than standard materials.”
Christiansen noted that Lego does not pass this cost on to consumers.
“By being willing to pay a premium for this product, we’ve also created an incentive for suppliers to develop this type of product and create more capacity for this type of product. We’re really working as an industry that needs to try to speed up this whole process.”
Over the next few years, Lego hopes to be able to source half of the raw materials it uses from sustainable sources.
