At LEGO: declining results, restructuring and layoffs

05/09/2017 - 10:04 Lego news

At LEGO: declining results, restructuring and layoffs

Lego comes from publish its financial results for the first half of 2017, and while I know most of you don't care how much the manufacturer who sells you your plastic bricks earns, the trend and consequences of this mid-point situation will be of interest to a few .

In summary, sales are falling in the USA and Europe, and so are profits. Only the "booming markets"like China are doing well with double-digit growth.

For the first half of 2017, compared to the first half of 2016:

  • 5% decrease in turnover (from DKK 15,7 billion to DKK 14,9 billion)
  • 6% decrease in operating profit (from DKK 4,7 billion to DKK 4,4 billion)
  • 3% decrease in net profit (from 3,5 billion DKK to 3,4 billion)

The operating profit amounted to 4,4 billion DKK, a decrease of 6% compared to the same period in 2016. This phenomenon is explained by the decrease in turnover and the increase in costs. related to investments made to expand production and organizational capacities in anticipation ofan increase in sales volume that did not materialize.

LEGO's reaction: The party is over, the manufacturer plans to reduce its workforce without delay by eliminating 1400 jobs or 8% of its global workforce (18200 people), the majority of which by the end of 2017. Layoffs , seniority bonuses and back-to-work assistance, everything is already planned.

"...Consequently, we have decided to overhaul the entire Group. This means that we will build a smaller and less complex organization than the one today, which will simplify our current business model, in order to offer our products to more children.

This will also have repercussions on our costs. Finally, in certain markets, this overhaul involves cleaning up and reducing stocks throughout the value chain. This process is already well under way. "

The new structure will allow the LEGO Group to focus even more on its markets and customers around the world.

Consequently, the LEGO Group believes thatit will be necessary to reduce its global workforce by around 8%. Around 1 positions are expected to be affected, the majority of which by the end of 400. The LEGO Group currently employs 2017 people.

 "We are deeply sorry for these changes which are likely to turn the lives of so many of our employees upside down. Our employees are passionate about their work and we are deeply grateful for their daily dedication. Unfortunately, we cannot avoid making certain decisions. difficult ", explains Jørgen Vig Knudstorp. 

The LEGO Group will pay the employees concerned severance payments proportional to their length of service within the Group and will support them in their search for a new position or new opportunities outside the Group.

I will spare you here the rest of the marketing discourse that surrounds this announcement, the full press release presenting the interim results for the first half of 2017 and the measures that will be taken can be found at this address.

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