Lego's Financial Problems

BC-Denmark-Lego,0478 Lego, expecting worst loss in its history, fires two executives,ponders layoffs By JAN M. OLSEN Associated Press Writer
COPENHAGEN, Denmark (AP) -- Danish toy maker Lego said Thursday it was expecting a $237.6 million pretax loss, the worst in the privately held company's 72-year history. The company, whose colored plastic building blocks have been a favorite children's toy for decades, fired executive vice president and chief operating officer Poul Plougmann over failed marketing strategies. Lego also dismissed Francesco Ciccolella, who was responsible for corporate development. Additionally, the company said would possibly lay off some of its 8,000 workers worldwide. Lego has several retail outlets in the United States and a theme park in California, but no U.S. production facilities. It was not known if the reductions would affect the company's U.S. staff. Kjeld Kirk Kristiansen, chief executive and grandson of the company's founder, said Lego's push to develop new products did not generate the results it wanted. Last year was "very, very bad," he said. Since it reported its first loss of $47.8 million in 1998, Lego has been hit hard by increasing competition from the makers of electronic toys. Under Plougmann, the company reacted by expanding its electronic offerings, including making high-profile deals to use characters from Disney, the Star Wars films and Harry Potter books in its toys. It also developed popular CD-ROM games and its lauded Mindstorms series, high-tech robots that are made of building blocks but can be controlled by personal computers. As a result, sales rose but profits stagnated because of the higher cost of producing the new products. The company now plans to stop making the electronics and movie tie-in products and return to its core mission: producing colored plastic building blocks for children. "We would rather be in control of our own products, the things that we can decide," Kirk Kristiansen said. "We want to go back to our core products, and that is a key part of our future strategy." Figures for 2003 were not released, but in 2002, Lego posted a 7 percent increase in sales, to $1.9 billion and a 1 percent gain in its net profit to $72.5 million. Until 1997, Lego did not release its financial results. Lego will also make "necessary organizational adjustments" among its 8,000 employees in nearly 30 countries. It gave no further details but said an announcement would be made in a couple of months. Founded in 1932 by Ole Kirk Christiansen, the name Lego was invented by combing the first two letters of the Danish words "Leg godt" (play well) without knowing that that the word in Latin means "I assemble." ------ On the Net Lego: www.lego.com (Copyright 2004 by The Associated Press. All Rights Reserved.) APTV 01-08-04 1319MST
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Yeah, I saw that on Lego's site. Maybe it will mean a return to the days of pirate ships and castles (Not the Knight's Kingdom thing, either).
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Wow. So Lego thinks that selling little plastic bricks will make it popular again, and selling second-rate Playstation games and branded backpacks were bad ideas? Sheesh, I reckon we could *all* have worked that out for them - can I apply for the vacant executive VPs job now?
Richard
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I dont think selling bricks will make it popular again The reason it branched out into "second-rate Playstation games and branded backpacks" was because bricks had become increasingly unpopular. Stopping making the games and backpacks wont magically reverse that trend
Loz
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Selling bricks alone without worrying about Jurassic Park III, Harry Potter, Spider-Man, and Star Wars and creating SPUD's for each of those ventures might, though. I also see the NBA theme heading that way soon. The Lego clothing line, which I've never seen anywhere, much like "branded backpacks," was unnecessary too. Create t-shirts and ball caps for some of the themes that the adults will buy and will occasionally buy for their kids, but a whole clothing line? I miss the Technic sets (Master Builder comes close but no cigar) that actually encouraged more building and experimenting with gears. Some of my favorite things growing up were the Idea books to further spark the imagination of what to build. Now it seems like every set comes with just the instruction sheet with no alternate models pictured and three to five pamphlets of what else you can buy. The new creator sets look like they are going back to what Lego used to be about for me. Just my 2 cents, C

popular
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Potter,
of
The clothes are some of the most sturdy and color keeping clothes you can get in my country (Denmark).
I love them for my kids, but unfortunately my 11-yo is growing out of the biggest size.
We do buy HP lego, Bionicle, Technic, Mindstorms, Explorer and Designer as well - in large quantities.
Tine, Denmark
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popular
were
them -

making
Perhaps they branched out b/c nobody was buying their sets which comprised mostly of specialty bricks which had little use other than what the set intended. And all these specialty bricks raised the price of sets becuase they had to make new bricks for each set. Get back to the basics. Concentrate on ways to reuse existing bricks rather than making new molds for every set. That will lower the price per brick and they could probably lower prices and still make a larger proffit. Secondly they should drop all sports franchises. Most kids dont play with lego so they can reinact the NBA playoffs, most kids play with legos b/c they can use their immaginations to visit strange lands. Aww hell who am I kidding, most kids who play with lego probably dont even care about sports... at least not enogh to get the Shaq mini-fig.
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Absolutely - we've been thinking for a while that a return to core Lego values and products makes more sense than expensive licences, speculative forays into multimedia products, and sets that consist of half a dozen speciality pieces. WHat's the use of a construction toy that can only construct one model? It looks like Lego are recognising this, with their 2003/4 line-ups concentrating on imaginative building sets rather than quite so many themed items.
Richard
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On Sat, 10 Jan 2004 14:53:29 +0000 (UTC)

I totally agree.
There are a lot of very nice MOC instructions floating around on the WWW, I don't think people who share their instructions wouldn't mind if LEGO borrowed them.. The sets LEGO come up with just aren't what they used to be and I'm sick of all these curvey bricks and that sort of thing!
Here in Australia, I've found people don't buy LEGO because the sets are so silly! Everyone I know who used to love LEGO stopped building because LEGO started with all the promotional stuff and these 4-piece sets..
Hopefully LEGO make a turn around.
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I thought TLC had started using MOC's. The one I am thinking of is the Blacksmith Shop:
http://shop.lego.com/product.asp?p739&t=7&d &cE45EEE%2D4E34%2D4264%2D8442%2DABDF20769208
And I have just noticed that TLC now have their own Ebay registration:
http://shop.lego.com/ebay/default.asp http://members.ebay.com/aboutme/lego-direct /
wrote:

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You could have stopped at the end of "Most kids dont play with lego" None of my kids or their friends have any interest in Lego, no matter how hard I try. And that's Lego's problem. Their core product is no longer competitive, and their extensions into other markets have failed. Goodbye Lego
Loz
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My two year old loves Lego, and is always playing with them. There is a kind of kid that does and a kind of kid that does not like Lego. Let 'em watch TV all day and give 'em Playstation video games and they won't like lego - why? It doesn't talk back and change every 20 milliseconds. Don't let 'em watch that much TV and don't even HAVE video games in the house and the imagination takes up the slack. That spoon-fed entertainment is what is causing the Lego hit, that is why they went for the movies and video games, to tap the overstimulated kid market (I think.)
IMO, YMMV, DLC
: :> Most kids dont play with lego so they can reinact the :> NBA playoffs, most kids play with legos b/c they can use their immaginations :> to visit strange lands.
: You could have stopped at the end of "Most kids dont play with lego" : None of my kids or their friends have any interest in Lego, no matter how hard I : try. : And that's Lego's problem. Their core product is no longer competitive, and : their extensions into other markets have failed. : Goodbye Lego
: Loz
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Lego is being GIVEN away locally. I can buy the NBA minifig sets for .35 each and the Star Wars minifig sets with the stupid looking little robot men for .35. I can buy decent size soccer and star wars sets for 2.99. All of the Harry Potter crap and the likes are cheaper too but not nearly as much as the sports and star wars stuff. I did pick some up but didn't go wild.
My 4 year old LOVES Legos. Her favorite activity is to take the heads off of all the people and make a totem pole of them. Then she builds intricate churches and cars full of headless people. A little morbid perhaps, but it's her thing. My 11 year old can't stand Lego. The whole reason I bought a car full (literally) was to spark an interest in her after we saw some cool Lego exhibits at the county fair. It was a miserable failure but the 4 year old and the wife just LOVE them. I put together a few sets, like Fort Legoredo and some ice planet stuff, and sold them on ebay to recover the money I spent and then just kept the rest of the stuff. I'd say 10 percent have been lost now and I'm constantly finding Lego head totem poles in our Caravan and behind the couch. But the good news is she's doing something besides watching TV.
Lego is never going to be as popular as it once was. There is simply too much competition and the prices are ridiculous. For them to expect to rebound is a pipe dream.
Mike

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I thought Lego had a production facility in Enfield, CT?
Is that huge complex just a warehouse?!?
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It was shut down a couple years ago. (In the wake of their first loss -- 2003's wasn't the first.)

I don't know what happened to it, but presumably yes part of it is just a warehouse now.
Kevin
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It has been for a year or three... I don't remember when they stopped production in the US.
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