Lego is rapidly increasing the number of its own-brand stores and investing heavily into ecommerce as it seeks to navigate the turmoil in the toy industry.
Niels Christiansen, Lego’s chief executive, said on Tuesday it would open more than 160 new stores this year — an increase of almost 40 per cent, as the Danish toymaker draws the lessons from the collapse of Toys R Us and the Nordic region’s biggest toy retailer Top Toy.
“We want to ensure that we stay really relevant even though there will be changes in the retail landscape. We still need kids to discover Lego. It’s about making sure we have the right access to kids,” he added.
Family-owned Lego has become the world’s largest toymaker by sales and profits as much of the rest of the toy industry has struggled to combat the rise in popularity of digital devices. It has overcome its own dip in 2017 when sales and profits fell for the first time in more than a decade.
The Danish group said on Tuesday that it had increased its revenues in the first half of the year by 4 per cent to DKr14.8bn ($2.2bn). Mr Christiansen said Lego had taken “the active choice” to bring down operating profits by 16 per cent to DKr3.5bn to invest more.
“We have the ambition of getting to as many kids as we can around the world, and getting to that means we have to keep gaining market share. We would rather do the investments upfront to be leading that change,” he added, underlining Lego’s strong balance sheet and long-term planning.
Lego’s reduced operating profit compares with $164m in the first half for Hasbro, maker of My Little Pony and Transformers, and a loss of $182m at Mattel, owner of Barbie and Hot Wheels.
The Danish toymaker is making a big push in Asia and is on track to have 140 stores in China in 35 different cities by the end of the year. It will also open an office in India as part of an attempt to crack the country.
“Within 10 years, there will be 100m kids in India living in middle-class families. They are strong into education and products like Lego are very high on the wish list. The idea would be to get on some kinds of journey like we are on in China,” Mr Christiansen said.
Lego is also investing more in new products, particularly focusing on the blend between physical toys and digital play experiences. It recently launched the Hidden Side series, with both physical sets and an augmented reality app.
“Kids want to play with what they have seen. It’s never just about the physical products, it’s about the entire experience. It’s one of the things we are investing behind . . . It’s extremely important we stay relevant and cool,” Lego’s chief executive added.
Mr Christiansen said Lego was “investing heavily in e-commerce”, updating its online platforms and ensuring its VIP loyalty programme worked across its websites, including Legoland, the theme park part-owned by its family owners.