Lego To Cut Jobs As First Half-Yearly Sales Decline In A Decade Rattles The Danish Toymaker
Even as Hasbro, Inc. (NASDAQ: HAS) and Mattel, Inc. (NASDAQ: MAT) made some progress in their respective recent second quarters, all isn't well in the toy space.
Denmark-based privately-held Lego, which was touted as one of the reasons for the underperformance by the U.S. toymakers, announced a 5-percent drop in revenues for the first half of the year. This marks the first sales drop in more than a decade.
The weak showing comes barely a month after Lego replaced Bali Padda as CEO. Padda took over from Lego's celebrated executive Jorgen Vig Kundstorp late last year. Kundstorp, under whom the toymaker managed to dodge the Great Recession bullet, is currently serving as the company's executive chairman.
See also: Argus Makes A Play Date With Hasbro, Initiates At Buy
Lego, known for its adaptability to new technologies and the partnerships it has forged with celebrated franchises, looks like it is jaded after years of strong performances.
The company reported a 5-percent drop in sales for the first half to 14.9 billion Danish crowns after seeing a sharp decline in sales growth to 6 percent in 2016 from 25 percent in 2015.
Weak demand in the U.S. and parts of Europe were cited as one of the reasons for the reversal.
As a remedial measure, the company said it would eliminate 1,400 positions, including 600 positions at its headquarter in Billund, Denmark. The numbers earmarked for job cuts represents roughly 8 percent of its total global workforce.
The rationale offered by the company was that it had invested heavily in the recent years to fuel strong top-line growth. Since some of the investments have not fetched adequate returns, it is now being pushed to the wall.
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