Lego Builds On Earnings Javier Espinoza, 08.12.08, 12:20 PM ET
Jørgen Vig Knudstorp, CEO of Lego
LONDON -
Toy maker Lego, which means "plays well" in Danish, paid tribute to its name Tuesday after it reported a 166.0% increase in first-half pretax profit. This was due to strong sales of Star Wars and Indiana Jones branded products, BEATING PREDICTIONS OF A SLOWDOWN IN THE TOY INDUSTRY as a result of the global economic crisis.
The private firm, owned by Forbes billionaire Kjeld Kirk Kristiansen, posted a pretax profit increase of 564 million Danish kroner ($112.6 million) from 212 million Danish kroner ($42.3 million) in the first half of 2007, due to higher sales and tight cost controls. "We have put in place a comprehensive savings program by reducing transport costs to offset the cost of oil and the impact from rising raw material prices," Chief Executive Jorgen Vig Knudstorp told Forbes.com Tuesday in a phone interview from Denmark.
Net sales for the first half of 2008 were 3.6 billion Danish kroner ($719 million) compared with 3.0 billion Danish kroner ($599 million) during the first half of 2007. "The total toy market has not grown during the period--while the Lego Group has achieved a double-digit growth rate in sales to consumers on many markets and increased its market share on all markets," the firm said in a press release.
Knudstorp said sales remained strong as CONSUMERS ARE STILL NOT CUTTING DOWN IN THE OCCASIONAL SHOPPING OF TOYS or other nonessential goods. "People have reduced spending in their daily groceries, new furniture or their summer holidays. But they haven't yet cut down the occasional shopping. This behavior goes against the economic cycle," he said.
The Billund, Denmark-based firm, which produces 600 toy bricks per second, also said classic product lines like Lego City, which features a police, fire fighter and rescue services, and Star Wars performed better than expected. "In addition, the new licensed line LEGO Indiana Jones has sold extremely well--especially on the North American market," the company said.
Knudstorp said Lego faces tougher challenges in the $50 billion global toy industry as the new generations of children grow older at a younger age and tend to spend more on computer games than on traditional games.
In 2003 and 2004, the group made significant losses, but returned to profit in 2005 after massive cost cuts.
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