Lego to cut 1400 jobs after sales drop

legoDanish toy maker Lego will cut 1400 jobs, or about eight per cent of its global workforce, after reporting a rare decline in sales and profits in the first half of 2017.

Revenue dropped five per cent to 14.9 billion kroner (A$3 billion) in the first six months of the year, mainly as a result of weakness in core markets like the US and Europe. Profits slipped three per cent to 3.4 billion kroner.

“We are disappointed by the decline in revenue in our established markets, and we have taken steps to address this,” said Chairman Joergen Vig Knudstorp.

He said the long-term aim is to reach more children in Europe and the United States and added there were “strong growth opportunities in growing markets such as China”.

The company, he said, needs to simplify its business model to reduce costs. Since 2012, the group has built an increasingly complex organisation to support global double-digit growth.

He told Denmark’s TV2 station that staff cuts would mainly affect administration and sales, not production.

Last month, the maker of the famous coloured building blocks appointed Niels B. Christiansen, who headed thermostat-maker Danfoss for nine years, as its chief executive to replace interim CEO Bali Padda. Christiansen will start October 1.

Based in western Denmark, Lego does not release quarterly figures. The group currently has about 19,000 employees around the world.

The privately held firm said on Tuesday it is now preparing to ‘reset the company,” aiming to simplify the business after years of high growth and expansion into new ventures like film.

Knudstorp said that the toy company had built an increasingly complex organisation over the last five years to support global double-digit growth, and in doing so had made further growth harder to achieve.

“As a result, we have now pressed the reset-button for the entire group,” he said.

“This means we will build a smaller and less complex organisation than we have today, which will simplify our business model in order to reach more children. It will also impact our costs. Finally, in some markets the reset entails addressing a clean-up of inventories across the entire value chain. The work is well under way.”

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