Toy Maker LEGO Builds More Plants to Keep Up With US Demand
LEGO plans to build more plants to revive sales in the US according to a report by Reuters.
The iconic toy maker's revenue growth and profits decreased in the first six months of 2016. However, the demand is not a sign of bad performance. In fact, the Danish toymaker needed time to add production capacity to meet increased demand for its well-lved colorful plastic bricks in North America, the company announced last Tuesday.
Lego saw its revenue grow 11 percent in the first six months of the year to $2.35 billion, while operating profit was up 1 percent at 4.66 billion. However, net profit fell nearly 2 percent to 3.49 billion $524 million.
According to Retuers, LEGO has increased sales by an average of more than 15 percent per year in the last 12 years, with an astounding 25 percent growth rate in 2015. The growth rate has made Lego the world's most profitable toy maker well ahead of rivals Barbie Doll maker Mattel
Lego's sales in Asia and Europe, its most mature market, grew by double digits in the first half of 2016 but there was hardly any growth in the Americas.
LEGO simply could not keep up with demand in North America, the world's biggest toy market in 2015, so it reduced its marketing activities, which led to the slowdown in the first half of 2016, Chief Financial Officer, John Goodwin told Reuters.
"We are working very closely with our retail partners to ensure that as we go into the important holiday season, the back half of 2016, that we've got all of the levers pulled to get back on the growth trajectory," he said.
As part of a global investment plan, the company has invested in a new factory in China, expanded production capacity in Mexico and plans to double the capacity of the group's plant in Hungary. As a result the company recruited over 3,500 new employees in the first half of 2016, an increase of 24 percent.
"We feel we need to invest, to build some breathing space. These investments in people and infrastructure will obviously have an impact on our short-term profit growth. But they are part of our long-term plan to sustain the development and delivery of fun," Goodwin said.
