The world’s second biggest toy maker is to cut 8% of its global workforce.
Falling sales and profit
The move comes after Lego saw profits and sales decline in the first half of 2017.
Reducing headcount is all part of Chairman Jorgen Vig Knudstorp’s strategy to simplify the organisation. The hope is that by streamlining corporate structures and reducing bureaucracy will help focus the firm on returning to growth. The cost cutting move is also a way to improve margins.
And the strategy makes sense: headcount was rapidly increased in order to facilitate increased production needs, should the demand be there. But since sales have dropped, headcount has become a liability rather than a necessity.
Over the past 10 years, the company has experienced strong growth. This has partly come from a diversification into new markets, franchise deals with Lucasfilm and a premium range.
And whilst it’s not been doing as well in more developed markets, such as the UK and Europe, it’s still boasting double digit growth in China and the rest of Asia.
Whilst the company has less to worry about from apps and internet connected toys, Lego could do more in the lucrative collectables market.