LEGO’s Lowered Profits in 2017 Attributed to Overstocking of Products by Retailers

So by now, the LEGO Group’s annual financial report for 2017 has played out and, as it seems, it was a bit of a downer revenue-wise. For the first time in 12 years, LEGO reported that their profits suffered a noticeable drop, with a net profit decrease of about 17%.

This turn of events, according to the Annual Results, was due to shrinking markets in Europe, particularly Germany, and surprisingly the US as well. But a spokesperson for The LEGO Group has also floated another reason for the sales slump: turns out their products have been overstocked across multiple markets.

Normally when new LEGO products are made available to retailers, they are quickly put on shelf display, with large numbers to entice buyers. However, if they still have significant stocks of older LEGO sets, the retailer would prefer to keep displaying them until they run out. This time, LEGO is competing for more shelf space.

“There wasn’t enough room to get 2017 toys into the stores,” the LEGO spokesperson said in this regard. To promptly have these older sets sold, retailers would try to reduce prices to attract buyers, but discounted prices mean a reduced gross, leading to lower revenues and profits for LEGO than before.

LEGO Group CEO Neils B. Christiansen followed up on this, saying, “During 2017, revenue in our established markets declined, primarily due to actions we took to clean up inventories.” There would be other contributing factors to this decline; but for now excess stocks and discount prices are held responsible.

On a more positive note, the LEGO Annual Results 2017 report also announced their top-selling themes, though they’re not entirely a surprise: LEGO City, DUPLO, Creator, Friends and Star Wars. LEGO Boost has also been getting a lot of attention thanks to its new compatible LEGO sets.

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Author: Albert Balanza

Teacher, student, dad, AFOL, psych geek & everything in between. :)

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