Lego Outperforms Barbie and Monopoly, Outpacing U.S. Competitors

The maker of toy bricks reports higher sales, pushing further ahead of competitors in the U.S.

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Lego A/S overtook Barbie maker Mattel Inc. MAT -1.97% as the world's biggest toy company less than a decade ago.

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Through the pandemic, recent supply-chain turbulence, and skyrocketing inflation, the maker of those brightly colored bricks is generating almost twice the revenue of Mattel Inc., HAS -3.10% the maker of the Monopoly board game and Nerf guns, which both survived the pandemic, recent supply-chain tumult, and sharply rising prices.

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Lego reported Tuesday that sales for 2022 rose 17% over last year to 64.6 billion Danish kroner, which is equivalent to $9.27 billion. The company earned 13.8 billion kroner in net profit, an increase of 4%.

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The Lego Group's Chief Executive Niels Christiansen credits the company's success over the past few years to a series of investments made in new stores and products, as well as e-commerce and digital engagement. The Lego Group performed above expectations last year, despite the economic turbulence which resulted from the Russian invasion of Ukraine to a large extent, according to Mr. Christiansen.

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“Overall, I am very satisfied with the results," said Mr. Christiansen on behalf of the company. In spite of a lot of challenges, we managed to achieve positive bottom-line growth compared to the previous year. And, he added, "we reached more kids with the Lego brand than ever before in a year with many challenges."

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Lego's widening gap with rivals is driven by its success in tapping new markets such as China, engaging new generations of fans via movie and videogame tie-ins, and piggybacking on the popularity of other popular brands, notably Star Wars, with themed sets. Also, the company has been able to enjoy a significant amount of success by rolling out more of its own stores, as well as having its own dedicated factories, close to end markets, which have allowed it to be largely free from supply-chain issues.

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Among the brand's bestsellers, last year were Lego City and Icons sets that included police and fire stations, along with sets based on famous landmarks, as well as a newer range of more challenging builds based on famous landmarks. The brand said its Star Wars and Harry Potter franchise tie-ins were also among the company's bestsellers.

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The company has also pushed into the world of digital play in the past few years. The company reported last year that it had found success with products such as the Lego Builder app and the video game "Lego Star Wars: The Skywalker Saga" that it had released last year. It would seem that the company's digital activities are still primarily geared towards attracting children to its brand and encouraging them to buy physical toys, according to Mr. Christiansen.

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In the coming year, Lego will continue to expand its digital presence, with its partner Epic Games Inc. planning to launch a version of the metaverse tailored for children, following a $1 billion investment made by the toy maker in the American videogame developer last year.

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In contrast, the performance of the 90-year-old Danish company stands in stark contrast to the downbeat results posted by other leading manufacturers, which blamed last year's sluggish sales on the volatile economic environment and the rising inflation rate.

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There was a big decline in annual revenues for Hasbro this year to $5.9 billion as compared with the $5.8 billion it reported last month, while Barbie maker Mattel reported its revenue for the year was flat at $5.4 billion. There was a very difficult holiday period for both toy companies in the U.S., in which sales were significantly down from the same period in 2021 compared to previous years.

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After its disappointing holiday season performance and its forecast of a tough market for toys in the upcoming year, Hasbro, the company which makes toys such as Transformers and Play-Doh, announced it would lay off 15% of its global workforce.

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In the meantime, Lego reported that demand for its brick sets over the Christmas period remained strong. It was through the company's investment across all product categories and price points that the company was able to appeal to consumers regardless of their spending power, Mr. Christiansen said. As a result, even in tough economic times, parents continue to purchase Lego for their children because they perceive it as an educational toy that will remain in use for a long time.

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While profits at Lego grew modestly compared to the rise in sales last year, it was still a good year for the company. In his explanation, Mr. Christiansen pointed out that the growth in the previous year had been exceptional. Furthermore, he said that the company was not entirely immune to economic challenges last year, as higher costs for raw materials and transportation were a hindrance to the growth of the company's profits.

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It's no surprise that Lego responded with single-digit-percentage price increases in around one-third of its product range in September, while keeping prices low on the remainder, according to Mr. Christiansen.

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The company was able to open 155 new stores over the course of the year, many of them in China, thereby offsetting the closure of 81 stores in Russia in the wake of the Russian invasion of Ukraine. As a whole, the company has announced that it has reached a total of 904 stores in its network.

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As for the future, Mr. Christiansen announced that Lego is expecting to increase its revenue by one or two percentage points this year. As a result of the company's commitment to meet the growing demand, they will open a new manufacturing plant in Vietnam this year and another one in the U.S. in 2025 in an effort to meet the demands.