Lego to cut 8% of workforce as it resets business amid sales drop

Danish toymaker Lego announced plans to cut around 8% of its global workforce as it reported a drop in profit and sales for the first half.

Revenue was down 5% to DKK14.9bn while net profit fell 3% to DKK3.4bn and operating profit declined to DKK4.4bn from DKK4.7bn in the first half of 2016.

Lego said it intends to cut around 1,400 jobs, the majority before the end of this year, as it reorganises the business, which it said has become "increasingly complex".

The company, which employs around 18,200 people, said the performance across market regions was mixed, with established markets such as the US and parts of Europe seeing a drop in revenue, while growing markets such as China saw revenue grow by double digits.

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

“We are working closely with our partners and we are confident that we have the long-term potential of reaching more children in our well-established markets in Europe and the United States. We also see strong growth opportunities in growing markets such as China.”

He added: "We have now pressed the reset-button for the entire group. 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.”

Lego said those affected by the cuts would be given redundancy packages, including support in transitioning to new positions or new opportunities outside the group.