LEGO is to cut 1,400 jobs before the end of the year in a bid to scale back the business after it suffered its first drop in sales in more than a decade.
The Danish toymaker said it was hit by weaker demand in established markets such as the US and parts of Europe and said that the business had become too complex over the past five years to support global growth.
The firm said that the decision to cut the jobs which represents around eight per cent of its 18,200 global workforce, was a difficult but necessary one as the company presses ‘the reset button.’
“We are very sorry to make changes which may interfere with the lives of many of our colleagues,” said Jørgen Vig Knudstrop, the chairman of the group.
“Our colleagues put so much passion into their work every day and we are deeply grateful for that. Unfortunately, it is eesential for us to make these tough decisions.”
Revenue fell six per cent in the first half of 2017 to 14.9bn Danish krone, while net profit was down three per cent at 3.3bn Danish krone. It was the first fall in sales since 2004.
“We are disappointed by the decline in revenue in our established markets, and we have taken steps to address this,” said Knudstrop.
“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 US. We also see strong growth opportunities in growing markets such as China.”
According to Knudstrop, business has suffered from an overly complex structure that resulted from rapid growth over the past five years.
“In the process, we have added complexity into the organisation which now in turn makes it harder for us to grow further. As a result, 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.”