Profit growth slows at Lego amid ‘extraordinary’ cost pressures

After tax profits at Lego Group jumped 3.7 per cent to almost 13.8 billion Danish krone (€1.85 billion) in 2022, the slowest rate of profit growth at the toymaker in a number of years as the group grappled with elevated costs.

Owned by the billionaire Kirk Kristiansen family, the Danish company, which opened its first Irish store on Grafton Street in Dublin in 2022, cut the ribbon on 155 new retail outlets last year, according to its annual results, published on Tuesday.

Revenues at Lego climbed by more than 17 per cent year-on-year to 64.7 billion Danish krone (€8.7 billion).

The company said that while the increase in revenues and net profits was in line with previous expectation, “it was achieved despite being negatively impacted by extraordinary inflationary pressures on materials, freight and commodity costs”.

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Lego’s production costs ballooned by more than 20 per cent in its latest financial year, to €2.7 billion. The group also expanded its factory footprint, increasing capacity at its factories in Hungary, Mexico and China at a cost of around €793 million.

Describing 2022 as a “milestone year for the group”, chief executive Niels B Christiansen said Lego’s earnings performance was driven by investments in production, retail and supply chain management “which are both paying off now and establishing a foundation for long-term, sustainable growth”.

He said: “We plan to accelerate investments in strategic initiatives in the coming years to build long-term relevance and growth of our brand.”

Looking ahead, the group said it expects single digit revenue growth in 2023, “ahead of the global toy market” after Lego’s main US rival Mattel, owner of the Barbie brand, last month said it expects no revenue growth this year. The other large US toymaker, Hasbro, said it sees a contraction this year.