Lego Unveils Restructuring Plan to Restore Profitability

Lego, the Danish family-owned toymaker, has announced a comprehensive restructuring program aimed at shedding jobs, cutting costs, and divesting non-core operations in a bid to return to profitability. The move comes after the company posted a record pre-tax loss of DKr1.4bn (Dollars 230m) in 2003 and has seen-sawed in and out of profit for the past seven years. The new plan is designed to improve Lego's competitive edge and refocus on basic play materials, while also seeking a better balance between classic products and merchandising spin-offs.

Key Takeaways:

• Lego's restructuring program aims to shed up to 500 jobs by 2006, representing approximately 6% of the global workforce.
• The company hopes to break even in 2004 and targets annual sales growth of 3-5% in future years.
• Lego will divest non-core ventures, including computer games, and license its intellectual property to partners.
• The company will focus on improving its competitive edge and refocusing on basic play materials.
• Lego will aim to regain shelf space and sales by increasing its efforts to woo major retailers.
• The restructuring plan has been criticized for its lack of detail, with some analysts questioning whether it is enough to restore the company's profitability.

Statistics:

• Record pre-tax loss of DKr1.4bn (Dollars 230m) in 2003.
• Up to 500 jobs to be shed by 2006, representing approximately 6% of the global workforce.
• 3-5% annual sales growth target.
• 2004: expected break-even point.
• 2006: expected completion of job cuts.

Sources:

• Bloomberg (February 2004)
• The Financial Times (January 2004)