The LEGO Group has announced plans to ramp up investments in digital playing experiences, which likely include its metaverse campaign with Epic Games, following impressive financial results in 2022.
LEGO’s growth has been remarkable during the COVID-19 pandemic, with sales and net profit increasing by two-thirds in the past three years. In its annual report, the toy giant cited “extraordinary inflationary pressures on materials, freight and energy costs” but was able to increase its market share and outpace its US rivals — Mattel and Hasbro.
The company’s revenues increased by 17 percent to DKK 64.6 billion (roughly US$9.2 billion) despite facing challenges from rising costs in 2022. Its net profits rose 4 percent to DKK 13.8 billion (roughly $2 billion).
Meanwhile, Mattel recorded revenues of $5.4 billion and net profits of $400 million in 2022, while Hasbro had sales of $5.9 billion and net earnings of over $200 million.
“We are doing a lot of things on the digital side,” LEGO Group CEO Niels Christiansen told the Financial Times.
“That is where we are upping the investment. We know very well how to immerse consumers into the LEGO universe in stores. We’re working very hard to create that feeling of getting into the LEGO brand universe also digitally.”
Despite its extraordinary growth, LEGO anticipates a “normalization” this year and is projecting a single-digit percentage increase in revenues. Nevertheless, the Danish company remains optimistic about continuing to grow faster than the overall toy industry.
“We expected that the growth would normalise into this year, and it has done so. We will continue to invest behind our momentum. Historically, the toy industry hasn’t been too cyclical,” Christiansen said.
LEGO’s growth, initiatives
Following a growth slowdown in 2017, LEGO has been reaping benefits from a series of investments.
Christiansen invested in expanding LEGO’s product range and opened hundreds of stores. The toymaker also launched sets that combined its bricks with digital apps.
As part of its continued efforts to innovate and expand, LEGO is set to reveal its metaverse project details in collaboration with Epic Games soon. Both companies earlier announced in April 2022 that they would enter a long-term partnership to create a safe and enjoyable digital experience for children and families in the metaverse.
In addition, Christiansen emphasized the importance of collaborations to LEGO’s success, including a partnership with Louis Vuitton to design windows and store displays for the Christmas season, celebrating the luxury fashion house’s 200th birthday.
“In the case of Louis Vuitton, we hope to reach women, mothers. We do hope to have more girls playing with LEGO,” Christiansen said.
LEGO is also committed to sustainability and aims to replace all fossil fuel-based plastic in its products and packaging with sustainable alternatives by 2030.
The company has been investing heavily in reducing its operations’ climate impact, including manufacturing products closer to consumers. LEGO plans to open carbon-neutral factories in Vietnam and the US in 2024 and 2025, respectively, as part of this effort.
Over the past year, LEGO opened 155 new physical stores, totaling 904 in 2022.