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Last Updated: Thursday, 8 January, 2004, 16:20 GMT
Lego tumbles as toy sales slump
Poul Plougmann
Mr Plougmann has paid with his job
Lego has blamed a "tough and turbulent" toy market for a record loss of 1.4bn Danish kroner (131m; $238m) last year.

The company sacked its chief operating officer, Poul Plougmann, and vowed to slim down management and concentrate on its core building-brick business.

"We have been pursuing a strategy based on growth... by focusing on totally new products," said chief executive Kjeld Kirk Kristiansen.

"This strategy did not give the expected results."

The firm, which has veered between profit and loss in recent years, vowed to break even again in 2004.

Spreading thin

Over the past few years, Lego has invested heavily in a host of new markets, including computer games, baby products, camping goods and even shoes.

Kjeld Kirk Kristiansen
It's back to basics, says Mr Kristiansen
But the strategy, Mr Kristiansen said, meant the firm missed out on the real values of its core products, and exposed it to the broader stagnation in global toy demand.

While worldwide toy sales have ground to a halt, revenues from Lego's building products doubled in 2003.

Lego's biggest recent hits have been in licensing deals with blockbuster entertainment franchises, especially Harry Potter and Star Wars.

But the flow of such deals ran dry last year, leaving Lego particularly exposed ahead of the last Christmas peak season.

Executives in the firing line

It is not yet clear how much cost-cutting will be necessary to get back in the black.

Lego's 2003 results are due to be presented in greater detail over the next couple of months, when the company plans to unveil details of possible job losses.

Mr Kristiansen implied that cuts were more likely to be in the executive suite than on the shop floor.

Lego cut close to 500 production jobs last year.

Mr Kristiansen said that Lego needed a simpler management structure in order to "achieve faster and better decision-making".

"We have to go through the whole organisation and decide which functions we have to do - and which we can do without," he said.


SEE ALSO:
Tired toys try a retro relaunch
25 Sep 03  |  Business
Lego losses: 500 jobs to go
02 Mar 01  |  Business


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