New action plan by LEGO Company will stabilise financial position
March 16 2004
The LEGO Company Leadership Team – headed by Kjeld Kirk Kristiansen – has just announced its new action plan for the employees of the company. The action plan is designed to secure the company's stable and sustainable growth. Most of the points in the plan will have immediate effect.
Kjeld Kirk Kristiansen, LEGO Company president and CEO, says: "The key aspects of our action plan are: adjustment of our activities and cost levels, improving our competitive edge, and focus on our core business (play materials)."
"The LEGO Company is experiencing a serious earnings crisis. The company will therefore adjust its costs to a turnover level of DKK 9.0 billion. Costs will be cut by DKK 700m but the full effects will not be felt until 2005. Future annual sales growth will be balanced at a level of 3 5%. Our objective is to achieve a bottom line figure of zero for 2004."
Kjeld Kirk Kristiansen continues: "We will be cutting the workforce by up to 500 jobs in our core business by 2006, Approx. one third of these cuts will be in Denmark. Around 170 lay offs will be implemented within the next few weeks, of these approx. 100 in Denmark."
These are the main points in the company's action plan:
1. A radical reduction in development and production lead times. For example, the time taken from idea to shelf will be cut by 50%
2. There will be a much stronger orientation towards retail customers, including focus on customer profitability
3. There will be greater promotional market pressure in conjunction with the trade to drive competitiveness and gain additional in store placement
4. More reliable deliveries, including greater flexibility, more accurate sales forecasts, and larger buffer inventories of key products
5. Focus on classic product lines such as LEGO DUPLO/BABY/QUATRO, LEGO Make & Create, classic play themes, LEGO TECHNIC and LEGO MINDSTORMS. The aim is to achieve a stronger portfolio balance between these classic product lines and story-based products like for example BIONICLE, LEGO Star Wars and LEGO Harry Potter. This will lead to regain of the volume the company has lost over the past five years
6. All non core ventures will be concluded or taken over by licence partners, including the development of electronic games
7. A simplified global location and operations infrastructure based on global HQ in Billund with three regional hubs: North America – Enfield, USA; Europe – Baar, Switzerland; and Asia/Pacific – Tokyo.
8. An integrated European market set up based in Switzerland with centralised administration – but bringing sales decisions closer to the retailer
The LEGOLAND Parks will not be affected by the action plan.
Later in the year the LEGO Company will be evaluating the role out strategy of the company's own brand retail stores.
The LEGO Company Annual Report for 2003 has been published on www.LEGO.com. As stated on January 8th the result was a pre-tax loss of earnings of DKK 1.4bn.
For further information, please contact:
Director, Press Relations
Telephone: (+45) 79 50 65 79
Senior Brand Relations Manager, Americas
Tel: + 1 860 763 7825
The LEGO Group is a privately held, family-owned company, based in Billund, Denmark. It was founded in 1932 and today the group is one of the world's leading manufacturers of play materials for children, employing approximately 4,500 people globally. The LEGO Group is committed to the development of children's creative and imaginative abilities. LEGO products can be purchased in more than 130 countries.
LEGO and the LEGO logo are trademarks of The LEGO Group.