Despite trade-downs and China pullback, Lego revenue increases in 2023.

• In 2023, the exponential growth in the toy industry sales that resulted from the pandemic-era gains decreased as consumers reduced their discretionary spending due to rising inflationary costs and mounting credit card debt.
• Despite a decline in sales in the region, Lego remains focused on expanding in China.
• Following a partnership with Epic Games and Fortnite, digital initiatives continue to be a top priority.

Despite a 7% decline in global toy industry sales, the Lego company managed to increase its sales by 2% last year, as per Circana's data.

In 2023, the exponential growth in the toy industry sales that was fueled by the pandemic era began to decline as consumers reduced their discretionary spending due to rising inflationary costs and increasing credit card debt. However, Denmark-based Lego reported resilient sales, with revenue reaching 65.9 billion Danish krone, or about $9.65 billion, as stated on Tuesday.

Niels Christiansen, CEO of Lego, stated on CNBC that it is impressive to see the company outgrow the market by almost 10 percentage points, as they have done in the past couple of years, even in bad years.

During the Covid-19 pandemic, Lego experienced significant growth and has maintained its position as a top performer in the industry. In 2021, the company's sales increased by 27%, and in 2022, they rose by 17%.

Last year, the toymaker's top-performing brands were Lego Icons, Lego Technic, Lego City, Lego Harry Potter, and Lego Star Wars. These kits cater to different skill levels and interests, with the company emphasizing that the themes promote building skills for children and offer a creative outlet for adults.

The company's strategy for offering fresh and relevant products to all consumers is reflected in the 2023 product line, which included 780 items, around 50% of which were new. This aligns with previous years and is consistent with the company's approach.

Although the company has not been immune to macroeconomic pressures, particularly as shoppers tighten their purse strings, Christiansen stated that Lego is selling the same volume of products, but customers have "traded down" in 2023 and opted for lower-priced sets.

In 2023, net profit was approximately $1.92 billion, a 4.9% decrease from the previous year.

In particular, the key Chinese market saw revenue declines.

"Chinese consumers are really holding back on spending," Christiansen said.

Over the past few years, Lego has expanded its presence in China by opening hundreds of retail locations. Although Lego first entered the country in 1993, it was only in the last decade that the brick maker began a massive expansion in the region.

Last year, 81 of the 147 new Lego stores opened were in China. Although Christiansen predicts that the number of new openings will decrease to approximately 40 in 2024, Lego remains committed to brick-and-mortar retail as it expands into smaller cities in China.

Epic Games has partnered with Lego to create an open world survival video game called Lego Fortnite.

Christiansen stated that we are essentially competing for children's time, attention, and relevance.

In 2023, Lego's digital experts team grew by 27%, as the company aimed to enhance online experiences, including shopping and film and television content, while linking these digital interactions to physical play.

Christiansen stated that while they may spend a little on Lego Fortnite or other things at the end of the day, he hopes that they will be on their wish list come Christmas.