Lego cashes in on tough times

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(China Daily)
Updated: 2008-12-26 08:03

Lego A/S may have a record gain in US sales this year as cash-strapped parents seek toys that will last, said the head of the company's Americas unit.

Lego's total sales growth will exceed its August projection of 12 percent, Soren Torp Laursen said in a telephone interview. The company has had an "exceptional year" in the US and UK, he said.

"We braced ourselves for fairly tough conditions because the macro-economic picture was not looking very good," Laursen said. "Much to our surprise, our demand actually started to accelerate as the market conditions became powerful."

Both Billund, Denmark-based Lego, the world's largest maker of snap-together blocks for children, and K'NEX Brands LP, which makes plastic construction kits, say their sales are gaining as the toy industry falters. Building sets typically do well in a down economy because families can add to existing ones, said Chris Byrne, a New York-based toy-industry analyst and director of content at toy-information Web site TimetoPlayMag.com.

"Parents and kids already have an investment in the property," said Byrne. "You add a new set to it and the whole set becomes relevant and new again."

US retailers may face the steepest decline in Christmas sales in at least four decades, according to the International Council of Shopping Centers, a New York-based trade group.

Toy sales will probably fall at least 5 percent this year, Sean McGowan, a toy industry analyst at Needham & Co in New York said in a Dec 19 note. They declined 1.1 percent to $13.3 billion in the year through October, according to NPD Group Inc.

Building-set sales soared 30 percent in the period, the Port Washington, New York-based market research firm said.

Lego's sales growth will probably slow next year, as the economy "will catch up with the consumer", Laursen said.

The company's Star Wars and Indiana Jones lines have bolstered construction-toy growth this year, said Anita Frazier, an NPD analyst.

The toymaker added licensed Indiana Jones toys, such as a $79.99 Temple of the Crystal Skull playset, and new releases to its 30-year-old Lego City line.

Some US retailers have doubled their Lego shelf space in the past four years and the toymaker has also benefited from Lego-brand video games and movies on Google Inc's YouTube video-sharing site, Laursen said.

K'NEX has seen year-to-date orders from the three biggest US toy sellers - Wal-Mart Stores Inc, Toys "R" Us Inc and Target Corp - increase in the "low double-digits" on a percentage basis, said Chief Operating Officer Michael Araten.

Agencies

(China Daily 12/26/2008 page16)