Lego reported their annual results this week for a turbulent 2021 in which they performed incredibly well (yet again!). Total revenues were equivalent to $8.15 billion USD, which makes Lego the biggest toy company by some way, and that figure represents growth of 27% yoy (!) compared with 2020. Operating profit came in at around 30% of revenues, which in terms of industry benchmarks is around twice what a toy company could reasonably be expected to deliver in good years.

In summary, Lego is an incredible business which has thrived during the pandemic both commercially and in terms of brand equity.

One major advantage Lego had in 2021 was the fact that they are the only major toy company to have their entire factory capacity in house and near to market. Whereas most toy companies manufacture most or even all of their products in Asia traditionally and then ship products to the major toy markets in the West, Lego have a long-term strategy of building their own factories closer to market i.e. Mexico for the lucrative North American toy market, Denmark & Hungary for Europe, and China & soon to be Vietnam for the fast-growing Asia-Pacific region. So, when most toy companies were in despair about container shipping prices and availability, Lego could keep on churning out their products close to home delivering industry leading profitability ratios and ensuring supply. There was probably some fun & games going on in the background in terms of securing plastic and other raw materials, but Lego had some massive innate advantages that other toy companies just didn’t have!

Another major advantage Lego has is own retail stores – with 832 stores as of December 2022. Most toy companies would see this as being too risky in terms of the business model and operational management of retail, and as being in competition with their customers. But Lego prove that a). toy companies can manage concept toy stores and b). they help not hinder other retail customers.

Lego have yet again shown the way to do it in 2021 – congratulations to Lego’s management and people around the world.


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