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In lugnet.general, Allan Bedford wrote:
> LEGO has released their annual report for 2004 and it looks like there is some
> good news!
>
> http://www.lego.com/eng/info/default.asp?page=pressdetail&contentid=14426&countrycode=2057&yearcode=&archive=false
I just finished wading through the annual report - it's an interesting read.
Boiled down, I think it comes to: "Last year wasn't quite as bad a stinkburger
as we thought. Kinda."
It's the type of document that can be taken both ways. Improvements are
definitely happening, which is good news; but they still lost more. The bar
charts are particularly telling. Hard to spin the numbers.
It's funny to note what the media gloms on to... a lot of headlines read,
"Ailing LEGO to shed parks" or something along those lines. That was announced a
while ago. Whatever is the sexiest headline, I guess.
It would be very nice to hear a balanced, honest analysis of what this REALLY
means for LEGO in the long run. No doom-n-gloom chicken little, no corporate
happyspeak spin.
Anybody here volunteer? ;)
- Kelly
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In lugnet.lego, Kelly McKiernan wrote:
> It would be very nice to hear a balanced, honest analysis of what this REALLY
> means for LEGO in the long run. No doom-n-gloom chicken little, no corporate
> happyspeak spin.
>
> Anybody here volunteer? ;)
Very tricky. I have gone through the annual report - but its not clear whether
what's happened is the start of a long contraction down to a niche player or
more of a once-off adjustment that's a foundation for modest growth.
A couple of interesting points from the annual report.
- gross margin is much healthier. This implies that Lego is selling less at
clearance prices and more at full price and that costs are being reduced
- cash flow looks much better
- investment has been reduced dramatically
- the % value of licensing fees to revenue didn't fall as I was expecting it
to. (and currency issues cloud that number)
Increased gross margins on slightly lower revenue in a flat market is a good
start. The current strategy of focusing on core lines rather than the old
strategy of broadening the brand seems to be improving the numbers.
But an annual report for a privately held company is never as informative as one
would wish.
The annual report doesn't answer the following questions:
1. Can they thrive in a smaller form - like Brio or Playmobil? Will there be
enough revenue to cover Lego-size R&D costs?
2. How representative are the anecdotal stories of shrinking retail shelf space
for Lego? Are the competitors increasing the shelf space share?
3. Has the toy market changed too much for Lego to adjust? Do kids want mobile
phones more than construction toys? Has the growing faddishness of the toy
market invalidated Lego's R&D model? Will Bionicle suddenly become "yesterday's
toy" and if so does Lego have another winner waiting in the wings?
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In lugnet.lego, Kelly McKiernan wrote:
> It would be very nice to hear a balanced, honest analysis of what this REALLY
> means for LEGO in the long run. No doom-n-gloom chicken little, no corporate
> happyspeak spin.
>
> Anybody here volunteer? ;)
Very tricky. I have gone through the annual report - but its not clear whether
what's happened is the start of a long contraction down to a niche player or
more of a once-off adjustment that's a foundation for modest growth.
A couple of interesting points from the annual report.
- gross margin is much healthier. This implies that Lego is selling less at
clearance prices and more at full price and that costs are being reduced
- cash flow looks much better
- investment has been reduced dramatically
- the % value of licensing fees to revenue didn't fall as I was expecting it
to. (and currency issues cloud that number)
Increased gross margins on slightly lower revenue in a flat market is a good
start. The current strategy of focusing on core lines rather than the old
strategy of broadening the brand seems to be improving the numbers.
But an annual report for a privately held company is never as informative as one
would wish.
The annual report doesn't answer the following questions:
1. Can they thrive in a smaller form - like Brio or Playmobil? Will there be
enough revenue to cover Lego-size R&D costs?
2. How representative are the anecdotal stories of shrinking retail shelf space
for Lego? Are the competitors increasing the shelf space share?
3. Has the toy market changed too much for Lego to adjust? Do kids want mobile
phones more than construction toys? Has the growing faddishness of the toy
market invalidated Lego's R&D model? Will Bionicle suddenly become "yesterday's
toy" and if so does Lego have another winner waiting in the wings?
Want more detail Kelly?
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In lugnet.lego, Mark Jordan wrote:
> In lugnet.lego, Kelly McKiernan wrote:
> > It would be very nice to hear a balanced, honest analysis of what this REALLY
> > means for LEGO in the long run. No doom-n-gloom chicken little, no corporate
> > happyspeak spin.
> >
> > Anybody here volunteer? ;)
>
> Very tricky. I have gone through the annual report - but its not clear whether
> what's happened is the start of a long contraction down to a niche player or
> more of a once-off adjustment that's a foundation for modest growth.
- much good stuff snipped -
That's a good analysis, thanks for taking the time to write it up.
> The annual report doesn't answer the following questions:
> 2. How representative are the anecdotal stories of shrinking retail shelf space
> for Lego? Are the competitors increasing the shelf space share?
This would be an interesting one for them to address publicly. You're right,
it's all been anecdotal, although I know that I've seen it as well, especially
at Wal*Mart and K-Mart. Toys 'R Us seems to be retaining the shelf space and at
least trying to differentiate the brands by separating them, but I don't know if
that's just my local stores or if it's more widespread.
> ...Will Bionicle suddenly become "yesterday's
> toy" and if so does Lego have another winner waiting in the wings?
That's the DKK 64,000 question, and one that has me worried. What happens when
Bionicle tanks? Let's hope that line has a few more years left, so LEGO can find
their Next Big Thing, their iPod. They've done a good job with expanding that
success into the Knights' Kingdom, but that's evolutionary rather than the
revolutionary change that Bionicle was in 2001. They need another leap, I'm
guessing within the next couple of years.
> Want more detail Kelly?
Always :) But this has been very helpful, thank you.
- Kelly
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