Billund, Denmark — Danish toy manufacturer Lego A/S has announced that it will be cutting its global workforce by 8 percent — roughly 1,400 positions — to make the organization “smaller and simpler.”
The announcement came amid the company's poor half-year results, which saw its operating profit dip 6 percent to just over 590 million euros ($703.3 million).
Explaining the decision, Lego Chairman Jorgen Vig Knudstorp said the Billund-based company had built an increasingly complex organization to support global double-digit growth over the past five years.
“In the process, we have added complexity into the organization which now in turn makes it harder for us to grow further. As a result, we have now pressed the reset-button for the entire group,” Knudstorp added.
The company, which currently employs 18,200, said the majority of the job cuts will be implemented by the end of 2017.
The new organization, Lego expects, will increase the group's focus on its markets and customers across the world.
The toy manufacturer reported a 5 percent drop in its first half sales at 14.9 billion Danish krone ($2.38 billion) mainly due to low performance in established markets such as the United States and parts of Europe.
The company also reported a 6 percent decline in profit for the first six months of the year, at 4.4 billion Danish krone ($705.2 million).
While established markets saw a fall in sales, performance across the market regions was mixed, with China seeing double-digit sales growth.
Lego attributed the decline in operating profit to lower sales and increased costs associated with investments in production capacity and organizational capabilities. The investment, said Lego, were made to support higher expectations of revenue which failed to materialize.
Voicing his disappointment with performance in established markets, Knudstorp said steps have been taken to address the problem.
“We are working closely with our partners and we are confident that we have the long-term potential of reaching more children in our well-established markets in Europe and the United States. We also see strong growth opportunities in growing markets such as China,” he added.
