Lego plans to lay off 8% percent of its staff, saying it needed to press the “reset button” after experiencing its first sales decline in more than a decade.
The Danish toymaker on Tuesday reported that sales for the first half of the year dropped 5 percent to 14.9 billion Danish crowns ($2.38 billion), reflecting weak demand in established markets such as the U.S. and Europe, while operating profit slumped 6 percent to 4.4 billion Danish crowns.
As part of an effort to streamline its operations, Lego will cut approximately 1,400 positions, most of them before the end of 2017. The company currently employs 18,200 people.
“We are very sorry to make changes which may interfere with the lives of many of our colleagues,” executive chairman Jørgen Vig Knudstorp said in a news release. “Unfortunately,” he added, “it is essential for us to make these tough decisions.”
As Reuters reports, the layoffs are “a sharp reversal for a company that managed to expand and respond to rising demand in Asia … even as the global toy market shrank after the 2008 financial crisis.”
Lego has moved into video games, movie franchises, robotics and smartphone applications to build up sales but revenue growth slowed from 25% in 2015 to just 6% last year.
To support global double-digit growth, Knudstorp said, Lego had “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.”
Lego is based in Billund, Denmark, and and is still controlled by the founding Kristensen family, which has a 75% stake. Last month, it replaced British CEO Bali Padda, the first non-Danish person to run the toy company, after just eight months.
“Lego has tripled its workforce and more than tripled the number of lines they offer [over recent years],” Lou Ellerton, associate director at the brand consultancy Mash, told The Guardian. “Realistically there is a limit to how much people can buy at any one time. There has been so much licensing they are over-extended.”