Lego is stacking more sales than ever, but profit margins are under pressure

Lego Group, the Danish toy giant behind everyone’s favorite modular plaything (and least favorite thing to accidentally step on), reported results for 2024 this week — and, as with much of its recent earnings, the main takeaway for Lego was that everything is awesome… at least in terms of sales.

Indeed, the Lego Group’s annual revenues rose 13% year over year to a record 74.3 billion Danish krone (~$11 billion), significantly outpacing the toy industry at large — with major competitors Mattel and Hasbro both seeing sales decline in 2024, according to Bloomberg — furthering its lead as the world’s biggest toymaker.

New bricks on the block 

While known the world over for its brightly colored constructible models, Lego’s recent success has been built on expanding its reach beyond bricks and mini figures.

Lego in its purest plastic form came about in 1947 before seeing a meteoric rise all the way through to the 1990s. But by 2003, the company was struggling, coming close to bankruptcy as sales plummeted almost 30% that year. To try to turn these results around, Lego then appointed its first nonfamily member CEO, Jørgen Vig Knudstorp, who championed new formats and collaborations with brands.

Rather than limiting itself to its own universe — there are only so many iterations of plastic houses or animals you can sell to people — Lego’s collaborations have created an almost infinite canvas of themes and characters for its designers to work with.

Lego has joined forces with huge franchises like Star Wars, Indiana Jones, Harry Potter, The Lord of the Rings, and even industry titans Disney and DC Comics to create a string of successful movies, TV shows, and video games. The brand’s own Lego-based movie, released in 2014, grossed more than $470 million globally, and its foray into video games has arguably been even more successful. Per GameRant, 2008’s “LEGO Batman: The Videogame” sold 12 million copies, while the Lego Star Wars video game series has sold more than 50 million copies worldwide across all its entries.

More recently, Lego partnered with Epic Games to release “LEGO Fortnite” in 2023, as well as launching exclusive products with retail brands like Adidas, Levis, and Ikea. Just this week, the company’s CEO told the Financial Times that Lego was building up its own in-house video game production capabilities.

The toymaker has also pushed forward with its theme parks — Legoland New York opened just after the pandemic, and Legoland Shanghai is slated to open this summer — and doubled down on more technical, adult-focused sets, like its bestselling Botanicals and Icons collections.

Lego’s versatile aesthetic format (basically, blocks in block colors) allows the brand to react quickly to emerging trends in pop culture. As such, the company has invested in expanding its product range, with Bloomberg reporting that its number of products reached an all-time high of 840 in 2024.

Plastic backing

For years, Lego’s iconic branding and market position has seen it enjoy profit margins that, in the world of selling physical goods, are usually reserved for luxury brands. But recently, even as Lego has stacked more sales than ever, profits have taken a hit.

Expenses incurred from marketing and developing new products, the inflated costs of raw materials, and continued efforts to switch to fossil-free plastics (which are up to 60% more expensive than nonrenewable materials) have hit Lego’s bottom line. Production costs were up 12% last year, with the company’s operating margin falling to 25%, down from 31% in 2021.

Another brick in the wall… Despite being headquartered in Denmark, Lego could also be subject to President Trump’s tariffs. Most Lego bricks sold in the US, the company’s biggest international market, are currently made in Mexico, with a new factory in Virginia not set to open until 2027.