Lego Cuts 1,400 Jobs After Sales Drop

Lego can't build itself out every dilemma.

The famed toymaker announced Tuesday it would cut 1,400 jobs before the end of 2017. The job cuts, which equates to 8 percent of the company's employee roster, are a result of a drop in profit and sales accumulated through the first half of the year.

The Danish family-owned company's revenue has fallen by 5 percent. Lego's operating profit is reportedly down by 6 percent and its net profit decreased by 3 percent. The toymaker's total revenue also declined by 5 percent, which doesn't compare to the Lego's earnings from the first half of 2016.

"We are losing momentum and productivity — and it's a warning light of declining competitiveness and thus adaptability," a representative from the Lego Group told International Business Times Tuesday. "Ultimately, this can lead to stagnation or even a decline. We cannot allow this to happen.

"We are already taking steps to regain momentum in markets like the U.S. and Europe and will work with our partners to do this. This is however not a quick fix, and may take a few years to materialize," the company added.

"We have added complexity into the organization which now, in turn, makes it harder for us to grow further," Lego chairman Jorgen Vig Knudstorp said in a press release. "As a result, we have now pressed the reset-button for the entire Group.

"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."

Lego's decision to create a smaller business and organization will ultimately simplify its business model. The European toymaker believes this will, in turn, help the company to better reach its target market.

All terminated employees will receive a severance package. The package will include job transition to a position outside the company, among other unlisted benefits.

Niels Christiansen officially becomes CEO on Oct. 1, replacing interim CEO Bali Padda.

Lego, which is owned by the Kirk Kristiansen family, began making wooden toys in 1932. The company's most recognizable product is the red Lego brick, which was first unveiled in 1958. However, the toymaker came under pressure to keep with the times as electronic toys became a hot commodity.

Lego hasn't experienced an annual revenue setback in 13 years.

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