BILLUND, Denmark -- March 16, 2004 -- The LEGO Company Leadership Team, led by company president and CEO, Kjeld Kirk Kristiansen, finalized an action plan to secure stable and sustainable growth for the future, with immediate effect.
"The key aspects of our new strategy are adjustment of our activities and cost levels, attention to improving our competitive edge and a focus on our core play materials business," Kristiansen says.
The Company is experiencing a serious earnings crisis, which leads to an adjustment in its costs to a turnover level of DKK 9bn. Costs will be cut by DKK 700m, but the full effect will not be felt until 2005. The objective is to achieve a bottom-line figure of zero for 2004, with future annual sales growth to be balanced at a level of three to five percent.
The Company's workforce will be reduced by up to 500 jobs in the core business by 2006. Approximately one-third of the cuts (170 jobs) will be implemented within the next few weeks, about 100 of which will occur in Denmark.
The main points of the new action plan include:
1. Radical reduction of development and production lead times, cutting the time it takes from idea to shelf by 50%.
2. Much stronger partnership with retailers, including focus on customer profitability.
3. Increased focus on trade promotions to drive competitive in-store placement.
4. More reliable deliveries, including greater flexibility, more accurate sales forecasts, and larger buffer inventories of key products, to be achieved through a new operations team and forecasting system already put into place.
5. Focus on classic product lines - LEGO(R) DUPLO(R)/QUATRO/BABY, Make & Create, classic play themes, LEGO TECHNIC(R) and LEGO MINDSTORMS(TM). The goal is to regain lost volume through a stronger portfolio balance between classic themes and story-based properties like BIONICLE(R), LEGO Star Wars(TM) and LEGO Harry Potter(TM).
6. All non-core ventures will be discontinued or achieved through licensed partners, including the development of software games.
7. A simplified global location and operations infrastructure based in global HQ in Billund with three regional hubs: North America - Enfield, USA; Europe - Baar, Switzerland; and Asia/Pacific - Tokyo.
8. An integrated European market organization with centralized administration based in Switzerland - but bringing sales decisions closer to the retailer.
The four LEGOLAND(R) Parks around the world will not be affected by the action plan. Later this year, the Company will be evaluating the roll-out strategy of its own brand retail stores.
The Company's 2003 report has been published on LEGO.com.
