Daily Brief: Lego's Growing Brick By Brick

Daily Brief: Lego's Growing Brick By Brick

over 1 year ago3 mins

On Wednesday, Lego reported strong sales growth in the first half of the year.

What does this mean?

With real bricks and mortar looking pretty unappealing right now, consumers seem to be finding solace in bricks of another kind: yes, we’re talking about Lego, a favorite plaything of kids across the globe and an age-old nemesis of adults' bare feet. In the first six months of the year, the toy manufacturer opened 66 new stores, mostly in China, helping to boost sales by 17% versus the same period last year. (Financial wizardry due in large part to enthusiasm for Lego’s Harry Potter and Star Wars sets.) That said, profits didn’t quite keep in step: investments in digital offerings and sustainable manufacturing processes sapped cash, as did higher raw material and energy costs – meaning the Danish toymaker’s profit didn't actually grow in the period.

Lego earnings

Why should I care?

The bigger picture: A winning strategy.

Lego, the world’s biggest toymaker outside the North Pole, has reaffirmed its position as the titan of the toy industry. It boosted its market share in key regions every month in the period, leaving the wider industry – whose size grew by just 1% – eating dust. See, unlike many rivals, Lego keeps manufacturing close to where it sells, so global supply chain trouble has been a non-issue for the firm. And unlike competitors, the toymaker hasn’t upped its prices in recent months – keeping its wide range of products attractive to adults and kids alike.

Lego biggest toymaker
Worldwide revenue of major toy companies in 2021 (in million US dollars)

Zooming out: More bricks to come.

Lego doesn’t intend to rest on its laurels either: the company’s planning to spend over $1 billion on a US factory to keep up with customer demand – its seventh manufacturing site worldwide. The ribbon-cutting’s scheduled for the second half of 2025, when the green factory – powered by an onsite solar park – will start churning out its portion of Lego’s 100 billion yearly bricks.

Keep reading for our next story...

The Bank of England Is Buying Up Bonds

BoE image

The Bank of England (BoE) announced emergency moves to rescue the bond market on Wednesday.

What does this mean?

The British economy has been less stable than Kanye West’s love life lately, with investors – eager to rid themselves of UK assets – knocking government bonds into free fall and sending pension funds’ holdings down with them. That’s bad news: pension funds implement some strategies using debt, and the current selloff means that brokers are asking for more collateral to cover those potential losses – in what are known as margin calls. But that’s got the BoE all sweaty and nervous: if pension funds started selling off investments to raise cash, it could hit prices even more and sink the market altogether. So, in order to prevent a full meltdown (and salvage millions of Brits’ hard-earned pensions), the BoE announced that it’s stepping in and buying up bonds on “whatever scale necessary” to stabilize markets. The effect was immediate: when the news broke, 30-year bonds headed for their biggest rally on record.

UK bond yields
Bond yields move in the opposite direction to prices

Why should I care?

The bigger picture: Why are you hitting yourself?

This all puts the BoE in a weird position: see, by buying bonds en masse, the BoE’s flooding markets with cash, a step that’s normally inflationary – but at the same time, it’s hiking rates in a bid to calm inflation. Whatever happens next, then, one thing’s pretty sure: the central bank will have to be even more aggressive with interest rate hikes from now on – which could hit economic growth even harder.

For markets: Hunting season.

The UK’s dire economic situation means it could be open season for takeovers by overseas buyers. After all, low valuations, a sinking pound, and favorable regulations have made British firms attractive targets – so it’s no surprise that 70% of top takeover picks are British right now, according to a recent poll.

UK takeover pics
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