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Lego sales are gaining as toy industry falters

December 25, 2008|bloomberg news

Lego may have a record gain in U.S. sales this year as cash-strapped parents seek toys that will last, said the head of the company's Americas unit.

Lego's total sales growth will exceed its August projection of 12%, Soren Torp Laursen said. The company has had an "exceptional year" in the United States and Britain, he said.

"We braced ourselves for fairly tough conditions because the macro-economic picture was not looking very good," Laursen said Tuesday. "Much to our surprise, our demand actually started to accelerate."

Lego, the world's largest maker of snap-together blocks for children, and another toy building company, K'nex Brands, which makes plastic construction kits, say their sales are gaining as the toy industry falters. Building sets typically do well in a down economy because families can add to existing ones, said Chris Byrne, a New York-based toy industry analyst and director of content at

"Parents and kids already have an investment in the property," Byrne said. "You add a new set to it and the whole set becomes relevant and new again."

U.S. retailers may face the steepest decline in Christmas sales in at least four decades, according to the International Council of Shopping Centers, a New York-based trade group.

Toy sales will probably fall at least 5% this year, said Sean McGowan, a toy industry analyst at Needham & Co. in a Friday note. They declined 1.1% to $13.3 billion in the year through October, according to NPD Group Inc.

Building-set sales soared 30% in the period, NPD said.

Lego's sales growth will probably slow next year as the economy "will catch up with the consumer," Laursen said.

Patricia Edwards said she was buying her sons, ages 7 and 8, Legos for Christmas. Their older sister is giving each of them a Lego car set, and Edwards, a retail analyst and the founder of Seattle-based Storehouse Partners, will probably buy them each a bucket of the bricks for their Christmas stockings.

"It's against the law to deny them access to Legos in our state," Edwards wrote Tuesday in an e-mail. "They have to follow pretty detailed directions to build the original item, then they can tear them apart and use their imaginations to create new things. They keep them busy for hours at a time."

The company's Star Wars and Indiana Jones lines have bolstered construction-toy growth this year, said Anita Frazier, an NPD analyst.

The toy maker added licensed Indiana Jones toys and new releases to its 30-year-old Lego City line.

Some U.S. retailers have doubled their Lego shelf space in the last four years, and the toy maker has also benefited from Lego-brand video games and movies on Google Inc.'s YouTube video-sharing site, Laursen said.

K'nex has seen year-to-date orders from the three biggest U.S. toy sellers -- Wal-Mart Stores Inc., Toys R Us Inc. and Target Corp. -- increase in the "low double-digits" on a percentage basis, said Chief Operating Officer Michael Araten.

Online sales at the closely held K'nex, which says it's the third-biggest building-toy maker after Lego and Mega Brands Inc., are up more than 20% this year, Araten said.

"Consumers are being more careful with their dollars than they were six months ago," Araten said. "They're asking themselves, 'Is it going to last them year-round for the next year because I may be buying less things in the months ahead?' "

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