China GDP Growing 3% Is Enough for Lego to Win Consumer Marketby
The world’s most profitable toy company says its Asian growth ambitions would be perfectly intact even if China grows at about half its current pace.
Lego A/S Chief Executive Officer Joergen Vig Knudstorp says the benefits of having China continue its transformation into a consumer-based economy with a strong middle class far outweigh any desire to see growth rates of 7-8 percent.
“Even with 3-4 percent growth in China, there would be plenty of growth opportunities for us there, especially as the economy is shifting from being driven by industry to being driven by private spending,” Knudstorp told Bloomberg.
Lego on Tuesday reported record sales and profit for 2015. Revenue grew about 40 percent in China, which is roughly twice the company’s global average.
“Looking over the next 10 years, we see a lot of potential” in China, the CEO said. ‘We’re currently mostly present in the most advanced parts of China, the big cities, where the economy to some extent resembles Denmark. We expect to expand out of those areas and to go deeper in to China.”
China’s factory gauge on Tuesday extended its stretch of deteriorating conditions to a record of seven months as the world’s second-biggest economy struggles with its output. The central bank late on Monday stepped up efforts to cushion demand amid plunging stock prices and a weakening currency, freeing up the amount of cash banks can lend.
“We don’t see any effect from the much debated slowdown in the world economy,” Knudstorp said.
Lego has roughly doubled both its global revenue and its net income over the past four years. The company in November started producing toys at its first Chinese factory in Jiaxing, on the east coast.
“Previously we have seen a strong correlation between Lego’s performance and global growth rates. But in the recent 5 to 10 years, there’s only very little correlation.”