Collapse Watch: Lego Layoffs and Tumbling Disney (and NOT about Hurricanes)

Lego announced they are cutting 1,400 jobs, and now Disney is slashing their company’s outlook. American family belt-tightening is happening in real time. In a “growing economy”, this cut in discretionary spending in not supposed to happen

Lego has just announced they will cut 8% of their workforce. Here’s more from the Chicago Tribune:

After building up sales aggressively since a near bankruptcy in 2004 through new ventures like films and new toy lines, the company seems to have hit a peak. Its sales are now falling for the first time in 13 years and it says it needs to simplify its operations.

Revenue dropped 5 percent in the first six months of the year, to 14.9 billion kroner ($2.4 billion), mainly as a result of weaker demand in key markets like the U.S. and Europe, where sales had risen strongly for years. Profits slipped 3 percent to 3.4 billion kroner ($544 million).

“You hit a peak,” said Jim Silver, the CEO and editor in chief of toy review site TTPM. “Nothing keeps going up like that.”

The company, he said, needs to simplify its business model to reduce costs. Especially since 2012, the group has been adding new businesses as it embarked on ventures like films.

“We have added complexity into the organization which now in turn makes it harder for us to grow further,” Vig Knudstorp said.

And just today from Zero Hedge

Once upon a time, Disney used to be the hedge fund world’s media darling. Not today, however, when at the BofA Media Communications Conference in New York, Disney CEO Bob Iger slashed the company’s outlook and said earnings in 2017 will be “roughly in line” with last year, sending the stock tumbling as much as 3.9%.

 

 

The entertainment giant, which has been under pressure to improve profit at its TV business amid criticism it failed to anticipate the competitive threat posed by Netflix and overpaid for sports rights for its ESPN cable network, was expected to post EPS growth of 3.2%. It will be lucky to get 0.0%.

 

 

Not even Iger’s promise that the parks business is having a “tremendous” year, or his promise that fiscal year “will be stronger than 2017” did anything to dent the wholesale revulsion against Mickey Mouse.

Iger’s other comment, that among DIS’s key priorities include a succession process, will likely further add to near-term stock concerns.

The other announcements made by Iger today, which had zero impact on the stock, included:

  • ESPN app will offer a plus service for more programming, Disney’s
    Chief Executive Officer Bob Iger says at Bank of America conference.
  • ESPN app will have 10,000 new live sporting events
  • ESPN app will be “a sport marketplace platform”
  • Iger says Disney will talk about app pricing in early 2018
  • Iger sees Disney app being introduced internationally before in the U.S.
  • Distributors will be able to distribute future Disney apps
  • Iger says Disney’s direct to consumer app to debut in late 2019

Disney’s weakness has quickly translated to other large cap media stocks, which have quickly fallen in sympathy including CBS -1.7%, VIAB 1.4%, and FOXA -1.3%.