Tuesday, Lego reported a decline in revenue for the first time in 13 years, The LA Times reports. Net profit also fell.

The company’s revenue over the first half of 2017 came in at $2.4 billion, a five percent drop year-over-year. Net profit dipped three percent year-over-year, to $544 million.

The revenue decrease was especially pronounced in established markets like the U.S. and Europe, but revenue in nascent markets like China grew by double digits, the company said. The press release hints that Lego intends to double down on its presence in China and other budding markets.

Sales of new lines, such as the Lego Chima have been underwhelming, according to the Times, while classic models like Lego City, Lego Friends, Lego DUPLO and Lego Technic continue to fly off the shelves.

“We are disappointed by the decline in revenue in our established markets, and we have taken steps to address this,” said Lego Group Chairman and former CEO Jørgen Vig Knudstorp.

Lego says it has built “an increasingly complex organization” over the past five years to facilitate growth. The strategy worked for a time: from 2011 to 2016, the company’s revenue doubled, the Times notes. Now, though, the bureaucratic web has become too convoluted to sustain further growth, the company says.

“…We have added complexity into the organization which now in turn makes it harder for us to grow further. As a result, we have now pressed the reset-button for the entire Group,” Knudstorp said.

In pressing the reset button, Lego plans to trim its global workforce of 18,200 by 18 percent, eliminating 1,400 jobs. “Unfortunately, it is essential for us to make these tough decisions,” Knudstorp said.

The company hopes the streamlining process will “simplify our business model to reach more children.”

The toy industry is changing as video games and smartphones continue to capture children’s attention. However, Lego has succeeded in adapting. It has developed high-tech toys like Lego Boost, a programmable robot, and has licensed its characters out for video games, movies, and theme parks.

The licensing endeavors have generated significant revenue. Warner Bros.’ The Lego Movie, which hit theaters in 2014, grossed $469 million at the box office and garnered critical acclaim. Warner Bros’ has scheduled a sequel for release in 2019.

“The Lego Batman Movie,” which came out in February, brought in $312 million in box-office ticket sales and, like its predecessor, received positive reviews from critics.

On September 22, Warner will release The Lego Ninjago Movie. Analysts expect that film to generate between $35 million and $40 million in sales in its first weekend, the Times says.

Despite their success in theaters, though, the movies have failed to increase sales of related toys as much as Lego anticipated, said industry analyst Keith Snyder, per the Times.

Warner Bros. also handles Lego video games. 2015’s Lego Dimensions rose to the second spot on sales charts in the U.K. and Ireland in its first week, Forbes reported. According to VGChartz.com, Lego Dimensions has sold 3.7 million copies worldwide. Rival toys-to-life games Skylanders: SuperChargers and Disney Infinity 3.0 have sold 2.6 million and 2.8 million, respectively.

Warner is developing video-game spinoffs of The Lego Batman Movie and Ninjago.

Lego has also licensed its brand to Merlin Entertainments, a British-based company which owns and operates nine Lego-themed theme parks throughout the world, per the Times. Those parks brought in $1.9 billion in revenue in 2016—an 11.7 percent jump versus the previous year. Attendance rose 4.2 percent year-over-year in 2016, to 63.8 million.

Lego’s disappointing performance in quarter two surprised the toy industry. “This drop really was surprising and caught the industry off guard,” said Snyder per the Times. “Lego has been the golden child of the toy industry the last four years.”

“Everything hits a peak,” added Jim Silver, editor in chief of TTPM, a toy review and research firm, in reference to Lego’s surge. “At some point within a category, you can only grow so much.”

Lego has rebuilt itself before. The company was on the brink of financial collapse in 2004, but Knudstorp assumed CEO duties and steered Lego back to fiscal responsibility and sustainable success.

Knudstorp stepped down as CEO in December and became chairman. Since, two men have filled the role. Last month, Lego announced that Niels Christiansen would take the reigns from Bali Padda, who originally replaced Knudstorp.

Christiansen may have to engineer a comeback reminiscent of the one Knudstorp led if Lego is to retain its dominant position in the toy industry.

Featured Image via Wikimedia Commons