The company recorded a five percent decline in turnover in the first half of the year to 14.9 billion kroner (2.0 billion euros, $2.3 billion), with net profit down by three percent to 3.4 billion.
The world renowned brand has strongly diversified in recent years, moving into areas such as video games, a hit movie that will have several sequels, cartoons and Legoland amusement parks.
"In the process, we have added complexity into the organisation which now in turn makes it harder for us to grow further," Lego chairman Jørgen Vig Knudstorp said in a statement.
The company would be turned into a "smaller and less complex organisation than we have today, which will simplify our business model in order to reach more children," he added.
However, this would mean slashing 1,400 jobs around the world before the end of 2017. Lego currently employs around 18,200 people.
"We are very sorry to make changes which may interfere with the lives of many of our colleagues," Knudstorp said.
"Unfortunately, it is essential for us to make these tough decisions," Knudstorp said.
The company said its revenue dropped in established markets such as United States and Europe, but grew by double digits in China, where it says it sees "strong growth opportunities".
Operating profit fell by six percent to 4.4 billion kroner due to "lower revenues and increased costs."