How 126-Year-Old Brand Lionel Is Leveraging Its Track Record in the Age of AI

Small business takeaway: 

• Lionel, the 126-year-old model train maker, is using its acquisition by collectibles company Round 2 to turn nostalgia into a growth strategy. Three insights stand out: emotional connection can become a durable growth asset; acquisitions work best when they deepen—not blur—brand identity; and innovation gains traction when it extends the customer relationship, from licensing and collector communities to technology that keeps the core experience relevant.

Lionel, the model train company that has been selling memories for parents and children since 1900, has survived by carefully steering its legacy brand through a changing consumer landscape. Now, as part of the newly formed Lionel Brands Group, it has a plan for accelerated growth.

In March, Lionel LLC was acquired by collectible company Round 2 to create the Lionel Brands Group. The deal comes as model train sales are accelerating globally and as the number of young collectors is increasing. 

Sales of model trains and related merchandise are expected to reach $1.37 billion this year and to grow to over $2.5 billion by 2035, according to a report by research and consulting firm Business Research Insights. 

In the overall toy industry, teens and adults are driving more purchases than young children. Purchases by adult collectors and hobbyists accounted for much of the 8% growth in global toy sales in 2025, according to research firm Circana. 

The acquisition also creates key synergies for both companies, including opportunities for shared technology and manufacturing, complementary licensing deals, and cost savings.

Joining forces with Round 2, with its background in collectibles, is a smart move for Lionel, toy consultant and industry expert Chris Byrne told CO—.

“They’re tapping into a market with a great deal more disposable income and a dedicated fan base that’s already invested in the property,” Byrne said. 

Round 2, based in South Bend, Indiana, sells the die-cast car lines Johnny Lightning and Racing Champions, as well as electric slot cars, model kits, and other collectibles.

The owners of Round 2, which is a portfolio company of private equity firm Praesidian Capital, named the combined company the Lionel Brands Group in deference to the long history and name recognition of Lionel.

Lionel Brands Group CEO: ‘Things that make brands great—an emotional connection that brings people back’

“You think about the things that make brands great—emotional connection with the brand, an affinity that brings people back—those were all things that we saw in the Lionel brand,” Lionel Brands Group CEO and previous Round 2 CEO Richard Barry told CO—.

Lionel’s long history holds key survival lessons that apply to all companies. For more than a century, it has stayed true to its core values of authenticity and quality craftsmanship, while being able to change direction to respond to consumer trends. It also forged deep connections with its customers and fans, and those relationships are expected to pay off by driving future growth.

Lionel was founded in 1900 by Joshua Lionel Cowen and Harry C. Grant. Originally, the first model trains Cowen created were intended to serve as store window displays that would promote the electric devices the fledgling company sold. But when the first trains went into store windows, customers wanted to buy the model trains instead of the Lionel devices. 

The company quickly pivoted to become a toy company, and Lionel was one of the exhibitors at the first New York Toy Fair in 1903. It is one of only three original exhibitors still in business today.

Lionel has experienced a number of ups and downs over the years, including two bankruptcies and numerous ownership changes. In the 1970s and 1980s, it was a division of General Mills, and at one point train enthusiast and music legend Neil Young was a part owner.

[Read more: Retro Rewards: How Businesses Are Monetizing the Nostalgia Trend to Win Over New Customers]

Leaning into the collectors’ market: ‘They’ve stayed true to their brand’ 

Something that has remained constant over the years is the love for the Lionel brand and the memories it triggers. 

Howard Hitchcock, the President and Chief Operating Officer of Lionel Brands Group and the Lionel CEO from 2014 to March 2026, said it has happened hundreds of times when he is spotted wearing a company shirt with the Lionel logo.

Enthusiasts “instantly launch into, ‘I remember when I got my first train’—and it’s the same exact story—‘I came down on Christmas morning, and the train was still warm because Santa has been playing with it all night long,’” Hitchcock told CO—.

“Their dads had saved up weeks of salary, and they wanted to be kids themselves, so they were playing with the train.” 

“One of the reasons Lionel has been so successful for so many generations is they’ve stayed true to their brand,” Kevin Davis, President-Elect of the Lionel Collectors Club of America (LCCA), told CO—. “They make toy trains that bridge generations. And that’s what they do really well.” 

Davis and LCCA President Andy Dubill told CO— that Lionel over the years has listened to collectors, even to the point of manufacturing a special piece of track requested by one. It stays connected with fans by participating in the club’s annual conventions and attending train shows. 

The LCCA has approximately 8,000 members, and the kids’ club is the group’s fastest-growing division.

Davis and Dubill expect an event this year that will spur interest in model trains is the coast-to-coast tour of the Union Pacific Big Boy 4014, the world’s largest and most powerful operating steam locomotive, which is drawing crowds as it travels to the East Coast for the first time in decades.

Lionel put out a special catalog of Big Boy–related trains and many local hobby shops are doing related events. 

[Read more: How Three Legacy Brands Are Honoring Their Storied Histories While Modernizing for Relevance and Growth]

Maintaining its heritage while innovating for the future via licensing and tech

The key challenge for Lionel going forward, toy expert Chris Byrne told CO—, is figuring how to turn kids into future collectors in an age when trains aren’t a part of daily life for most children. 

“For any toy you have to look at where is the similar reflection in the culture at large,” he said. “Where does the romance of the train and the mythos around the train come into a child’s consciousness so they want to replicate that in their play?”

Lionel has been proactive in recent years about forming licensing partnerships with the top train-related kids’ properties, creating Lionel versions of the train Harry Potter took to Hogwarts, as well as Polar Express and Thomas the Tank Engine trains. 

Barry and Hitchcock attended the annual Licensing Expo show in May and saw that many top entertainment licenses were excited about the opportunities to deal with a combined company representing multiple collectible brands. 

Lionel also has stayed current with technology, adding features like Bluetooth-enabled train controls that can be operated from a smartphone and special effects such as state-of-the-art lights and sounds. Hitchcock isn’t ruling out AI innovations down the road. “It’s definitely on the radar,” he said.

“The responsibility for us is to figure out the ways to maintain the heritage while innovating for the future,” said Lionel Brands Group CEO Barry.

Barry, a toy industry veteran who was a top executive at Toys R Us before heading Round 2, believes that, even in the age of AI, kids will continue to find trains magical. 

“I think it’s part of their DNA. Trains are one of those classic play patterns for kids,” he said. “I don’t think that’s something that will ever go away, even with technology.”

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