"My kids still play with the large brick sets to create Minecraft-like buildings or vehicles, but the modern sets tend to be played with once"
exactly. After a while, parents catch on and buy the kids the thing that lasts for a while, rather than paying for the overpriced "new, shiny" that only gets used one time.
Also Lego seems to be having a classic 'inventory control' problem. The solution to an inventory control problem is EXACTLY what their CEO appears to be doing. You have to eliminate the excess inventory, using the method that creates the least amount of pain, and then fix your forecasting methods and get the production schedule RIGHT this time, so you don't end up with another warehouse full of crap that won't sell.