Björn Borg AB (publ)

Good morning! Finally Friday. What an incredible weather. And today is Friday. Then it is also obligatory sports meeting at Frösnavika. So come and join the training session if you don't have anything else for you. It will be something completely incredible. But today we are here to talk about our Q1 for 2024. And looking back and just quickly summing up the quarter, we are super happy with the quarter. There are a lot of highlights, a few challenges as well. But our absolute biggest victory is continued strong growth for our sports collection. It's absolutely fantastic. In addition to that, our own e-commerce continues to grow incredibly well. last year's very, very tough comparison figures. So that's cool. If we sum up everything openly, then we increase our turnover. We say that our channels increase even if retail stores decrease from last year. Here we have a strategy to close stores and instead focus those investments in wholesale but also for e-commerce. We say that the categories are extremely good. but not SCORE. This was a huge challenge. Right at the beginning of the quarter, we had a lot of contenders in the competition. We have been preparing for a long time. We have long thought that something could happen. So as part of our work to be prepared for that, we were still well prepared that something could happen. We quickly decided to integrate SCORE into our business and we believe that it is an incredible potential. But if we look at Q1, we lost 12 million. It is challenging to buy and trade with a competitor instead of a business partner. And that had incredible consequences in the short term. But here we have great hopes, as I said. If we look at our margin, it also improved to 53.3%. Our salary also increased by 7% to 34 million. So it's a strong quarter. All the numbers are going in the right direction. Not a huge increase, but slowly but surely we're getting closer to our dream of building a global sports fashion company. That's fantastic. And this is not far off, of course. We're here to inspire. Our long-term goal is to grow, of course. Our business strategy is to handle all these channels, focus a lot of our investment on sports apparel and online, but now also, of course, accelerate growth in shoes. And if we look at Q1, our brand has developed very strongly. Even though it's not shown here, one of our absolute highlights, and something that we didn't even think was possible, not more than a dream a few years ago, was that we were going to be stronger than any of the global brands, Nike and Adidas. And in fact, in the end, it happened. So in Q1, when we asked the Swedish consumers, If you can choose a brand on this list, which brand do you choose? Then they chose Nike as number one, but Björn Borg as number two and Adidas as number three. It is a result of a very strong marketing team that is good at focusing all investments directly towards the end consumer and creating a strong value where the consumer feels they are a part of us. If we look at the top 3, then it also increases for HUR, which is about, and if we look at our next largest market in the Netherlands, then we also see that the brand is strengthened. Overall, a continued nice brand journey. If you remember, not that long ago, this was a colourful underwear company for men. Now it's something completely different. But with that said, we know that an important category is underwear. Here we are market leaders. We have absolutely the best underwear in the world for men. So they should try it out already. Here we see that this position is available, even though we choose to invest and focus on building a sportswear company. And of course, it is very important that we maintain this strong development in underwear, which gives us the financial opportunity to invest in these smaller categories. If we look at the growth, we can see that this is a record Q1. We have never done more than that in Q1. And if we look through all the quarters, we know that Q3 is often our strongest quarter. So this quarter is one of the three absolute best all quarters, regardless. So a strong start to the year. And then we should also remind ourselves that we lost 12 million in score here. If we hadn't done that, if they hadn't gone into competition, Yes, of course, then we would have had an incredibly strong quarter. Absolutely the strongest quarter ever. So we have started the year very, very, very strong. We are super happy. If we look at our different markets, they develop a little differently. We lose a little bit in Sweden and Finland. It ultimately has to do with scores that we lose. In other markets, we grow. We have continued to challenge some of the distributors. We had that last year too. Even though Norway, our largest distributor, has made a nice recovery during the quarter. If we take a quick look at the channels, we can see that wholesale is growing by 4%. If we take a look at the scores, then wholesale is growing by 10%. Own e-commerce by 21%. Own retail by plus or minus 0%. And then I talk about comparable units. Distributors continue to fall and it's not a very big focus for us. Our focus is wholesale, e-tailers and of course own e-commerce. And if we look at the development here online, we see that we continue to take a larger and larger share with e-commerce and also e-tailers. This is a piece of news. We continue to focus a lot of our power on digital context, both in terms of communication and also in terms of sales. We say that physical retail will continue to recover, even if we can conclude that there is a drop in traffic. Most likely, there is still too much physical net stock. We are facing further challenges for physical retail, even if some will grow stronger. We believe that the growth of e-commerce will, like many others, slow down, thanks to this balance. Our own view is that we have high expectations and a good plan to continue a very strong growth in e-commerce. If we look at the categories, underclothes grow by 9%, which we are super happy with. If we look at apparel, apparel grows by 24% and bags drop something. Shoes drop a lot, as I said, so 46% down in the quarter, almost 12 million. This has of course ultimately to do with the fact that at the beginning of the quarter, our license partner went bankrupt as we previously mentioned. We believe that this gives us an incredible opportunity to drive growth forward, but for Q1 it has been a challenge. But to build a strong sportswear company, we believe that it is very important to have a high sustainability focus. And it is not enough to have a recycled polyester package that we have on us now, but it is necessary that it penetrates our entire business. And one of the parts that we are super happy with is that despite the fact that we are growing the business, our CO2 emissions decrease by 12% compared to our Basel, which is 2022. And we are strongly committed to reducing our even though we obviously have very strong growth ambitions. It is a hot focus and it will continue to be so. But with that said, the sum of all this is that we are going to create a strong result that in itself creates a lot of value for shareholders. We have had a good trip so far this year, we had a great trip last year, but I will let Jens dig a little deeper into our earnings figures. So Jens!

Which quarter have we had? Which state in 2024? It is slightly unlikely. We are very, very happy. If we dive into the financial figures, we can see that the gross margin increases in the quarter compared to previous years. Around a little over 53%, which is strong evidence that we succeed nicely with the profitability at the gross level. On EBIT we also see a good development, 33 million SEK in Q1 compared to 31 million SEK a year before and a little lower even a year before that. So a strong development also on the financial side. Net income in the last few years has decreased a bit due to some currency changes to Swedish kronor that have affected us negatively. If we look at the balance sheet, we also see quite strong key figures that we follow very closely. The solidity is stable around over 55%, which is a very solid company and we have climbed high as you can see on the slide here from earlier years, from over 30-35% up to now stable around over 55%. Net debt is 89 million SEK in Q1, a clear improvement compared to previous years. Q1 is normally a quarter where we have relatively high net debt in the second quarter. If you remember our Q4 last year, we closed on net cash. Of course, this is due to the seasonal variations that we see in the company, depending on when we make our purchases for the different seasons. We also look very closely at the moving capital, so that we make sure that we have the right stock, above all. And we have an internal goal to be somewhere around 20% of a rolling 12-month sales. We see that we close quarter one at just 20% and have been quite stable around 20, 19, 20, 21% in recent years. So here it is obviously about having the right stock, but also not running away too much, of course. So with that said, a short summary of the key figures in the balance sheet also on the results side. Super happy with the start of 2024 and it will only get better. Henrik.

Yes, nice, nice. Yes, but we can of course even more if we just sum up the quarter in some strong highlights. The first is that the commodity market continues to become stronger in all of our markets. The second is the incredibly strong momentum for our own e-commerce, but also in our wholesale channels, both IT and Brick and Mortar. We strengthen our gross margin and in terms of time, sportswear continues to develop very, very strongly with an increase of 24 percent. The biggest possibility, however, is Score. We are incredibly charged. You've probably seen this, but... We have already released our first collab with Murqvist, a shoe from Portugal, Italian leather. Put it on and you will never take it off again. With this shoe we can also sell products with pretty high recommended retail prices. It is also a strong brand. The shoe will be something extraordinary, I'm sure of that. But with that said, I hope you have a great Friday. Remember to train today, you will be very grateful afterwards. We are so happy that you are listening. Have a fantastic Friday and good luck!

How do you see sourcing, design and sales? Have you really been according to expectations and where are we right now?

Yes, this has gone very, very fast. So the work with integrating and taking over basically started at the same moment as we understood that our previous partner would go into competition. And here it is of course about providing us with the right competence. And we have been thinking for a longer time, and we do this with both our countries, but also channels. Do we have different plans in place in case something extraordinary could happen? And this was a big part of the business. Of course, we have been talking for a long time. What do we do if something like this were to happen? But it can also be something else that they choose to end the collaboration, maybe choose to collaborate with another brand that competes with us. Or that they would not be able to cope with after the swathes from Covid. During the whole of 2023, we have prepared ourselves for different alternative scenarios. We were ready when it happened, even if we did not foresee it or knew it could happen. I think that the development from the day we got the message has gone absolutely beyond expectations. There is also a lot of work that the whole team has put into this. It was a group that already had full-time work before, and now they got one more. But they have handled it extraordinarily. But we knew that the Q1 would be challenging. We have had a conversation with a competition manager instead of a license partner. It's about talking to a lot of different contact areas that will of course be affected by the contests in different ways. So that as quickly as possible we can get as many products as possible from all these different sources. So that we can deliver to different customers in all of our markets. And that has been a big challenge in the short term. But as soon as that lands, then of course I think there is an incredible potential to continue working with Score. And even if both sourcing and product development are very different than clothes and underwear. So of course it's the same geographical areas, the same distribution channels, but it's absolutely necessary to strengthen and have already strengthened the team in terms of competence in order to be able to and solve the incredible potential that exists in the shoe category.

You mentioned that the Coolab shoe had a slightly higher price point. Is there any ambition in this segment to move up a bit? Or are you going to be in the same price range as you were before?

Our idea with pricing in general is that we want to price up the products. We still want to be a brand that is affordable, so we don't want to create an ultra-premium. But we also believe that the more the brand gets stronger, the more we increase sustainability. Thanks to the fact that we are more compromise-free in terms of function and quality, there will also be an increase in pricing. But at the same time, it's fantastic to see that we can sell a lot of expensive products. It's a combination of a good product and a strong brand. So it's about exercising all categories and slowly increasing some price points.

If we look at gross sales, if you take into account that the quarter is a bit burdened by this shoe integration, I think it's strong figures. How do the customers on the gross sales side see the future? Is there optimism there? Or how does the underlying market look there according to your opinion if we look into the rest of 2024?

Yes, it's incredibly different. But if you take away the score, then we grow by 10% in the gross interest rate, which is strong, both for e-tailers and physical doors. But it's very different. I would say that in Germany, perhaps the biggest challenge when talking to retailers and retailers, they still think it's very challenging. Quite large goods, low traffic numbers. It happens a lot in the German market. But if we talk about the Nordic countries, it feels like we are starting to land and maybe plan ahead. We continue to see that the consumer chooses a rather polarized way of buying, whether it's expensive or cheap, but finds new alternatives. We see that the consumer starts to find his way back to trips, to experiences, to try out what he wants to invest his money on. And we believe that sports, training and health will continue to have a strong opportunity for underlying growth. And we see some signs that you continue to want to invest in yourself, quite simply. But of course, we are not past this tough financial situation we are in. There is still high interest rates, there is still an anxiety in the market. And we see that consumption is a bit delaying. And we get signals from that when we talk to our big gross partner.

Thank you. If we look at the distributors there, now you came in in 2024 to meet a little easier comparison, because even 2023 was quite exposed there, but do you see any indication that it could move up there again, or where are you when you have a dialogue with the distributors?

It's a small focus. In 2015 and 2016, we realized that the business model we choose to work with is outdated. We want to talk directly to the consumer. It will create the greatest possible value. We don't put much focus on that. We have had some good distributors during a very long time. For example, Christian in Norway, where we have chosen to keep going. But he explains quite a lot himself and then we help a lot of course. We don't think that you should expect a very high growth from the distributors, but maybe not all of them will drop so much more. But our main focus is to put our resources in a market where we have full control. And there are Norden and of course Benelux, Germany and the USA, which are growth markets that we have identified, where we can drive ourselves.

If we look at EGN Online, there is still a strong growth there, but there is a certain margin pressure there. What aspects are there that work together here? Have you had a lower price point in that channel, or is it market response costs?

Last year we closed with 36% growth. That was fantastic. We started Q1 with 21% growth. But if you look at the entire e-commerce panel, you can see that growth is quite expensive. We are still doing 24% growth for the channel, so it's a very profitable channel. But not as high as a year ago. So it costs a little more to create growth. But of course there are also some extra costs that burden our own e-commerce. Partly we have a lot of logistics costs that should have been produced last year, which we took in January. It's not a huge figure, but it affects our sales costs a little negatively. But also of course we ended last year incredibly strongly. We had 46% growth in Q4 for our own e-commerce. And of course, some of those products, even if we didn't want to, are returned. And of course, that appears during the Q1. So that is also something that affects profitability. And above all, it drives up sales costs, given the logistics costs that are linked to these returns. But overall, we are satisfied with e-commerce development. It is growing by 21%. It is still very profitable. We have continued to see growth in sportswear and underwears. But above all, we see that these smaller categories, like shoes, are growing 128% per quarter in the retail market. Bags are growing over 80%. So we see that this is a channel where we quickly get an indication of the power and strength of these new categories, which we can then capitalize on the other channels. So overall, it's a strong quarter, but it costs a little more than the previous year to drive this growth.

If we look at the gross margin, it's good and strong, but do you feel that you are safe in your pricing level right now? You had very good pricing power at least in 2023. Where are you there? Do you feel that there is pressure from how competitors react?

I think we are doing well. The biggest impact on the gross margin is of course the channel mix. Thanks to the fact that we own in trade, the gross margin will go up. Another thing is the strong connection to the currency. Of course, we have had a very weak crown for a long time, so the comparison is the same. But of course, there are upsides in the margin, given the channel split, given the possible currency changes in our direction. But we also continue to optimize our price image in relation to how good the product is, and especially what happens around us. And as we get stronger and stronger, of course, we can expect Thank you very much Henrik and Jens for coming here and presenting today. Great, thank you very much. Let's go!