Björn Borg AB (publ)

and welcome to our Q2 presentation. On Fridays, we do one thing that is unique for us. We force everyone working for us to train. In a couple of slides, you will see an incredible quarter unfold in front of you. And one part of creating those results is our ability to create a culture, gathering a lot of different people with different backgrounds, and have them believing in one long-term dream. And that is to inspire you that you can be a bit more, that you can reach whatever goal you have, and that the key enabler to help you do that is training, working out a bit more. So every Friday, we decide that we close all the offices all around the world, which is currently not that many countries, but we will add more countries as we grow older, 11 and 12 we work out together, because we know that that's going to benefit the business. By doing that, we will earn more money, and we will sell more. But first things first, Q2 was all about footwear integration. So we stood there after Q1, our licensed partner in the Netherlands just went bankrupt, that landed in our lap. We were quickly together with some of the major shareholders, some of the board members, and of course our executive management team. We decided this is going to be the greatest opportunity that we have ever had for this brand. Let's take it over. Let's integrate. Knowing of course that the footwear category is huge, offering massive potential for further growth, but also enabling us to even quicker transform the brand from that beautiful, old, colorful underwear brand into a sports fashion brand. The decision was easy to make. Making it happen, however, was not as easy. And it would never, ever have unfolded as good as it did without the team. So of course headed up by our global ops director, Daniel Grohmann, who simply turned out to be a wizard in driving this project into what can be described as nothing, as a massive success. It took a while to sort all things out. Yes, it meant some short-term discounts that you will see in our margins, but of course, GF2D8 footwear growth of 35%, Q2 footwear growth of 199% is just a very clear message to everyone that when it comes to handling challenges and things that was not planned, when it comes to integrating things into this great team that we're having, we are master in turning that into something even better. So as you can hear, looking at Q2, I'm just extremely proud over what we have accomplished. And it doesn't really only stop with footwear. If we just run through all of our categories, as you will see in a few slides, everything is really working for us right now. And yes, of course, stuff can be better. Looking at the gross margin, well, we've taken a hit, partly due to currencies working against us, a bit due to increased container and freight costs, but a lot that has to do with one-off discounts that we simply had to do given that we took over an order book of footwear very, very late. And of course, we wanted the retailers to continue to get those products, helping them with additional discounts so they could sell that out within the season. That will change, of course, as we go forward. We believe that if you do footwear right, it could actually be a gross margin driver. Most likely, it will take a bit of time. Looking at the bottom line, it's fairly strong. Q2, it's ahead of last year. We know from the past that Q2 is roughly a pretty challenging quarter for us in terms of making high-profit numbers. But during the last couple of years, we've shown that we can also make profit in Q2, which is dominated by D2C business and not so much distribution and wholesale business. If we look at some of the highlights, reminding all of you, where is this guy going? Where is this brand heading? And of course, one of the success factors is perhaps not that I've been with the company now 10 years, but we have a very, very consistent long-term view in terms of what we want to create. We don't change direction. We simply keep on digging, even when things are working against us. So our mission, of course, is to build a sports fashion brand, inspiring people out there that training is too important just to give to those who want to win Olympic gold medals. Training is for every one of us and a key facilitator to bring something more out of you, to become a better mother or father or a better friend or just living longer or perhaps laugh a bit more. You can win a gold medal as well. That's okay with us, but that's not the main purpose of what we want to do. Our long-term financial goal is to grow, of course, and to continue to be profitable. Our business strategy has been to really dig where we stand, but working with key categories, and now also footwear being included, to drive growth in all of our geography markets. And with that said, also slowly then built a much stronger international presence, where our key focus is Germany on one hand and the US on another. So running through a few of the numbers then. So first, of course, our brand. So as I've said many, many times before, we have two things that makes us truly unique. And one is that Jens, our CFO, is deciding to work for us and not somewhere else. And the other one is our brand. Those are our assets. And of course, the key is to make the most out of those two. And looking at our brand is constantly developing in the right direction, sometimes a bit slower than anticipated or that I would wish for. But every quarter, we're taking small, small steps and becoming stronger. And some of the highlights from Q2 is that our unaided awareness is increasing dramatically in all the markets. Meaning that if you would ask just a random consumer on the street, hey, make a list of sports brand. We want them, of course, to say Bjorn Borgi immediately. But there's a couple of other brands that they usually say first. But Bjorn Borgi is more frequently popping up on that list. Whilst on that list and asking, hey, do you know about Bjorn Borgi? Would you like to buy stuff from them? There, we're really, really high already. And if you can only pick three brands from that list, in Sweden, we're number three. Looking at the percent intent, so when you ask consumers, can you consider buying from us? We can see that we're increasing on apparel and we're maintaining and actually also increasing on underwear. And as you might have remembered, one of the challenges or potentially the risk back in 2015 and 2016 with transforming the brand into a sports brand was that what happens with the underwear category? Will you lose out on that? And what we said then, very confident, but not really knowing, of course, the future was that we believe that building a strong brand, building a sports fashion brand will actually drive underwear growth. And that turned out to be the truth. But also we can see that by building a strong performance brand, a strong apparel brand, a strong sports fashion brand, actually people view our underwear collection and us as an underwear brand even stronger. Very, very important. Looking at our growth, of course, it's a record quarter. We're up 30% versus last quarter. We never sold more in a quarter. I don't think we ever grew as much in a quarter either. And of course, it's a number of things that's simply working our way. And all of the countries, of course, consequently is doing really, really well. And of course, the good thing is that Sweden and Netherlands, our biggest markets are really, really flying, which is showcasing that our ability to roll out new categories is really getting a strong foothold. Germany, Finland, Belgium, Denmark is also showing strong growth numbers. The distributors in the quarter are somewhat getting a bit back on track. But again, that's not our main focus. We believe in interacting directly to our consumers, either through partners like Stadium and XXL or through our own channels, driving our own business and being in control over how we would want to build the brand. That is key for us. Looking at the different channels, of course, we're growing all over the place. So wholesale is plus 50%. You know, own e-commerce plus 9% is a bit slower. But if you look closely, of course, profitability is a lot higher in Q2 versus last year. Own retail is growing a lot. Comp growth is 4%. Distributors is growing, but on a very low number. And here, you know, we've talked about our idea of moving the brand online. And that started already in 2018, 2019. And of course, a bigger and bigger share of our business is coming online. However, of course, I think it's worth mentioning again, you need to have a strong balance here. We know that consumers still want to go out and visit physical stores, you know, touch and feel the stuff. See what you can only experience in real life. Together, of course, you know, driving a strong foothold online. And of course, the key for us is to balance the two. We want to grow both. And of course, looking at the categories, as you can imagine, you know, this has been one of the best quarters in terms of category growth. I think that, of course, footwear is one thing to celebrate. But as you recall, we've been talking about apparel over and over and over again. You know, a few years ago, I said that our targets have grown year on year 35%. Many was laughing now, you know, we're up 43% in the quarter. You know, year to date, we're plus 35% when it comes to sports apparel. And of course, that's the key category so far in terms of transforming the brand into a bigger arena. And of course, adding footwear will only fuel that up. And of course, as already mentioned, you know, footwear is up 199%. But again, here, we're not really comparing Apple versus Apple. We took over, you know, volumes from markets we didn't have last year. But still, of course, if you take that out, we still see a strong footwear growth in all of our markets. And of course, with that said, looking at bottom line, things could always be better. And I'm sure that Jens will tell you all about that, even though, of course, there's a lot of victories also when you look at that. So, Jens, why don't you show me the money? Thank

you. Thank you, Henrik. And what a fantastic morning. I woke up this morning thinking I cannot wait to show the world these numbers and this report. It's simply fantastic. And we're so proud. So looking at the bottom line, the gross margin is, I'd say, quite good, considering that we just integrated footwear, as you heard from Henrik, just a few minutes ago. It took a little hit this quarter, but we're expecting that to come back, as we just heard. So fantastic. The bottom line or the EBIT margin, the EBIT number is very high, very strong compared to previous years. And following, obviously, the net income as well, showing good numbers for being a second quarter, as you know, our second quarter is dominated by D2C and has not so strong as other quarters. But comparing to Q2 previously, we're showing a very strong growth. If we look at the balance sheet, we are a very, very solid company. The equity is strong. It's at 46 percent. So showing that we can balance also the cash or the liquidity situation when integrating a category such as footwear. Looking at the net debt, yes, it's increasing a little bit compared to the two previous years. However, if you go back in history, we see that we are on a very, very good level when it comes to our debt situation. The working capital is super important for us and the KPI that we follow very, very closely. And we have an internal target of being around 20 percent of rolling gross sales 12 months. And that's exactly where we end up when we close Q2. And looking back, we are going slightly downwards. The trend is going down, even though we now are increasing a number of pieces in our warehouse. So the working capital is looking good. We're in control of our cash situation and the balance sheet is super, super strong. So why should you believe in Björn Boyd, let's say? Well, first of all, you should believe in what Henrik just said. You should believe in the culture. If you want to see what we're all about, well, join us any Friday. Just give me a call, send me an email and you can come train with us on Fridays at 11. Then you will see what this company is all about. That's number one, I would say. However, we also have a few items listed on the screen in front of you. So we have a proven track record of profitable growth since back 10 years ago. The strategy that we sent out also 10 years ago is showing that we will grow and we will do it in a profitable way. The value creation, so we can look at the stock market and comparing to other peers in the market, we are outperforming basically all of them. If you're interested in high dividends, well, yes, that's also Björn Boyd. We have shown going back in history that the dividend payments that we've delivered over the years is quite high. As I just mentioned before, the balance sheet is strong. We have the equity ratio and the net debt ratios are very, very good. We are way below our targets that we've set out towards the banks, for instance. The management team has been around for a long time and have a good, good track record and has also become some of my very, very close friends. So that's showing that this is a super company with a very, very strong culture that I already talked about before. Well, we've done all the investments. Back in 2019, we launched what we call the System Excellence Project, basically replacing everything. We had several warehouses, we had several ERP systems, cash systems, BI systems, and I don't know how many systems we had, but when we launched a huge project, I was consolidating those into one of each basically. So there's really no large investments for us coming our way. I mean, we've taken all that work done already. So we offer a good continuation, I would say. So with that, I wish you all a very, very good Friday. Brilliant,

brilliant. Let's wrap it up then. Thanks for listening, guys, and calling in. And I guess we shouldn't over-plank you, too. We know that we've been around for a while, so of course some cores are really, really strong, others are a bit weaker. This is all about having a long-term perspective and, of course, making sure that every quarter is taking us a bit slower to our end goal. Some quarters you might take two or three steps closer to that. Some other cores you might take a step back. But it's really having that long-term approach that value creation takes time. Looking at the quarter, of course, there's many, many highlights. So the brand is continuing to get stronger and stronger. Looking at our channels, Wholesale is really driving a fantastic growth. But also, of course, we see e-com and com growth in our retail stores. So, of course, the retail stores are working really, really well as well. All of that indicate that the brand is really, really working as we have a strong traction with the end consumers, really picking stuff up from us. We hear rumors, and of course I can feel that myself, that the situation around you as a consumer is not as good as it was three, four, five years ago, perhaps. And we have less money to spend. And we read about that, but we can't really see that impacting us currently. And, of course, we are a small brand. So even if the entire market is declining, we could still grow. And last, of course, we have an exceptionally strong momentum in sports apparel. That's been one of our key focuses, of course, since we launched the Northern Star in our business plan and the idea, or dream, if you will, to turn this underwear brand into a sports fashion brand. And, of course, the key sign, if you will, traffic light that will indicate for you looking at us whether we do that successfully is definitely then sports apparel growth. But with that said, a strong quarter, there's a lot of stuff that could have been done a lot better. We need to work even more on our gross margin. It's declining for clear reasons, and many of that is one-off effects. But, of course, we need to work even harder on that. We need to make sure, of course, that we invest everything very carefully so we can continue to drive profitable growth and not growth at any price. And, of course, that journey will never continue. But at the end of the day, it comes down to simply really understanding what makes us unique. And again, to repeat myself, we need to continue to build a strong brand. We need to continue to develop everyone choosing to work for Bjorn Borgir so they become their best version of themselves. And a combination of the two, that will unleash no massive amount of potential. And, of course, then no ceiling is too high or no goal is too big if we accomplish to continue doing that. So with that said, thanks for listening in, for joining us and for believing in us. As Jan said, join us on a sports hour. Many of our biggest shareholders are actually joining. I think one is coming next Friday, so we're looking forward to that. But I'm sure Jalmer has a few questions before we hang up here. Jalmer, is that correct?

Yes.

So fire away. Let's dive

into the questions. So first, I guess just relating to the shoe integration, could you just describe how the progress has been? Has it been in accordance with your expectations? Has it been better just on a wider scale? How do you perceive the Q2 development?

Well, the quick answer is, well, better or worse, depending a bit on who you're asking. So when we, of course, looked at this during Q1, when we got the news that they first, of course, went into Chapter 11, that later on then became a full scale bankruptcy. We couldn't talk to the licensed partners, but instead we had to talk to liquidators and lawyers. Of course, we were concerned that this will take a hit. And of course, because of that, we should then oppressory saying that there's probably a five million a bit risk here. However, and also short term, a bit of a sales risk. However, long term, of course, we see great potential adding value throughout the entire P&L. And in Q1, we saw exactly that. So of course, we took a hit in top line. We lost about 10 million in footwear sales, I think 13 and a half million even perhaps. But we thought that we would catch up, that we would have catch up this quick. I didn't think that. I mean, even though I'm an optimistic guy, I thought that it would take a bit more time. But we simply had a very, very dedicated team that spent a lot of hours doing whatever it took to get hold of all these products that was sitting then with the liquidators on boats, in warehouses, in harbors, getting their hands on that, making sure that we connected to these customers that we never spoke to before. And of course, the price of that was adding additional discounts. So they would accept very, very late orders to support them in selling this stuff out so they can receive new footwear now when the new season starts. So the quick answer, better than anticipated. But again, just to highlight, this is perhaps not even the beginning of the beginning of footwear. It's going to take time to rebuild this category so it can fuel a profitable growth going forward. Yes,

and naturally there are, as we've spoken about, the four long-term prospects in this. But I just like, how do you feel leaving the quarter? You mentioned these discounts and the margin pressure. Should we expect those in the coming two quarters as well? Or how do you feel this margin pressure developing?

Well, so we try to avoid, of course, getting into too much of a forecasting exercise. But what we've said, mid-long term, we should be able to work towards a 55% gross margin. That's a clear aim. And of course, there's a lot of things impacting that. One, of course, is currencies that we don't really control. The other, of course, is how we are working with our different categories and how we're supporting our different channels. But looking at what we can control, of course, we are confident that long-term we could accomplish much, much higher margins than what we saw in Q2. That's very, very clear. And then, of course, how quick that will go. It might take a bit of time. Let's see. We don't think that we will have any big one-off discounts that we saw in Q2 going forward because, of course, now we're controlling the entire supply chain flow much better than what we did in Q2. So, of course, that will disappear. But then again, it might be other things that is impacting, of course, the margin. High share of holes, it would drag it down a bit. We're close to now retail stores that would also drag down the margin a bit. We continue, of course, to invest in our own Ecom that will lift the margin. And midterm, long-term, we see that both apparel and predominantly footwear, there's room to improve the margins on those categories that will hopefully then enable us to lift the gross margin to closer to 55%.

Thank you. And if you look at your D2C segments, how do you feel that campaign pressure has been this summer with regards to campaign intensity? How do you feel that your competitors are acting in this environment? No,

but I think the general feeling we're having is that the sort of the stock situation is a bit better for most. So, last year, we saw there was a lot of stock in the market for all of the different brands and with almost all of the retailers. But I think most of them have done a fairly good cleaning up work. And then, of course, depending on which category you're looking into, we know, for example, like bikes and a few other categories that are still struggling a bit with a lot of inventories in the market. But overall, we see that it's slightly more healthy than in the past. From our perspective, you know, our Navarro stock product has been sold out. We have strong sort of reorder requests, which indicate that the brand and the market is, you know, having a fairly good momentum. But again, you know, we shouldn't overplay that we continue to grow because we're still small. We do see when we look at, you know, consumer studies that the consumers still are a bit worried. There's still, you know, less money in the wallet. There's a lot of concerns also happening around us that makes you a bit hesitant. So it's clear that, you know, the financial surroundings is not optimal. But what we said all along is that we're so small, it doesn't matter. We will grow whether it's tough times or great times. That's our ambition. And we do believe as well that even when things are really, really tough, you know, you could always afford a small piece of garment like this, you know, Recycled Polyester PK that is just fantastic. If that's going to help you work out a bit more, you know, that would be the best gift you can ever give to yourself. So I think that's the upside of being small. You can always grow.

Yes, thank you. And you spoke on the need for both stores and online sales, of course. But looking at the need to see the own stores, could you elaborate a bit on the strategy here? Could we see store openings looking forward or how do you see the market for the own stores?

So what we've said, you know, I think it was 2019 already. We concluded that there's other people better in driving, you know, concept and full price stores. So we believe that we as a brand need to be in physical retail, whether it's through a shop in shop or with a nice installation. But we believe that, you know, some of the wholesalers, you know, like Stadium, for example, they do that much better than us. So the key is really to be their best partner. So how can we support them so we can have, you know, physical retail space with them that already have a strong retail foothold and not opening up, you know, full price stores. So we took the decision to close them down just before, you know, the pandemic. And I think that was a very, you know, the right decision. It was massively loss making. It required a lot of, you know, people and of course a lot of focus from the management team. So what we will see going forward is, you know, closing down potentially one or two more stores because that's what we now have left in terms of full price stores. But of course, maintaining our outlets. So we still believe in the outlet business. It's one way of getting rid of excess stock from our own e-com, for example. And also we see that the out of the store format is working really, really well. So as a consumer, you really want to go out to those outlet villages, spend the entire day, you know, have a nice lunch, look at all the different brands. And of course, you want to buy something. You want to feel that you're making a great deal. So, of course, we want to be there as well. And we might as well open up one or two more outlet stores going forward. But it all depends, of course, on where they're located and, of course, the agreement that we can conclude with the landlord.

Thank you. And on sports apparel, naturally, you have a strong position there right now. So how do you feel? What is the current view of the competitive environment and how has it developed in 2024? How do you feel competitors are acting? Can you elaborate a bit on this?

It was nice to say that we have a strong position. I'll probably say that internally we feel that we have a strong position, but of course, we're very, very small still. So we're not even perhaps a player to consider if you're not working for Björn Borgir or if you're a nice retailer with us, of course. But we have a massive momentum with sports apparel. That's clear. In Q2, isolated, our biggest category online was sports apparel. And that's of all the victories that we have celebrated so far this year. I think that's really showcasing something. That was something that many, many for a very long time would never happen. So it's clear that this idea of building sports apparel, building training is really working for us. And with that said, underwear is also growing in the quarter. So one would have thought that, yeah, how hard is it to be bigger in apparel if underwear is declining? But that's not the case. If we look outside, of course, there's still a lot of brands that are in the marketplace, big, small. What we can conclude, though, is that a few of them that was growing with tremendous pace just a few years ago, they're slowing down a bit. A few are struggling a bit with profitability and cash flow. So I think probably what we will see is a bit of a consolidation also on the brand side. But again, I think our competitors, those that we compete against, I don't think really is other sports brands. We're here because we want to inspire you to take a break today, Almer, and join us for the sports hour. That's what we want to do. And if you want to wear a gunboard product, that would be great. I think that's the idea. So rather than spending money on another app or buying an energy drink or whatever you plan to do, spend it on us and hopefully you will connect with us and you will feel that you want to be a part of this whole idea of, hey, I'm going to work out. Knowing, of course, that before that workout, there's a bit of resistance. That's for me as well. But after the workout, that's the feeling that money can't buy.

Thank you. And then finally, on the marketing spend, do you feel satisfied with the spend levels you have now? Do you feel happy with the yield that you get on the ad investments?

Yeah, well, we've never spent more. So, you know, that's good. So it's also going up. But of course, that's a decision that we took. Again, we believe that you need to invest in two things. Of course, that's the brand and then that's the people. And the combination of two would do great things. So, of course, I think we're probably invested 10 million more. I'm looking at Gens now, I think 10 million more than last year. But we believe that that's key, not to grow in Q2 or perhaps not even Q3, but to really build a strong brand and to give this great brand a fair chance of becoming a global sports brand. We simply need to invest a lot of money into the brand that would drive profitable growth going forward. So I'm super happy with the way we're allocating our money. I think we do a good job in terms of making sure that we get a lot of stuff back for the investments. But of course, it's impact in our P&L short term. So if we would have invested the same as last year, we would have done almost 20 million in EBIT. And of course, one day potentially we could reduce the marketing spend. But I think the timing right now really is to reinvest into marketing and really build something that is going to be a long term value creation. That's the plan. And

then just one final question. Yes. On the shoe integration and the product mix, if you dare to dream, what is your vision for the future regarding product mix and what would you see it maybe looking three years ahead?

No, but I think long term, if we do this right, then half of what we sell will be footwear. 50%

if

we do this right.

Thank you so much for answering our questions today.

Thank you, Almar. Thank you guys. See you soon again. Don't work out today. Then you work out tomorrow or Sunday. But ideally you do it today together with us. Have a great Friday.