Björn Borg AB (publ)

If you haven't been outside yet, it's absolutely beautiful. At least if you're in Stockholm, not sure about the other cities, but we're not here to talk about the weather. We're here to talk about our Q3 report for 2024. So welcome and well, first things first, it's a record quarter. So never before have we sold more products, which of course makes us extremely happy. Another fantastic victory in the quarter is our own e-commerce that is continuing to having a fantastic development and it's growing 32% in the quarter. Very good. Looking into our channels, e-commerce growing as I said, retail, comparable stores plus 1%. However, if we just compare retail versus retail, we're down. As you probably remember since 2018, we've said we want to pull out from concept store on retail development and rather focus on outlets. So of course we've been closing store as contracts has been running out. And of course, that's the reason why our retail numbers has been declining over the years. But again, comparable stores were growing. Wholesale, our biggest channel is growing 5% and running through different markets. Of course, we have a few super strong highlights of which one is the development in Germany. So plus 44%. As you've recalled, in August, we talked about that we want to increase our growth. We believe that we're ready to fuel growth even more. And that we said that we want to grow at least 10%. And one of the focus areas that we have said is to be successful in Germany. So we simply need to be bigger in a big market. So a lot of effort has gone into the German market. And here we see first signs of very, very good progress. So growing 44% in the quarter. So that's very good. But also the other smaller markets are developing very, very nicely. Netherlands as well, which is our second biggest market. Looking at Sweden on one hand, our own e-commerce is growing a lot in Sweden. However, the wholesale business is declining a bit. But overall, you know, a very, very good momentum in terms of sales for the entire quarter. Looking at product categories, of course, you know, the victories that we have integrated. Footwear, as you know, our former licensed partner went bankrupt at the beginning of the year. We took that over and we see in Q3 that we're growing 29%. So very, very strong development. And looking at our own e-commerce development for footwear, it's actually up 114%. So indication that there is a strong potential for further growth within footwear. Also sports are powerless growing. So in the quarter plus 25%, year to date plus 29%. And of course, for those of you that has been following us for a while, the whole, you know, walk to fame has been to move the brand from underwear to sports apparel and building a sports fashion brand or sports brand with a fashion edge. And we've been very successful in doing that transition, even though, of course, it's been taking a lot of time. But we see now, you know, for the last ten quarters that our sports apparel collection is continuing to grow. Looking at the margin, a bit of a hit, so a slight decline versus last year. One reason is, you know, footwear, which short term has a lower margin. Also, we've had a very strong momentum with a few of our really big European key accounts, and they have a slightly higher discount. And combining the two is leading to a slight decline in our gross margin. Looking at operating profit, however, that's increasing to 42 million. So yet again, we can see that we can and we have the ability to drive, you know, profitable growth. So growing top line without diluting profitability, even if the profit ratio is slightly lower than last year, you know, still close to 15%. So overall, you know, a good quarter. If we then look into where we want to go, as a reminder, I think you all know it by now. But of course, our idea is to build an iconic sports fashion brand. That's where we're heading. And one of the trick of doing that, of course, is to really fuel all our investment into building that, you know, sports brand proposition. And we are determined to do so. And of course, one of the things that we're doing is investing into the brand. And short term, of course, that's going to mean that the marketing investment will go up. But mid and long term, of course, that will mean that the brand will be stronger and stronger. And of course, that would facilitate future growth. So just in the quarter, we actually invested seven million more than last year, all, of course, into creating long term growth opportunities and looking at the brand. It's developing really, really well. So, of course, we are asking 22,000 consumers every year a bunch of different questions to be sure, of course, that our marketing investment is really, you know, creating attention and making sure that we are building and becoming stronger as a sports brand. And it's it's working. And of course, one of the signs is the very, very strong own ecom development. Looking at the challenge. So, of course, you know, we are market leader in men's underwear. We want to maintain that market leadership position, but we want to build not an underwear brand, a sports brand. Of course, that's a bit tricky. But when we are measuring also how the consumers review our underwear, we can see that we are maintaining, you know, our market leader position here. And at the same time, of course, gaining strength as a sports brand. And of course, that's reassuring and a sign that we're doing the right things when it comes to communication and building this sports fashion brand going forward. Looking at the development. So, as we said, you know, record quarters absolutely fantastic. Year to date, of course, is also then a record. So we have, you know, strong growth momentum, but we want to grow even more. If we take out, you know, currency impact, actually, we are growing 10 percent and 10.4, actually. But without that, we're just shy of nine percent growth in the quarter. But again, you know, a very, very strong quarter also, of course, given what is happening around us in the world. Looking at the different countries, as I said initially, you know, very strong momentum in Germany. Sweden is declining a bit. Where wholesale or partners are declining was on the other hand, our own ecom in Sweden is growing more than 30 percent. Netherlands, you know, our second biggest markets is developing nicely. Finland, Belgium and Denmark is also having a very, very strong momentum. And also we've seen a very strong recovery from the distributors that had a very tough last year, but also at the beginning of the year was slightly challenging. And here, of course, Norway is our biggest distributor and we have a good momentum across, you know, both Norway and UK and some of the other distributors. Looking at the channels. So wholesale plus five percent. That's our biggest challenge. What we see in Q3 is a strong, strong development with our e-tailers. We have a number of pan-European e-tailers, you know, Booz, Zalando. They're developing really, really, really good. Looking at own e-commerce, I said already, so exceptionally well performed Q3 with growth of 32 percent. Also increased profitability. So 17 percent versus last year, 16 percent. So that channel is really doing well. Own retail. So declining five percent. However, of course, that's due to store closures. If you compare store by store, we're plus one percent and distributors are plus 31 percent. So strong recovery from from that side where the Norwegian distributor again, as I said, is the biggest one. And looking at the online share. So as you probably remember, what we've said early on is that we believe that the brand has a lot of growth potential within the online environment. So whether it's online marketing, online communication, own e-commerce marketplaces or e-tailers. Here's where we saw we have a great opportunity to grow even further. And looking at the share, you know, currently, it's 41 percent of our overall business is coming from pure e-tailers, including own e-com. So we take a bigger and bigger share here. And of course, that group will most likely continue, even though, of course, we see that there is some changes in the landscape now. So it's a number of brick and mortar doors also doing fairly good. And of course, our idea is to have a very balanced footprint. We simply need to be where the consumers are and where they want to go in and shop at stadium, which we know they want. And we need to be there. And if they want to go into boost, of course, we need to be at boost as well. And of course, you know, complementing them with a very strong, you know, own e-com platform. So I think the combination of the different channels is making us very, very strong. Looking at our categories, they're developing slightly differently in the quarter. So underwear, our biggest one is declining a bit. Looking at apparel, so plus 25 percent, so very, very good. So, of course, now we are into tenth quarters of apparel growth, looking at bags declining, but they had a very good start of the year. So still we're growing here to date and looking at footwear. So, again, we integrated that. I think you followed us in the beginning of the year when our license partner went bankrupt. You know, we took that over. We now integrate that into the business and we're growing 29 percent in the quarter. And we can also see that the initial challenges with Grossmortis actually picking up and looking ahead. I would believe that footwear, lusher, you know, is a category that actually will help our Grossmortis development. And with that said, of course, the bottom line is also increasing, but I'm not going to be the one talking you through that. That instead will be Jens. So, Jens, you fire away.

Thanks a lot, Henrik. And good morning to you all. And what a morning it is. In just a few hours, I will be jumping around playing with my colleagues at our sports hour. And if you are on your way to Frösundavik, join us. Eleven o'clock today. Beatrice haven't talked about Beatrice in a long while. She's been out sick for a few days. She's now back. I'm so happy for you, Beatrice. And my very good friend Robin is back to training. So it's a fantastic morning. It's a good Friday. But back to the bottom line. So yeah, the gross margin we heard from Henrik already. A few things about slight drop in the quarter, however, due to the footwear and the larger key accounts taking a bigger share in the quarter. But still, we believe going forward that the footwear will actually contribute to our overall margin. So we have big hopes for for this going forward. The operating profit, fantastic quarter, 42 million ahead of last year and also the years before. So it's a good development on the bottom line. Net income even more strongly, let's say, development in 35 million versus 32 last year, same quarter. So good development on the profitability where we can see that the growth also comes with a good profit. If we look at the balance sheet items, we can see that our equity of assets or the solidity of the company is still strong, even though a slight dip in the Q3. However, we remain way ahead of our targets that we set for the company. The net debt is increasing slightly in the quarter. 139 million compared to 94 last year. This has to do with the footwear integration requiring some more capital here, but also a slightly higher dividend earlier in the year. Another KPI that we look at internally is, of course, the working capital. And we compare that to a 12 month rolling gross sales. And here we are declining, which is a good thing, obviously, for us as we keep good track of that, we're just below 20 percent. And this is despite the fact that we took over footwear that requires more working capital. We have some overbys in the warehouse to be sure that we have good levels of inventory. But despite all that, we are keeping the KPI on a good level. So I'm very happy to see that. So strong balance sheet as we close close Q3. With that short, short words from me, Henrik, I leave it to you to close this fantastic Friday.

So first, of course, as we've said, the the the Bjornborg brand is continuing to to develop well. You know, that's our biggest asset. You know, that's what sets us apart. You know, that's what we're fully owning ourselves. So, of course, very important to continue to invest. Secondly, it is a record quarter. Yes, we always want to grow even more, especially myself. But still a record quarter. You know, we see a strong momentum across all channels. You know, I think, you know, highlighting EECOM once again, so 32 percent in the quarter is clearly way better than, you know, almost all of our competitors and those we compare ourselves against. Last, of course, looking at the categories, as I've said, you know, many years ago, you know, if you want to look at our development, you know, watch out for our sports apparel development, you know, when we get traction there, that's, you know, when you can really see that the brand is getting slowly to where it needs to be as a sports brand. So sports apparel growing 25 percent in the quarter, year to day, 29 percent footwear is growing 29 percent in the quarter and also a very, very strong development. So that those are the three main key takeaways. I think if I would just give you one sort of victory from Q3, I think it has to be the development in Germany. So we really need to be big in a big market. We need to get some traction in a new market and 44 percent up in Germany. I think it's absolutely fantastic. We're working together with, you know, German e-tailers. We're investing into our own EECOM in Germany that is actually growing 48 percent. And we're also slowly building a strong community in Hamburg with the fiscal space. With partners, you know, with individuals. And we believe really that, you know, building the brand from one city will be the key to fuel further growth in the German market. We also have, you know, this last slide again, looking back, I think we now can conclude that we have shown, you know, profitable growth and solid developments in a long, long, long time. We it is a bit of a dividend case. Of course, we've had high and stable dividends, you know, looking back. It's a strong team that has been on board. And of course, we're really, really dedicated. We also, of course, have invested ourselves heavily into this. So we wanted to go good. And I think also with the growth initiatives that we now have in place and we have all the ingredients to to turn this from, you know, mid, you know, high single digit growth case to a double digit growth case. And that's really the ambition going forward. And clearly, as to highlight, you know, what you should look for then is, you know, sports apparel that needs to grow, of course, you know, footwear, of course, but also bags, underwear we need to maintain. But that's not really where we see double digit growth. And in terms of market is definitely Germany. Yes, we need to continue the good development in other markets, but Germany is really where we need to get a strong, you know, foothold in. We also are looking into the US, but, you know, that's fairly slow. We're a bit, you know, careful there. But Germany is really where we want to invest our money into and looking at channels, we continue to believe that we have a very relevant place online. So meaning investing in own ecom, investing in marketplaces and, of course, in in e-tailers. And, of course, the combination of those, we believe will enable the brand then to lift to a new level when it comes to sales growth. So I think with that said, you know, good to be here. I hope you have a fantastic Friday. As Jan said, you join us for the sports hour. You know, training is going to make your day a bit better. You live a bit longer. And remember, you know, train to have fun, you know, train so you can take that beer later today. Not necessarily to do that triathlon on the Saturday. So with that said, I'm sure that Jalmer has a bunch of questions for me as well. So, Jalmer, you know, jump on board. Fire away.

Good morning. Nice to meet you. So first, the numbers so far indicate that the transition of the shoe or integration of the shoe business has gone smooth. And you seem very positive about this. Could we say that the integration now is... Could we say it's on a good track to fully integrate it or are there any risks remaining to the full integration here?

Well, I think first, perhaps, you know, smooth. Most likely, it's not the word that the project team would use when it comes to the integration. So, of course, it's always very, very challenging. But I think you're right, though, in terms of how the numbers are evolving. It looks a lot better than what I earlier anticipated. I thought that this would be a bit more challenging. But I think it tells again that the brand is strong. We have strong partners. The products are good. And then, of course, internal challenges will simply be mitigated by that. But of course, looking ahead, we are taking over distribution from markets where we have not distributed footwear ourselves before. And that's going to be a bit of a challenge. Also, of course, we are creating the footwear ourselves. And that's going to slightly change then from how things were done in the past. And when you do changes, there's always no risks. We, however, believe that it's going to be a massive opportunity. And even short term, we believe that we could expect further growth numbers from footwear. But in order to really get the full benefit of footwear and see the full potential, then that's going to take a couple of years. But we will definitely see footwear growth going forward. That's what I'm very, very confident on.

And you mentioned some positiveness regarding this segment to be margin and creative, I guess. So could you just paint a picture from where we currently are in terms of margins within the shoe business towards a state where it's margin and creative? How is that transition going to look?

No, I think partly when we took over, of course, it was a bankruptcy and a lot of the footwear was sold by someone else. And of course, we picked it up from boats, from containers. Customers were unhappy because everything was delayed. No one was really knowing what was going on. So all of that happened in the spring. And in order for them to simply take the goods that they have ordered with the delays, we simply had to give them more discount. So, of course, that's one reason why the margin were a bit lower. But more related to Q2, actually. But it's a bit of that also flooding into Q3. So that's due to a lot of challenges with the whole integration. When we look at our past experience, of course, a few of the team members have been working for others, for example. We know that Lecher sneakers, that was the highest gross margin category of them all. And we can also see that if you do sneakers in the right way, the margins are really, really high. It's completely different if you look at performance footwear. But we will most likely get into that as well. But that's not the short term focus. So we clearly believe, partly based on what we've done in the past, also just looking at the business model that the margin for footwear, should be slightly higher than for sports apparel and even close to underwear.

Thank you. And you also have revised your financial objectives. Could you just remind us of the objectives and maybe paint a picture on the growth side, which markets are contributing and how do you see that dynamic playing out?

Yes. I think the biggest difference is that we've changed the growth ambitions. The rest are fairly the same. So what we said that we want to grow in at least double digit. So that was the key message that we communicated in August. And it came out of a number of meetings with, of course, the management team, but also some of our major shareholders and the board, where we simply said that we have invested a lot into the brand, ERP, platforms, cleaning up. And integrating a lot of different categories. And we simply felt that we have a very strong base right now. And from this, we simply need to give the brand what it really deserves, which is a growth mode. So in the entire team, we were sitting down and looking at growth opportunities. So where can we grow? Knowing, of course, that we need to grow in all markets and all categories, in all channels. But where can we really drive growth so it's double digit? And of course, the obvious first answer was let's just continue the focus on sports apparel. On one hand, that's moving the brand into becoming a sports brand. And the arena there is much bigger than being an underwear brand. And also now we have a proven track record, I would say, of enabling us to grow sports apparel. So again, you know, 10th quarter in a row, 25% in the quarter, 29% year to date. You know, it just goes very, very good. And we also then looked at footwear. So initially, we weren't sure when we could integrate or when we could take over footwear. But that, you know, became an opportunity and we simply just grabbed it because of course, we knew that in order to have footwear internally, that will give us a massive opportunity to control that fully and fueling growth. So of course, that's the second, you know, most important growth category. So sports apparel, footwear. And then the last one, we believe, is a category that we integrated many, many years ago, and that is bags. So our bags, you know, they're fantastic and they work really, really well. But only in a few markets, and there's no really reason for that. So yes, by, you know, upping, you know, the bag sales per capita. So it's it's equal to what is in Sweden in, for example, Holland. You know, then we would add another 100 million. And that's really, you know, where we believe we can drive growth from a category perspective. And then, yes, of course, underwear was continued to grow, but three, four percent, perhaps stocks will grow. Women's underwear will grow. But in terms of really, you know, making a change, we believe it's going to be apparel, footwear and bags. And from a country perspective, well, all needs to grow. But here really, you know, Germany, that's where we want to invest. You know, it's a massive market. It's as big as all our other mature markets. So, of course, we get a foothold here. Well, you know, that's going to be a clear growth driver. And on a side note, we are also doing some work in the US. But here we're in a bit more cautious to see, you know, and find our way. But of course, it's also a massive opportunity in the US. And last, of course, when it comes to channel, we believe that, you know, continuing to focus online. So only E-Com, E-Tailers, marketplaces. You know, here we see that we have a good traction. Forty one percent of our business has done that already. We see that, you know, by focusing on these, we can continue to drive growth. So that's really, you know, the the growth initiatives going forward.

Thank you. That's very clear. And looking going back a bit to the gross margin, you previously indicated that you feel that you have a very strong pricing power in the market, at least that you can maintain good levels of discounts. Do you feel momentum here? Do you feel still that you have a strong pricing power? And what could we expect going ahead in terms of campaign pressure and such?

Yeah, we believe that the brand is getting stronger and stronger and we see that we're reducing discounts. I think that's a strong sign, of course, especially in our own E-Com. However, of course, when it comes to the margin, there's other things, of course, impacting that as well. So, you know, the category split, the country split, because it's different, different countries. And also, of course, you know, we have the currency. So it's it's a bit hard, of course, to to guess, you know, what the future impact will be due to elections and, you know, and the political situation that we have around us right now. But at least in the short term, we can see that the US dollar will be stronger. I think that's pretty clear, even though, you know, it went down a bit perhaps in the beginning of the week. I think now it's above 11 again. And of course, you know, we're again, you know, buying a lot of our products in US dollars. But we're not, you know, we don't have any revenue almost in US dollar. So, of course, that's going to, you know, that's going to impact us for sure. And of course, that we need to then impact or, you know, mitigate by looking at prices, looking at product development, you know, looking at where we sell the products. I think we've said a long time ago that our business model should be able to achieve a 55 percent gross margin. That's what we said, of course, we're pretty far away from that in Q3. But I think that's, you know, still the mid long term ambition to work towards those numbers. But we always want to avoid, of course, giving any forecast, so not saying, you know, what the future will look like in the short term run. But I think there's definitely more of an upside on our gross margin than a downside. That's for sure. Even with me anticipating that US dollar public continuing to become stronger under the new leadership that we have in the US.

Thank you. That's very useful. And also, could you give us maybe a view of the current state of the customer? Of course, there are many items affecting the customer currently on the key markets here. We have some we have the upcoming holidays and like a strong shopping season. What is like the current state of the customer in the key markets?

Looking at Nordics, it's been very warm. And that's not really good for the trade because you don't sell the high price ticket items like jackets. And that, of course, together with looking predominantly perhaps more on Sweden, where, you know, we see interest rates going down. There's tax relief, you know, coming into play next year. There's talk about, you know, changing amortization. So, of course, it's a lot of indications, things that already happened that will mean that you will have simply more money to spend. And of course, together with, you know, slightly warm fall, which means that there is overstock coming into the Black Friday and Christmas. You know, I anticipate that Black Friday and Christmas will be a wreck finish of the year. I think that seems to be very clear. We, however, are not sort of following that trend. So it's not like we can do any excess clearance or, you know, go completely bananas here. But I think there's a lot of indications that will enable consumers to, you know, shop a bit more. And given excess stock and the combination of the two, I think we can look forward to a record fall in terms of sales.

Thank you. That's very, very useful. And finally, on the highlighted, of course, very positive development in Germany. If you were to maybe elaborate a bit on the long term potential you see here, what could the German market mean for you in the future?

Well, you know, some people have a tendency to sometimes call me unrealistic, but of course, you know, we can do a billion only in Germany. So, you know, again, that market is as big as all of our other mature markets combined. So it's the opportunity is massive, but also, of course, the challenges in looking at, you know, the political stability right now in Germany. You know, it's been fairly challenging. I saw some studies just last week. The household seems to be fairly confident, but there seems to be a big worry around the country. And that's of course also impacting, you know, your willingness to buy things. But we're very, very small. We have a three step approach. And all of those three things that we have put to play is actually showing good results. So own ecom in Germany is growing 48 percent. Looking at Zalando and some of the e-tailers sales in Germany, it's not in other markets, is also growing disproportionately. And then we've started to work with Hamburg and the idea of course, to build a very small physical foothold and then of course grow from there. So it's including then, you know, partnering up with Alster House with, you know, Tennis Point with gyms, with, you know, restaurants with influencers, but a very small area. And that is also, you know, in initial, you know, actions has been falling out really, really well. But again, it's very early on. It's still very, very small. But I think that's the approach really to win in Germany. But of course, but if we win in Germany or when we win in Germany, well, that's going to be by far our biggest market, you know, for sure, you know, probably four times the size of Sweden. And that will then take the German market to a billion.

Sounds very positive. Thank you so much, Henrik and Jens for coming here today, presenting and answering our questions.

Brilliant. Thank you. Thank you for listening, guys. Have a great Friday and see you at the Sports Hour. And if you're not joining, I will do sports yourself. Have a great Friday.