Good morning, guys, and welcome to our Q2 presentation. Beautiful Friday. We're at Björn Borg, getting ready for the midnight run tomorrow. You should join us if you can. We're partnering up with Midnattsloppet, and tomorrow in Stockholm, more than 30,000 runners will be wearing a beautiful Diva Pink Borg tee. Of course, everyone working from Björn Borg is doing the run as well. Enough of that. Looking at Q2, I think the clear highlights obviously are that our sports apparel and our own e-com are continuing to perform exceptionally well. Own e-com growing 26% in the quarter, you know, benchmarking that against competitors, we're clearly taking market shares. The growth is spread across almost all of our markets, so that's very, very reassuring. Of course, a clear sign that the brand is getting stronger and stronger and stronger.
The combination with a very strong product offering, of course, is the reason for this very strong growth. Of course, together with a great team that is managing our e-com business. I think the highlight that is worth talking about over and over again is our ongoing very, very strong momentum with sports apparel. + 45% in the quarter. Those who have been following us for a while, you know that this journey was all about taking this very beautiful, strong men's underwear brand and moving that into a bigger arena, moving it into sports, sports apparel, extending the categories, and by doing so, growing in our already existing markets. That was the plan. We can now conclude that we have 10, perhaps even 11 quarters of very, very strong sports apparel growth. The clear highlight, obviously, + 45% versus last year in a market that is very, very challenging.
These are comp numbers, so it's not like we have bought something or that we have added something that we hadn't in the past. It's really comparable numbers. I'm super, super, super proud over that development. The highlights, of course, we're continuing to grow our top line, 6%. Of course, I'm not really happy with that. We want to grow even more. Currency neutral, looking at total sales, we're actually above 10%, which I think is good in a fairly tough market. It's driven from wholesale, and of course, own e-commerce I already talked about. Our retail operations, our own stores, of course, are declining because we're closing down here, but also those that we still have are getting smaller and smaller versus last year. Part of that is actually related to that we got some support last year, a payback from COVID support back in the days.
Nevertheless, own retail, of course, that's not our focus. Wholesale and e-com is. Looking at the product categories, of course, sports apparel + 45%. Bags is doing really, really well. Underwear is also on a strong growth number. Yes, footwear in the quarter is down, but we just need to remind ourselves that last year in Q2, that's when we sold almost all of our products the first half year due to the bankruptcy that happened in Q1 last year. It's not really comparable numbers. Nevertheless, of course, we want to see stronger footwear numbers. The highlight, obviously, is that we're still growing very, very good with footwear in our own e-commerce, which is more sort of comparable numbers. Our gross margin is declining versus last year. There are many different reasons for that.
One is that we got a bit of a support last year, so it's hard comparable numbers. It's also product mix, also a bit category mix and the country split. I think we also have to just acknowledge that, of course, we have been a bit more aggressive when it comes to clearance on own e-commerce to continue to take market shares and drive growth. That's also, of course, impacting it versus last year's same quarter. Profit is increasing, which is fantastic, of course, and we have a very strong financial position as always. Our long-term goal doesn't change. This has been with us and me since I joined Björn Borg in 2014. We're here to build a sports fashion brand. Our long-term financial objectives remain the same, and the strategy obviously remains exactly the same.
Really growing the sports apparel business, the footwear business, the bag business, and moving us into a bigger arena. That's clearly the main objectives. The good thing, of course, is that the brand, one of the things that makes us truly unique, is getting stronger and stronger. This slide probably would be my screen saver for the rest of the year. When we look at the Q2 data from all the markets where we're measuring this, which is Sweden, Finland, Denmark, Norway, Netherlands, Belgium, we ask 400 consumers every week a bunch of different questions. One of the questions is that out of this list of brands, which would you consider buying? In Q2, we are at an average in those markets, number three. This is absolutely incredible.
Thanks, of course, to a great effort from the marketing team, in combination, of course, with being in the right distribution and creating great products. The only ones that are now bigger in terms of people considering buying them are Nike and Adidas. We're ahead of everyone else. Just hang on to this slide for a while. It's just very, very beautiful. If we dig a bit deeper into it, we can see that the push in Germany is actually going really, really well. Consideration for him is also increasing, and purchase intent is also going up. In this brand track numbers, there's a number of different KPIs, but the main message is that the brand is getting stronger and stronger every quarter. That is what we also then see in our e-com growth number as one example.
The trick has always been, how do you maintain a strong underwear position, being the market leader in underwear, and at the same time then moving into this bigger arena of sports products? We can see that purchase intent is going down a bit versus last year, but still, of course, very, very high on underwear, where we're maintaining a very strong position. Apparel continuing to be on a very, very good trend. Looking at the top line, as we've seen, we want more, but with that said, we have never sold more in a Q2. For the details, I'll bring in my CFO, Jens. Listen now.
Thanks a lot, Henrik. It's good to be back from summer holidays. It's good to be back with Henrik. You're fired up. Maybe I should print a slide on the brand position and frame it for you. It's beautiful, I agree. On the top line, however, we can see that the Q2 is super strong. Never have we had a stronger Q2 in the history of this company. Really proud to see that we're growing. Yes, we want to grow more. We want above 10%. 6% is still good in a tough quarter. Breaking it down to the different markets, we can see that in our own subsidiaries, almost all markets are growing. We struggle a little bit in the Benelux, but that is temporary and it will bounce back.
In terms of the distributors overall, going down, however, our biggest market in Norway is still just above the zero line. If we combine that into our segments or channels, wholesale is growing 9% in the quarter. Here we can see that the physical doors, the brick-and-mortar wholesale channels, are growing even 16%, while the online players are fighting a bit with - 3%. Own e-commerce, you heard from Henrik, is growing 26% in the quarter, super strong. While everyone else is losing market shares, we're gaining. Own retail is declining. Comparable stores, meaning the same ones we had open last year, excluding contributions from any government on COVID, etc., it's a - 6%. Still declining, but not really the focus either, as you heard before. Distributors - 11%, mainly the sum of the smaller distributors have a bit of a catch-up to do.
If we look at the online sales, and when we talk about online sales, we talk about our own e-commerce, obviously, the wholesale e-tailers, meaning wholesale partners selling online only, and marketplaces. Here, we've kept track of this for a while, and we can see it's going up in absolute numbers, and if we compare it to last year, even in percentage of the total sales. Obviously, if we were to see how much of our products are sold on physical players' own websites, it should be an even higher number, obviously. Breaking down the sales to our categories, you heard from Henrik many times today that the sports apparel is up 45% in the quarter, super strong, really comparable numbers as well. Very, very good to see. Also, underwear bounced back.
For those of you remembering that Q1 had a timing problem, let's say, or challenge in the first quarter, it now bounced back in the second quarter with + 11%. Bags, back to growth on 38%. Good to see as well. Looking at the bottom line, gross margin is down towards the end of the Q2. Mainly, you heard a bit from Henrik as well, but we have the biggest contributor to that is that the large key accounts are taking a bigger share of sales with slightly higher discounts, but also the D2C channel, mainly in e-com, is having slightly lower margins in the Q2. In the operating profit, it's increasing versus last year slightly, whilst net income is slightly declining. However, this is related to revaluation or FX revaluation of our accounts, as well as some hedging impact that's impacting us negatively in the quarter.
In terms of the balance sheet, the equity is still strong, very stable, around 50%. Net debt is increasing slightly. We have a slightly higher dividend. At the same time, the own e-commerce channel is taking a bigger share of sales, requiring a higher inventory, requiring that the net debt is increasing slightly compared to previous years. The working capital in relation to the rolling gross sales, we want to be around 20%, slightly up during the Q2, but not alarming. It's 22%, but I think it's going to keep fairly stable around the 20% line, roughly. With that, I'm very happy to be back to work. Very happy it's Friday. Henrik, should you run this up before we go training?
Yes.
Good.
Thank you for hanging in. A couple of key takeaways. One, of course, in terms of the brands, we talked about that. The brand is getting stronger and stronger. Of course, that's our most important asset. That's what makes us truly unique. The stronger the brand, the bigger the price difference between what it costs to produce a product and what we can actually charge. That's very important and is going in the right direction. Secondly, of course, we have very, very strong momentum in own e-commerce, as you have seen, and also wholesale is doing a very, very good job. Interestingly enough, we see that it's really the brick-and-mortar wholesale channels that are now growing, while the e-tailers are declining.
Even though the retail trend, we continue to believe, is going to be fewer and fewer stores, we see that being where the consumers currently are is crucial for us. That means one big part of our business will still be based on physical retail. Last, in terms of category, very, very strong momentum for sports apparel. That's fantastic. We also see good momentum in underwear currently and bags. When it comes to footwear, it's declined in the quarter, as we said. It's hard to compare because last year's number was the full year numbers in Q2. Nevertheless, we have integrated that. It's a great potential, but it's a lot of hard work to integrate that and turn that around and make that also contribute to our plans of growing even further.
Overall, to summarize the whole quarter, as I said, also in my CEO comment, I think it's a good quarter. It's not a great quarter. It's certainly not a bad quarter. The highlight is clearly that we're growing sports apparel in own e-commerce and wholesale. The more challenging part where we need to dig in deeper is the margin development, but also the footwear category. To sum it up, again, a good quarter. I'm super proud over the team that in a very, very tough market, reviewing some of our competitors, we believe that we are amongst the few ones that actually are gaining market shares and growing top line and actually profit. I think with that, I'm sure that Hjalmar wants to fire in as well.
Thank you so much. I guess let's start a bit with the pricing pressure from the discount that you mentioned. Should this be a concern ahead, or are you confident that this price pressure that you mentioned is temporary? What could we expect, going forward? Looking back, you had quite a good pricing power, I would say. Is this just a temporary dip, or what's the current situation on the pricing?
No, I think the pricing power is as strong as it has ever been in terms of the brand. Of course, we need to acknowledge what is happening around us. One of the levers that we can play with is just to increase the margins a bit, being slightly more aggressive with certain product groups, perhaps investing slightly different to continue, of course, to drive growth, predominantly in our own channel. That is really the main thing we see in Q2. If you want to grow, you need to be a bit agile and finding ways to enable growth. Still, of course, we want to improve profitability. If we look at the e-com channel, yes, we are dropping in margins slightly, partly due to increased discounts, partly due to product mix, but of course, also the profit on e-com is increasing.
That is the balance we want to have because ultimately, of course, it's all about selling a lot and making a lot of money. What happens in between, less important. That's sort of our view on that. On wholesale, we are focusing on our bigger customers. The bigger customers buy bigger volumes. With that comes slightly higher discounts. The evolution, if that continues, is that the discount on wholesale will be slightly bigger, simply because we're selling bigger volumes to bigger customers that have slightly higher discounts.
Yeah. A little bit in the D2C channels, lower margins to push growth than at least for the short term being. Is this across all markets if you look at your own online, or do you feel this is particularly emphasized in certain markets?
No, but it is a bit differently depending on which market we're currently in and where we see traction. It could vary a bit between some of the markets. We've seen currently that the behavior in Germany, for example, they are very, very hesitant. There's a lot of worries about what's going on around them, which is also impacting their willingness to sort of spend money. On the same side, we see that we have a very strong momentum in terms of selling to German consumers. That's actually up 29%, almost 30% year to date. Sold into Germany to German consumers. That's a mix of also own e-commerce and German customers, but still very low volumes. It's a bit different depending on market.
Okay. I know you don't provide guidance, but if we look ahead, you have some, I mean, currency or FX-related tailwinds looking into the second half here due to the purchasing terms and so forth. We mentioned some margin pressure here. How should we balance these two items? Are you confident that maybe you could have margin expansion looking ahead? How do these items counteract each other?
I think the easiest way, and of course, everyone listening are very smart and talented people. As you say, of course, we are purchasing most of our products in U.S. dollar. We're selling, well, close to nothing in U.S. dollar. Actually right now, nothing because we closed down the U.S. business due to all the stuff that is happening. That will have an impact on our gross margin for sure. It's simply all about measuring what the currency is currently versus how it was a year ago. Then, of course, timing that in when we purchase the stuff, but also, of course, when we sell the stuff. It's very, very clear that a weaker U.S. dollar is something that will help our gross margin. That's clear. It's also a case where the SEK Europe plays into account.
What we now see with a, I wouldn't say that the SEK is strong, but at least it's changing a bit in a direction where it becomes a bit stronger. Of course, also impacts our top line negatively. It impacts our P&L in many, many different ways. I think also, not to sort of overcomplicate things, but as we talked about in terms of our financial net here, we are reevaluating our cash and loans at the beginning of the quarter versus how we are looking at the end of the quarter. Those fluctuations also will have an impact on mostly then, of course, our profit after tax. There's a lot of different things that's impacting us due to the currency. At least the last, probably a year, it's been very volatile.
That's going to make it a bit trickier, of course, for people to see, okay, how is that going to impact the Björn Borg business? From a gross margin perspective, that will definitely have a positive impact. All other things the same.
Thank you. On Germany, you mentioned the development and particularly maybe in Hamburg, which is your focus area here. Is the German consumer overall putting pressure on your sort of development in this region? How should we look at this? Going ahead, are you confident that you can keep growing in this pace, or is this maybe just sort of like a one-off?
It is certainly not a one-off. We're very persistent. Of course, I've been doing this now since 2014, and there were many reasons to give up along the way. One of the things didn't go as planned. We simply do not give up. It is clear, you know, if we look at Germany, that market is as big as all our other markets combined. Massive, massive potential. With that said, of course, not an easy market. That is what we said. Let's aim small. Let's start with one city and then slowly build a strong community. That is what we've done in Hamburg. When we look at some of the KPIs, brand track data from Hamburg or our own e-com into Hamburg, we can see that we are now doubling our sales on our own e-com to people living in Hamburg.
That is the quickest growing city now in our own e-com. Of course, that showcases that the investment is really, really paying off. We are in Germany to stay. Of course, how long will it take until the German business will be a substantial part of our overall P&L? Hard to say because, again, of course, when you look at the P&L, it looks like it's already big, but that is due to the Zalando business, which is not really to German consumers. Now we're trying to build a strong brand towards German consumers. Zalando plays a role, but predominantly own e-com is our key channel to win German consumers. That in Germany is going so far, you know, good. Those investments will continue.
Yeah, okay. Thank you. You mentioned some, I mean, we've spoken on the reduced pricing in order to maybe like drive growth ahead. Maybe that is indicating somewhat the challenges in the market driving growth currently. Considering that, what should we expect in terms of marketing looking ahead? Are you feeling that you have a good yield on the marketing spend right now? How do you see that developing?
I think we found a fairly good balance. In terms of how much we need to spend, I would say roughly between 7% and 9%. That is what you could expect from a company like this to invest into marketing. Of course, when you benchmark with other companies, you don't really know always what they put into their marketing working budget, whether it's showing up elsewhere in the P&L. I think that's a good starting point. Out of that big chunk of money, how you spend it is going to be different. Very, very clearly, if we talk about performance marketing, so the stuff that is then driving e-com business as one example, that's very easy to measure. You know that I put in something here, then this is what I get out.
Of course, a big chunk of our marketing is still in formats where the benefit in terms of P&L impact in terms of revenue or profit is hard to calculate. One, of course, example is the Midnattsloppet or the midnight run we do on Saturday. Absolutely incredible. Imagine in the middle of the night, more than 30,000 people running in our Diva Pink Borg tee. Incredible. Of course, that's going to have a massive impact for the brand. The event is perfect for us. That's where people are that are not pretending they're runners, but that run because they want to do something else potentially. That's where we want to be. Of course, if you try to translate that into revenue, then it's going to be very hard. We don't know how much stronger the brand will be because we're there. It's not an easy question to answer.
Do you get the money back from your investments? I believe we have a very strong team in place. I believe that when we look at the brand track data, us being number three as one example, it showcased that we are spending the money where it needs to be spent to continue to drive the brand. That's my assessment of it.
All right. Thank you. Thank you. Finally, on the sports development, naturally, I mean, still solid numbers in this quarter. Like just how far can this reach, do you feel? What are your ambitions looking ahead? What can you maybe remind us again of the drivers of the sports apparel?
Yes, yes. To describe 45% growth with solid, Hjalmar, I'm probably more thinking extraordinary. Hey, you know, that's just me then. No, again, we believe that sports apparel will be our biggest category. Looking at own e-com, year to date, June, it already is bigger than underwear. Of course, that is where we are heading in our mature markets, without opening up a new market. Of course, sports apparel will continue to grow if things go as planned, more than double digit. I'm sure there will be exceptions here and there because things don't always go as we plan. Of course, that's where the volume growth, that's where the big potential is. We can certainly do SEK 1.5 billion, perhaps even SEK 2 billion in sports apparel in existing markets already without that being very strange. Currently, rolling 12, we're just above SEK 300 million. Huge potential.
Again, it doesn't always go as we plan. I'm sure that one quarter will be 45% again, another one perhaps will showcase something else. It's hard to know. Long term, our view is very clear. We have not changed our long-term ambition, and that is to be a global iconic sports fashion brand.
Perfect.
That's clear.
Thank you, Henrik and Jens, for coming here today. I'll leave it to you for any concluding remarks.
Yes, thank you. You know, it's Friday, so make sure you do a bit of a workout. If you can, I'm not sure if there's any spots available. You should come and join us tomorrow for the Midnattsloppet if you're living in Stockholm. It's going to be absolutely incredible. Actually, our biggest shareholder, [Martin Bjerring], is joining as well. That's going to be worth a visit just to meet him. With that said, have a fantastic Friday. We're happy with the quarter, and I'm just so happy to be back from vacation. Can't wait to dig in and continue this growth journey with Björn Borg. Thanks a lot.