Good morning and welcome to the Björn Borg Q4 2022 presentation. We are joined today by CEO Henrik Bunge and CFO Jens Nyström, who will present Q4 2022 results. After the presentation, there will be a Q&A session. And with that said, I hand the word over to you, Henrik.
Brilliant. Thank you. Thank you. It's good to be back again. 3.5 billion people watched the World Cup. The discussions off the pitch seem to be the lack of beer. It should have been probably the lack of human rights. We, as a brand, of course, stand for equality and everyone's right to unleash their own potential, and on a Friday evening, an evening that turned out to be great for the Argentina population and also for our brand, one of our long-term loyal e-commerce customers, Messi, decided to give us a bit of a push in the right direction, so you can, of course, measure your brand strength in all kinds of different directions and angles through consumer service or internal tests or asking customers.
But when someone that has unlimited possibilities to buy whatever you want and that gets everything that he wants year in and year out decides to buy products from us at full price, that is a sign that makes me super, super proud. And looking at 2022, it was a year where we continued to strengthen our brand and continue to drive growth. And we know, of course, and perhaps it becomes a bit boring or repetitive, but if we look at last year from a currency-neutral perspective, we have never done better. Record sales and record profit. And now we can look back at seven out of our last eight quarters with strong growth. Absolutely fantastic. If we look at some of the headlines, of course, Q4 continued to grow 9.9% to SEK 198 million. And with that, a record quarter, our gross margin decreased.
So the same trend we've seen throughout all the quarters last year with a decrease in gross margins due to a very unfavorable US dollar exchange rate versus the krona. If we will take that out, of course, the underlying gross margin is 56.6%, so a strong increase versus last year, and that, of course, is due to lower discounts, a better product portfolio, and really, really working closely with making sure that we can improve our profits. Looking at our EBIT, of course, it's massively impacted by the lower gross margin, so landing at 7.8. If you take out the currencies, it's going to end up at 16 million, so yet again, a very, very strong quarter. The good news, of course, is that we're continuing to grow our sports apparel, so full year last year, we were up 19%. In the quarter, we were up 9%.
We also see in the quarter that we have a strong recovery for retailers that had a tough beginning of the year. Many of them were overstocked, but we're now returning on strong growth levels there. And also, Germany and Netherlands had a very, very strong Q4. Looking at the full year, many of our markets are doing really, really good. Our own e-commerce continued to grow 14% in the quarter, and it's also growing year on year. And of course, as you know, that's been one of our focuses since the last four or five years to really divert the business into becoming much more digital, focusing on retailers and own e-comm. And that is definitely working, and now we see strong growth on retailers as well.
However, even though we believe that that strategy is also valid for tomorrow, the growth online will be much more moderate than what we have seen in the past. Looking at our financial solidity, it's also improving. So looking at 2019, we had a net debt above 120, and now we are at 14. So we're super, super happy with 2022 behind us. So let's just remind ourselves, then, but what are we here for? What is our long-term ambition? And first, of course, we want to inspire people that you can be whoever you want, and that training and sports is the key enabler. And whether it's to play padel or just taking the stairs or walking the dog doesn't really matter. It's about exercising and movement. That is really the key to become a better version, be happier, and live longer.
Our financial objective is to have an annual sales growth of 5%, operating margin of 10%, a dividend on minimum 50%, and an equity ratio of 35%. And our business strategy remains still very, very relevant: increase your online business with retailers and own e-comm, grow our business share with sports apparel, and expand geographically in Europe, predominantly then with Germany. And also, then, of course, it's not only underwear that Messi is buying. He's also buying our sports apparel, which, of course, is a very, very good sign. And the brand is really, really doing really well. So, of course, we are measuring this every week by asking end consumers in all of our big markets an array of different questions to make sure that what we're doing is actually working. And we see that all of the KPIs are going in the right direction.
Brand awareness, brand top three, all those KPIs are getting better and better. Of course, our main priority is to continue to increase the unaided awareness among people so they're spontaneously thinking of us as a sports brand. That's our biggest opportunity and also our biggest challenge. Looking at how we're doing, then, because, of course, the trick is to continue to build a sports fashion brand, but, of course, maintain your number one position. Here we look at purchase intent. We can see that underwear is continuing to increase. We're still the number one player in our mature markets. Of course, a lot thanks to individuals like Messi, who's showcasing the underwear for the entire world. We can also see that the intent of buying our apparel is also going up.
We're really driving two categories on a very, very good progress. That's fantastic as well. Looking at our top line development, so again, a record year, but also a record quarter, we're growing 10% year on year. That's also fantastic. Of course, it drives predominantly by retailers. Looking at the Q4 business, we see that we had a bit of a drop in Sweden. However, the full year business is doing really, really fine. Germany had a fantastic swing back. It only relates to Zalando, who did a very, very strong Q4 for us. Looking at the online development, so as we've communicated now many, many quarters in a row, we believe that as a brand, we're working really well in an online environment. We can see now that our online share is continuing to increase.
Looking at our channel, own retail +2%, online is continuing to grow. And also, of course, our wholesale and our distribution is also growing as well. So we see a strong underlying growth in all of our channels. And I think especially the comp growth in Q4 of 28% in own retail is fantastic. But then, of course, we should remind ourselves that last year we were impacted by COVID-19. So all of our stores in the Netherlands and Belgium were actually closed. So, of course, that makes it quite easy to have strong comp growth numbers. But even without that, we see a fairly strong underlying retail and e-comm development together with our own retail stores. Our strategy remains the same, and that is to continue to grow our own retail stores.
We believe that the way for us is to partner up with strong wholesale partners and rather build branded exposure within those that already have traffic. That's super, super, super important for us. So the strategy to continue to close stores will also be relevant for 2023. Looking at our category, so underwear, -2%, so not super strong in Q4. Sports apparel continuing to develop well with +12% for that you're using off court, on court, +5%. Bags is doing fantastic at +253%. Footwear is also doing very, very strong, and also eyewear. But again, a strong sign that many of our categories are doing really, really well also in the quarter. And the full year picture looks fairly the same. So it's very, very, very strong growth in sports apparel and bags for the full year picture as well.
With that said, as I already, of course, highlighted a number of times, the bottom line is impacted by currencies. That's by far our biggest challenge for 2022. We know that, of course, the US dollar is getting weaker than it was compared to Q4, but still, of course, it's on a very, very high level. That's one of our many challenges looking ahead. But with that said, please welcome Jens to run through some numbers below the line as well to see how our profit is developing. Thank you for that.
Good morning. It's a pleasure to be back, and the other day, I had an external visitor visiting us at the headquarters in Frösundavik. It's a partner that we collaborate with, and she wanted to get closer to us to understand what are we all about, what's the fuss about, who are we, what do we do, so she came out the other day to join us for a training session. During this session, we ended up in different groups, you could call it. But this guest, she ended up with a colleague of mine. We can call her Beatrice, Bea. Without question, without any hesitation, she just took care of my guest. She showed her around, explained the exercises, and just made sure she had a good time during our session, and Bea did not do this because she was asked to or she had to.
She did that because she's just one of the amazing colleagues that I work with every day, so if you want to know how Björn Borg is doing, well, meet Bea or any other of my colleagues. Just join us, come out to visit us to see what we are all about, and that will explain it, so numbers and KPIs and CAGR and balance sheets is all very important, obviously, but if you really want to know how we're doing, come visit us, but anyway, as I said, developments and KPIs are important, so let's have a look at that as well, so in terms of gross margin, Henrik already started to talk about it. It's decreasing slightly during 2022. However, if we look at it currency neutral to evaluate our underlying business, well, then it's 57% or 56.6%. That's an increase versus last year.
It's a strong growth in the operational gross margin, if you will. Obviously, we need to take care of one-off items and currencies. That's part of our jobs, obviously. But to evaluate the underlying business of what we do, it's increasing and it's doing well. In terms of EBIT, yes, also decreasing both in the quarter as well as full year. Full year going from record high last year of SEK 104 to 73 million. Again, as Henrik alluded to earlier, if we would look at it currency neutral and take out some one-off items that we had in 2022, the full year EBIT would be SEK 120 million. That's an increase versus the record of last year. Now, the world is not currency neutral, unfortunately, so we need to deal with it. But nevertheless, the underlying business is doing fantastically well for Björn Borg.
Obviously, the net income is following the same trend as the operating profit. So 86, record high last year to 51 this year. If we then continue to see the EBIT margins in relation to sales, you see that last year, the top gray line that you will see on the screen was a bit stronger than what we've seen this year. However, we continue to be on a fairly strong level when it comes to the operating profit margin. So in terms of the balance sheet, then, to the left, you see the solidity or the equity in relation to sales steadily increasing back from the mid-30s up to mid-50s. So a strong, solid company that we worked hard with. The net debt in the middle, as you can see, from above SEK 100 net debt in 2019 to 14 million when we closed this year.
When we closed 2021, we actually had a net cash position of 17, so we worked very hard with the cash or the liquidity situation in the company to strengthen the balance sheet, and we have succeeded, so we have a very strong company also when it comes to the balance sheet. To the right, you can see our working capital or the core working capital in relation to rolling gross sales, and it remains on a 20% level, and that's really, for us, it's a good level to be, and we're pleased with the number or the outcome of 2022, so with that, I've talked about the amazing colleagues that I work with every day. That's what Björn Borg stands for. I talked about some of the numbers that are super strong, and I leave the final words to Henrik for you to take with you this Thursday.
Thank you.
Brilliant. Brilliant. Thank you. So let's finish off, then. So there's, of course, a number of highlights. With that said, of course, there's also a number of things that need to be improved and become even better. But if we just stay to the stuff that's really working fine, number one is, I think, the brand is gaining strength in all of our markets. We are managing to maintain our number one position, so being the preferred underwear brand. And at the same time, slowly, of course, building a stronger position as a sports fashion brand. So that is fantastic. And, of course, that work just needs to continue. We have a strong growth online, both for retailers at the end of the year, but also our own e-comm. So that's also a sign that people really want to buy our products.
Of course, overall, we never sold more products, which is a good sign, of course, in terms of pulling the market. We also see gross margin improvement. So, of course, for me, that's important to see how can we really make sure that the developed organization is working much, much better with being efficient in terms of giving away discounts and which products to sell to which customers. And, of course, that's heavily impacting our gross margin. But, as you saw, currencies are impacting us. So we are closing 2022 with a lower gross margin than what we had in the past. And, of course, that needs to be addressed as well. And lastly, of course, sports apparel, one of our key strategies, is continuing to grow, which, of course, is also very, very good news.
And really, to wrap that up, sometimes you might think that it's the office that makes the difference or the computer that you're using or which incentive system that you have in place or how your organization is structured that will be the enabler for you to unleash your potential. We believe in something very different. We think that there's only two things, really, that we have that is completely unique that no one else is having. And one is that we are working at Björn Borg, so all the individuals and Bea and Jens and the entire team, we can only be at one place at one time. So, of course, knowing that, we need to continue to invest and develop each of the individuals so they can become their best version of themselves. And one key enabler is actually to train.
So, yes, you will become a better CFO if you train every day. That's what we believe in, and that's why we're doing that. And second, of course, Björn Borg. We have the brand. We own the brand. That's our brand. And those two, combining them, is going to be the key to continuing to grow also in the future. So, I think with that said, thank you for listening in. Messi, thank you. Keep buying our stuff. And I'm sure that Jelmer has a few questions as well after this presentation. So, Jelmer, why don't you just fire away?
Yes, thank you. And congratulations on a very strong quarter. So, first, I was thinking about the growth, mainly maybe in the own online to begin with, very strong in the quarter. Could you elaborate a bit on the drivers? Did you have any successful campaigns relating to, for example, Black Friday, Cyber Monday, stuff like that?
I think that you can divide into a few different things. I think one is that our sports apparel collection is growing 41%. With that said, of course, we have a product group that is now taking a bigger share of the overall e-comm business and also having a very strong growth. I think that comes down to really, really good products. Together, of course, we're placing those products in environments where consumers want to see them. Predominantly, that's in various social channels. We've done a number of things over TikTok, but also, of course, over Instagram that is driving sales at a very, very good level. I think that's one explanation. The other one, of course, is that at the end of last year, we said that why don't we start building up a stronger internal team.
So, we've recruited a fair bit of people internally. And, of course, that makes us much, much, much quicker. And, of course, that will also then utilize growth going even further. So, I think it's a combination of a few different things. We can actually conclude as well that the market is not working with us. So, actually, we're growing much, much, much quicker than what we see e-tailing is doing in Sweden and in Europe currently. So, we're taking market shares here. But I would say strong product offering and also, of course, having a high awareness in terms of where you will place those products, where consumers are, and then, of course, really investing into the team. So, we have a much, much more competent team right now than what we had a year ago.
Yes, thanks to recruiting more people without saying that the team last year wasn't competent, Robin. It's just that we added more people that are fantastic. So, that's, I think, the answer to our strong e-comm growth.
That's great. Thank you. And on the e-tailer side, of course, you're leaving behind a few quarters where you've been facing a challenging environment, but now you grow strongly there. You mentioned the inventory levels. Could you elaborate a bit on how do you perceive their inventory levels currently and what could we make of that relating to the growth in the quarter?
So, of course, a few we know because, of course, they also do quarterly reports and a few we don't really know, but, of course, we have a strong collaboration. So, we feel that at the end of last year, there was a lot of inventories sitting with almost all of our customers and in all markets in Europe. We believe that for many of them, the inventory levels have gone down dramatically now when we're looking into Q1. However, we still feel, or my subjective feeling is that there's still quite a lot of overstock in the European market that, of course, in one way or another need to be cleared out. But overall, it looks a lot better. So, we're slowly going into a much more healthier position than what we had last year. But as you can imagine, it's not hard to understand the reasons.
So, of course, we came out of a COVID where e-comm were booming. Of course, everyone is buying towards past growth. And then all of a sudden, the growth stops. And then, of course, there you sit with a lot of inventories. So, it took them probably the best part of 2022 to get rid of a very high overbuy that they did for 2021 based on how good it was in 2020 for the e-tailers only. But it's a much, much healthier situation right now, would be my assessment.
Thank you. And then on your expansion plans, you mentioned Germany there looking into 2023. Could you elaborate like how is the competitive environment in Germany and how is maybe the brand reception there? What challenges do you face for expansion in Germany?
All challenges you can possibly imagine. So, of course, we've been in Germany for quite some time. We do really, really good business with Zalando, with About You, with Tennis-P oint. So, we have a strong collaboration with many of the e-tailers, knowing, of course, that a fair bit of their turnover from us is actually sold outside Germany. But Germany is still growing. We also have a very strong country manager based in Berlin who's doing a very, very strong job. So, I think it's about having the right people locally driving the business, and then you slowly need to get traction. So, we're not planning to overinvest into Germany, but just slowly build traction with sports apparel and underwear. And we have a very strong consumer base with Zalando and About You and Tennis Point. So, it's about continuing to work with those.
And then, of course, also we launched Amazon U.S. with our own brand shop in December. So, of course, that will be one focus area in the future to drive growth. And then also we see that by localizing our own e-comm site, so translating that into local languages, that's also going to help, of course, our own e-comm to drive growth. So, but you can really say if you want to crack things down in terms of growth potential, it's clearly apparel. We need to continue to focus on sports apparel. Germany with big European e-tailers is a growth area. And, of course, own e-comm. So, that's really where we would want to invest to drive further growth.
Thank you. And then if we look at the underlying or the FX-neutral gross margin, of course, like you mentioned, it is a result of your pricing action. But also, I can imagine, of course, the product mix is affecting this. So, how can we see now? Because sports apparels are growing quickly. How will this affect in the long run the gross margin? And what contribution can we see from a different product mix?
No, I think obviously, as you say, the product mix has a massive impact on the gross margin as well as the channel mix. So, if you take exactly the same product and then you sell it to Zalando or through own e-comm or through own retail or perhaps through a distributor, the margin will be very, very different. So, of course, we need to just play with that so we can continue to strengthen our gross margin. From a product perspective, it's clear that apparel, sports apparel has a lower margin than underwear, for example. And if you look at footwear, for example, that also has a lower margin in general than what underwear is having.
Of course, here it's all about understanding that, making sure, of course, that we're competitive so we have the right price in the market, and then using that to package the entire product offer so we can continue to strengthen our gross margin also going forward without, of course, losing our competitiveness and not being able to win the consumer at the point of sale.
Thank you. And if we look at some of the retailers or e-tailers in the market, a lot of them have reported very favorable campaigns relating to Black Friday and stuff like that. And, of course, there's always a matter of balancing whether you should prioritize growth or profitability. Can you elaborate on how did you view this balance in the Q4?
No, I think we separate that a bit. So, it's clear that a lot of our partners, so the external e-tailers, of course, they're driving high volumes in clearance periods and Black Friday. And we support that. When we look at our own channels, so own retail and own e-comm, we are constantly reducing discounts toward end consumers. So, looking at last year, and one of our KPIs to measure RARP, which is a realized average retail price, so that we want to increase. And actually, last year, we increased that with five percentage points. So, looking at our own e-comm, we never sold products at a lower discount last year than what we did versus 2021. And that will also continue going forward. So, we'll do fewer sales periods. We will most likely stop doing mid-season sale.
We will limit our offers over Black Friday because, simply, we believe that a sustainable way of driving our growth for e-comm is to create pull in the brand and not using discounts as a lever to drive turnover. And instead, of course, we know that there's multiple e-tailers who will do that anyway. And also, that's a way of not competing on price versus some of our partners. So, the quick answer is that we will have lowered our discounts in own channel, and we will continue to lower our discount in our own channel and drive growth by creating pull instead. Whilst, of course, we understand that many of the e-tailers are still, of course, using those seasons as high volume drivers, such as Black Friday, for example.
Thank you. And then finally, on your own inventory level, can you elaborate a bit on this? Are you confident in the current inventory level that you're having? Is it on a healthy level? And could you elaborate a bit on maybe the parts that make up the inventory?
Yeah, no, absolutely. I would say that's probably never been better. And it's related to, of course, we have a number of different KPIs. So, one, of course, is stock turn. So, how often do you spin the stuff? That is on record high levels. And also, when we look at the aging, so if I go and look at, okay, how old is this stuff, we also see that we have a very fresh inventory. We closed the year, I think, roughly at 200 million SEK, which you could say is fairly high as a ratio of turnover, but it's a lot of fresh products. And also, we believe that the trend currently is that people are buying less pre-orders, but they want to have stuff in the season in case people are really continuing to buy. So, it's a very sort of cautious market right now.
I would say that our inventory situation has never been better. Again, a lot thanks to a strong, strong team led by Daniel Grohman, who's heading up Global Ops, done a purchase excellence project that is working out really, really well. It's, of course, about having the right stuff at the right time and looking at all our key asset points in the right direction for 2022, but also now coming into 2023.
Sounds great. Thank you so much for joining us today.
Excellent. Thank you for being here, Jelmer. And good to be here and see you soon again. And don't forget to trade, huh? That'll make you happier and live longer.