Earnings Call: Q1 2021

May 18, 2021

Hello, and welcome to the presentation of the Bjorn Borg Q1 Results. I will start off by sharing some of the financial results for the group and then our Henrik Bonge will follow with some more great news for our company. If we summarize the Q1 of 2021, we can conclude that our online sales continue to grow strongly, and it actually represents over 50% of our turnover for the Q1 of this year. If we include our own e commerce, if we include our wholesalers, e tailers and also our wholesalers on e commerce sites, then we are well above 50% of our turnover online. The Q1, however, we should note was continuously negatively impacted by COVID-nineteen, obviously. We have seen lockdowns in some of our markets. For instance, in the Netherlands, the entire quarter was closed. Also, we see lockdowns in Germany and in the UK. That obviously results in some challenging some challenges in our own retail business and clearly for our retailers in the wholesale segment as well. But overall, net sales increased by 7.4% in the quarter compared to last year. We see a strong quarter for our wholesale channel and then predominantly driven by the e tailers, as I just mentioned, they're growing with 68 percent in the quarter. So very strong online, as mentioned earlier. Our own e commerce site is also doing really well, so plus 40% in the quarter and they continue to show a great momentum. The owned retail stores, however, declined 44%. So clearly, the impact of corona is still with us with the lockdowns that we've seen in some of our markets. The segments of external distributors grow very strongly in the quarter plus over 100% and the main increase we see in Norway, which is having a great momentum at the moment and also a strong recovery in the U. K. That has shifted from being an integrated part of our business to an external distributor as of January 2021. The license business declined in the quarter, but mainly bags category that is representing this decrease as this category has been brought in house towards end of 2020. So that clearly represents a change. Currency neutral, the sales increase is above 14%. Gross profit in the quarter declined slightly 0.8 percentage points. This is mainly driven by some inventory write downs that we did as a consequence of the lockdown in our retail channels. Currency neutral of the decrease was above 4 percentage points. The operating profit on the other hand increased to €22,000,000 versus 7.2% last quarter last year. So this quite a large increase has come from the focus that we've had on profitability in the gross margin, but also the measurements and activities the company has taken to reduce our operational expenses. If we try to summarize this in net sales and profit over the last three quarters. We can see, as I said, 7% growth this quarter versus last year. And the positive drivers that we can see on the turnover is coming from online. So our own e commerce 40% up, e tailoring in the wholesale business, 68% up, distributors mainly driven by Norway and UK, over 100% increase and clearly, the downsides are to be seen in own retail, which is declining with above 40% in the quarter. Profit wise, a very large increase compared to last year and this is then coming from generally a good control of our operating expenses from the activities taken by the company to reduce the OpEx base, let's say, we have less wholesale discounts improving the margin slightly, but on the downside, there is some inventory write off due to the lockdowns in our own retail segments. Summarized in a simplified P and L, we can then again, the sales increasing 7.4 percent as mentioned, slight decline in the total gross profit margin of 0.8 percentage points. Operating expenses, on the other hand, decreased with close to 10% and then resulting in the rating profit increasing well over 200 percent from $7,000,000 to $22,000,000 That gives us an operating margin well above 10%, so 12.1% for the quarter. If we try to see which of the channels is providing the growth. Then on the left hand side of this slide I'm showing, we can see that the wholesale segment or the wholesale channel is driving an increase in sales of above €12,000,000 in the quarter. Distributors that I said growing 100 percent is increasing close to €6,000,000 in the quarter. The downside is our direct to consumer being our own retail combined with own e commerce. In total, the direct consumer is then declining to 2,500,000, but also the licensing is decreasing by €2,000,000 Then if we look on the operating profit for the quarter, the main driver for the increase in the quarter is driven or coming from the wholesale channel, almost €20,000,000 versus last year. But we do see a downside on distributors are increasing with SEK1 1,000,000 in the quarter. Again, the wholesale is showing a very strong growth in our e tailer segment, so plus 68% and the operating profit is then increasing with these increased sales in the online, but also due to improved gross margins and reduced operating expenses. So wholesale isn't having a really strong quarter for the Q1 of this year. Direct to consumers, we can split up in own e commerce and own retail. Own e commerce increasing sales by 40% was the own retail decreasing 44 due to the lockdowns mentioned earlier. Operating profits then clearly declined due to the lower sales and also slightly lower gross margins. Distributors over 100% increase, strong development in Norway, but also in the U. K. And then as I mentioned earlier, the licensing business declining due to the fact that we brought the bags category in house out of the licensing business. With that, I would like to hand over to the CEO, Henrik Bogen. Thank you. Behind us, we have a year and a few months of a global pandemic, but we also have our record quarter 1 for Bjorn Borg. Of course, we've learned a lot during the last year, but there is a number of things that is popping out, which gives us confidence to believe in a future that looks much better than the past. There's an ongoing health trend that has never been stronger. People are looking for brands that inspires them, that you can indeed be more and that training is more crucial than ever to allow you to unleash your own potential. And we're that brand. When Well, looking ahead, it's clear that people listen to brands, but more and more importantly, it is clear that people listen to people. So during Q1, we did a massive push with our brand with a number of different transfers in all of our biggest markets. And we can see that the new arena for us is clearly online. And the connection that we have gained with consumers in various online channels is impacting our brand in a very positive way. So we see record numbers when we're measuring how strong our brand was looking at our Q1 results. So first, of course, we did an influencer attack with more than 100 different influencers that immediately, of course, increased our brand awareness. As we've seen in the past, that's been one of our biggest challenges. People simply do not look upon Bjorn Borg as a sports brand, even though we are. But if we remind them that we are a sports brand, then 1 of 3 will pick us as their favorite brand, And that's a massive potential and a massive opportunity. So of course, the whole idea was to build brand awareness and we saw that increased by more than 100% Q1 versus last year, only through focusing all our resources on online. And, of course, the whole idea is to continue to be where the consumers are. And we can see it's also immediately correlating to growth. So our ecom business, as you just heard Jens talked about, had yet another record quarter where apparel business grew more than 294%. So looking ahead, we see a number of different challenges. But more than ever, we see that our brand and what we stand for resonates really, really well with what consumers are looking for. And already back in 20 We felt that the new arena is online. That's where the consumers will be. And we already saw a quick move from physical retail to online e tailers and marketplaces. And of course, during last year, that simply boomed. And our approach has always been to increase our online business Simply because we believe that that's where the brand should be. And there's a number of things that points in direction that we can really thrive in that environment. And looking at our development very shortly, the majority of our business would come from online and we are slowly turning Berenberg into an online company with an online proposition building and living and communicating our brand online where the consumers are. And that we intend to continue. But it's not only about being online. So if that's where the consumers are, it's also about Taking a responsible view on how you come across. And for us, of course, making the promise that we wanna make you better also means that we need to take a responsibility in how we impact the environment around us. So sustainability is a very, very high focus And will continue to be so. And we have made a massive progress in terms of different sustainability initiatives that we Implemented in Q1 and will continue to implement throughout the rest of 2021. And we truly believe that the combination of focusing online, Building a brand that will inspire you that you can be better and having a very high sustainability focus, that's really the recipe for a massive success going forward. So with that said, I think looking at our mission that we wanna be here to inspire you that you can be more, be whatever you want to be. And I'm not talking to you that are running 7 times a week, that are running and competing in marathons. I'm talking to you that just want to be a bit better, Live a bit longer, feel a bit stronger. Those are the ones that we wanna reach out to. We wanna inspire you that you can be whatever you wanna be. And looking at Q1, we did that. We have a record quarter behind us and we have high faith in our business idea and in our brand mission and we'll continue to deliver on that also looking forward. So with that said, thank you for listening in.