Another interesting year has passed

Foreword by Chairman of the Board, Martin Nordin

As I/we predicted it was a challenging year, even more than we/I anticipated. The first half started out well, but as we anticipated the inventory in the retail part of the industry meant that reordering/resupply demand was very weak, and we saw unusual cancellation of products as retailers realized their over inventory positions. The second half of the year started quite well as the demand in the retail increased due to sales in the retail sector starting similarly to 2022, and the inventory situation improved.

Just as it looked that some kind of stability occurred, the heatwave hit Europe, especially in August, coinciding with the winter merchandise for colder temperatures arriving in the stores. This meant that reordering for winter merchandise never really took off as the inventory situation in retail became worse again. We have also seen that a lot of retailers have faced challenging financial situations. For example, Sport Scheck in Germany as well the Internet Stores group, with retailers like Campz in Germany, was caught in the Signa Group restructuring and had to face restructuring.

The picture is similar in many other countries. This also led to a significant price pressure in the market as retailers had to liquidate inventory. Christmas trade was hampered by this as Black Monday in some markets became Black week and the same for Cybermonday. We also need to keep in mind that we came out of an industrial record year in sales 2022. The effects will go on into 2024 in which we still see substantial risks with inventory as well as liquidity problems in the retail segment. We also believe it will make our business riskier, as we think that retailers will be more cautious in placing large preorders depending more on “in season deliveries” from of the suppliers. We see that already on the orderbooks for Spring 2024.

On top we need to keep in mind that the Covid years gave a huge boom in volume in the industry, and therefore we do not think that the fundamental Outdoor segment will see any growth this year. The new customers gained during Covid are not necessarily going to be prone to the same retention and behavior of history, which can even mean decrease. A change we have seen however is that outdoor lifestyle, being more fashionable in design, has kept its momentum a bit more after Covid.

This could prove a trojan horse for the classical outdoor brands that mix this up with fundamental growth. An example of this is when we, in the early 2000s, had a boom of waterproof garments at Naturkompaniet as a lifestyle item in Sweden. We over prepared for this, the boom ended quickly, and we ended up with 5,000 waterproof garments in inventory, which in turn took us quite an effort to solve. From the brighter side we do have a few markets that have been outperforming 2023 though. Our JV in China had an all time high in sales and result and now it is not Kånken, but a much wider assortment. Canada also had a record year showing a great improvement on the struggles from last year. The rest of Asia, especially Korea and Taiwan, was still outperforming.

Given all this, 2023 ended up with net sales of 739.4 MEUR, down from 759.2 MEUR last year. Brands was down 3.8% and Global sales 8.3%. The exception was Frilufts which was up 1.2%. Another interesting fact is that the direct-to-consumer sale in Global sales and Brands was up 2.9%, which means that our brands, from a consumer perspective, had an OK year. This is in particular true for Fjällräven. Hanwag, who had an amazing growth during Covid, is facing tougher challenges as it is more hardcore in its model program. A product segment that shows an overall decrease when observing the segment sales in our Frilufts operation. The “New customers” are not buying these heavier models that often and there is a trend towards light shoes.

Operating profit was down to 55.0 MEUR vs 83.5 MEUR the year before. The operating margin decreased due to the generally increasing costs from inflation as well as through that we have still not gotten full efficiency out of our logistics investments. We also made reservations for measures to decrease costs and increase our efficiency as mentioned in the Q4 report. The digital business was flat. Digital sales amounted to 146.9 MEUR, up from 146.4 MEUR. The sales figure represents 19.9% of total net sales and 31.8% of our net sales direct to consumers.

What can we expect from 2024? The first quarter will be weaker than last year, especially in Global sales and Brands. We do however expect/believe in an improvement in sales, in those segments, in Q2, as
we believe that as the lower inventory and the reasonable sales among our retail customers will mean that we should improve on last year’s weak number. In terms of the rest of the year, I refrain to comment due
to our experience last year with the weather combined with the inventory and liquidity problems in the industry and given the last years experiences anything can happen both financially, politically and weather wise. I do however believe that a full recovery will l take place earliest 2025. In the US major retailers do not expect a return to “business as usual” until 2025.

What are we doing in 2024 to improve our performance:

  • We have launched a cost savings program saving us around 7.0 MEUR for 2024 as earlier stated.
  • We are continuing reevaluating all projects and investments based on lower expectation of growth as well as on higher interest rates to ensure a better cost control.
  • We are taking tougher measure to improve cost control.
  • We are on track to improve our liquidity by improving our purchase systems. We believe our currently high inventory levels will start improving on a like for like basis end of Q1.
  • It is also very likely that we can reenter the acquisition mode as the asset prices seem to be coming down due to the higher interest rates.
  • We are continuing to improve our logistic operational. Our automated small order system in Ludwigslust is now running and will be scaled up during 2024. We believe the full effect will come in 2025, with lower operational expenses of 2-4 MEUR. This is expected to substantially decrease our cost for delivering, especially for the digital business in Europe.

We are also continuing investing in a new ERP system for the Brands and Global sales segments in 2024 to enable us to work more efficient. We are also expanding our focus on our marketing efforts, especially in our two largest markets as we have been too stringent in spending in this area during and after Covid.

The new year has started in a reasonable way according to plan. We have been able to deliver in good way to our retailers. Despite the challenges, I believe we are very well positioned with our initiatives to counteract

All the best

Martin Nordin

Chairman of the board



Important information

The annual report differs from the Q4 press release in one position.

–                                      Q4 Press release                                    Annual Report

Right of Use asset           MEUR 130.5                                            MEUR 117,2

Total Asset                       MEUR 743.2                                           MEUR 729.9

The reason for the difference is the addition of a German lease contract prolonged from 2024-01-01, signed in 2023. No effects in Income statement for 2023.