KappAhl and Newbie sales improve, but profit drops as restructuring continues

By

Sandra Halliday

Published
Mar 20, 2019

Swedish fashion retailer KappAhl offered up mixed Q2 results on Wednesday, reporting a “satisfactory” kick-off to last season with full-price sales doing reasonably well on the back of “well-filled stores and a broader offer.”

And it also said that Q2 sales had risen 6.3% to to SEK1.19 billion (€114 million) as its balanced offer and Christmas season/clearance sale proved strong. That was good news as overall first-half sales rose only 4.3%, so the second quarter clearly marked an acceleration of growth.

But costs connected to its on-going restructuring plan bit deep into its profits and it said there are more store closures and more job losses to come. It should shutter another 20 underperforming stores in the year ahead and will axe 50 HQ and distribution centre jobs as it targets an SEK100 million earnings improvement.

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So what about those Q2 operating profits? The company saw them falling to SEK2 million from SEK5 million while for H1 as a whole, they dropped to SEK55 million from SEK95 million. And the gross margin was down to 57.5% from 58.8% for the quarter and fell to 60.4% from 61.8% for the half.

The company has big change ahead on lots of fronts as its new president and CEO, Elisabeth Peregi, joins on April 7. And it appears that she’s joining a company that’s in recovery mode with the firm saying in Wednesday’s results announcement that it’s “taking market share in all markets and seeing how the changes in the supply chain and offer that we carried out started to have an effect.”

However, it’s not out of the woods yet and it admitted that it saw the “continued negative impact of tough competitive pressure” in the last quarter. It added that “Christmas trade got under way later due to Black Friday and the ever-earlier clearance sale start meant a period of discounted sales that was somewhat more extensive than previous years.” That took some of the shine off that “satisfactory” start to the season.

The company also said that childrenswear sales have “continued to grow and Newbie continues to be strong.” Womenswear, meanwhile, “successively improved during the quarter and we see that menswear has a more integrated and attractive offer today than a year ago.”

The firm’s e-tail sales also continued to rise, albeit from a small starting point, They were up 14% in Q2 but still only make up 5% of the total. Their growth is being helped by click & collect with over half of e-sales fulfilled this way.