While several Scandinavian sports and outdoor retailers are under pressure, XXL Sport & Villmark has set itself a target to reach sales of 4 billion Norwegian kroner (€491.9m-$663.8m) this year, compared with NOK 3.1 billion in 2012. That was already an increase of nearly 26 percent, while the retailer's operating profit jumped by 13.4 percent to NOK 330 million (€40.6m-$54.8m).
The retailer is on track to reach its target so far, despite a few slow weeks after the summer. The extra billion or so will not come only from organic growth but also from eight store openings: While XXL had 18 Norwegian stores and nine Swedish stores at the end of 2012, as well as an online store, the plan is to end this year with 22 stores in Norway and 13 in Sweden.
XXL's sales soared by 16 percent to nearly NOK 2.4 billion (€295.1m-$398.2m) last year in Norway, where the sports market advanced by an estimated 2.3 percent at retail. This meant that XXL lifted its share in Norway from 20 percent to 22 percent, based on the definition of the market used by Sportsbransjen, the Norwegian sports industry association. XXL said its Norwegian market share improved again by 3.1 percentage points for the first half of this year.
XXL has suffered from a decrease in average prices, which was partly caused by the fierce competition with retailers like Gresvig in Norway and Stadium in Sweden. However, this has been compensated by lower operating costs as XXL took advantage of synergies with its business in Sweden. The group's operating profit in Norway jumped by 10 percent to NOK 316 million (€38.9m-$52.4m) last year.
The Norwegian retailer has expanded yet more rapidly in Sweden, increasing its turnover in the country by 71 percent to 816 million Swedish kronor (€93.0m-$125.3m). XXL had already achieved an operating profit in Sweden in its first full year of operation there, and it did so again in the second year, with an enlarged operating profit of SEK 16.3 million (€1.86m-$2.50m). With four store openings, XXL expects to grow its Swedish sales by another 70 percent this year.
XXL's expansion in Sweden came at a time when the entire Swedish market was under heavy pressure, leading to reduced margins at Stadium and financial issues at Intersport Sverige and Team Sportia, the two leading buying groups in the country.
The Norwegian retailer points to its brand-oriented formula as the reason behind its inflated sales. Unlike other large players in the Nordic sports market, and unlike Décathlon, XXL only sells about 3 percent of private labels.
XXL managers pointed out that their owners were not taking any of the profits, opting to reinvest them in expansion. The resources are required to finance the new stores as well as a Swedish warehouse in Örebro. Each project costs about NOK 30 to 40 million (€3.69m-$4.97m to €4.92m-$6.63m).
Furthermore, XXL is preparing for rapid deployment in the Finnish market next year. A store is under construction in Vantaa, in a judicious location not far from Helsinki's airport, to be opened in the spring. XXL said it had signed four other leases in Finland, focusing on Helsinki, Turku and Tampere.
As it continues to squeeze operating costs and to capitalize on synergies, XXL will not be taking on any extra employees at its head office for its business in Finland, but recruiting has started in the country.
The retailer had some less comfortable weeks last year, as the launch of its updated online store in December was plagued by all sorts of logistical issues. Muddling through for four months, it had to entirely revise logistics and processes for its online business.
The efficiency of the online store has been fully restored: After a recent campaign XXL reaped about NOK 7 million (€0.86m-$1.16m) in online sales in two days in Norway alone, using one warehouse. The potential of such promotions will be multiplied once it operates in three countries with two warehouses next year.
