Efforts to prioritize costs, earnings and cash flow bore fruits in the fourth quarter of 2020, helping the New Wave Group to score record operating profits. Despite restrictions linked to the pandemic and canceled or postponed events, the Swedish company behind Craft of Scandinavia and Cutter & Buck saw its operating results rise to 283.6 million Swedish kronor (€28.2m-$34.3m), from SEK 240.3 million for the year-ago quarter – the highest level in its history. The group’s gross margin narrowed by 0.5 percentage points to 46.2 percent in the fourth quarter, but its net income rose by 25.5 percent to SEK 208.2 million (€20.7m-$25.2m).
Revenues declined by 7 percent to SEK 1,873.2 million (€186.5m-$226.3m), or by 3 percent in local currencies. The group witnessed some recovery during the quarter in the Nordic countries, especially in the Sports & Leisure segment. According to an authoritative source in the company, Craft enjoyed a 15 percent sales increase in the fourth quarter, and the brand is currently sold out of some snow products due to very cold winter conditions in Scandinavia.
For the whole Sports & Leisure segment, however, revenues declined by 11 percent in the quarter, with most regions posting lower sales, but the most significant drop was seen in the U.S. Along with Craft and Cutter & Buck, the division includes the Seger and Ahead brands, as well as the distribution of Speedo in Scandinavia, among other brands and activities.
By region, sales rose by 12 percent in Sweden, where coronavirus-related restrictions were minor, and increased by 3 percent in the other Nordic countries. In the U.S., group sales decreased by 28 percent, with most of the slump occurring in Sports & Leisure. The exchange rate had a negative impact, as sales in constant currencies fell by 20 percent. Revenues dropped by 8 percent in Central Europe, by 13 percent in Southern Europe and by 10 percent in Other countries, mainly due to lower sales in the Corporate segment in Asia.
For the full year, New Wave’s revenues amounted to SEK 6,098.8 million (€607.3m-$736.8m), which was 12 percent lower than last year in reported terms and 10 percent lower in constant currencies.
Sports & Leisure was negatively affected by Covid-19 due to canceled sports events and the sport retailers’ high inventory levels, leading to a 25 percent drop in net revenues. Despite these negative effects, investments in the Craft brand continued during the year, including a partnership with the IFK Göteborg football club in Sweden. The U.S. market was hit hard by the pandemic, causing several of the group’s companies in the segment to shut down during a period. However, they have made large cost savings and adjusted their business according to the current volumes.
Overall, the group’s gross margin fell by 1.2 percentage points to 43.2 percent, due to a higher share of sales coming from the Corporate segment. The operating margin improved by 1.3 percentage points to 9.0 percent.
Net income declined by 1.9 percent to SEK 363.0 million (€36.2m-$43.9m) for the year, but the balance sheet improved sharply, with the equity ratio reaching a 20-yar record of 53.4 percent and the debt/equity leverage down to a record low of 1.7 times.
The management said that it is not releasing any outlook as the pandemic makes it difficult to assess the coming first half of the year. The group will continue to focus on improving the operating margin. It plans to build up its inventories again for an expected rebound in demand during the second half of the year.