Challenging market conditions continue to weigh on XXL ASA

XXL ASA, the operator of sporting goods across Scandinavia and Austria, continues to see historically low consumer confidence and diminished demand for sporting goods, in general, weigh on its financial results. Earlier, the group said the two trends commenced in mid-May. Now, the retailer, which recently promoted CFO Stein Eriksen to interim CEO, is bringing back its former EVP of marketing for a period to help it navigate shifts in its marketing strategy. It is unclear how long Jarle Bråten will serve in the capacity as XXL ASA moves to initiate more tactical marketing and introduces a new marketing tool in the fourth quarter. Given current sales trends, the group is taking action to adjust costs and lower its purchasing volumes. The FY capital expenditure budget is being lowered by NOK 50 million; corporate headquarter costs are being reviewed, and store costs will be reduced through less staffing. 

Third quarter net income fell by 40 percent to 42 million Norwegian kroner (€4.1m) from NOK 70 million as Ebitda declined by 45 to NOK 186 million (€18.0m) from NOK 336 million. The gross margin eroded to 35.0 percent from 38.9 percent. Total revenues fell by 13.9 percent to NOK 2,313 million (€223.5m) from NOK 2,686 million, with each of the retailer’s four markets reporting lower year-over-year Ebitda and revenues. E-commerce sales fell by 6.7 percent in the period to represent 19.1 percent of total group revenue. After strong years in both 2020 and 2021, the Nordic sports retail market is showing weaker demand after historically growing by 4 percent annually.

In its home Norwegian market, where it operates 37 doors, XXL Asa saw its Ebitda margin fall to 16.8 percent from 21.7 percent in the year-ago period as total revenues declined 11.4 percent to NOK 1,139 million (€110.1m) and gross margin fell to 36.0 percent from 41.2 percent. Total sales fell by 16.9 percent in Sweden, where there are 29 stores, to NOK 673 million (€65.0m) from NOK 809 million. Ebitda sunk by 40 percent to NOK 73 million (€7.1m) from NOK 123 million. In the 17-store Finnish market, Ebitda declined 38 percent to NOK 48 million (€4.6m) from NOK 77 million on a 16.8 percent drop in operating revenue to NOK 395 million (€38.2m) from NOK 475 million. XXL ASA was able to turn a NOK 4 million profit versus a NOK 7 million in its smallest market of Austria, where total revenues from eight stores declined 8.5 percent to NOK 107 million (€10.3m) from NOK 117 million.