Signa Sports United (SSU), the world’s leading sports e-tailer, reported a 10 percent increase in total revenues to €247 million in the fourth quarter of its fiscal year, ended Sept. 30, 2021, despite supply constraints for full bicycles, as it continued to benefit from resilient consumer demand across its verticals. Excluding full-bike sales, revenues were up by 19 percent.
The disruption in the supply of full bikes, especially e-bikes, is seen continuing in the first half of the current fiscal year. Lapping against a period when many physical stores were locked down, the situation is likely to result in an organic sales decline during the first half ending March 31. The German-based group anticipates that organic growth will resume in the third quarter as supply chain constraints are being alleviated, notably by partial European on-shoring of the supply chain.
SSU, whose shares began trading on the New York Stock Exchange on Dec. 15, saw adjusted Ebitda in the fourth quarter decline by 85 percent to €1 million, with the adjusted Ebitda margin narrowing to 0.4 percent from 2.7 percent the year earlier. The gross margin rose to 38.0 percent from 36.2 percent in the fourth quarter of the previous fiscal year, but the group’s quarterly net loss widened to €21 million from €10 million, due to exceptional cost related to the IPO.
For the full year, sales were up by 24 percent to €872 million and were 31 percent higher if full-bike sales are excluded. They rose by 21 percent in team sports, by 23 percent in the bike and outdoor segment and by 31 percent in tennis. The company had previously predicted that its sales for the financial year would hit €1 billion.
The active customer base rose by 31.9 percent on the year earlier to 5.2 million, reaching a level that was 68 percent higher than two years earlier. The number of visits to the group’s websites increased by 9.7 percent to 274.4 million, but the growth slowed down in the final quarter due to the easing of Covid restrictions. Customer retention rates continued to increase, while many new customers approached the group.
The number of orders jumped by 29.4 percent during the year to 7.1 million, but the average order value inched down by 0.5 percent to €100.6 due to the product mix effect from lower bike sales, which were partly offset by a robust business with bicycle parts and accessories and higher sales in the tennis segment.
The German-speaking countries continued to dominate the regional mix, although the company didn’t specify their share in the total revenues. In addition to a further consolidation of its market position in core geographies such as the Nordics, where sales rose by 26 percent, SSU expanded its omni-channel strategy with the opening of more directly managed flagship stores in key European cities. We have already reported on the new store openings of Tennis-Point, for example, especially in Spain.
Adjusted Ebitda for the year jumped by 90.5 percent to €28 million, leading the adjusted Ebitda margin to widen to 3.2 percent from 2.1 percent in the previous financial year. The gross margin expanded by 2.8 percentage points to 38.9 percent. The bottom line loss widened by 79.4 percent, growing to €46 million from €26 million, largely due to one-off costs tied to SSU’s stock listing and other transaction costs.
Expanding its presence in its core bike and tennis businesses, SSU closed the acquisitions of Wiggle CRC and Tennis Express on Dec. 14 and Dec. 31, after the end of fiscal year 2021. The group’s pro-forma revenues including those two companies amounted to €1.36 billion last year, up by 14 percent, generating adjusted Ebitda of €73 million, or a positive Ebitda margin of 5.4 percent. On a pro forma basis, the number of active customers increased to 7.4 million, the number of orders to 11 million, and the number of visits to its websites to 430 million.
The management sees the adjusted Ebitda margin growing to between 12 and 15 percent across the group in the longer term, with direct e-commerce alone generating a margin of 8 to 10 percent. As a percentage of e-commerce revenues, personnel, logistics and marketing costs on a pro-forma basis represented 10.1 percent, 10.3 percent and 7.0 percent of sales last year, respectively. Longer-term, the ratios should go down to a range of 8 to 10 percent, 8 to 9 percent, and 5 to 6 percent, respectively.
Although the company pointed to uncertainty about the development of consumer demand in light of inflationary pressures and Covid-19, it said it expected consumers to cut spending on other discretionary items before sports, describing the sector as being more “resilient” than others.
The e-tailer confirmed previous guidance for revenues of €1.40-1.55 billion for the fiscal year 2022 ending next Sept. 30, reflecting continued organic growth for the enlarged group and severe disruptions in full-bike supply. The gross margin should remain more or less flat, as the company has managed to raise prices slightly in the bike segment.
In a webcast, company executives indicated that the group is still targeting annual growth of around 21 percent and a resumption in the gross margin’s expansion after conditions come back to normal.
The CEO of the group, Stephan Zoll, said that SSU is looking at expanding into new markets and into new segments, including emerging sports. It plans to take advantage of merger and acquisition opportunities in the rather fragmented bike and outdoor sectors in the U.S., for example, after consolidating its latest acquisitions. Some takeovers may be financed by a combination of cash and shares.
SSU is also planning to experiment with alternative business models. It plans to expand its third-party business, which was boosted in the fourth quarter of last year by the addition of 80 connected retail partners.
