Norwegian retailer XXL ASA reported another weak quarter of results but also some progress on its initiative to develop a new operating model under CEO Freddy Sobin, who has been on the job for two-and-a-half months. The Q2 Ebitda loss was 57 million Norwegian kroner (€4.9m), which included a NOK 67 million inventory write-down, compared to Ebitda of NOK 203 million in the year-ago period ended June 30. The negative Ebitda was also the result of a huge tumble in period gross margin to 27.6 percent from 37.8 percent as the group dealt with high inventory and reduced demand for sporting goods in its markets. The net loss was NOK 246 million (-€21.1m) compared to a profit of NOK 45 million.
Total revenues declined by 6.9 percent to NOK 1,946 million (€167.0m) from NOK 2,090 million, with all geographies posting lower sales except Finland. All e-commerce sales fell by 2.0 percent year-over-year to account for 21.1 percent of operating revenue for the group. Sales in Norway, where the company operates 38 doors, fell by 10.3 percent to NOK 963 million (€82.6m) as Ebitda slipped by nearly 68 percent to NOK 90 million (€7.7m). In Sweden, where there are 30 stores, Q2 sales slipped by 5.6 percent to NOK 594 million (€51.0m), and the Ebitda loss was NOK 39 million (€3.3m) versus NOK 44 million. Finland, meanwhile, has a slight 0.5 increase in Q2 sales to NOK 390 million (€33.5m) but Ebitda tumbled by 90 percent to NOK 4 million from NOK 41 million. A prior plan to exit the Austrian market by year-end remains on schedule.
With the “resilient” sporting goods and outdoor markets in decline for six consecutive quarters, Sobin bluntly stated that the group “hasn’t been resilient or dynamic enough to respond to market changes.”
On the financial front, XXL has extended its bank facilities until June 2026, has seen a liquidity covenant of NOK 200 million set for the September 2023 until May 2024 period, and has negotiated a NOK 500 million (€42.9m) rights issue that should infuse the group with additional capital from existing shareholders.
Under Sobin, the group is assembling a more experienced senior executive team consisting of an EVP of marketing, EVP of IT development and the reinstatement of the COO role in the coming months. XXL also intends to “double down” on private labels with a new strategy to be announced later this year.
