XXL ASA reported what it described as a “disappointing” sales performance in the second quarter of 2024. Its top line fell by 8.7 percent to 1,776 million Norwegian kroner (€151.7m), led by a decline in purchases of higher-priced capital-intensive goods, particularly bicycles. Sales were also negatively affected by limited product availability at key price points and for high-demand products.
As consumers continued to favor soft goods and products at lower prices, sales once again contracted in all XXL markets, declining for the tenth consecutive quarter. However, XXL also highlighted “early indications of improvement” mainly in Sweden, but partly also in Norway. It stressed that the Finnish market remains challenging.
E-commerce sales at XXL fell to 20.4 percent of the sales pie from 21.1 percent the year earlier, with a like-for-like contraction of 9.4 percent. However, management said that profitability trends in e-commerce continue to improve.
At the group level, XXL’s gross margin widened to 35.7 percent from 27.6 percent the year earlier, of which an additional write-down of inventory in the second quarter of 2023 accounted for about 3.4 percentage points of the improvement. The gains were also attributed to healthier inventory levels and better pricing. At the same time, XXL noted that continued lower demand for products with higher price points and a high share of sales from campaign products is putting pressure on the gross margin.
Group Ebitda in the quarter improved to a positive NOK 39 million (€3.3m) from a negative NOK 57 million in the second quarter of 2023, mainly driven by the improvement in the gross margin. The net loss widened to NOK 283 million (€24.2m) from NOK 246 million. Inventory decreased to NOK 1,804 million (€154.1m) from NOK 2,123 million as the group adapted purchasing volumes to sales.
In Norway, revenues fell by 8.2 percent to NOK 884 million. (€75.5m) The gross margin expanded to 37.9 percent from 29.3 percent, driven by healthier inventories and strict price control, partly offset by more campaign activity later in the quarter. Ebitda in Norway rose to NOK 148 million (€12.6m) from NOK 90 million.
In Sweden, sales fell by 4.9 percent at constant currency rates to NOK 560 million (€47.8m), as XXL pointed to early signs of improvement in the market in May and June. The gross margin expanded to 32.2 percent from 24.3 percent, driven by healthier inventory levels, lower clearance activities and stricter price control. The Ebitda came in at breakeven versus a negative NOK 39 million.
In Finland, revenues decreased by 14.0 percent at constant currency rates to NOK 332 million (€28.4m) in a market characterized by weak consumer sentiment and low demand. In March 2024, XXL closed its store in Redi, Helsinki, accounting for NOK 10 million (€854,078) of the sales decrease. Gross margin rose to 35.5 percent from 28.6 percent, boosted by a decline in clearance activities and stricter price control. Ebitda rose to NOK 17 million (€1.5m) from NOK 4 million.
Overall, XXL had 85 stores in the quarter, unchanged from the year earlier. While the number of stores in Finland decreased by one to 16, it rose by one to 39 in Norway following the opening of a new store there in the second half of 2023. The number of Swedish stores was unchanged at 30. In the year to date, XXL has signed for no new store openings in 2024, although in the medium to long term, it expects to open two to three new stores a year, including relocations. XXL said it will also be downsizing several existing stores. “Short term, the group will continue to focus on optimizing the store portfolio, including evaluation of selective closures of low-performing stores with limited turnaround abilities,” it said.
