XXL ASA, the Norwegian-based sporting goods retailer, continued to grow at strong double-digit rates in the third quarter. It delivered revenues of 2,080 million Norwegian kroners (€230.1m-$252.2m) for the period - up by 19.0 percent over the year-ago quarter - driven by new stores and e-commerce, along with an unusually strong performance in its home market. This occurred despite a challenging month of September, with unseasonal warm weather in all regions, impacting same-store growth and gross margins.
The company saw its retail revenues gain 4.0 percent on a comparable store basis. E-commerce grew by 68.2 percent, representing 9.7 percent of total turnover. XXL operates online and offline in Norway, Sweden and Finland. It has just started to operate online in Denmark.XXL's Norwegian operation stood out with a 15.4 percent jump in revenues to NOK 1,103 million (€122.0m-$133.7m), up by 2.2 percent on a comparable store basis. This contrasts with the year-on-year growth of 3.7 percent that it had reported for the third quarter of 2015.
XXL's new momentum in the country was driven by the expansion of e-commerce and the establishment of new stores in 2015 and 2016. On Sept. 1, 2016, XXL set up a store in a new region of Norway, in the city of Skien, with strong opening sales figures. XXL said that the Norwegian market experienced sound selling conditions in July and August, but September brought an unseasonably warm weather in all regions. As a result, many areas experienced a slow start to the autumn season. The company's gross margin inched up by 0.1 percentage points to 41.6 percent in the country.
In Sweden, XXL's revenues grew by 18.8 percent to NOK 663 million (€73.3m-$80.4m) - or by 17.0 percent in the local currency - with same-store growth of 4.8 percent. This was driven by stores that opened last year as well as organic growth. XXL opened one new store in the quarter. The gross margin lost 0.6 percentage points, down to 38.0 percent.
Although the overall macro situation in Finland continues to be difficult, the retailer's sales in the country were up by 27.6 percent to NOK 304 million (€33.6m-$36.9m). They went up by 24.2 percent in the local currency, with a rise of 1.9 percent on a comparable store basis.
The company said the month of September was depressed for the overall retail industry under particularly warm weather conditions in Finland. As a result, the degree of its clearance sales where higher this year due to the slow change of seasons. This affected the gross margin, which was down by 1.2 percentage points to 29.1 percent.
Overall, XXL ended the quarter with a total of 58 stores in the Nordic countries as compared to 47 stores in the third quarter of 2015. The company expanded into Denmark in May with only an e-commerce offering. The launch came with aggressive pricing and high marketing investments that will cause a loss during the first years of operation. This was the first full quarter for the Danish operation, and total revenues amounted to NOK 9 million (€995,696-$109,112) in the country.
The group's gross margin edged down by 0.5 percentage points to 10.3 percent, driven by a change in the geographical mix and lower gross margins in Sweden and Finland. The operating margin dipped by 1.1 percentage points to 10.3 percent before amortization (Ebitda).
XXL has signed 12 new lease agreements for new stores due to be opened this year, only six of which were in operation at the end of the third quarter. The total includes seven new stores in Norway, two in Sweden and three in Finland.
Combined with the growth of e-commerce, this has led the group to decide on new investments in the company's central warehouse in Norway, which will go from approximately 24,000 square meters to 32,000 square meters.
XXL maintained its guidance for 2016, with same-store growth expected to be in the mid-single digits and gross margins to remain stable.
