After assuming in June that the worst of the market disruptions were over, Signa Sports United N.V. (SSU), the Berlin-based sports e-commerce specialist, has now announced an acceleration of its strategic realignment and performance improvement program. Ahead of putting its Q3 numbers on the table, the company is talking about how subdued demand and excess inventory in the market continue to have a very negative impact on the company’s results and liquidity. As a result, SSU plans to wind down underperforming businesses and explore divestitures of non-core assets, the company said in its statement. It is also taking drastic measures, such as delisting from the NYSE and appointing a new CEO. Austrian investor and billionaire René Benko, also known as the owner of the Galeria Karstadt Kaufhof department store chain, took his online retail subsidiary SSU public in 2021 by merging it with a SPAC, then at a valuation of $3 billion.
The operating environment for the company in the first nine months of FY23 and after was characterized by a continuation of material disruptions, which started in H2 of last year, SSU said. Although some economic indicators across core markets have continued to improve slightly, the demand for the company’s products remains significantly below 2022 and pre-pandemic levels. In addition, inventory levels across the industry remain elevated as market participants still aim to clear excess inventory, resulting in a material adverse effect on the company’s gross margins and increasing negative cash flows.
SSU’s management has responded to ongoing market dynamics by thoroughly reviewing the company’s operating model. Consistent with this initiative, and as a result of the challenging macroeconomic environment, a sustained oversupply in the company’s relevant markets and the resulting severe and materially adverse impact on the company’s liquidity and profitability situation, SSU’s Board of Directors has resolved together with management to implement a transforming strategic realignment, performance enhancement and downsizing program for the company and all of its subsidiaries with the aim of returning the business to profitability and free cash flow breakeven as soon as possible. The key performance enhancement measures under consideration include the streamlining and rightsizing of underperforming business units, the termination or winding down of non-performing assets, and the opportunistic evaluation of disposals of non-core assets to strengthen the company’s distressed liquidity position and financial profile.
Delisting from NYSE
In addition, also taking into account the limited liquidity and trading volume in SSU’s publicly listed shares since the business combination in December 2021, the company’s Board of Directors has concluded that the benefits associated with being listed on the New York Stock Exchange do not justify the costs and demands of management’s time necessary to meet the company’s US regulatory commitments. Consequently, the Board of Directors decided to start delisting the company’s shares from the NYSE immediately. Such delisting is expected to become effective on or around Oct. 22, 2023. After the NYSE delisting becomes effective, SSU intends to promptly initiate the process for suspending its reporting obligations under the US Securities Exchange Act of 1934, as amended. The company expects that the US deregistration of its securities under the US Securities Exchange Act of 1934, as amended, will become effective before Dec. 31, 2023.
New CEO
To support the accelerated realignment and performance enhancement program, the Board of Directors will extend the scope of the duties of Torsten Waack van Wasen, CEO of Internetstores since February 2023, to become part of the company’s management team as Chief Performance Officer (CPO) for the group. Waack van Wasen has many years of restructuring experience from his prior positions, including at Alvarez & Marsal and Alteri Investors. After the expiry of the contract of the company’s CEO Stephan Zoll in Q1 2024, Waack van Wasen will succeed him as CEO.
The Board of Directors determined that the accelerated broader strategic realignment and performance enhancement plan, in conjunction with the NYSE delisting and suspension of US reporting obligations, is in the company’s and its stockholders’ overall best interests.
Outlook
Since announcing FY23 guidance, operating performance, particularly in the bike segment, has continued to lag management expectations. As a result of weaker consumer demand and elevated promotional activity to rightsize inventory levels, SSU management anticipates that FY23 net revenue will fall below the FY23 guidance, and FY23 free cash flow may miss the low end of the previously provided range.
As the company enters FY24, SSU’s management believes that the market disruptions associated with market overstock will likely persist into late FY24 and adversely impact the company’s ability to achieve its near-term growth and profitability targets. As a result, and in light of the upcoming accelerated realignment and restructuring program, the company is withdrawing its previously stated mid/long-term guidance provided in H1 FY23.
Signa Sports United has businesses operating within bike, tennis, outdoor and team sports. The company has over 80 online sites and partners with 500 shops serving over 6 million customers worldwide. It includes Tennis-Point, WiggleCRC, Fahrrad.de, Bikester, Probikeshop, Campz, Addnature, TennisPro and Outfitter.
