Björn Borg AB (publ) (BORG) Earnings Call Transcript & Summary

Good morning. And it's Friday again, and I'm happy that you have joined us for our Q4 presentation closing 2025. And I decided to squeeze in 3 victories in one sentence. I think that's going to wrap up pretty much the feeling of our last quarter. So I think, first, of course, we closed the year with a very strong momentum in own e-com, so growing 24% in the quarter, taking market shares. So that's reassuring. And the second one, of course, sports apparel continues to drive growth, very, very important part of our key strategic initiative to move the entire brand then into becoming a sports fashion brand. And I think last, of course, it's not easy to navigate in the world these days, but to improve the operating profit with 28% in the quarter, I think just showcase the strength of the business model that we're operating. So overall, we're leaving Q4 that we are satisfied with. Of course, we want to grow even more, and we'll dig a bit deeper into some of the things that we want to do even better going forward. But to wrap it up then, net sales, SEK 238 million, so currency neutral, we're growing about 5%. The world, however, is not currency neutral. So the real growth is 1.5%. So lower than what we would want. Of course, closing the year still on a growth just close of 6%. Currency neutral is 8%, so a bit below versus our financial targets. Looking at gross profit, however, that's going in the right direction. And of course, here, we have some help with the currency, but also, of course, the channel mix, and we can still see that we have a very strong pricing power. And of course, that is leading into then a very, very strong operating profit in the last quarter and also, of course, closing then the full year at 10.5%, so well above our financial target. So overall, a good year 2025 and a strong finish of the year with a strong quarter 4. Our background and platform, of course, is the same. We're here to inspire and to build a brand that wants you to move, not to become an athlete or to win any Olympic gold medals, even though we love that the Swedish guys and girls are doing that, too. But actually, we think that this journey is about inspiring you to move so you can become better at something else. And we see that, that's more relevant than ever. So a strong why is really resonating with the world around us right now, which is super strong, of course. The financial objectives remains the same. And of course, the business strategy has been to focus on online e-tail marketplace and own e-com. That is going really, really well. Grow sales, of course, and predominantly then throughout our sports apparel push, but also now with bags and footwear, that is, of course, what comes to be our future growth initiatives, even though neither one of those actually are growing last year, which, of course, is a bit of a disappointment, and here, we need to do a lot better. The focus in terms of countries is still Europe. And looking at the brand, of course, that's our biggest and most important asset. And we can see -- and here, we only have one German number, but one thing that we saw in Q4 and actually for the full year last year is that the brand is getting stronger in Germany towards German consumers. And yes, of course, at a very low base. And we also know, of course, that there's some challenges in Germany in terms of their economical output, but we see a very strong momentum. So we're gaining growth also in terms of sales towards German consumers and also the brand is getting stronger and getting some traction here. Sweden and Holland is continuing to develop good in terms of our brand. And here, we have consideration. So this is full year 2025 numbers. And of course, what we asked the consumer here is a list of a lot of different brands of which here do you consider buying, and we have a very high ratio at 53%, which, of course, tells us again that the biggest opportunity for us here is really to be visible when the consumer is out there shopping because then they are very likely to pick us before any of our competitors. So the brand is going in the right direction, which is reassuring. Looking at the full year numbers. So as I think I wrote in my CEO comment, with the profit and the sales in Q4 that we did in 2025, that's actually the best Q4 that we have done since I started now 11 years ago. So a very strong finish of the year. And looking at the full year, we're growing. The growth is driven from e-com and sports apparel. Footwear and bags are lagging a bit behind. So here, we need to increase our focus. But overall, a fairly strong year is behind us. And looking at some of the categories, and here, we have only Q4. Loungewear is doing really, really well. Sports apparel, as I said, is continuing to grow. And socks is also gaining momentum and it's actually now almost twice the size of women's underwear. So we see that these smaller categories require not so much effort, but we can still drive a lot of growth in a very profitable way. Socks, also as opposed to footwear and apparel, has a very low return rate on own e-com for one example. So a very profitable category. Looking at the country. So it's a bit of a mixed picture here. Full year, all our countries are growing, except Germany and Belgium. Looking at the quarter, we see super strong growth in Germany. So a good rebound of last year in Germany. Sweden is doing really, really well. Denmark is having a strong momentum and Finland is also doing really, really good. And they had also an exceptionally good finish of last year. The distributors are continuing to struggle even though a few of the smaller ones are growing, but that's still low numbers. And of course, here, we're not focusing too much on those. We still, of course, want them to grow, but the plan really is to work even more with wholesale and, of course, continue our D2C push with e-com at the forefront. And with that, of course, wholesale is growing in the quarter, plus 2%. We also have a full year growth on the wholesale e-com 24%, so a very, very strong finish of the year. Also full year numbers is 19.7%, so just shy of 20%. So here, we're taking market shares and doing an exceptionally good work. And actually, also on e-com, we can see that footwear is growing almost 20%. So there are consumers out there that wants to buy our footwear. We just need to be better at also managing our wholesale, so they also can grow and benefit from the need that consumers really feel around our footwear collection. Own retail is declining. And of course, that's because we're closing down stores. I think now when we come into 2026, we have a store base that we are fine with. It's an outlet store focus. And from here, most likely, we will rather add stores and actually reduce store. But with that said, also the comparable stores are declining 2%. Distributors, as I said, a poor quarter and a fairly poor development, not so much focus. But with that said, of course, we still would want them to grow, even though, of course, our strategy is to focus on our own channels. And I think with that said, there's no one else better than Jens to run you through some of the other lines in our P&L, which is also actually showcasing a very, very strong quarter. So Jens, why don't you fire away?

Thanks a lot, Henrik.

Thank you.

Thank you. And I wish you all a happy Friday as well, and I'm wishing the best of success to the male Swedish hockey team playing against Finland in just a couple of hours. But leaving that aside and focusing on this Q4, the gross margin was a jump up with 0.7 percentage points compared to Q4 last year. Here, we have been helped with some favorable FX development putting the gross margin in the right direction. But still, it's a good sign for closing 2025. In terms of profitability, as Henrik already mentioned, the operating profit is up 28% in the quarter to SEK 22 million almost compared to SEK 17 million last year. So super strong close in terms of profitability for 2025. If we look at a simplified P&L for the quarter as well as full year 2025, sales was up 5%, currency neutral and for the full year, 8% to just above SEK 1 billion. The gross margin just mentioned, up 0.7 points for the quarter and almost the same, but the opposite direction for the full year. So closing close to 52%. The operating expenses in the quarter is a bit favorable and then more or less a bit unfavorable towards the full year. However, this is planned with mainly increased marketing investments driving the OpEx growth for the full year. EBIT, as I mentioned, 28%, super strong close of 2025 and then plus 9% for the full year to SEK 112 million, bringing the EBIT margin to 10.7%. So very pleased with the profitability for 2025 and especially the last quarter of the year. If we look at the balance sheet items for a second, we can see the solidity or the equity through assets is strong. It's above 50% increasing versus last year. The net debt, on the other hand, is increasing slightly to SEK 50 million, still fairly low compared to previous years, but compared to last year, there's an increase that's quite substantial. This is driven by 2 things mainly. First of all, the own e-commerce is taking a bigger share of our sales, which is very positive. But on the other hand, it needs -- it requires some larger inventory and hence, bigger payments. And we also have the footwear integration that is playing a bigger part this year compared to previous year. The working capital is increasing for mainly the same reason, as I just mentioned, mainly coming from the bigger inventory in -- while e-com is taking a bigger share. So all in all, positive signs. Having a working capital in relation to sales of just above 20%, that's where we want to be around 20%. So quite good KPIs on the balance sheet. There's lots of stuff to look at, obviously, but these are the main ones that we focus on and quite pleased to see where we are. So with that, I think with coming towards the close of this presentation, and Henrik, why don't you close this before we have questions.

Yes, I'm back again. Let's just wrap it up then. So we have a number of different, of course, highlights in the quarter and also when we look at the full year 2025. So obviously, the first one is that we see that the brand is continuing to get stronger and stronger. We see a very, very strong momentum in Germany, where the brand is growing a lot on a small base, but that's a key strength looking back. Secondly, of course, e-comm is continuing to develop. So close to 20% full year, finishing off the year at 24% growth, very, very strong. We know then that the consumer really wants to buy our stuff. And even some of our weaker categories is actually performing fairly well on e-com. So footwear is growing 20% as one example. And then last, of course, we're doing really, really well on sports apparel. So that's really, I think, the key highlight. The brand is getting stronger, own e-com is doing really, really well, sports apparel is continuing to grow. The stuff, of course, that needs to be better is footwear and bags. So footwear were declining last year overall. That's not part of the plan. And of course, here, we need to continue to build. We need to be a bit patient, make even better products and make sure they find the right home where consumers want to pick the products up so we can get back to growth mode when it comes to the footwear category. That's a major challenge that we are currently having. So I think that's that in terms of closing 2025 and also our last quarter of the year. So with that said, I know that Hjalmar, for sure, have a lot of questions that he wants to shoot off as well. So why don't you hit me.

Yes. So let's get started. Yes, right away. So you mentioned Germany and of course, the strength of the brand in this market. But if we look at Germany, maybe if we exclude e-tailers in this market, when do you feel that we are at a point when we can evaluate Germany from a sales perspective? What is sort of like the time frame that you are envisioning looking forward for the German market?

Well, if you ask me, then I would say we can start doing it right now, but for some a bit [ unpatient ], but it's going to take a bit of time. I think the key learning is that if you want to build something that is sustainable also over time, it takes a bit of time to build that platform. So if you look at last year, so sales towards German consumers was up 20%. So that's good. And of course, that's a split then of our own e-com towards German consumers, German wholesalers towards German consumers and also, of course, e-tailers that are selling into Germany. So that's a combination of those. So we see that we are growing and taking market shares in Germany. But again, it's very low numbers. So I think this is just about continuing to push and not give up. We see, of course, from some other Swedish brands that they're doing extremely well on the German market. And we believe that we have a place to play also on the German market, even, of course, knowing that it's fairly challenging, consumer sentiment and outlook is fairly pessimistic in the German market, but it's still a massive market. So we're in Germany to stay, but it's not going to be a quick fix. So it's going to take a bit of time, of course, but we have time.

Yes. And considering categories, which categories do you think will be most successful in Germany? Will it be similar to the product mix of Bjorn Borg as a whole? Or do you feel that there is like a pocket that you can maybe target in Germany?

The stuff that is really growing right now is sports apparel. And of course, we want to build a sports fashion brand, and we want to build the same brand in all the markets, independent on whether it's Norway or Finland or Germany. So of course, our push is really to build Germany from focusing on Hamburg. So we have tied up a number of different gyms, a number of different ambassadors. And of course, the main focus is to really launch our sports apparel collection. And then, of course, we're also picking up socks and some footwear and some underwear, but the key category to drive growth initially is going to be sports apparel, and that's also what is growing.

Yes. Okay. And then if we move on to the e-commerce or maybe the direct-to-consumer channel in a wider sense. I mean, since the product offering, you've been growing maybe outside of the traditional underwear, are you feeling that you in the direct-to-consumer segment becoming more maybe sensitive to seasonal patterns, maybe weather patterns and items like that? I mean, many retailers in the Q4, they referred to the delayed winter in Sweden, for example. Do you feel any impact from this? I know previously, you said that you don't feel that much impact. But what we can expect going forward if the product mix will change in the future?

No, but I think on e-comm, so on one hand, we are weather dependent and not because we do winterized products, but because when there's no winter, no one is visiting the stores in Sweden. And even though they're looking for a jacket, they're also then picking up Bjorn Borg stuff. So -- but that's sort of the wholesale part of the business. So there, we are weather independent simply because lower traffic means lower sales for jackets, of course, which we don't do much, but also for other product categories. For e-comm, we don't see any seasonal connection tied into weather at all. So for us, e-com is something that remains a key focus. We need to invest, of course, to be really good at promoting the right products, but it doesn't correlate at all with the swings in the weather that we see in physical retail. And of course, I think that's clear also, of course, visible in the Q4 finishing. So of course, that was a Q4 where there simply were no winter. So of course, everyone was a bit struggling, but we are doing one of the best Q4 ever for our own e-com. So I think that probably sets it all.

Yes. Yes. Okay. And then if we move on to the shoes and bags segment, I mean, you mentioned that maybe you had some struggles in 2025, although, I mean, looking at the full year, I guess. But could you elaborate a bit on this? Is it that do you need to address the product offering? Do you need to make it wider? Is it a price point concern? Or what is the challenge that you maybe need to address if you look into 2026, if you are to maybe accelerate the growth from this point?

No, but it starts with us making really good products. And it takes a while to get that going. But of course, now if you go in and look at our bjornborg.com, you see that the footwear collection is really fantastic. And if you also purchase one and you will also feel that the fit and the step in comfort is also spot on. And I think also the price points are where they need to be. So -- and we see also that we're growing on our e-com. However, of course, when it comes to wholesale, and of course, that's where the big volume in footwear is and will also be in the future. On one hand, the footwear distribution has been struggling probably for the last couple of years. I think we can estimate last year, a decline of 9% to 10% in footwear specialist distribution, whilst, of course, apparel actually was growing a bit. So on one hand, they're struggling a bit. And also, of course, we're repositioning ourselves. So the footwear that we're now launching is better. It looks better, but different. It's slightly higher RRPs. And of course, that might not fit then all of the old distribution. So it's also a bit about shifting distribution points. And here, the ambition, of course, is to do that and still grow, but we managed to do all of that, but we didn't manage to grow. But it's also very tightly linked into challenges in one or potentially 2 markets. So if we look at the development in Sweden and Finland, footwear is still doing good. And of course, those were our old markets that we also owned in the past, even though we didn't make footwear ourselves, whilst, of course, Holland and Belgium, that was markets that our former license partner were also distributing, and that's where the big drop is. So it's going to take a bit of time. I think that's clear as it did with sports apparel. And we're not happy at all with the development from last year. Here, we simply need to do better. But it's going to come down to continue to make better products, make sure we work with the right distribution points so we can drive traction in wholesale. And then, of course, continue to focus on footwear as a category. So we don't give up just because it's a bit tough.

Yes. That's very clear. And then on the gross margin, I mean, you mentioned that you feel that you are in a good position in terms of pricing power currently. Could you recap maybe this year or the Q4 in terms of campaign participation and things like that. Are you satisfied with the pricing level that you can have, driving the growth that you have? And do you see that maybe changing going into 2026?

If you want to wrap up 2025, you can say that the year was a bit more off-price driven for almost everyone. And of course, that's partly related to there's just no snow. And then when the snow comes, that's end December, and that's when you do clearance. So of course, probably all or most of the down jackets sold in Sweden last year were sold very late in the year when it's clearance. And we were also impacted of that. So in all the channels, I would say that we've been a bit more price aggressive than what we were the year before. And of course, that's more tactics. So we need to see what happens in the market. We need to continue to drive volumes, win consumers, but of course, at the same time, remain at our price points. But the quick answer is slightly more campaign-driven last year in general, and we also saw that the market was leading that way. But the plan, of course, is to continue to work with reducing discounts and sell more products full price.

Yes. And then finally, maybe if you could give us your picture of the current maybe Swedish consumer right now. I know we get a lot of -- I mean, of course, peers are reporting. We get a lot of indications of underlying market data and so forth. But it would be very useful to maybe get your perception on the current state of the Swedish consumer.

Yes. And it's a bit tricky actually because, of course, every -- we said the same last year. There's a lot of indication or rational reasons for people starting to buy more, more money, tax releases, interest rates going down. It's just a lot of stuff that just indicated that now we can spend more money, but it doesn't really happen. It doesn't materialize. I think what we saw from last year, at least that many of the e-com players recovered. So I think PostNord reported like a 10% online growth in general last year, whilst some of the physical doors are struggling a bit. So this shift is, of course, continuing from physical stores to onliners. And at the same time, of course, it seems like the consumer is still a bit hesitant. So let's see. I think as a year ago, there's a lot of indications that all of the ingredients are in place to get some consumptions going again. But again, as soon as you open up a newspaper, all you read is about the world going -- is going to explode, if you will. And of course, that's not going to drive instant purchases. But again, tomorrow, we have Valentine's, make sure you buy something for your wife or your husband or your kids. And of course, there's nothing better than a pair of underwear or a track top from Bjorn Borg. So I think we can all help each other out of that. We just need to purchase a bit more. And of course, ideally, Bjorn Borg stuff.

Yes. All right. That's very useful. Thank you so much for answering the questions. And yes, I'll leave it to you to any concluding remarks.

No, thank you. Thank you so much. Happy that you dialed in. We're continuing our journey. And again, of course, short or long term, it might go a bit up and down, but we're here to build a sports brand that inspires you to move more. So make sure that in the break in the hockey game in a few hours that you do a bit of running yourself as well. That's going to make you stronger and also happier. So with that, have a great Friday, and while I'll see you in a quarter.