New Wave Group AB (publ) (NEWAB) Earnings Call Transcript & Summary

[Audio Gap] and the 6 first month. I think it's most -- now all of you, I recognize very well, and I think most of the ones that are on the net is also familiar anyway. So I do this very quickly. In the start, our business ID and our sales activities and so on have not changed during those 3 months. The only new thing on the market is that we have started the introduction of teamwear in Craft in the U.S. and Canadian markets, which I will come back to. On the purchasing side, we have also started to be more active in Africa through our Egypt office. Otherwise, it's the same kind of [ players ] that are the main suppliers as well. Brands, nothing new for Q2, it's the same as before and also the different business segments. And this, I actually jump because it's very, very old. Launch of Craft in Canada and U.S. We have finally started. We have planned it for a couple of years, actually. And I think that the clients have really reacted in a very positive way. We still don't have any bigger stock there. We built up that in Q -- parts in Q3, and Q4 and Q1. But if we get the same successes in Europe, this can really be something that will make us grow much, much quicker again in percentage. And of course, in the beginning now, for the first year, it will cost some money. And as usual, I see it as an investment, but it's booked over the P&L. So -- but it's a very, very interesting thing. And we're also now in January, are on the biggest fair. So we expose it quite broad from January and forward. So that's it. Otherwise, it's no news here as we jump into the quarter. I'm a little bit disappointed on one thing, and that's the sales. Even if the sales actually are over estimations and we're back on growth, which are nice. But I thought that the market will turn around when they cut down the interest rates and start talking about cutting it more. I more today have the opposite feeling that the consumers, especially are quite pressed and the prices that have been in the past for energy and also higher interest level have actually come and hit the consumers more now than before. And I thought that it would be enough to be a little bit more positive about interest rates and so on. To make [indiscernible] open the wallet again. So on that point, even if we had to grow, and I'm very happy for that and definitely, we take quite big market shares, I think there's very few companies that are growing at all. And you can see the market on corporate, we think it's down between 5% to 10% -- or think, we are quite sure on that, little bit, depending on the countries and we still have a small increase. And the retail, especially, of course, the sports market have had tough times. It's no secret there. We have a couple of public companies as well, but it's more easy to follow, and we have an increase of 10%. So in one way, I'm happy, but I actually would -- or did expect a little bit more. Otherwise, I think it's a very, very stable report. We have a strong cash flow. We have a fantastic, I would say, balance sheet. We continue the investment in the market to growth -- to create growth and I think I had some of the questions earlier today that why don't we cut down costs if it's a bit tougher. And I think opposite. If it's any time we should invest, it's when our competitors are weaker and it's cheaper to buy marketing and do investments. And again, most of this I see as investment even if it hit the P&L. We have also made a big move. We had 2 subsidiaries in Stockholm in [indiscernible] that we have moved to [ Iansherping ] and put together in one, and that's, of course, those, I think, around SEK 10 million mainly -- in both Q1 and Q2, but most in Q2. But there will be a saving instead from next year. It's a totally automatic warehouse again. So in general, I'm quite happy. I'm also quite happy for the gross margin, which I think is very, very stable in this market. And operating margin, it's far away from our goal and a bit slower -- lower than last year, but we should also remember there that normally, Q1 and Q2 are quite weak if you compare with the rest of the year. So we also have the best years in front of us, actually. Yes, sales, up a little bit and actually all-time high for Q2. And promo channel increased by 2%. And as I said, it's in a market that we think decreased between 5% and 10% and retail, 9% up. And we know we are -- on retail, we have a good network because it's quite a few clients. It's bigger chains, and we know that there's been tough times for them. Here's not so much to comment actually. If we look at the different markets on the quarter. Yes, or you take 1/2 a year here actually. Or, I don't know, we take the quarter. U.S. is up 5%. I would say that U.S. economy, I personally think it's a little bit weaker than it was before, not dramatically, but a little bit. Sweden, I would say, is quite fantastic with the market we have here and how the situation is among consumers drove 6% growth. I think it's actually one of the better figures we have produced if we compare with how the market is. Central Europe, 6%; Nordic countries, excluding Sweden, 10%. So at least they are doing our goal for growth. Southern Europe was a little bit down and other countries a little bit down. And other countries is mainly due to our trading activities in Asia. Gross margin, 49%. And again, I think it's very, very stable. And as I said already in Q1, we see actually a deflation in some of the segments, especially on basic textile and that we should also remember then we see the sales figures. But we keep stable, and we have not felt that we need to cut down prices or margin to defend the sales. So there, I'm quite happy. External costs, you have, of course, some part of it that are increasement, inflation that had been in salaries and rents and so on, of course, hitting us as well. But I would say, most of it is volume related and to increased market activities. And also, as I mentioned, the moving costs for Jobman Texet. So I would say it's under very good control. And a lot of it is also easy if, which I don't think, but that really the time will be even tougher, most of the marketing activities and so on, we can actually take down again and we'll be 6 months in advance or something like that. And as I said, the cost for Jobman Texet will turn around to be a saving instead from next year. It normally takes 6 to 12 months before you really reach full efficiency in a new area I think that. Operating result, it's never funny to have lower than the year before, and it's nothing we are used to in the last 6 months. But I think it's easy to understand why now it is. And also acquired business contributed with minus SEK 9.9 million. So we still have a lot of companies actually doing and reaching our goal. Also B2C, that was the latest requirement before Tenson is taking down the average operating margin as well and will do for at least this year and maybe next year because they were quite far from 15% and 20% when we acquired it. If we look per segment. Corporate, it's not so much to say. It's a very, very stable area for us. Sports & Leisure, increased sales in all regions, except other countries and increased sales in both channels. Gross margin a little bit lower and acquired operations affected then SEK 9.9 million, and that's then Tenson more -- 100% Tenson, which we, of course, have a big hope for to create growth and nice profits in Tenson in the future. I don't know if you have seen, but for example, I don't think they have had any marketing for the last 2, 3 years before we acquired it. And I would say we invest more or less what we sell it for in advertising and to build up the brand again. Gifts & Home Furnishings is, I would say, disappointing. I'm disappointed on again. And there, we have to work harder to improve it. It's not the right development there. I mean, it was what I think a quite bad results already last year, which have decreased more. So that's an area there, we really need to do better work. You can also say that for that area, most of the profit is always coming from Q4. You have a Christmas that -- have the Christmas gift both for companies and for consumers. So I'm not so worried about it for the first half of the year. I hope we can do it much better in the second half and especially Q4. Cash flow. Still very strong. And if we look at our balance sheet, we are over 60% again in equity ratio, which is a very, very nice situation to have, because we have room financially, both for new establishment and for organic growth to increase the stock when that day is come. So that we see an increasement in the market and also for acquisitions. And I thought last year that I will never see so many suggestions for acquisitions, but actually, they have increased and stuff. And then you can say, 3 out of 4, we maybe spend 15 minutes on and I would say it's not interesting. But that it's a lot of opportunities. With that said, we should be, as we have been in the past, careful. We should buy the right things and we should only buy companies that really fit into the group and that we can do something good with in the future, but I have quite big hope that we can at least do announce one or a couple the coming year. Balance sheet, I mentioned, which are very, very strong. We have quite higher amount in credits that are not used today. So it's a nice situation. Rolling 12, not so much to comment. I hope I soon don't have to see 9.5 something in sales again. I want to break the 10 as soon as possible. Otherwise, it's not so much to say there. And January, June is quite the same picture, a difference, of course, Q1 was lower. We also had, I should say, a small positive effect in the calendar for Q2. And Q1 was a quite big negative effect with that. But sales on first half year is down 1%. So it's a clear improvement if you compare Q2 and Q1. There's not so much to comment. And here, you can see that Q1 was -- I think U.S. in the quarter was up 5% and here, 1%; and then Sweden was actually down here compared with 6% up in Q2. So it's an improvement if you compare those 2 quarters. And it's also quite interesting to see that Sweden has been #2 after U.S. always in how we show the figures and actually, now it has been passed also in Central Europe. Yes. Gross profit, again, stable. Costs, we have talked about, and it's the same picture if you take 1/2 a year. There's not so much to say there. And the cash flow. Cash flow, then a big improvement, SEK 0.5 million, which was, of course -- SEK 0.5 billion sorry. That also depends on that we have decreased the stock a bit. And I think we have a very balanced stock now for what we think about sales. Personally, I say that like always that I would have liked to see a bit bigger stock because that would have meant that we thought that the market should turn around quick, which, I don't think now. So it's quite open there when I'm opposite to the market. When the market thinks the stock is too high, I think it's good. So -- but we will continue with having a good cash flow. Yes. The last comments growth, 4%, 1% currency. We continue to gain market shares. And I think on the corporate, I think we have taken more market shares than ever in the short period actually. All-time high for net sales. Strong gross profit and cash flow. But again, I'm a bit disappointed on the sales even if it was a growth. And minus 1% January-June, that I'm not happy at all with but that was mainly Q1 then -- or it was Q1. Cash flow and we are very happy with. Future, I'm, as always, quite optimistic and you can say, I see the slowdown in the economy also has a big possibility for us, as I mentioned. If you look at -- we have had IT crashes, we have had financial crashes, we have had pandemic and so on, and we have always come out stronger. And I'm very, very convinced that we will do them again. Much thanks to a very strong balance sheet that you do that we can use the situation. We continue to take market shares will -- which means that we will gain even more when the markets get a little bit stronger, and we continue to look at acquisitions. So yes. That's it. So we open up for Q&As if you have any. Yes, you need the microphone.

So I think if we start off with some of your comments in the CEO -- in the CEO words. You're mentioning that your confirmed orders are also looking better than last year. Can you maybe give some more flavors on that?

It's mainly due to Craft that have bigger preorders this fall than last fall and also better than it was for the spring.

Okay. So that's mainly related to the retailer?

I would say it's 100% related to retail more or less. On corporate, you have more of this day-to-day business and you don't have that kind of preorders that you have on the retail side.

Yes. Okay. And what are the general takes out there in the retail markets? What are your thoughts about it? And is the growth now primarily driven by restocking or are consumers starting to be more active again?

I would say it's mainly due to market shares. And even if still the shoes, for example, is a very small part of us, we're growing there all the time. And also on the teamwear we get stronger and stronger. So a lot of that is -- the growth we have is due to shoes and teamwear. We're opposite if we calculate [indiscernible] teamwear and shoes. So it's more market shares. We have not seen that they start to restock a lot yet. But on the opposite side, we have seen that they don't cut down anymore. So it's more stable again. But it's the same there. I think that if our clients should start increasing the stocks on the retail side, they must believe in a turnaround with the consumer, which I still don't think they do.

I see. I see. And can you maybe also give us some more details about the current investments in Germany when it comes to the teamwear? Do we see some of these investments maybe hampers the results in this quarter?

Yes, you do. Not very much because we have actually so far failed to take the big clubs for -- failed is maybe the wrong word because we have the one we have negotiated with, we have the feeling that they're too expensive still, so we take it easy there. You see a part of it, we have employed, but mainly in salaries I would say then because we have increased the sales forces and of course, some of the new sponsoring agreements and so as well. We had quite much publicity through the -- what's the name in English? [Foreign Language] in Swedish. There we have the German team as well during the Olympics. So yes, it's not a huge negative effect. If I remember right, it could be about EUR 500,000 compared with last year or something like that. But it's affecting a bit and if you -- of course, if you add on the moving costs, and you add on the Tenson history and you add on Germany, it's quite a lot of money.

Yes, I see. And given on what kind of development we are seeing on the balance sheet when it comes to inventory levels and looking at the second half year, we're also facing easier comparable figures year-over-year since you shrank last year, in Q3 and Q4. What do you think we should expect for the second half of this year?

Yes, but I expect growth and at least at the same level or better. Hopefully, better than we have had in Q2. We don't need to increase the stock in this situation, excluding the teamwear in U.S. That's our own story and that our pure investment for the future there on that market. But otherwise, we have a balanced stock, so I think we will continue to see a quite nice cash flow.

And do you think that we should -- or are we going to continue to see this pattern with increased spend on OpEx in the coming quarters related to marketing activities, et cetera, right?

Yes. I think it will be because I'm again thinking it's the right time to do these investments. We have a lot of competitors that are really weak at the moment. And also the marketing, excluding the biggest sponsorships, that has also come down in cost. So I think it's the right time to really take market shares and so on. And if we don't see any big downturn again in the economy, I think it's worth to do it even if it takes 6 or 12 months to pay off.

I see. And a final question from my side. I think the development in the promo wear business is really impressive, given the market environment. Also, looking for the next coming 6 months or so, do you think that you must see a decrease in interest rate in order to see that start growing? Or can you already see the start of growing?

No, the market has not turned around. I mean the few clients we have that are public in that sector, they have, I think, all imports decreases in Q2 and I think they have a quite tough start in Q3 as well. Then it's very different in different segments. I mean, the nightmare right now in Sweden, for example, is the construction companies. So that's -- I shouldn't say the market is standing still, but it's not so far away. But also, I'm quite optimistic for the fall because we launched now and made a quite huge investment on jacket collections, where we really have synergies between our different brands. So we have a stronger product program, I would say, in the fall in corporate that we had in the spring. So -- but I have -- it's hard to say. I don't think the interest -- yes, for sure, it affects, for example, workwear and construction companies.

Okay. Fair enough. That's all my questions for now. Anybody else?

Just a quick question. Then on the Craft launch, the teamwear in the U.S., what are your early findings? And when should we expect you to increase your inventory in that market or [indiscernible]?

Start in Q3 remember because I start with inventory. Q3, more Q4 and also Q1 as we have to build it step-by-step also depending on lead times. What surprised me about the U.S. market and Canadian market, especially there, is that we found it very similar to Europe, even if it's a bit different distribution. And we found our competitors have the same weaknesses as in Europe, which are maybe not strange in one way because several of them are global brands. So I hope we can make a quite quick and bigger move there. Then you can say it will always take 1, 1.5 years before you have the distribution in place and so on. But I would say I'm optimistic for it, and it's less differences than I thought.

So the brand seems to work well in the U.S.?

Yes. But you can say the good thing is that on the teamwear side, we're not only competing with the brand because I'm still not so crazy as I think that Craft is beating a Nike in brand image. But you're also competing with a logistics to be able to supply to be trustful and a lot of other things. So the brand is one part of it, and we have a lot of other ingredients as well. How much products we have for females, et cetera. So we have very good orders there as we have then had in Europe.

Good to learn about the Craft teamwear in North America entry. Any estimate on investment impact in Q2, midterm potential growth for profit impact?

You can say the investment is not huge. And that's make it maybe more difficult for you because you have the loss intense on that so much. You have the move of Jobman. You have the investment in U.S. You have Germany. And each of them could be SEK 5 million to SEK 10 million. But in total, it's quite a lot of money. I think we will reach profit if you take only the U.S. market and Canada, on teamwear, I would say that we will be profitable 2026. I also think 2025 will cost some money, if we really want to make a footprint there, and that's what we want.

The table tennis player, Truls, mentioned your relationship in a previous interview and thanked you for your commitment to the sport. Do you have any plans to sponsor table tennis more long term in the future?

You can say we are involved in table tennis with Craft quite a lot. We have actually many of the clubs, and we have a cooperation with STIGA and so on. I don't think -- I think Truls is going to pick STIGA. But I don't think it will affect us so much, and we have no plans to increase. We're doing what we should in that sport. So no big changes for us there. But since I'm an old table tennis player, I think it's fantastic what happened in the Olympic Games. And we really see an increasement for example, in the table tennis club in Kosta and we have the same report from most table tennis clubs. So it's nice to see, but it will not be on a big changement or effect in our business.

Can you elaborate on Tenson sales development, which looks weaker than expected? Will you stick to the target of SEK 500 million in sales, 2026?

I beg your pardon?

Can you elaborate on Tenson's sales development, which looks weaker than expected? Will you stick to the target of SEK 500 million in sales, 2026?

Yes. We do. I wouldn't say it's weaker than expected. I mean we know it will take some time. So I'm not disappointed that way. And I think, visually, most of you can see that we really have increased the marketing and so on. And of course, we need to build it a while. But I believe very, very strong in the brand.

You state in the report that you have started the launch of Craft teamwear in North America. Can you please comment a bit on the potential you see in the launch of the coming years? Also, will this have any material effects on the inventory level?

If we start with the inventory level, it will have an effect. I estimate it can be like SEK 100 million this year, but there's an estimation, which means that it can be between SEK 70 million and SEK 130 million. And then I think we need to increase during '26, up to maybe SEK 200 million, SEK 250 million, because, again, it's no idea to enter a new market and not be better than the existing ones. And the second question was the sales? The other part of the question, I meant.

Yes, the other part was the inventory level. But can you please comment a bit on the potential you see in the launch over the coming years?

The potential is enormous. And then I have all the respect that it takes some time. But the potential is not less there, maybe even bigger than Europe is. So if we're sitting here 5 years from now and don't have a quite big turnover there, it's we that have failed, and done a bad job, it's not the market. So the market is wide open. But again, it takes time. You should break relations. They have bought from others in many, many years. Some clubs that maybe want you today can't take you today because they have an existing agreement on 2 or 3 years and so on. But I'm very positive. But again, it will take some time to really break it.

If we look at Tenson, any early signs of improved order already ahead of autumn/winter season?

We have a little bit better this -- for this fall than last year, but not so much. And then the big test is really the preselling for fall/winter '25.

Can you give any picture of how the operations in Kosta are going?

Yes. As the figure shows, not so well the first half year. No, we need to improve that and when I said that we see clearly on the retail side and sport leisure that it's a tougher market, we have seen that there as well. I would say, thanks to the damage, it's not the capital. But the tourist season and those parts have not been as expected. And it's not the number of visitors. It's more that they choose to spend a little bit less money, which I think is obvious also for a lot of other companies, both in retail and restaurants and so on. So we have a lot of improvement to do there.

You say you are looking for buying one or more sport brands the coming year. Can you tell us something more here? What kind of sports brands are you looking for? You have teamwear Craft, country skiing in Craft, outer skiing in Tenson and golf. Can you see yourself as an owner of a bike brand?

Can we? Absolutely do. Then we should also remember that then it has to be a very -- take bike. It has to be a very strong brand because Craft are quite active in bike. If you look at possible acquisitions, we look more into product areas than to brands, I would say, because it's no idea to add on a lot of brands with exactly the same products or assortment and start competing internally. So it's more, for example, where we are big today in [indiscernible] for football, for example, but we don't have the shoes. We don't have the protection. We don't have what you practice with. And that's a situation we have in most sports. Also outdoor is an area we want to be stronger. Tenson is an outdoor, but we are still not in cooking equipment, tents or we could be more on hiking and all these kind of outdoor areas. That can be acquisitions or it can be product broadening in Tenson. So it's a lot of possibilities in it. But again, we are quite picky when it comes to acquisitions because we should also be 100% convinced that we really can do something good with them in the future. So we don't just acquire to acquire or to show growth.

Any more questions here?

So just on the teamwear side, have you seen any indications that your competitors are changing their offerings or trying to find cooperations to match your full-service offering? And the second part, could you imagine supporting brands in other markets where you're not in to -- with the rest of their offering to be part of like you are [indiscernible]?

You can say that we -- the only changements we see from competitors on teamwear is in some countries, they increased their spending on sponsoring. And that's also the reason why we have said no thank you to a couple of big and more famous clubs. But we don't see any change in behavior on our really strong sides. And one of our really strong offers is the whole merchandising. And I mean, we can offer -- as we have talked about before, we can offer [ Hammer wear ] example, if we take Stockholm. Everything from beer glasses to wineglasses to cotton t-shirts to hoodies and everything from stock, which really increase their sales of merch. And I think it's a very long run for competitors that only doing teamwear to start supplying hardware and glasses and stock a lot of cotton items and so on. And I think the last figures now I got from [ Hammer wear ] , I think we have tripled the sales on their merchandise since we started the agreement. So -- and the second question, absolutely. I mean, if we, theoretically find someone that are very good on hardware in the sport in the U.S., we can, of course, add on Craft to that distribution. So geographical acquisitions could be interesting. And that's not only in sports; that's also on corporate. We still have some big countries where we have too few clients according to me. There, we might -- can acquire distribution companies and then introduce our brands on that client list.

Perfect. Any more questions? I think that was all.

Okay. Thank you all very, very much for listening. Have a good day. No, that was the question he asked. That was rather. Yes, so they had a lot of questions. Okay. Thank you very much, and I wish you all a good day.