Pierce Group AB (publ) (PIERCE) Earnings Call Transcript & Summary

Welcome to Pierce Group Q2 Report 2026 presentation. [Operator Instructions] Now I will hand the conference over to the speaker, CEO, Goran Dahlin; and CFO, Fredrik Kjellgren. Please go ahead.

Good morning, everyone, and welcome to Pierce Group's presentation of our results for the second quarter of 2026. I'm Goran Dahlin, CEO of Pierce Group, and I'm joined today by Fredrik Kjellgren, our CFO, and thank you for joining us. So today, we will begin with a brief recap of who we are and where we stand in the European market, followed by a summary of our financial performance in the quarter. Then we will provide updates on our ongoing transformation and strategic initiatives before we look ahead to our outlook and growth drivers for the coming quarters. We'll close with a Q&A session at the end. Pierce Group, we are Europe's #1 online destination for motorcycle gear and equipment. We were founded in 2008, and we are the leading European e-commerce platform for motorcycle of snowmobile gear, parts and accessories. We operate the online stores 24MX, XLMOTO and Sledstore. 60% of our turnover is done with off-road riders, 35% with on-road riders and 5% is with snowmobile riders. We today operate locally adapted websites in 29 European countries. We have the broadest and most differentiated product assortment in the market, including one of the highest shares of private brands. We offer more than 200,000 articles to more than 1 million customers across Europe. We turn over SEK 1.8 billion and show 3.3% EBIT last 12 months. We have approximately 295 employees, whereof 157 white collars, spread over Stockholm, Szczecin, Poland and Barcelona. And we're listed on NASDAQ since 2021. As I said, we have the broadest and most differentiated product assortment in the market, including one of the highest shares of private brands, and we offer more than 200,000 articles. We started in Sweden, but we're now the only true pan-European company in the industry with over 70% of our turnover being done outside the Nordics. E-commerce penetration varies across Europe and remains higher in the Nordics and part of Western Europe, while still lower in Southern and Eastern regions, creating room for continued online shift. Within our category, e-commerce penetration is higher in off-road and lower in on-road, where the market is larger but still more underpenetrated online. Overall, the niche is well suited for e-commerce where we can offer a superior selection and availability compared to physical stores. The rider base continues to grow and electrification, we believe, will further broaden the customer base. Our logistics setup is quite unique for the industry. Our warehouse is located in Northwest Poland and is 37,000 square meters. We stock there more than 60,000 articles, and we have a deep buffer capacity. This means that we can serve our customers with thousands of orders per day that we pick and pack within 24 hours. We also have a very efficient setup with Pierce dedicated long-distance haulers that both delivers the national injection points for last mileage as well as pickup, refill and cross-stock orders from our suppliers. The competitive landscape is fragmented and consists of 5 main segments. I will not go through the segments now, but I will say that we are one of the largest retailers in our industry. And we have -- we are the only pan-European specialist with our local sites with local language, local payment options, local customer service and local delivery partners across our markets. Most other players are strong local champions focused on their home markets, often primarily on-road and generally with a relatively low private brand share. Several are financially owned, which could facilitate future consolidation. Overall, the market structure creates a clear opportunity to build a significantly larger pan-European category leader with a scale to stock a wider assortment, offer superior availability and delivery times, strengthen private brands, improve purchasing power with key suppliers and unlock meaningful back-office synergies. So turning to the second quarter results. In Q2, we continued to improve profitability despite the temporary operational challenges related to the introduction of our new warehouse management system. The Q2 EBIT came in -- adjusted EBIT came in at SEK 34 million compared to SEK 32 million last year. This corresponds to an adjusted EBIT margin of 6.4%, up from 6.2%. This was achieved while still absorbing approximately SEK 6 million of transformation costs during the quarter. Looking at the last 12 months, adjusted EBIT has now reached SEK 61 million, corresponding to a margin of 3.3%. So we continue to move step by step in the right direction towards our medium- to long-term target of an adjusted EBIT margin of 5% to 8%. On the top line, we continue to grow despite the operational impact of the warehouse management transition. Q2 sales increased by 3% year-over-year to an all-time high of SEK 537 million in local currencies, growth was 2%. At the same time, the WMS implementation temporarily affected both sales and cost, all in a quite significant way. Ahead of the launch, lower campaign activity was forced because we needed to give the warehouse room to train the operators. And during the transition, fulfillment was paused. And post the transition, we had a lower warehouse productivity during the ramp-up period, and that created a significant backlog, both in outbound but also in inbound. Moving to margins. Profit after variable costs came in at SEK 2 million lower than last year with a significant negative impact of extra freight costs related to our WMS transition. At the same time, improved performance marketing efficiency helped offset part of this impact. So our focus remains to maximize profit after variable cost in absolute terms as our business model is extremely scalable. Overhead costs amounted to SEK 75 million, broadly unchanged from SEK 74 million last year, while decreasing slightly as a share of sales to 14%. Q2 included approximately SEK 6 million of transformation costs primarily related to external consultants and temporary parallel systems during the transition to our new technology platform. We expect these transition costs to gradually decline over the coming quarters as we stabilize the WMS and continue the rollout of the new e-commerce platform. As previously communicated, we continue to expect Pierce 2.0 to deliver further annual EBIT improvement of approximately SEK 20 million to SEK 30 million as the transformation cost disappears. Part of this has already been realized through lower depreciation and amortization. Finally, we have a very strong financial position with SEK 319 million in cash. And in addition, we have SEK 150 million credit facility with no cash amounts drawn at the end of the quarter. Inventory amounted to SEK 505 million, down slightly from SEK 522 million last year, and we believe inventory levels are well aligned with demand. Overall, this strong financial position gives us significant strategic flexibility. Moving into some of our KPIs. First, the private brand share. Over the last 12 months, the private brand share was 35%, unchanged from previous quarter and compared to 37% a year ago. The decline over the year is mainly mix driven, reflecting a very strong growth in external brands as well as somewhat weaker development than targeted in the private brands. In absolute terms, private brand sales was still strong at SEK 638 million over the last 12 months, and we continue to invest strategically in private label while increasingly focusing our efforts on the brands and categories where we see the strongest potential. Our ambition absolutely remains to accelerate growth, but we are realistic about the time required to build successful new products and categories. At the same time, we continue to unlock significant growth within our external brands portfolio by improving availability and assortment. This remains an important growth driver for us. Customer satisfaction. This remains a clear strength. We have quite high Trustpilot scores compared to our peers in the industry, although we have, during the WMS transition, seen impact on our Net Promoter Score. And -- but we believe that when we are out of this transition, this will return to the previously high levels and our Trustpilot score will remain stable at a high level. Continuing on some of our KPIs. We have an increased customer base is steadily growing. This is very satisfying to see, and we have a stable AOV year-over-year. And with that, I hand over to our CFO, Fredrik Kjellgren.

Thank you, Goran. If we zoom in a little bit on the gross margin, you can see that the gross profit increased slightly year-over-year to SEK 231 million, while the gross margin came in at 43.1% compared to 43.7% last year. The somewhat lower gross margin was mainly driven by mix effects and our active pricing approach. During the quarter, we continued to position prices to support commercial activity and remain competitive in the market. As before, our objective is to be price competitive, but not necessarily the cheapest in the market while carefully balancing growth and margin. Looking at the shipping costs. In freight amounted to SEK 21 million in the quarter, corresponding to 4% of revenues, which was unchanged compared with the same quarter last year, so pretty stable. That said, shipping rates from Asia continue to be very volatile. So this is something that we monitor closely. And importantly, in-freight costs affect cash and working capital when inventory is purchased, while they're recognized in the P&L only when products are sold. So there is a time lag here. Overall, our focus remains the same, to grow gross profit in absolute terms by balancing pricing competitiveness, marketing efficiency and margin discipline. Next slide, please. Now to give some context to the adjusted EBIT for the quarter. Q2 adjusted EBIT was SEK 34 million compared to SEK 32 million last year. This corresponds to 6.4% of the revenue. As in previous quarters, there are also some costs within the adjusted EBIT that are related to transformation, but not classified as items affecting comparability. During Q2, these amounted to approximately SEK 7 million in total, around SEK 1 million was due to the accelerated amortization of trademarks and approximately SEK 6 million were related to transformation costs. The transformation costs mainly relate to external consultants and overlapping license fees as we operate systems in parallel during the transition of our new tech platform. Excluding these 2 effects, adjusted EBIT would have been approximately SEK 41 million for the quarter. The SEK 1 million of accelerated trademark amortization in Q2 will be the final remaining impact from the consolidation of our private brand portfolio. Looking ahead, the transformation cost will continue for some time as we stabilize the new WMS and progress with the rollout of the new e-com platform. However, we expect these costs to gradually decline over the coming quarters. As Goran mentioned earlier, part of the benefits from Pierce 2.0 have already been realized mainly through lower depreciations and amortizations. We continue to expect further annual EBIT improvement of approximately SEK 20 million to SEK 30 million as transformation costs come down and the remaining systems are fully implemented. Next slide, please. Going over to the overhead costs. Overhead costs remained broadly stable in absolute terms at SEK 75 million compared to SEK 74 million last year. As a share of revenue, however, overhead costs improved slightly from 14.1% last year, and this is despite the cost of transformation of about SEK 6 million that we absorbed in the quarter. These costs mainly related to the external consultants and parallel license fees connected to the rollout of the tech stack, but there are also some costs related to more operational consultants supporting the WMS rollout. If we take a step back and look at the progress since the start of the Pierce 2.0, the change is significant. Going back to Q3 2023, we have reduced our white collar workforce by approximately 100 FTEs or 40% from 256 FTEs to 157 FTEs today. At the same time, the rolling 12 revenue has increased by 17% and the sales per FTE, white-collar FTE has thus increased by approximately 90% since the launch of Pierce 2.0. This clearly demonstrates the scalability of our business model and the efficiencies we have created through simplifying processes, reducing bureaucracy and empowering teams to make faster decisions. And importantly, we have achieved this while continuing to grow the business and carrying the temporary costs for the transformation. Next slide, please. Heading over to the net working capital. We've seen a significant improvement compared to last year. The improvement is mainly the result of the continued progress in inventory management and our disciplined approach to working capital. While working on the working capital, we are sort of keeping a close eye on the inventory. And I'm happy to say that the inventory remains well balanced. Going forward, we still see opportunities to strengthen part of the assortment and further improve availability. But our ambition is to do this without significantly increasing the overall inventory levels. The focus is, therefore, to continuously improving our purchasing methodology and inventory quality, keeping the stock fresh, acting early on slow-moving products and maintaining the right inventory in the right areas. This should allow us to continue supporting growth while maintaining disciplined working capital management. And with that, I hand it back over to you, Goran.

Thank you, Fredrik. So I will finalize with looking forward. So summarizing a little bit on Pierce 2.0. Since Pierce was started literally in a garage in 2008, it was a successful and fast-growing company. Following the COVID period, however, the business entered a more challenging phase. The demand was declining, there was a pressure on margins and the losses accumulated. I joined Pierce in Q2 2023. Shortly thereafter, in Q3 2023, we launched Pierce 2.0 with clear priorities to return to profitability and get back to sustainable growth while making the company more stable and scalable. We initiated a major organizational reset in Q3, Q4 2023, where we simplified the structure and significantly reduced the white collar headcount and then continue to reduce over the years. At the same time, we took a hard look at our technology platform, and we concluded that the existing tech stack was not fit for purpose. It was underperforming, unstable and lack the scalability required for us to expand into new markets and verticals. As a result, we made the tough decision to replace 4 of our core IT systems, including our warehouse management system and e-commerce platform. This was a difficult decision. We knew it would be both costly and time consuming, but also necessary. We simply had no alternative. Alongside this, we evaluated our private label portfolio and concluded that sales were spread across too many brands, making it difficult to invest in brands in an efficient way. Some brands also suffered from weakened brand perception due to inconsistency in product quality and lack of clear assortment and brand identity. We therefore, simplified the portfolio from 7 to 3 brands, focusing on Raven and Gear, expanding it into the large and highly competitive on-road segment and Proworks in parts and accessories, while keeping course as a tactical brand. We migrated several thousands of products and replaced several thousands of products also. And we partnered with leading designers to strengthen the overall brand and product offering. This transition has been quite hard to be frank but we -- and this is the reason why the growth rate of the private label has been somewhat lower than we had hoped for. But we are absolutely convinced it has been the right decision. And long term, this is the right thing to do. With fewer brands, we can invest more efficiently in those brands and build real brands. Then we spent several quarters cleaning up inventory through targeted sales activities for slow-moving goods and more restricted buying. We also made a very large onetime write-off -- write-down of SEK 40 million of obsolete inventory. And growth was initially held back as we cleared out slow-moving inventory, but began to recover once we rebuild the assortment in Q4 2024. We aim to take this position as the true specialist in our industry by building a wider and deeper assortment than anyone else, combined with very competitive delivery lead times. Since Q3 2024, sales has grown by 17% despite a challenging market, and we have clearly gained market share. Since Q4 2025, the growth reported in SEK has slowed down due to currency headwind of 4% to 5% in Q4 and Q1. And this quarter, we have been significantly affected by the WMS transition. Underlying, the business is still growing in a healthy way, albeit slightly lower than the very high year-over-year growth rate with an average of 16% reported in the 4 quarters of Q4 to Q3 2025. This growth, combined with a 39% reduction in the white collar headcount, as Fredrik said, has resulted in a 90% increase in sales by white-collar employees, something that we are very proud of. And this has demonstrated the efficiency gains of Pierce 2.0 program in a very good way. Looking at the results, we reported an EBIT of minus SEK 69 million in 2023. And since then, we have turned the business around and have been profitable in all quarters, except for a setback in Q1 2025. Adjusted EBIT improved first to SEK 25 million in 2024, SEK 45 million in 2025. On a last 12 months basis, we have reached now SEK 61 million despite transformation costs. At the same time, the underlying business has strengthened. The customer base has grown, customer satisfaction and retention has improved and also an employee Net Promoter Score has increased. And as we approach the end of this transformation, we are now gradually moving into the next phase, which we call expansion. With a stronger and more scalable platform, we are ready -- we are in a position to expand into new markets and categories and to explore consolidation opportunities in a fragmented market. So what's left now in Pierce 2.0? The remaining activities is primarily the rollout of the e-com platform, apart from stabilizing our WMS, which will take the beginning of Q3 to do. And we are slightly later than we anticipated. We had hoped to be able to close everything during Q2. We were not able to do that. And this affects our launch plan of the e-com. So in Q4 last year, we launched a beta version of our new e-com stack in 4 pilot markets where we had no localized sites before. After a period of improvements, we launched the remaining markets to be localized, primarily in Eastern Europe. And we, therefore, now operate local sites in 29 European countries. We also migrated Spain and Belgium as pilot markets for the markets where we have had local sites for many years, which we in Pierce call established markets. We will now follow up by migrating the rest of the smaller established markets during August and September. But as we have experienced quite a significant reduction in sales post launch, and this is quite known that and expected that this happens normally when you change -- make big changes to your sites, primarily due to the search engines that need to relearn the new structure of your sites, and this takes some months to recover. And we have seen this in all the markets that we have launched. But as we do that, and we are very keen on protecting the very strong sales period of the Black Friday sales period, we will wait with launching the larger markets, the larger established markets until December and January. The transformation costs are connected both to the WMS and the new e-com stack. And as we stabilize the WMS and roll out the e-com stack, the transformation costs will gradually be reduced over the coming quarters. So looking ahead, we are now finalizing the 2.0 transformation. And with a scalable platform, we're entering a new expansion phase. Apart from defending and growing in our established markets, the rollout of 13 localized markets and continued growth in mountain bike and scooter/moped categories, this will broaden our addressable market, create cross-selling opportunities and add new revenue streams over time. It will take time to scale, but it will be an important contributor to our long-term growth. And I must say that the start of the new markets and the new verticals has been very promising even if it's a short time frame. And finally, the European motorcycle e-commerce market remains fragmented and ripe for consolidation. As the largest and only pan-European listed player with a scalable platform already in place, Pierce is uniquely positioned to participate and potentially lead the next phase of industry consolidation. So this ends our presentation for today. And with that, I hand over for Q&A.

[Operator Instructions] The next question comes from Adrian Elmlund from Nordea.

I think I have 3 main questions. I'll take them one by one. So firstly, you're kind of guiding here for continued negative effects from the warehouse management system during Q3, right? I think you said that you expect it to be resolved end of the quarter. Could you perhaps give us some more details on sort of why you expect this? And sort of what is more to be done during the quarter, if you will?

Adrian, good question. So thank you for that. There are 2 different things. One is the productivity and functionality of the WMS and the operators. So it takes time to ramp up the system a bit longer than we had before. We've had for 10 years, more than 10 years, and we've been adapting that, improving that. And when you launch something completely new like this, it takes some months before you're back to normal productivity. But then it's also, as we mentioned in the call now that we have had a quite strong or strong -- we've had a big backlog in outbound and inbound, and that takes time to work down. And even if the outbound is almost gone now, we still have a backlog in inbound, which affects availability and hence, our sales because we don't have -- yes, we have a lot of stock outs at the moment. And that will take some time to get rid of.

Okay. Fair enough. Second question here regards to the new localized websites, the scooter and bike categories as well. Could you that these are sort of the main growth drivers in, let's say, the coming 12 months? Or are they still too small? And if not, then what is kind of the main growth driver for the upcoming expansion phase that you mentioned during the presentation?

So number one is, of course, to defend and grow the current business that we have in the established markets. We hope that the market will recover a little bit and that we start seeing good signs in -- primarily in some of the markets in Europe, but far from all. We also have the inflation, of course, that will naturally be driving underlying growth. And also, we see that the rider base continues to expand, which is promising. But when it comes to -- so that will -- the established markets will for sure be -- and the online penetration will continue to increase. So the established markets will be an important contributor to growth. If we fail to grow in the established markets, it will be difficult to show very strong growth. But I must say that new markets and verticals have shown very promising results to start. So we have good hopes that, that will be an important contributor to the growth.

Okay. Last question from my part. Could you give us some guidance on -- or at least your thoughts on the private label products here? Could we see beginning -- could we see growth maybe this year? Or is it more to be done?

Yes. We target to get back to or reach our targets when it comes to growth rates on private label during next year and from Q1, Q2 next year. That's -- it will take some time. And the primary thing here is that we have 2 things. We have been a little bit too -- hindsight, we've been a little bit too aggressive taking out products. And we also experienced quite large challenges when introducing new products and replacing old products that have been selling quite well. Even if we're just changing the brand, it's still a new product and it's treated like a new product by all the search engines and also our customers sometimes has difficulties understanding that even if we try to guide them, that it's basically the same product. So that has impacted our growth rate quite a lot. We see this for the products that we did early. We see that they have now recovered, but it will take some time before we get back to the growth that we should have in private label.

The next question comes from Kristian Smolle from Pareto Securities.

So a couple of ones from me here. Firstly, on the WMS drag here, would it be possible to maybe quantify the impact of this? I mean, considering that, I guess you have quite good visibility in the backlog here since you referred to 2 days. Would it be possible to quantify this backlog here?

The impact in Q2, I think the primary impact was on the top line. What we have quantified in the report is that we have a backlog of about 2 days worth of sales, and that impacts the revenue recognition. So we didn't manage to ship all the products that were sort of ordered in Q2. So that is what we sort of come out with in terms of quantification sort of the impact. But in addition to that, we did have some impact on availability in Q2 and also some extra costs and the extra cost was partly included in the transformation cost that we absorbed in Q2. But also part of it productivity sort of in the warehouse. So that is a part of the variable cost that you find in Q2.