XXL ASA – Q3 2021
Presentation of Financial Results 28 October 2021
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This presentation was prepared for the interim results presentation for the third quarter 2021, held on 28 October 2021. Information contained herein will not be updated. The following slides should also be read and considered in connection with the information given orally during the presentation.
XXL ASA – Q3 2021
Great brands Great prices Great assortment Great expertise Great accessibility
Headlines Q3 2021 E-commerce growth continues while delayed delivery of bicycles impacts sales
Q3 2021
- Delays in delivery of incoming goods especially bicycles
- Leading to unsatisfactory customer traffic and top line development
- The migration to online channels continues. E-commerce growth of 18 per cent, on top of strong sales last year, and all markets posting growth
- As stated in Q2 2021 XXL sharpened the campaign activities in Q3 2021 hampering gross margins. Target of gross margin above 39% remains
- Strong financial position
Outlook
- Financial position yielding flexibility
- Remaining NOK 250 million in extraordinary dividend to be paid out in December. Returning to dividend policy
- XXL with strong concept and capabilities to succeed ongoing implementation of strategic initiatives
- Our targets and goals going forward is to continuously gain market shares and strengthen our profitability
Highlights Q3 2021
- Operating revenue of NOK 2 686 million (NOK 2 823 million)
- o Strong comparator last year with significant "staycation" effects
- o Challenging delivery situation of bicycles sales decline of NOK 100 million vs. LY, explaining around 70% of total decline in revenue
- o E-commerce growth of 18%
- Sharpened campaign activities, combined with higher freight costs, hampered gross margins. Target to stabilize above 39% going forward
- EBITDA of NOK 336 million (NOK 420 million)
Market share development RTM
• Target and goal to gain market shares over time
- RTM figures for XXL is partly explained by the extraordinary clearance campaigns last year with high volumes at low margins
- Also, XXL is hit by store closures due to the centrally located stores + challenging delivery situation within the large bike category
- XXL sharpened campaign activities during Q3 and stabilizing the market shares
-
However, XXL is still not pleased with the development and is longer term aiming for increased market shares in a controlled way
-
Market 2020 equals Sportsbransjen AS in Norway, SCB in Sweden, TMA in Finland and WKO in Austria
Q3 2021 Performance per segment
|
Group |
Norway |
Sweden |
Finland |
Austria |
Denmark |
HQ |
LFL
GROWTH |
-4.0% |
-4.5% |
-0.3% |
-3.5% |
-22.6% |
-48.0% |
n/a |
| Ex bicycles |
-0.6% |
-2.3% |
3.7% |
-0.4% |
-13.9% |
-33.3% |
|
|
|
|
|
|
|
|
|
EBITDA
GROWTH
(mnok) |
-84 |
-20 |
-28 |
-19 |
-14 |
-0 |
-3 |
Delays in the global bike value chain impacting sales and inventory in Q3
- Bike sales of ~80 index vs. Q3 2020 decline of around NOK 100 million
- We have experienced delays and cancellations of bike deliveries this year resulting in a volume drop of up to 60% vs LY in selected bike subcategories
- Supplies improved late in the quarter and into October
- Due to the situation we seek to optimize the balance between inventory levels, next season start and overall profitability of the bike category
- Overall, for all categories we are monitoring the situation closely and taking the necessary actions (e.g. early execution of options, frontloading of deliveries and additional buying of low risk products)
Financial Review Q3 2021
Key Figures
(Amounts
in
million)
NOK |
Q3
2021 |
Q3
2020
(Restated) |
YTD
2021 |
YTD
2020
(Restated) |
FY
2020
Audited |
| GROUP |
|
|
|
|
|
Operating
revenue |
2
686 |
2
823 |
7
273 |
7
851 |
10
423 |
Growth
(%) |
-4,8
% |
14
2
%
, |
-7,4
% |
17
6
%
, |
15
,9
% |
Gross
profit |
1
045 |
1
151 |
2
933 |
2
863 |
3
904 |
Gross
(%)
margin |
38,9
% |
40
8
%
, |
40,3
% |
36
5
%
, |
37,5
% |
OPEX
% |
26,4
% |
25
9
%
, |
27,5
% |
26
4
%
, |
26,7
% |
| EBITDA |
336 |
420 |
934 |
789 |
1
117 |
EBITDA
margin
(%) |
12,5
% |
14
9
%
, |
12,8
% |
10
1
%
, |
10,7
% |
| EBIT |
132 |
221 |
350 |
229 |
364 |
EBIT
margin |
4,9
% |
7
8
%
, |
4,8
% |
2
9
%
, |
3,5
% |
Net
Income |
0
7 |
165 |
191 |
113 |
126 |
- Revenue down with NOK 137 million vs. a strong comparator last year
- Negative like for like growth of 4.0%
- E-com growth of 18.2% representing 18.0% of total revenue versus 14.4% last year
- Gross margins ended at 38.9%, down from 40.8% last year
- Sharpened campaign activities to improve the sales trend and gain market shares over time as communicated in Q2
- Increased freight costs
- OPEX in % is 0.5 p.p higher than last year driven by the lower top line hampering scale in operations
- However, a reduction of NOK 23 million vs. LY
- EBITDA ending at NOK 336 million
- RTM EBITDA of NOK 1 263 million
- RTM EBITDA ex. IFRS of NOK 652 million
Gross Margin Development
XXL ASA Q3 2021 - Gross margin per segment (in %)
- Weakened gross margin development in the quarter, down from 40.8% in Q3 2020 to 38.9% in Q3 2021
- Sharpened campaign activities to improve the sales trend and gain market shares over time as communicated in Q2
- High freight cost for incoming shipments
- XXL targets to stabilize the gross margin above 39%
- Improved market dynamics
- Improved campaign approach and execution
- Healthier assortment and inventory levels
OPEX Development
XXL ASA Q3 2021 - OPEX per segment (in %)
- Group OPEX% up with 0.5 points to 26.4% in Q3, mainly explained by lower revenue hampering scale in operations
- Reduction of NOK 23 million vs. LY
- Reduced bonus accruals of NOK ~10 million
- Reduced consultancy cost of NOK ~10 million
EBITDA Development
XXL ASA Q3 2021 - EBITDA per segment (in mNOK)
- Negative EBITDA development vs LY down NOK 84 million
- explained by the negative revenue growth and lower gross margins, but partly compensated by lower opex
- EBITDA margin of 12.5% in Q3 2021 vs. 14.9% in Q3 2020
Net Debt Development
Continued strong financial position
Financial summary Q3 2021
P&L Summary
- EBITDA of NOK 336 million vs. LY of NOK 420 million
- Decline in revenue vs. LY of NOK 137 million, partly explained by delayed delivery of bicycles, with a negative growth of approx. NOK 100 million
- Gross margins in the quarter of 38.9%, down from LY of 40.8%, due to sharper campaign activities and increased freight costs
- Increase in opex %, mainly due to weakened top line hampering scale in operations. However, a reduction of NOK 23 million in Q3 2021 vs. Q3 2020
Balance sheet summary
- Increase in inventory vs. Q2
- Inventory age continued healthy levels (obsolete provisions unchanged)
- First tranche of extraordinary dividend payment in Q3 2021 and second tranche in Q4 2021
- Continued strong financial position
- NIBD of NOK 393 million
- Liquidity reserves of NOK 1,407 million
Outlook
We have maintained progress on our key strategic initiatives and accelerated some key focus areas short term ("Must win battles")
Our targets and goals going forward is to continuously gain market shares and strengthen our profitability
Long-term market share growth Improve gross margin Decrease cost-ratio
Our ambition is long-term market share gains in all markets and continue the growth within the e-com channel
We target to strengthen and improve our gross margin further from the stabilized 2020-levels (> 39% in gross margin)
We continue to invest in improved operational efficiency to decrease the cost ratio and increase quality
Dividend target of 40-50% of annual normalized net income
Closing remarks
Q3 2021 Key Takeaways Priorities Outlook
- Delays in delivery of incoming goods especially bicycles
- Unsatisfactory top line development but strong growth from E-commerce
- Gross margin hampered by sharpened campaigns and higher freight costs
-
Strong financial position
-
Category strategies and seasonal execution
- Replenishment end to end improvements
- Campaign process optimization
- Action plan for E-commerce growth
-
Optimize inventory and cost base
-
Over time gain market shares in all markets
- Stabilize gross margin above 39%
- Capex in 2021 of NOK ~250-300 mill, related to ongoing improvement programs
- 2 new stores signed for 2021, 1 in Sweden and 1 in Austria (opened Sept).
- 3 new stores signed for 2022, 1 in Norway and 2 in Sweden. Töcksfors to close during 2022
Q&A
XXL ASA – Q3 2021
Appendix
Q3: Norway and Sweden
- Negative growth in topline vs a strong comparator, also partly explained by delays in deliveries of bicycles
- Lower gross margin is explained by sharpened campaign activities, also impacted by high freight costs in the quarter
-
EBITDA of NOK 279 million (NOK 299 million)
-
Slightly negative growth in topline (local currency), affected by delays of bicycles
- Lower gross margin is explained by sharpened campaign activities, also impacted by high freight costs in the quarter
- Opex% slightly higher than LY due to negative Like for Like however good cost control
- EBITDA ending at SEK 121 million (SEK 147 million)
Q3: Finland and Austria
All sports united. Sports unite all.