Summary of Consolidated Financial Performance Q1 2024

The beginning of 2024 unfolded largely as anticipated, presenting both expected challenges and encouraging prospects to carry forward into subsequent quarters.

Entering Q1, our order book reflected a decrease compared to the previous year, primarily stemming from inventory uncertainties among our retailers last spring. This impacted sales in our Global Sales and Brands segments, although it’s important to note that a direct comparison to Q1 2023 is skewed due to Primus no longer being part of Fenix Outdoor.

Frilufts Retail experienced a promising start to the year, particularly in the Nordics due to colder weather. However, towards the end of Q1, growth began to taper.

In Brands and Global Sales, we managed to meet our targets with minor logistical cost overruns attributed to the learning curve associated with implementing a new automated system in our central warehouse in Ludwigslust, Germany.

Cost management efforts are yielding results, with the impact of our measures expected to become more evident as the year progresses.

The increased proportion of direct-to-consumer sales contributed to a rise in gross margin on a group level, with a 4.5% growth in direct-to-consumer sales during the quarter, now constituting 57.4% of total group sales.

Geographically, most wholesale markets experienced stagnant growth due to low order volumes, but we observed an uptick in direct orders across markets, indicating an improving inventory situation. Q1 saw record numbers in China and growth in the Nordics, albeit flat performance in Germany.

Group Overview: Total sales for the quarter amounted to 163.8 (180.0) MEUR, with an operating profit of 12.8 (17.1) MEUR, primarily influenced by reduced sales. Notably, our inventory decreased by 4.9% to 257.8 MEUR, signaling a peak in inventory levels on a like-for-like basis. Operational cash flow strengthened by 27.3 MEUR compared to the previous year.

Brands: Despite a slowdown in major markets due to inventory challenges and retailer caution, direct-to-consumer sales in Europe showed growth, particularly online. Fjällräven performed notably well in this regard. External net sales decreased by 14.9% to 45.2 (53.1) MEUR, with an operating profit of 12.9 (17.6) MEUR.

Global Sales: Similar to the Brands division, Global Sales witnessed a decline in net sales from 58.7 to 47.6 MEUR, with an operating profit of 7.8 (12.3) MEUR.

Frilufts: While the Nordics experienced growth, particularly due to weather conditions, Germany showed minimal development. Brick and Mortar sales outperformed digital sales, with total net sales increasing by 4.4% to 71.1 (68.2) MEUR. The operating profit improved to -7.3 (-8.6) MEUR, driven by higher sales in Sweden.

Sales Channels: Brick and Mortar continued to excel in sales compared to digital channels, except in Brands. Digital sales accounted for 19.2% of total sales in the quarter, up from 16.8% in Q1 2023.

Q2 Outlook: Expectations for Q2 remain cautious yet optimistic, given the direct order rate surpassing last year’s levels. However, financial stability among retailers poses a potential risk.

Looking Ahead: While challenges persist, signs of inventory improvement are promising. Market dynamics post-Covid present both challenges and opportunities, with a focus on cost management and operational efficiency. The environment may also present acquisition opportunities, leveraging our strong cash position. Despite uncertainties, our robust business model positions us well for long-term success, provided we remain agile and proactive.

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