Oslo, 6 November 2024: XXL continued to see sales recovery quarter over quarter but delivered negative year over year growth of 7 per cent in the third quarter of 2024. Total operating revenue amounted to NOK 1.8 billion (NOK 2.0 billion). The Nordic sporting goods market persisted to be challenging in Q3 2024, after ten consecutive quarters with negative growth, especially in Norway and Finland. XXL is experiencing initial recovery in Sweden impacted by three interest rate cuts so far this year. EBITDA amounted to NOK 5 million (NOK 35 million), mainly driven by the negative sales growth hampering scale in operations.
XXL has continued to prioritize strict liquidity and inventory control, resulting in a reduction of inventory of 13 per cent in value but only 3 per cent in number of pieces. Lower inventory has a negative impact on the availability of products and on the topline development.
Consequently, XXL is in the process of securing a financial solution that is expected to cover both short-term liquidity needs and allow for working capital investments. The Company contemplates that the financing will be a combination of a fully underwritten rights issue in the amount of approximately NOK 600 million, a prolongation of the Company's existing loan facilities and a bridge loan, which will enable working capital investments to support efforts in strengthening top line growth and continue to deliver on the “Reset & Rethink” plan.
XXL sees positive effects of the cost out program as well as strengthened gross margin. However, EBITDA improvements are hampered by a continued negative market development, where the expected 2024 recovery in consumer demand has not materialized, and where the outlook on a market recovery now is delayed until 2025.
XXL will have full focus ahead on turning around sales development in a continued challenging and campaign driven market, as well as delivering on the Reset & Rethink plan to be prepared for the recovery in the market through strengthening its position as the leading mass-market sports retailer in the Nordics.
Highlights:
- The market remains challenging, especially in Norway and Finland, but signs of recovery in Sweden
-Total operating revenues of NOK 1.8 billion (NOK 2.0 billion)
- Limited product availability still holding back sales, but revenue recovery continues quarter over quarter since Q1 2024
- High campaign activity in the market with price and margin pressure, while Private Label share has increased in the quarter
- EBITDA of NOK 5 million (NOK 35 million), mainly driven by lower top line
CEO Freddy Sobin says:
"We’re seeing a positive trend throughout 2024, with steady sales recovery each quarter, and early signs of improvement in Sweden influenced by three interest rate cuts so far. However, this quarter brought soft top-line results and a year-over-year decline, largely due to limited operational scale from lower sales.
The Nordic sporting goods market remains tough, especially in Norway and Finland, with ten consecutive quarters of negative growth. We’re seeing benefits from our cost-reduction efforts and an improved gross margin, but continued weak consumer demand delays EBITDA gains, now pushing market recovery expectations to 2025.
We maintain strict liquidity and inventory control, reducing our inventory this quarter, though this limits product availability and affects topline growth. As we look forward, our focus is on reversing sales trends in a challenging, promotion-driven market and delivering on our Reset & Rethink plan, strengthening our position as the leading mass-market sports retailer in the Nordics to prepare for market recovery."
Outlook
XXL is in the phase of implementing several strategic initiatives and projects to improve profitability and operational efficiency moving forward, called “Reset & Rethink”. The Five must win battles identified and under execution are expected to deliver an EBITDA run-rate uplift of NOK 500-750 million by the second quarter 2026, a delay of around a year versus previous ambitions driven by continued challenging market conditions as well as low product availability for XXL.
Sales in October has continued to be volatile and is estimated to be negative 10 percent driven by low demand for seasonal winter products.
XXL’s target and goal moving forward is to come back to sound profitability as well as over time gain market shares in all markets and regain growth in the E-commerce channel.
In line with the existing strategy, XXL will continue to mainly invest in operational efficiency, store footprint optimization, customer experience enhancing projects in both stores and in the E-commerce platform, as well as in IT and tech. Total CAPEX for XXL Group in 2024 is expected to remain modest at around NOK 100 million.
XXL has thus far no new store openings signed in 2024. Mid- to long-term XXL continues to expect the pace of the store roll-out to be 2-3 new stores per year including relocations of stores. At the same time XXL will be downsizing several existing stores. Short term the Group will continue to focus on optimizing the store portfolio, including evaluation of selective closures of low performing stores with limited turnaround abilities.
For further information please find attached the quarterly report and the presentation material.
For APMs please see the quarterly report for further definitions and reconciliations.
The results will be presented at 08:30 CET by CEO Freddy Sobin and CFO Lars Syse Christiansen. The presentation will be held in English and will be webcasted at www.xxlasa.com.
For further queries, please contact:
Investor Relations:
Tolle O. R. Grøterud
Phone: +47 902 72 959
E-mail: ir@xxlasa.com
Press:
Jan Christian Thommesen
Phone: + 47 918 21 387
Email: presse@xxl.no
This information is considered to be inside information pursuant to the EU Market Abuse Regulation and is subject to the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act. This stock exchange announcement was published by Tolle O. R. Grøterud, Investor Relations Officer at XXL ASA, on 6 November 2024 at 07:00 CEST.
About XXL ASA
XXL is a leading sports retailer with stores and e-commerce in Norway, Sweden and Finland. It is the largest among the major sports retailers in the Nordics. XXL pursues a broad customer appeal, offering a one stop shop experience with a wide range of products for sports, hunting, skiing, biking and other outdoor activities. XXL's concept is to have the largest stores with the best prices and the widest assortment of products, focusing on branded goods.