KappAhl struggles as warm weather upsets turnaround progress

Swedish fashion retailer KappAhl upset investors on Monday with news that trading has been proving tough in Q1 and the company’s shares plunged over 20% at one point as a result.


KappAhl


The firm, which as recently as last month said its turnaround was on course, now says that sales in the September to November period have been running below its expectations and that will dent its operating profit. The market turned weak in late September and the Swedish fashion sector has seen a 6% contraction.

The profit figure is now expected to be less than a year ago after its  promotional strategy didn’t spur sales as much as it had been predicting, according to CEO Danny Feltmann. And with the firm having a margin target of 10%, he said there could be a hitch in achieving this goal.

The senior executive added that overall consumption had suffered a downturn as warm temperatures suppressed consumer interest in cool weather clothing.

That’s a refrain that has been heard in other Northern European markets this season as countries that could be expected to be shivering in low temperatures have been basking in relatively mild ones instead. Consumers in those markets have been unwilling to buy cool weather pieces until temperatures actually drop, perhaps also thinking that they could hold off until retailers dropped their prices.

The company will release its Q1 results on December 20 and now expects operating profit for the period to be around SEK100 million, well below the SEK145 million it saw a year ago.

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