Kappahl upbeat after good Q1, but sees currency issues ahead

By

Sandra Halliday

Published
Dec 21, 2016

Kappahl got its 2016/17 financial year off to a good start in Q1 with sales up 8.3% as it opened new stores and benefitted from currency effects. But as well as new stores, it also made the most of existing locations and comparable sales rose a healthy 4.8%.

The Swedish clothing retailer’s operating margin also rose, from 10% to 11.4% on the back of a strategy of focusing more on full-price sales. This gave a boost to profits and meant operating profit surged 23.1%  to SEK144m.

The rise was helped by the debut of the Newbie store concept, investment in store upgrades and its expansion online, although CEO Danny Feltmann warned that the recent weakness of the Swedish krona could hurt the gross margin in the future.

For Q1, Kappahl saw solid growth in its core Nordic market with its 378 stores in markets including Sweden, Norway, Finland and Poland seeing higher sales, for the most part.

Overall Q1 sales rose above expectations to SEK1.26bn (€130.5m) with SEK714m of that comping from the Swedish market, where the brand saw sales rising 7%.

Foreign sales were boosted by currency exchange with Norway rising by 15.8% to SEK332m on a reported basis and a lower-but-still-strong 9.4% currency-neutral. Finnish sales rose 8.5% on a reported basis to SEK145m, or 4.6% currency-neutral.

But Poland was a problem market with sales there down 9.1% on a reported basis to SEK70m and down an even worse 10.3% currency-neutral.