Feb 6, 2019
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Tiger of Sweden and By Malene Birger owner downgrades forecast after Q2 results

Feb 6, 2019

IC Group reported its results for the second quarter on Wednesday. Or, more accurately, it reported results for its continuing operations, as the company has shed quite a few of its businesses in recent periods.

By Malene Birger

And the figures came with a sales and profits forecast downgrade so it seems that its remaining operations – Tiger of Sweden and By Malene Birger – aren’t exactly firing on all cylinders, although Tiger appears to be the strongest performer of the two.

Revenue for Q2 (the period to December 31) edged up 1.1% to DKK271 million (£32m/€36m), although it was up a better 3% when measured in local currencies. Growth was driven by Tiger of Sweden’s wholesale channel which, as expected, “reflected the positive effect from the brand’s execution of its present strategic business plan.” Overall Tiger revenue rose 3.7%, or 5.9% in local currencies.

By Malene Birger’s wholesale ops were also stronger, but the brand still struggled as reported revenue fell 3.8% and revenue in local currencies was down 3%. 

Meanwhile revenue from both brands’ retail ops also fell as their physical stores struggled. In fact, like-for-like revenue was down as much as 12.9%.

Gross profit fell to DKK145million from DKK171 million and the gross margin declined by 10.3 percentage points to 53.5%, partly due to structural changes and the divestment of Peak Performance in 2017/18. 

After having adjusted for the structural changes and the Peak Performance sale, gross profit would have been DKK158 million and the gross margin 58.3%, so both figures still down, but not showing such a sharp fall. The remaining gross margin decline was blamed mainly on higher discounts compared to Q2 2017/18.

Tiger of Sweden managed to generate an operating profit of DKK4 million, up from a loss of DKK3 million a year ago and corresponding to an EBIT margin of 2% (much better than the negative EBIT margin of 1.6% in the previous Q2).  But By Malene Birger’s operating profit painted a different picture with a fall to DKK2 million from DKK5 million and the EBIT margin down to 2.7% from 6.4%.

Consolidated operating profit for the group as a whole (excluding the recently-divested Saint Tropez) fell to DKK 2 million from DKK 7 million before non-recurring costs linked to the transformation of IC Group, corresponding to an EBIT margin that fell to 0.7% from 2.6%.

So, what happens next? The company is expecting times to stay tough and guidance for full-year revenue is for a minor reduction in local currencies. The Tiger brand’s revenue should dip slightly and so should nominal earnings. That compares to previous expectations that revenue should rise while nominal earnings should be flat. The updated expectations for the brand “reflect lower anticipated performance in direct-to-consumer channels for the rest of the financial year – retail in particular.”

For By Malene Birger, a moderate revenue reduction and a “substantial decline” in nominal earnings are expected. Again, that’s a downgrade from earlier expectations that predicted higher revenue and flat nominal earnings. And the reasons are the same as for the Tiger downgrade.

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