Björn Borg Q2’24 earnings preview: Strong growth figures expected

Björn Borg will report its Q2’24 results on Friday, August 16. We anticipate good growth in revenue compared to the corresponding quarter last year, primarily driven by the integration of the footwear category and continued strong development in own e-commerce. Although we expect a favorable channel mix and reduced discounts to positively impact profitability, we forecast that EBIT-% will remain similar to last year's corresponding period due to increased costs associated with footwear integration and marketing. Given the challenging economic environment, our focus will be on demand-related information and updates on the footwear transition, which we consider the key highlights of the upcoming Q2 report.

Footwear integration expected to support growth

Despite relatively sluggish consumer demand, we forecast Björn Borg’s Q2 revenue to increase by good 8% from the comparison period to 179 MSEK. This growth is primarily expected from the integration of the footwear category, which previously generated revenue through royalties from a licensing partner. With Björn Borg now managing the entire footwear distribution, all sales from this category will be consolidated, resulting in higher sales growth. However, the net effect on earnings is likely to be marginal due to costs also increasing.

In terms of segments, we anticipate high growth in the consumer direct segment (15% year-over-year), driven by increased sales of footwear and sports apparel through Björn Borg's own e-commerce. Growth in the largest segment, wholesale (3%), is expected to be fueled by e-tailers, particularly in the German market. We estimate that distributors will show good growth during the quarter (10%) due to more normalized inventory levels and easier comparison figures. Conversely, the licensing segment is expected to continue showing highly negative growth figures following the integration of the footwear category, which previously constituted a significant part of this segment. However, since the licensing segment's contribution to the group’s topline is modest, the impact on overall results will likely be minimal.

Q2 is seasonally the smallest quarter

We forecast EBIT to be 9.1 MSEK (Q2’23: 8.1 MSEK), representing around 5% of revenue, which is relatively in line with the comparison period. We expect Björn Borg’s relative gross margin to remain roughly the same as last year, indicating that the fixed cost structure will increase alongside revenue. This is mainly driven by higher costs related to the footwear integration and increased marketing expenses. However, reduced discounts within direct-to-consumer sales are expected to support profitability. In the bottom lines of the income statement, we anticipate net financial costs to remain roughly in line with Q2’23, resulting in an increase in EPS to SEK 0.23 (Q2’23: 0.17). It is worth noting that Q2 is seasonally the smallest quarter, accounting for only around 7% of full-year EPS on average over the past three years.

We focus on demand-related comments and delivery possibilities

Björn Borg does not provide financial guidance, but we forecast approximately 9% revenue growth and an EBIT margin of 11.6% for the full year 2024. This is slightly higher than the company’s financial targets of annual revenue growth of at least 5% and an annual EBIT margin of at least 10%. Given the strong start to the year, we believe that the company is well positioned to achieve our full-year estimates. However, success will largely depend on the effectiveness of Björn Borg's integration of the footwear category. Therefore, we are keen to hear any comments regarding the transition process, as well as sales and delivery possibilities for already produced footwear. Additionally, insights from management on the market environment in the past quarter and the future outlook are crucial, especially given the ongoing sluggish consumer demand.