Björn Borg Q3-24

Solid Growth Across Key Focus Areas

Björn Borg (“Björn Borg”, “the Company” or “the Group”) is a well-established and renowned company with a rich history spanning decades, earning its place as a favored brand among a broad consumer base. Nevertheless, the predominant association of Björn Borg with underwear presents a compelling challenge: to transition consumer perception from an underwear brand to a sports fashion brand. This strategic shift, central to the Company’s vision since 2014, has already yielded noteworthy progress, driven by amplified investments in social media and successful launches of new sport collections. Analyst Group estimates an attractive growth trajectory on the horizon, which promises improved margins. The forecasted EBIT for 2025 stands at SEK 131m, and by applying a forward EV/EBIT multiple of 12.0x, this presents a potential value of SEK 61.3 (64.6) per share in a Base scenario.

• German Market Grew by 44% Y-Y

Net sales amounted to SEK 285.1m (262.1) during Q3-24, representing an 8.8% Y-Y growth (10.4% excl. FX). The outcome fell short of our estimate of SEK 312.0m, where we had anticipated stronger growth within Footwear following the in-house integration in Q1-24. Nevertheless, Footwear grew by 29% Y-Y, while Sports Apparel achieved robust growth of 25% Y-Y. Additionally, Underwear experienced a slight decline of 1% Y-Y, while Bags temporarily decreased by 14% Y-Y, following strong performance during H1-24. Own E-Commerce maintained its positive trajectory, with growth of 32% Y-Y, while Wholesale grew by 5%. Geographically, the key market of Germany delivered strong performance, with growth of 44% Y-Y. Analyst Group believes that the strong performance within Footwear, Sports Apparel, Own E-Commerce, and the German market serves as a testament to Björn Borg’s successful execution of the Company’s strategic initiatives.

• Increased Marketing Spend

The gross margin for Q3-24 stood at 52.1% (52.6%), with the FX-neutral margin at 51.2%. The decline was primarily attributable to a higher sales contribution from the Footwear category and increased sales to larger customers, which carried higher discounts. Nonetheless, Footwear is projected to enhance the Company’s overall profitability profile over the long term. Björn Borg reported an EBIT of SEK 42.0m (40.9), reflecting modest Y-Y growth of 2.8%, driven by a slightly compressed gross margin and elevated marketing expenses. Analyst Group views the increased marketing investments as a strategic initiative likely to support long-term growth by sustaining and strengthening brand momentum.

• Revised Valuation Range

In conclusion, Björn Borg’s Q3 report came in below our expectations both regarding revenue and profitability, primarily due to slower-than-expected growth within the Footwear category. However, it is encouraging to observe strong progress in the Company’s strategic focus areas, including Footwear, Sports Apparel, Own E-Commerce, and the German market. Nevertheless, Analyst Group revises the top-line estimates for 2024 and 2025. By applying a forward EV/EBIT multiple of 12.0x to the estimated EBIT of 131m for 2025E, a potential value of SEK 61.3 (64.6) per share is derived in a Base scenario.