Björn Borg Q4-23

The E-Commerce Excellence Continues

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 foresees an attractive growth trajectory on the horizon, which promises improved margins. The forecasted EBIT for 2024 stands at SEK 127m (118), and by applying a forward EV/EBIT multiple of 10.7x (10.5), this presents a potential value of SEK 54.1 (47.8) per share in a Base scenario.

• Strong Momentum in The Company’s Own E-Commerce

The Q4-report served as a testament to the current macro environment, marked by a reduced purchasing power, with net sales falling short on our estimates (SEK 197.6m v.s. expected SEK 204.6m). It is evident that Björn Borg’s distributors are grappling with heightening inventory levels and diminishing household spending, resulting in decreased purchases and sales to customers. However, on a positive note, own E-commerce showcased great momentum and posed a robust 46% Y-Y increase, exceeding our estimates with a wide margin. Consequently, online sales grew to a 47% share in Q4-23, and 41% for FY2023, which surpassed our projections. Analyst Group views this development positively as it indicates that the Company’s investments in marketing and online strategies have yielded stronger brand recognition and online market penetration than predicted.

• Strong Surge in Operating Profit and Increased Dividend

The operating profit soared by an impressive 126% to SEK 20.2m in Q4-23 compared to the corresponding figure last year, surpassing our projections. The strong increase Y-Y in the operating result was driven by a stronger-than-expected gross margin of 56.8%, fueled by improvements in the channel mix. Given the Company’s strong balance sheet, Björn Borg announced alongside the Q4-report the Board’s proposal to increase dividends to SEK 3.00 for fiscal year 2024, marking a 50% increase from last year. The proposed dividend for 2024 exceeded our estimates of SEK 2.30, underscoring the Company’s confidence in its financial position going forward.

• Revised Valuation Range

Despite facing challenges such as inflation, rising interest rates, and geopolitical uncertainties, all of which inevitably impact household consumption, Analyst Group argue that Björn Borg has demonstrated resilience and adeptly navigated these hurdles. The Q4 report serves as the latest testament to this, highlighted by the stronger-than-expected operating result. The strong momentum in own E-commerce is a driving force to that outcome, hence, Analyst Group has revised the profitability projections upwards, as we e.g. anticipate a stronger development within the online channels going forward, which boosts the bottom line. The combination of a stronger expected EBIT for 2024 and a multiple expansion among peers, has resulted in a new valuation range.