A quarter characterized by action program and restructuring

JANUARY 1 – March 31, 2019

• Total operating revenue decreased 18 percent to SEK 86.2 million (105.5).
• The gross profit margin decreased to 49.3 percent (54.1).
• The operating loss was SEK -17.6 million (-6.7), negatively affected by restructuring costs of SEK 3.8 million.
• The net loss amounted to SEK -19.2 million (-6.7).
• Earnings per share amounted to SEK -2.27 (-1.17).

IMPORTANT EVENTS DURING AND AFTER THE QUARTER

• Additional repositioning and efficiency measures have been identified. These measures are expected to reduce operating costs by approximately SEK 25 million on a full-your basis and will gradually be implemented in 2019, with full financial impact in 2020. Restructuring costs for the action plan of SEK 3.8 million were allocated in the quarter.
• The previous action program with the aim of reducing complexity, capital tied up and operating costs by about SEK 50 million on a full-year basis runs according to plan.
• In the quarter, the Odd Molly stores on Humlegårdsgatan in Stockholm, in Bromma Blocks and Femman in Göteborg were closed. The stores in the shopping centers Nova Lund and Hansa Malmö were closed in April.
• In February, a licensing agreement was signed with the existing partner in the Czech Republic, Slovakia and Hungary.
• In May, a licensing agreement was signed in the US and Canada.
• During the quarter, Odd Molly implemented a directed offset issue of 250,000 shares at a price of SEK 10 and a directed cash issue of 250,000 at a price of SEK 10 to Aggregate Media. The issues will be used to cost-efficiently achieve maximum media exposure in broad-based channels in connection with the branding efforts Odd Molly has begun.
• On April 5, the company announced that the Board of Directors decided to implement a new share issue of approximately SEK 25 million with preferential rights for the company’s existing shareholders.

Sara Fernström, current Deputy CEO, is leaving her position as responsible for, among other things, license and international expansion after successfully converting a number of markets to license. Sara remains within the company’s sphere also going forward. The Board of Directors has today appointed the company’s CFO Johanna Palm, in addition to her current area of responsibility, as Deputy CEO.

Comment from the CEO

Additional efforts to reverse the development

The first quarter was impacted by the action plan and restructuring of the business model that were initiated last fall, which is progressing according to plan. The consolidation of our retail network is continuing and much of our focus has been on creating a stronger brand position. In connection with this work we have identified additional measures to simplify and streamline Odd Molly’s operations – and at the same time generate cost savings in the range of SEK 25 million on a full-year basis from the end of 2019 and with full financial impact in 2020. The result in the first quarter was charged with one-off costs of SEK 3.8 million to implement the additional measures needed to create a modern company with a simple and clear structure suited to industry conditions today and in the future. Our ambition is to accelerate the restructuring work and strengthen Odd Molly’s position both in our home markets and in selected international markets, thereby reversing the negative development.

Revitalizing the brand

In the quarter we focused much of our energy on revitalizing the brand with a new strategy and a new expression. Concretely, this can be seen right now in a new branding campaign with our ambassadors Titiyo and Neneh Cherry, which has been rolled out. In the quarter we also signed an agreement with, and implemented a directed share issue to, Aggregate Media. This collaboration provides us with a more cost-effective way to create media space, reach out more broadly and invest in the brand.

Development in the first quarter

Net sales in the first quarter decreased from SEK 105 million to SEK 86 million, affected by the ongoing restructuring. End of season sales were not as high as last year, which is partly explained by timing and the market being generally weak. Another factor that affects the comparison between years is that we have closed a number of stores. During the quarter we sold off older merchandise in inventory through our own and external outlets, which generated cash flow but resulted in a lower gross profit margin. Excluding the impact from older seasons, the gross profit margin was in line with last year. The inventory after these measures is healthy and at a satisfactory level. We have control over our operating costs and the cost savings program is continuing as planned, with enhanced effect after the summer.

Additional measures to strengthen future opportunities

The additional measures we have identified will generate cost savings of approximately SEK 25 million on an annual basis, to be realized at the end of 2019 and with full financial impact in 2020. In short, it means that we become more efficient and digitized in our sales to both end customers and retailers, and further reduce the product assortment. We have terminated the collaborations with agents in several smaller markets that have not been sufficiently profitable for us. In the US and Canada, where we see great potential for the brand, we have entered into a license agreement with a new partner. The partner will be taking over the operations in these markets from the fall and onwards.

We are preparing a new share issue that is expected to provide the company with SEK 25 million to strengthen our financial situation and accelerate the conversion of the business model and digital investments. We are working diligently to make our online shopping experience more relevant with better analysis and customer segmentation.

I am proud of the drive I see in the organization and am convinced that we are taking the right steps to gradually reverse the trend.

Jennie Högstedt Björk, CEO

Please see the full report in the attached PDF file.