Comprehensive action plan to reverse the current trend

JULY 1 – SEPTEMBER 30, 2018

• Total operating revenue decreased 26 per cent to SEK 99.5 million (134.5), mainly due to weak sales to external retailers.
• The gross profit margin was 51.0 per cent (53.0).
• The operating loss was SEK -19.3 million (6.6), negatively affected by restructuring costs of SEK 5.8 million (4.8).
• The net loss amounted to SEK -15.7 million (4.9).
• Earnings per share amounted to SEK -1.87 (0.85).

JANUARY 1 – SEPTEMBER 30, 2018

• Total operating revenue decreased 18 per cent to SEK 281.2 million (342.6).
• The gross profit margin was 54.0 per cent (54.5).
• The operating loss was SEK -38.0 million (6.6), negatively affected by restructuring costs of SEK 5.8 million (4.8).
• The net loss amounted to SEK -32.8 million (2.9).
• Earnings per share amounted to SEK -4.91 (0.51).

EVENTS DURING AND AFTER THE QUARTER

• A comprehensive action plan to reduce complexity, tied-up capital and operating expenses has been resolved. Operating expenses will be reduced by around SEK 50 million on a full-year basis. The effects will gradually be realized in 2019. Restructuring costs for the action plan of SEK 5.8 million were recognized in the quarter.
• The number of stores operated by the company is planned to be reduced from 17 to six within the next year.
• In October an agreement was signed with an operator in Portugal and Spain, which, under a licensing model, will take over sales to retailers in these markets as well as operation of the existing store in El Corte Inglès in Lisbon.
• During the quarter the new CEO, Deputy CEO and head of business development joined the company.

Comment from the CEO

Strong action to redirect the business model and reduce costs

During the quarter we worked intensely to develop a future plan for Odd Molly. We are facing an accelerated transition and have to renew the business model, our offering, and how and where we meet our customers. The plan contains cost cuts in some areas along with specific measures focused on our web shop and sales to selected international markets – initiatives that will enable Odd Molly to develop faster, more efficiently and with less capital. Basically, we will switch in most international markets to a licensing model, significantly reduce our product range and close a large share of our own physical stores. Taken together, we will decrease costs by about SEK 50 million on an annual basis, with the impact gradually felt in 2019.

Due to the ongoing strategic transition, in combination with a very challenging market, the company’s third quarter was weak. We also saw a large negative impact in all our sales channels from the warm weather, where the majority of lost sales coming from outerwear and knits. Odd Molly’s total operating revenue for the quarter fell 26 per cent compared with the same quarter in 2017 and the operating loss amounted to SEK -19.3 million including a provision for restructuring costs of SEK 5.8 million as well as additional costs of one-off nature amounting to about 3 MSEK.

Channels

As a direct result of the rapid change in the market, we have decided to close a large number of our physical stores. In the next year we plan to reduce the number of own stores from 17 to six, while making sure that Odd Molly is sold through strong digital and brick-and-mortar retailers in Sweden and internationally.

This is in line with our strategic focus on digital sales and international growth through further investments in our digital offering as well as entrepreneurial partners and strong retailers.

Product range

Odd Molly’s design works well online, and we will continue to optimize our product range in order to grow sales online and internationally in the best way. We feel that today the product range is too wide and as a result, we will greatly reduce it, making us more agile and cost-effective.

Licensing model

In order to improve our opportunities to grow internationally, we have begun a strategic change of the company’s business model in selected markets outside our home market. We will rapidly change over to a licensing model based on long-term collaboration with strong local partners. The licensing model is capital-efficient and creates much better opportunities for the local partner to grow and invest in the brand and distribution.

Odd Molly will also get support and a boost to our digital growth through oddmolly.com, which we will continue to manage ourselves. The first to switch to licensed markets are Portugal and Spain, where we signed an agreement with a local operator.

Together, the measures constitute important steps to develop Odd Molly in a more effective and capital-efficient way toward profitability and growth.

Jennie Högstedt Björk, CEO

Please see the full report in the attached PDF file.