Odd Molly International AB (publ)
Stockholm, Sweden, August 16, 2019
1 April – June 30, 2019
- Total operating revenue decreased 18 percent to SEK 62.7 million (76.3).
- The gross profit margin was 50.6 percent (57.6).
- The operating loss was SEK -17.9 million (-11.9).
- The net loss amounted to SEK -19.2 million (-10.3).
- Earnings per share amounted to SEK -2.12 (-1.78).
January 1 – June 30, 2019
- Total operating revenue decreased 18 percent to SEK 148.9 million (181.8).
- The gross profit margin was 49.8 percent (55.6).
- The operating loss was SEK -35.5 million (-18.6).
- The net loss amounted to SEK -38.4 million (-17.0).
- Earnings per share amounted to SEK -4.39 (-2.95).
IMPORTANT EVENTS DURING AND AFTER THE QUARTER
- The restructuring and efficiency measures announced at the end of last year and in May to reduce complexity, tied-up capital and operating costs by about SEK 75 million on a full-year basis are progressing as planned.
- In April, the stores in the shopping centers Nova Lund and Hansa Malmö were closed. In May, Odd Molly closed the store in the shopping center A6 in Jönköping, where it instead has a shop-in-shop operated by a retailer.
- A licensing agreement was signed for the US and Canada. Germany and Austria have been licensed as well. Operations in these markets will be taken over by the respective licensee in fall 2019.
- The rights issue in June provided the company with SEK 22.5 million after issue costs.
- As of June 30, 2019, the share capital in Odd Molly amounts to SEK 1,486,556 and the total number of shares in the company is 14,865,555.
- In May, the company’s CFO, Johanna Palm, was also named Deputy CEO, succeeding former Deputy CEO Sara Fernström, who left the role.
Comment from the CEO
Ongoing restructuring and savings for a stronger and more effective company in the long term
With the second quarter behind us, we can say three things. The changes we are making are continuing as planned, we are taking further steps to transform our foreign markets to the licensing model, and most gratifyingly we are beginning to see the positive effects of the action plan in our own retail operations, where profitability has increased. In total, the savings measures Odd Molly is implementing will reduce operating costs by around SEK 75 million on a full-year basis with a full impact during 2020. In addition, we are thankful for the faith shown in Odd Molly through a successful share issue, which provided the company with an additional SEK 25 million, before issue costs, in the quarter.
Increased profitability in the retail operations
Odd Molly’s strategic focus on increasing online sales and strengthening the international platform is beginning to see results. We have an increasingly effective web shop which posted higher sales in the quarter and improved profitability. We have continued to optimize our own retail network and in the quarter we closed an additional three stores in Sweden. The store closures and the reduced costs they result in are also beginning to have a positive effect on profitability.
Additional measures for more effective wholesale operations
While our retail operations reported improved profitability, the wholesale operations continued to decline due to lower sales and the continued negative effect of discounted sales of older merchandise in inventory. Our priority in the first half-year was to greatly reduce the inventory we built up in 2018 in light of the sales slowdown. This has significantly affected the gross profit margin but strengthened our liquidity. After this we have a much more current inventory and the negative effect on profitability is expected to subside going forward.
To address the situation in this segment, we are continuing to restructure with the goal of a more effective sales model. As a result, and in line with our distribution strategy – where we mainly invest online and in strong retailers and international partnerships – we recently signed a licensing agreement with a new partner in Germany and Austria.
Brand and ambassadors
We are taking additional steps to revitalize and strengthen the Odd Molly brand. Our campaigns during the quarter, with the model Caroline Winberg, together with the current partnership with the sisters Titiyo and Neneh Cherry, have received a positive response. New and continuing collaborations with strong ambassadors are planned, and the product line continues to be optimized based on our strategy and market conditions. These strategic branding investments are having a very limited effect on cash flow due to the collaboration with Aggregate Media entered into in spring 2019. We are also significantly more cost-effective in our digital marketing and are getting more targeted traffic from our marketing investments and digital advertising.
In summary, we are seeing a number of positive indications even though the comprehensive restructuring we are implementing will take time and the measures have initially had a negative effect on earnings. Our own retail operations are beginning to show improvement, where despite lower sales from store closures we are seeing improved results – an effect of the action plan and more efficient operations of our web shop. More puzzle pieces have to fall into place before the Group will experience a noticeable turnaround, but we are clearly seeing evidence that we are headed in the right direction.
Jennie Högstedt Björk, CEO
Please see the full report in the attached PDF file.