Odd Molly International AB (publ)
Stockholm, Sweden, February 14, 2020
OCTOBER 1 – DECEMBER 31, 2019
- Total operating revenue decreased 33 percent to SEK 43.9 million (65.7) due to half the number of stores as the same period in 2018.
- The gross profit margin was 33.4 percent (52.4), affected by a more conservative valuation of remaining quantities of older merchandise in inventory.
- The operating loss was SEK -26.9 million (-22.6).
- The net loss amounted to SEK -28.5 million (-20.7).
- Earnings per share amounted to SEK -1.92 (-2.46).
- The Board of Directors has proposed to the Annual General Meeting that no dividend be paid for the financial year.
JANUARY 1 – DECEMBER 31, 2019
- Total operating revenue decreased 22 percent to SEK 269.4 million (346.9).
- The gross profit margin was 46.5 percent (53.7).
- The operating loss was SEK -71.6 million (-60.6).
- The net loss amounted to SEK -75.9 million (-53.5).
- Earnings per share amounted to SEK -5.11 (-7.52).
IMPORTANT EVENTS DURING THE QUARTER
- Underlying costs decreased in the quarter by SEK 16 million and for the full-year by SEK 45 million, in line with the action plan to gradually generate savings of approximately SEK 75 million on a full-year basis in 2019 and 2020.
- On November 19, the company signed an agreement to acquire Used A Porter International AB (Used By), an online marketplace for second hand fashion, as well as a large logistics property, by acquiring the shares in the property owner’s company, Ilija Batljan Invest Kristianstad Fastigheter AB. Both acquisitions were implemented, following a resolution by the Extraordinary General Meeting, through issues for non-cash consideration, and the closing for both companies was December 19. As a result, Ilija Bataljan is directly and through his company the largest shareholder in Odd Molly with 45.5 percent of the shares and votes.
- The Extraordinary General Meeting on December 19 also approved a directed share issue, which was implemented later in the month and provided the company with proceeds of SEK 16 million before issue costs.
Comment from the CEO
Efficiency improvements and growth initiatives – tough quarter from a profitability point of view
2019 was affected by the industry’s continued transition to changing consumption patterns and new needs. For us at Odd Molly, this meant the implementation of planned efficiency improvements as well as new growth initiatives. The main line in our strategy is to focus on our core products, build the brand and continue the digital transition. In line with our action plan, we cut the number of stores in half in 2019, significantly reduced the product assortment and lowered operating costs by about SEK 45 million during the year. At the same time, we have taken growth initiatives, including the licensing agreement with Hunkydory, which improve opportunities to utilize our strength as a brand.
Actions and efficiencies
Sales at the end of the year were affected by a continued tough market and a consciously lower degree of promotions and campaigns than in the same period in 2018. Odd Molly’s own web shop was still the channel that performed the best. The ongoing action plan, which is expected to reduce Odd Molly’s operating costs by around SEK 75 million on a full-year basis with a full effect in 2020, is progressing, and we are realizing the cost savings we had planned.
The actions that have been taken have also resulted in costs that have impacted the income statement in the short term, but with the goal of positive effects further in the future. The fourth quarter was therefore affected by non-recurring costs attributable to ongoing activities, including acquisitions and the inventory transfer. The decision to use a significantly more conservative assessment of the value of older inventory at the end of the year resulted in a large write-down in the quarter, which was the biggest reason for the weaker gross profit margin.
In parallel with day-to-day operations, we took several steps in the quarter to ensure a sustainable development.
- We strengthened our preworn offer with the acquisition of the second hand marketplace Used By. Odd Molly’s clothing already has a strong position in the second hand market and the acquisition gives us a firmer grip on preworn in a digital format that own ourselves. We see that the consumer’s increased focus on sustainability will contribute to continued growth in the sale of second hand branded clothing. Used By strengthens Odd Molly’s sustainability efforts in a concrete way – a sustainable idea, digital focus and a longer connection with customers.
- We also strengthened the company’s financial position through the acquisition of a logistics property with stable cash flows and through a capital contribution in the form of a directed new share issue of SEK 16 million. The subsidiary Odd Molly Fastigheter AB will evaluate further opportunities in the Swedish real estate market.
We expect both Hunkydory and Used By to be integrated into our operations with economies of scale and synergies.
A stronger brand
The year we now leave behind was very challenging and required forceful action and efforts. In summary, I am proud that we decided on and implemented a tough action plan that significantly reduces operating costs and at the same time combined it with steps to strengthen opportunities for future growth. We have improved efficiencies in many parts of our business while also strengthening our financial position. We are lookin forward to entering this spring with a stronger brand and capitalize on opportunities with our acquisitions, further develop Odd Molly and relaunch Hunkydory.
Jennie Högstedt Björk, CEO
Please see the full report in the attached PDF file.