The industry is changing – and Odd Molly with it

October 1 – December 31, 2017

• Total operating revenue amounted to SEK 89.6 million (86.5), an increase of 4 percent.
• The gross profit margin was 51.6 percent (60.0).
• The operating loss was SEK -11.1 million (-0.3).
• The net loss amounted to SEK -9.2 million (0.8).
• Earnings per share amounted to SEK -1.60 (0.14).
• The Board of Directors proposes to the Annual General Meeting that no dividend per share be paid for the financial year 2017. For the financial year 2016 a dividend of SEK 1.00 per share was paid.

January 1 – December 31, 2017

• Total operating revenue amounted to SEK 432.1 million (423.2), an increase of 2 percent.
• The gross profit margin was 53.9 percent (55.6).
• The operating loss was SEK -4.5 million (24.5), affected by costs of SEK 4.8 million for the termination and buyout of agents as well as organizational changes. Excluding these costs, operating profit amounted to SEK 0.3 million.
• The net loss amounted to SEK -6.3 million (17.7).
• Earnings per share amounted to SEK -1.09 (3.08).

Events during and after the quarter

• On February 5 it was announced that Anna Attemark had informed the Board of Directors that she wishes to leave her position as CEO of Odd Molly, and that Jennie Högstedt Björk, today Deputy CEO and Assortment Manager, has been named as her successor. The CEO shift will take place in August 2018, at the latest.

Comment from the CEO

The customer is leading the way – we accelerate the changes

When I joined Odd Molly at the end of 2011, we began a transformation process, and our work has accelerated as the market has changed. The big move we made was to go from a design-driven to a customer-centric company, from clothing to lifestyle, and we took better control of our own retail sales, where an early investment in e-commerce has clearly been the most important engine behind Odd Molly’s growth. For 2017 about 40 percent of Odd Molly’s total sales came from digital channels (including sales to digital external retailers) – compared to about 35 percent in the previous year and about 10 percent five years ago.

To serve the customer in the best possible way requires continuous adjustments in our offer and our organization and during the year we have accelerated the changes, focusing on the areas where we see largest potential for profitable growth. The industry’s transformation continues: e-commerce is growing, the market is becoming increasingly promotion-driven and many brick-and-mortar retailers are struggling.

Odd Molly has a solid platform in many ways: we have a strong brand and lifestyle concept that can be offered in every channel and a profitable e-commerce business with strong growth that is well-suited to new buying patterns. Sales in our own channels (own stores and web shop) grew by 13 percent for the full-year. During 2018, we will strengthen the offer, the customer experience and increase the focus on digital sales.

Growth – but weaker than hoped

Odd Molly reported growth for both the full-year and the quarter, which compared to the market is relatively strong. Even though we reached all-time-high sales, there is no getting around the fact that 2017 was weaker than hoped. The strong digital channel growth is very positive long-term, but the strong slowdown in traditional retail gives short-term challenges that need to be handled. Adjusted for costs of SEK 4.8 million due to major investments, mainly in our international network of agents, we reached a slightly positive result for the full-year, while the fourth quarter had a negative result. The fourth quarter has become a period with decreasing share of sales at full price, and includes mid-season sale, Black Friday and end-of-year sale. Black Friday this year broke new records also for us but resulted in weaker Christmas sales. All in all, this had a strong negative impact on the gross margin.

Accelerated transformation

Altered purchase patterns between distribution channels require continuous cost adaptations for Odd Molly. This work will continue. We are reassessing profitability and costs in the entire retail segment and carefully monitoring developments in our wholesale business. Our physical stores are an important part of our offering and a complement and catalyst to other sales channels, but they must meet our profit requirements and strengthen the brand.

The category strategy we worked with during the year is reaching the market in a more extensive way this spring. The strategy represents a shift from traditional collections to smaller, more concept-driven releases to meet the increased demand for news. Our customers will find more but smaller specialty collections with shorter lead times, mainly sold online.

Lastly, I would like to note that it was with great sadness that I decided in the beginning of February to move on from Odd Molly’s fantastic team and lifestyle concept to an assignment outside the company. I am convinced that this is the right time, after nearly 7 years, to hand the baton to Jennie Högstedt Björk, currently our Assortment Manager and Deputy CEO.

Anna Attemark, CEO

For full report see attached pdf file.