KappAhl margins hurt by promotional environment but sales still rise

By

Sandra Halliday

Published
Oct 9, 2019

Swedish fashion retailer KappAhl is facing tough times at the moment and its full-year report on Wednesday underlined that fact. The company described the 12 months to August as “a year marked by hard competition and focus on change” and also talked of declining footfall to its stores.

That said, sales rose 3% to SEK4.9 billion (€449m/£403m), but that increase was clearly achieved at the expense of margins as the gross margin fell to 59.5% from 61.8% a year ago.

Operating profit fell to SEK168 million from SEK282 million for the year, although it would have fallen less steeply to SEK211 million without one-off costs that hit the bottom line.

And the final quarter saw a performance improvement compared to the first nine months with sales up 6.7% to SEK1.322 billion, although gross margins were still battered, falling to 56.8% from 59.2%. But operating profit rose to SEK108 million from SEK66 million, helped by cost cuts. The bigger sales rise in Q4 was accounted for by a 4.8% rise in comparable sales, as well as new stores and a slight bump upwards from positive currency effects.

During the quarter, the firm’s majority owner Mellby Gård AB submitted a public takeover bid to all KappAhl’s shareholders. This big change is going through with the company already controlling more than 90% of the shares, which means KappAhl will be delisted from the Nasdaq Stockholm market.

So what did CEO Elisabeth Peregi have to say about this? She said the firm has been working hard to meet the transformation that’s going on in fashion retail and that sales in international markets are looking strong, even though the market has been very promotional due to the intense competition out there in all countries.

Poland saw a sales rise of 17% and the company’s UK and Norwegian businesses are also “showing a positive trend”. KappAhl’s e-tail ops were also buoyant with a 20% rise, which means they now account for 5.5% of total sales, up from 4.7% a year ago. It has to be said that 5.5% is still a relatively small percentage compared to some companies, which means it looks like KappAhl has plenty of room to continue growing its e-commerce business fast.