New Wave Group (NWG), the Swedish-based owner of Ahead, Auclair, Craft, Cutter & Buck, and Tenson AB, reported that the company’s third-quarter net sales dipped 1 percent to SEK 2,308.3 million, compared to SEK 2,337.0 million in the year-ago Q3 period.

The exchange rate effects during the quarter reportedly negatively impacted NWG sales by 3 percent of the reported growth. Net sales in local currencies increased by 2 percent.

Torsten Jansson is NWG’s founder, CEO and majority shareholder. The Group consists of approximately 70 operational companies under the Corporate, Sports & Leisure, and Gifts & Home Furnishings categories, including Craft, Cutter & Buck, Ahead, and Craft in the active outdoor industry.

“It is very reassuring that we continue to take market shares in a tough market, although I am not at all satisfied with our results,” offered Jansson in a letter to investors. “As an example, in Sweden, the Sportindex decreased by 1.5 percent during the third quarter, and it was the 11th quarter in a row with negative figures. The home furnishing index was minus 9 percent in the quarter, even though it was also minus 1 percent in 2023, a total decrease of 10 percent compared to the third quarter of 2022. We also estimate that the Promo market declined by around 7 percent to 9 percent, confirming that it was indeed a very challenging quarter. Overall, however, we are in a very strong position and will continue with our market investments.

The Promo sales channel decreased by 1 percent year-over-year, and the Retail channel decreased by 1 percent year-over-year.

Segment Summary

Sports & Leisure
The Sports & Leisure segment increased by 1 percent, with growth in the U.S., Central Europe, and Nordic (x-Sweden) regions offsetting declines elsewhere. Net sales from July through September amounted to SEK 1,115.2 million in Q3, compared to SEK 1,030.0 million in Q3 2023.

The Promo sales channel increased by SEK 19.6 million to SEK 289.5 million, while Retail decreased SEK 6.0 million to SEK 740.5 million.

Operating results amounted to SEK 169.9 million in the third quarter, compared to SEK 180.3 million in the prior-year Q3 period. Last year they included a positive effect of SEK 6.5 million in connection with the acquisition of Tenson AB.

Corporate
Corporate segment net sales were down 4 percent year-over-year to SEK 1,232.6 million with growth in the U.S. and Central Europe.

The Promo sales channel decreased by SEK 37.6 million to SEK 1,067.0 million, while Retail decreased SEK 2.2 million to SEK 8.4 million.

Operating result decreased by SEK 36.7 million year-over-year to SEK 149.9 in the quarter. The lower result was reported to be related to lower sales and higher costs tied to sales and marketing.

Gifts & Home Furnishings
In the third quarter, sales in the Gifts & Home Furnishings segment decreased by SEK 3.5 million to SEK 202.9 million. Sales increased in Sweden but were flat or down in all other regions. Retail sales increased slightly, while promo sales decreased slightly. Both sales channels were said to be in line with the previous year.

The segment’s operating loss was SEK 2.9 million in the quarter, compared to an operating profit of SEK 18.5 million in the prior-year Q3 period. Last year’s results included a SEK 9.6 million positive effect tied to government electricity support.

Region Summary

  • U.S. region net sales increased by 4 percent year-over-year (y/y) in the third quarter. Sports & Leisure and Corporate increased while Gifts & Home Furnishings declined versus the prior-year Q3 period.
  • Sweden region sales increased in the Gifts & Home Furnishings segment but declined in the Sports & Leisure and Corporate segments. Overall sales in the region fell 5 percent year-over-year.
  • Central Europe region sales increased by 5 percent, with growth in the Sports & Leisure and Corporate segment, and a decline in the smaller Gifts & Home Furnishings segment.
  • The Nordic region, excluding Sweden, declined by 1 percent compared to the previous year. The Sports & Leisure segment increased, while Corporate and Gifts & Home Furnishings decreased.
  • Southern Europe region net sales declined 6 percent with lower sales in Corporate and Sports & Leisure and flat sales growth in the Gifts & Home Furnishings business.
  • The Other Countries region net sales decreased by 15 percent year-over-year, with declines in all segments.

Income Statement Summary
Gross profit margin amounted to 48.8 percent, a 20 basis point improvement year-over-year.

“A significant reason we can still deliver a solid operating result in a difficult environment, even though we continue our investments, is due to our stable gross profit margin,” said Jansson. “During the quarter, gross profit margin amounted to 48.8 percent [of sales], which was 0.2 percent better than the previous year, even though many competitors are in price wars in an attempt to maintain volumes and turnover.”

Gross margins in the Corporate and Sports & Leisure segments increased while Gifts & Home Furnishings decreased.

Consolidated operating results decreased to SEK 312.8 million in the most recent quarter from SEK 381.1 million in Q3 last year. The operating margin for the quarter was 13.6 percent of sales this year. The reduction was said to be due to a combination of non-recurring income in the previous year and increased wage costs. The company also continued to invest aggressively in all markets, particularly Germany and the U.S.

Results for the period amounted to SEK 204.1 million, or EPS of SEK 1.54 per share, in Q3, compared to SEK 270.9 million, or SEK 2.04 per share in the year-ago Q3 period.

Cash Flow and Balance Sheet Summary
Jansson said the company’s cash flow and balance sheet from operating activities in the quarter improved from SEK 173.3 million in Q3 2023 to SEK 191.4 million in Q3 2024.

“The equity ratio is now 60.7 percent, a record high, and the indebtedness is very low,” he said. “In the last nine months, I have experienced some impatience among our investors and shareholders that we are not aggressively using our strong financial position for acquisitions. We are in a position to and plan to acquire, but NEVER for just short-term growth. Our acquisitions must create long-term shareholder value and add value to the group for our customers in both the short and long term.  We continue to actively look for acquisition opportunities.”

Image courtesy New Wave Group/Auclair