EXEC: Ahead, Craft, Cutter & Buck Parent Gets Q2 Lift from Sports & Leisure

New Wave Group (NWG), the Swedish-based owner of Ahead, Auclair, Craft, Cutter & Buck, and Tenson, reported that second-quarter net sales increased 4 percent to SEK 2,397.9 million, compared to SEK 2,304.5 million in the year-ago Q2 period. The exchange rate effects during the quarter reportedly positively impacted sales by SEK 18.1 million, or 1 percent of the reported growth. Sales were up 3 percent in constant-currency (cc) terms.

Last year’s acquisition impacted turnover by SEK 10.1 million.

Growth reportedly came primarily from the company’s Sports & Leisure segment, while Corporate and Gifts & Home Furnishings remained flat to last year’s Q2 period.

The Promo Sales channel increased by 2 percent and Retail Sales by 9 percent. Promos increased in the Sports & Leisure segment but decreased in Gifts & Home Furnishings.

Company CEO Torsten Jansson shared that the market was considerably weaker than the company had previously assessed. “That assessment was made based on a potential interest rate cut and possible future interest rate cuts, which would boost sales; however, that was not the case. Our current evaluation is that the promo market decreased by 5 percent to 10 percent depending on the country and that the retail trade continued to experience similar challenges and reductions.”

Jansson said the company foresees a temporary weakness in the market and will continue its market investments as an opportunity to take market share. “Our confirmed orders are also looking better than last year,” he said.

Segment Summary

Sports & Leisure
The Sports & Leisure segment increased 10 percent, and all regions except Other Countries improved their net sales. Net sales from April through June amounted to SEK 958.6 (869.2) million. Acquired business affected sales by SEK 10.1 million. The segment reportedly increased in all regions except Other Countries, which decreased. Both sales channels increased net sales.

Operating results amounted to SEK 121.5 (140.2) million. The lower result is related to a lower gross profit margin and higher costs, mainly from marketing activities and higher personnel costs. Acquired operations had a negative impact of SEK 9.9 million.

Corporate
Corporate segment net sales were reportedly flat to Q2 last year. The segment experienced slightly higher net sales in Sweden and Central Europe and decreased in the other regions. Net sales amounted to SEK 1,232.6 (1,231.7) million. Sales reportedly increased in Central Europe and slightly in Sweden but decreased in other regions. Both sales channels were at the same level as the previous year.

Operating result decreased by SEK 38.2 million to SEK 187.0 (225.2) million. The lower result is attributable to higher costs.

Gifts & Home Furnishings
Gifts & Home Furnishings segment sales were also flat to last year’s second quarter and increased in Sweden and the U.S. but decreased in other regions. Net sales for the second quarter amounted to SEK 206.6 (203.7) million. The segment increased in the U.S. and Sweden but had lower net sales in the other regions. Retail increased slightly while promo decreased slightly.

Operating result decreased compared to last year and amounted to -7.2 (-1.6) MSEK. In addition to a lower gross profit margin, the segment also had slightly higher costs.

Region Summary
Net sales reportedly increased in most regions but decreased in Southern Europe and the Other Countries region.

• U.S. region net sales increased by 5 percent year-over-year (y/y) in the second quarter. Sports & Leisure and Gifts & Home Furnishings increased while Corporate was at the same level as the prior-year Q2 period.
• Sweden region increased its net sales by 6 percent and made improvements in all segments.
• Central Europe region sales increased by 6 percent, related to Sports & Leisure and Corporate segment, while Gifts & Home Furnishings decreased.
• The Nordic region, excluding Sweden, increased by 10 percent compared to the previous year. The Sports & Leisure segment increased, while Corporate and Gifts & Home Furnishings decreased.
• Southern Europe region net sales declined 3 percent. Corporate had lower net sales.
• Other Countries region net sales decreased by 4 percent, attributable to Asia and trading operations in the Corporate segment and Canada in the Corporate and Sports & Leisure segments.

Income Statement Summary
The gross profit margin decreased 50 basis points compared to the previous year and amounted to 49.0 percent of net sales in Q2, compared to 49.5 percent in the year-ago Q2 period. The decrease was related to the Gifts & Home Furnishings and Sports & Leisure segments.

The gross profit margin decreased slightly compared to the previous year, reaching 49.0 (49.5) percent. The decrease pertained to the Gifts & Home Furnishings and Sports & Leisure segments. Corporate was “on par” with last year’s figure.

External costs increased by SEK 58.8 million to negative SEK 441.1 million, compared to negative SEK 382.3 million in the prior year. The increase was mainly related to higher marketing activities, moving costs in Jobman Texet AB, volume-related costs and acquisitions.

Personnel costs increased by SEK 24.5 million to negative SEK 363.2 million in the quarter. The increase was primarily due to a general salary revision and increased activities the company made in several countries.

Exchange rate changes increased these costs by SEK 5.7 million and acquired operations were affected by SEK 12.5 million.

Operating income decreased by SEK 62.7 million compared to the prior-year quarter and amounted to SEK 301.2 million, with the decline primarily related to a lower gross profit margin and higher costs. Acquired operations had a negative impact of SEK 9.9 million.

The operating margin decreased 320 basis points and amounted to 12.6 percent of net sales for the quarter, compared to 15.8 percent of net sales in Q2 last year.

Other operating income decreased by SEK 12.0 million to SEK 15.4 million from SEK 27.4 million in the 2023 Q2 period.

Other Operating Income
The company said this was driven primarily by the operation’s exchange rate gains and set against the profit line Other operating expenses, where mainly the operation’s exchange rate losses are reported. Other operating expenses decreased by SEK 2.1 million and amounted to negative SEK 11.0 million, compared to negative SEK 13.1 million in the year-ago quarter.

The net of the above items amounted to SEK 4.4 million versus SEK 14.3 million in the prior year period.

The period’s net income decreased year-over-year and amounted to SEK 210.3, or SEK 1.59 per share, in the second quarter, compared to SEK 259.6 million, or SEK 1.96 per share, in the 2023 Q2 period. The lower net result was primarily due to last year’s inclusion of a capital gain on property sales of SEK 6.5 million, as well as lower exchange rate gains.

Inventories
Inventories decreased by SEK 602.5 million to SEK 5,112.3 million, of which the exchange rate change when converting to SEK decreased the value by SEK 95.3 million. Acquired operations increased the inventory value by SEK 64.0 million.

Image courtesy Cutter & Buck