Signa Sports United N.V. (SSU) reported sales in its third quarter ended June 30 grew 29 percent, boosted by the full contribution of recently acquired businesses WiggleCRC and Tennis Express. The Berlin-based online platform reduced its guidance for the year due to continued supply chain challenges and weaker consumer spending.
SSU’s businesses include Wiggle, Chain Reaction Cycles, Fahrrad.de, Bikester, Probikeshop, CAMPZ, Addnature, Tennis-Point, TennisPro, and Outfitter.
In Q3 FY22, despite having improved from early FY22 lows, supply chain constraints remained, especially in full bikes and e-bikes. Additionally, the industry was hit by an unexpected deterioration in consumer sentiment, as inflationary pressures and geopolitical events weighed on demand in core markets. Nevertheless, SSU achieved net revenue and gross profit growth on a reported basis by +29 percent and +13 percent YoY respectively, and expanded its customer base by 42 percent YoY to 7.0M active customers in Q3 FY22, as the company’s scale increased. The company is accelerating various initiatives to drive efficiencies and synergies across the group and position itself to deliver its long-term profitable growth targets.
Stephan Zoll, CEO of SSU, said, “Q3 FY22, our second quarter as a consolidated company, confirmed how our scale enabled market share growth in the competitive landscape. While the company demonstrated its ability to enhance and prioritize initiatives in the evolving macroeconomic and operational environment, we are confident that SSU’s strategic projects will accelerate our strengths, to be best positioned for long-term profitable growth when coming out of the current challenges.”
Alex Johnstone, the company’s CFO, said, “While the challenging operating environment has weighed on our organic performance, we are focused on efficiency and leveraging our scale to position SSU for profitable long-term growth. The company is well capitalized to make targeted investments in our logistics and technology platform, to deliver synergy and return to run-rate adjusted EBITDA profitability from the second half of our fiscal year 2023.”
Q3 FY22 Business Highlights/Commentary
- SSU’s increased due to WiggleCRC and Tennis Express acquisitions, leading to reported double-digit revenue growth;
- Stronger effect of demand headwinds and lingering supply constraints on its bike business versus tennis business;
- Heightened promotional activity to drive categories and manage temporary overstock resulting from softening consumer sentiment;
- Adapting to inflationary pressures focused on customer unit economics and increased emphasis on margin-accretive initiatives;
- Numerous Q3 FY22 wins, including the launch of an integrated Hockenheim logistics facility serving its customers at lower cost strategic partnerships with the Intercollegiate Tennis Association (ITA) and Professional Tennis Registry (PTR) and on-site presence at the US Open at the US tennis business level, successful retail media sales, MVP on online bike shops, and several awards to its latest owned brand Nukeproof and Vitus bikes
Key Performance Indicators
- Plus-42 percent YoY growth to 7.0 million active customers, led by recent acquisitions and targeted marketing spend to drive conversion. Legacy SSU +5 percent active customer growth despite consumer sentiment headwinds;
- Meaningful increase in scale with +16 percent YoY traffic growth on a reported basis, thanks to recently closed acquisitions, despite a decline in pro forma organic traffic due to weakening consumer sentiment, supply constraints and lapping COVID-19 driven spikes;
- Strong +29 percent reported YoY increase to 2.6 million net orders due to recent acquisitions. Decline in net orders on a pro forma basis YoY driven by the traffic decrease in the current challenging environment
- Net AOV declined by -4 percent on a reported basis to €100.8, as higher-priced item availability was still limited due to lingering supply chain constraints; and
- Pro forma growth vs. pre-Covid (Q3 FY19) of conversion (+99 bps), net orders (+11 percent) and active customers (+27 percent), despite lower traffic due to Brexit impact on WCRC (-25 percent) and stable net AOV.
- Plus-29 percent net revenue growth to €324 million in Q3 FY22 and +29 percent to €806 million in 9M FY22 on a reported basis. The challenging macroeconomic environment combined with prolonged supply chain constraints weighed on the pro forma performance, with net revenue at -14 percent YoY in Q3 FY22 and -12 percent YoY in 9M FY22. The positive impact of multiple long-term megatrends supported net revenue pro forma growth vs. pre-Covid, at +16 percent vs. Q3 FY19 and +27 percent vs. 9M FY19;
- Gross margin was down -524bps YoY to 35.5 percent in Q3 FY22 and down -304bps to 36.2 percent in 9M FY22, as heightened promotional activity was required to drive consumer demand and manage inventory overstock;
- Adjusted EBITDA reached (€13) million with Adj. EBITDA margin at (4.1 percent) in Q3 FY22, due to lower gross profit and inflationary pressures across cost lines in the current environment; and
- Net loss at (€52) million in Q3 FY22 and (€254) million in 9M FY22, 9M FY22 largely due to one-off accounting charges related to the public listing.
Outlook and Guidance
In light of the sudden deterioration of consumer demand over Q3 FY22 and lingering supply chain constraints during that quarter, the company updated its guidance for FY22 and now anticipates:
- Net revenue at €1,150 million to €1,200 million; and
- Adjusted EBITDA margin at (4.0 percent) to (5.5 percent).
Previously, sales were expected in the range of €1,250 million to €1,400 million. Adjusted EBITDA margin was expected between (3.0 percent) to 0.0 percent.
Photo courtesy Signa Sports/WiggleCRC