Interim report 1 September 2006 - 30 November 2006
Growth and sharp increase in earnings
• Net sales amounted to SEK 889.8 M (315.4), an increase of 182 percent. Sales for comparable stores rose by 6.7 percent.
• Operating profit totaled SEK 86.8 M (31.3), up 177 percent. Profit after net financial items amounted to SEK 77.3 M (30.8).
• Profit after taxes amounted to SEK 62.2 M (22.3), corresponding to SEK 1.1 (0.67) per share.
• Cash flow from operating activities amounted to SEK 62.0 M (3.4).
• Establishment at Illum department store in Copenhagen.
Events since close of the reporting period
• Solo and Saks have been sold to Varnergruppen, effective February 1.
• Expansion of retail space at Steen & Ström by approximately 1,000 square meters.
• Decision taken to initiate internationalization of the J-Store concept.
RNB is organized on the basis of two business areas – Polarn O. Pyret and a distribution platform for national and international brands. Polarn O. Pyret is a brand focused on baby and children’s wear. The distribution platform consists of two main areas, Department Stores and Store Concepts. Department store operations are conducted via stores in the NK and Steen & Ström department stores. The store concepts comprise JC, J-Store, Solo, Brothers, Sisters and Saks. At November 30, 2006, the RNB Group had a total of 454 stores, of which 212 are operated by franchisees.
Establishment at Illum department store in Copenhagen
The Department Stores business area is expanding its distribution platform by establishing a presence at Illum in Copenhagen. In total, there will be approximately 2,000 square meters of retail space that will offer men’s fashion, cosmetics, jewelry and watches. The men’s fashion department is scheduled to open at the end of spring 2007 and other departments will open in August 2007.
RNB sells Solo and Saks
Solo and Saks have been sold to Varnergruppen, effective February 1. The sale is in line with efforts to streamline operations and focus fully on the store concepts that RNB gained access to through the acquisition of JC. The sale comprises a total of 16 stores and the purchase price is SEK 150 M, which is expected to generate a tax-free capital gain of approximately SEK 110 M.
Expansion of retail space at Steen & Ström by approximately 1,000 square meters
RNB has reached an agreement concerning the expansion of retail space at Steen & Ström by approximately 1,000 square meters. The expanded space will be used mainly for sales of ladies’ fashions and sportswear. It is estimated that the new space will be put into service during August 2007.
Internationalization of the J-Store concept
J-Store is a concept that focuses on the age group comprising children of 6 to 13 years and focuses mainly on jeans-related fashions. A decision has been taken to initiate the internationalization of J-Store, which will be implemented in accordance with the business model applied for Polarn O. Pyret.
Market and demand
During September to November 2006, retail sales in the ready-to-wear clothing sector in Sweden rose 2.5 percent for comparable units, according to the Swedish Wholesale and Retail Research Institute’s lightning index. RNB’s sales for comparable stores rose by 6.7 percent.
Sales and earnings
RNB’s net sales for the period increased by 182 percent to SEK 889.8 M (315.4). The acquisition of JC had a favorable impact of SEK 504 M on net sales during the period. Sales in comparable stores rose by 6.7 percent during the period.
The gross profit margin for the period was 48.5 percent (51.8). The new operations added to RNB through the acquisition of JC generate a lower margin than other parts of RNB.
Operating profit for the period rose sharply totaling SEK 86.8 M (31.3). Profit after net financial items amounted to SEK 77.3 M (30.8). Profit after taxes was SEK 62.2 M (22.3). The fact that previously claimed but not approved tax loss carryforwards have now been approved and can thus be credited had a favorable impact of SEK 6.0 M on tax expenses.
Through the acquisition of JC, the Group gained access to tax loss carryforwards of EUR 11 M pertaining to previous operations in Germany. These loss carryforwards have been capitalized in the consolidated accounts. The company’s assessment is that the prospects for utilizing the loss carryforwards in the future are favorable. The loss carryforwards have a value of SEK 28.6 M for tax purposes.
Polarn O. Pyret business area
Net sales during the period rose 29.8 percent to SEK 107.5 M (82.8). The sales increase for comparable stores was 25.3 percent. The concept was streamlined during the autumn through the removal of the ladies collection, which increased the focus on babywear and children’s collections.
Operating profit amounted to SEK 20.4 (14.7). At the end of the period, the number of proprietary stores was 38 (37). In addition, there were 42 (27) franchise stores, of which 16 (15) were in Sweden and 26 (12) in other countries.
Establishment of Polarn O. Pyret outside Sweden is proceeding as planned. Management estimates that Polarn O. Pyret should be established in at least 20 countries by 2010.
Department Stores business area
The business area comprises operations conducted at the NK Stockholm, NK Gothenburg and Steen & Ström in Oslo department stores and the Kosta Outlet. As of spring 2007, the business area will also include the operations conducted at the Illum department store in Copenhagen.
Net sales within the Department Stores business area rose 32.6 percent to SEK 233.6 M (176.2). The sales increase for comparable units was 6.1 percent. Operating profit amounted to SEK 20.4 M (16.8). At the end of the period, the number of proprietary stores was 64 (55).
The business area will be starting up another new operation during the year through the establishment at Illum in Copenhagen. This will comprise a total of approximately 2,000 square meters distributed among men’s fashion, cosmetics, jewelry and watches. The men’s fashion department is scheduled to open at the end of spring 2007 and other departments will open in August 2007.
During autumn 2007, the operations at Steen & Ström will be increased by an additional 1,000 square meters. The expanded space will be used mainly for sales of ladies’ fashions and sportswear.
Store Concepts business area
The business area comprises the JC, J-Store, Solo, Brothers, Sisters and Saks store concepts. As a feature of efforts to streamline operations and sharpen the business area’s focus, the Solo and Saks concepts have been sold to Varnergruppen, effective February 1, 2007.
Net sales within the Store Concepts business area amounted to SEK 548.8 M (56.6). The sales increase was attributable to the acquisition of the JC Group. Sales in comparable units rose 2.0 percent. Operating profit amounted to SEK 42.6 M (2.2). The increase in earnings was attributable to the acquisition of the JC Group.
At the end of the period, the number of proprietary stores was 140 (16). In addition, there were 170 (0) franchise stores, including 11 (0) in Norway.
Financial position and liquidity
Consolidated total assets amounted to SEK 2,900.5 M, compared with SEK 2,862.5 M at the end of the preceding fiscal year. Shareholders’ equity amounted to SEK 1,350.7 M (1,273.0), corresponding to an equity/assets ratio of 46.6 percent (44.5).
Shareholders’ equity grew during the period by SEK 103.6 M, of which SEK 45.7 M was added through the acquisition of JC. Minority shareholders account for SEK 11.0 M of RNB’s shareholders’ equity.
On November 30, 2006, inventories amounted to SEK 512.4 M, compared with SEK 202.6 M a year earlier. The increase was mainly attributable to the acquisition of JC.
Cash flow from operating activities amounted to SEK 62.0 M (3.4). Cash flow after investments amounted to SEK 10.1 M (neg. 17.5), with the JC shares having a negative impact of SEK 28.6 M on cash flow.
Net debt amounted to SEK 877.2 M, compared with SEK 890.2 M on August 31, 2006.
Including unutilized overdraft facilities, the Group’s cash and cash equivalents amounted to SEK 173.3 M at the end of the period, compared with SEK 217.8 M at the end of the preceding fiscal year.
Investments and depreciation
Investments during the period amounted to SEK 101.0 M (21.4), of which the JC shares accounted for SEK 74.0 M. Depreciation during the period amounted to SEK 19.0 M (6.3). The increase in depreciation was due to the acquisition of JC.
The assessment for 2007 is that growth in the Swedish retail sector will be healthy which, together with the preceding year’s acquisition of JC, is expected to have a favorable impact on the RNB Group’s net sales and earnings.
The average number of employees during the period was 1,332 (590). The increase was attributable to the acquisition of JC.
Net sales in the Parent Company during the period amounted to SEK 0 M (0). After net financial items, the Parent company reported a loss of SEK 1.1 M (loss: 1.9). Investments during the period totaled SEK 77.4 M (1.6), of which the acquisition of companies accounted for SEK 74.0 M (0).
Future reporting dates
Q2 interim report for 2006/07 March 30, 2007
Q3 interim report for 2006/07 June 20, 2007
Year-end report 2006/07 October 19, 2007
Stockholm, January 24, 2007
RNB RETAIL AND BRANDS AB
President and CEO
Questions regarding this report will be answered by:
Mikael Solberg, President and CEO, +46 (0)8-670 95 95, +46 (0)708-18 44 40
Göran Blomberg, CFO, +46 (0)8-670 95 99, +46 (0)733-97 95 99
RNB RETAIL AND BRANDS AB conducts operations in business areas comprising
Polarn O. Pyret and a distribution platform for national and international brands through the JC, J-Store, Brothers, Sisters, Saks and Solo store concepts and department store operations at NK in Stockholm and Gothenburg as well as at Steen & Ström in Oslo.