Including costs for closing down operations in Denmark and Norway operating loss amounted to SEK 99.8 M

The first quarter (January 2010 – March 2010) • Net sales amounted to SEK 269.9 M (290.1), down 7% compared with the year-earlier period. • Sales in the Group’s comparable stores were unchanged 0% (neg: 27). In local currencies sales trend were positive in all markets. • Gross profit amounted to SEK 124.8 M (147.3), corresponding to a gross margin of 46.2% (50.8). • Loss after tax amounted to SEK 80.1 M (loss: 32.6). A loss per share before dilution of SEK 1.95 (loss: 1.1). • Operating cash flow after investments was negative SEK 32.1 M (neg: 19.9). • Nine stores where closed during the first-quarter. • Expenses of SEK 30.7 M for closing down operations in Denmark and Norway were charged against earnings. • An operating loss of SEK 99.8 (loss: 41.7), including expenses for closing down operations in Denmark and Norway, was reported. CEO’S COMMENTS The launch of the new Hemtex in the Swedish and Finnish markets is approaching rapidly. On May 19, 2010, we will present the changes to the product range, the new store concept and a new visual identity at a capital market breakfast meeting in Stockholm. Accordingly, the company’s efforts during the first quarter have been focused intently on and dominated by the necessary changes that Hemtex is undertaking. We currently have a loyal customer base that we are nurturing and caring for. The purpose of the new Hemtex is to attract new target groups by expanding the offering. Customers should not visit a Hemtex store simply to make an essential purchase – visits should be just as much about being inspired and looking at new patterns, materials, functions and unexpected expressions. The core of the offering should be easy to recognize and appreciate, while the modern product range should be playful and sometimes even artistically challenging. As a result, the size of the steps in the price ladder will be significantly expanded. The work on changing the offering and the product range strategy has been assigned considerable scope in the organization since the start of the year. It can be difficult to strike a balance between, on the one hand, focusing on the current situation and, on the other, managing a resource-intensive and extensive change-over process from the old to the new Hemtex. There is the risk that the customer offering may appear to lack focus and be less attractive than before during this transitional period. At the same time, it was important for us to gradually introduce the repositioning of the brand and thus raise the degree of caution in price offering. Given this background, the year began weakly and the change process had an adverse impact on sales. Net sales declined 7% compared with the year-earlier period, of which approximately 3% was attributable to currency effects. Meanwhile, the restructuring process is continuing in the Group. The Group’s finances will gradually become more stable by means of increased cost control and adopting a consistent approach to unprofitable structures. Loss-making markets have impeded the development and growth potential of the Group and, accordingly, we intend to complete the divestment of the store portfolios in Denmark and Norway in September. Nonrecurring costs of SEK 30.7 M for the closure of Group stores in Norway and Denmark were charged against earnings. The review of the store portfolio in Finland is continuing and no decision has yet been made on the stores that may be closed. All in all, focus on adjustment work toward the new Hemtex resulted in an operating loss of SEK 99.8 M (loss: 41.7). Erik Gumabon, President and Chief Executive Officer

Tags: