YEAR-END REPORT SEPTEMBER 2013–AUGUST 2014

FOURTH QUARTER. JUNE–AUGUST 2014

• Group net sales amounted to SEK 242.7 M (219.6). The number of stores totaled 150 compared with 128 in the year-earlier period.
• Gross profit margin was 49.3% (52.3).
• Before depreciation, amortization and impairment, a loss of SEK 3.5 M was reported (profit: 8.4), including a charge for items affecting comparability totaling SEK 5.4 M.
• The loss after tax was SEK 15.8 M (profit: 4.6).
• Earnings per share, including newly issued shares amounted to a negative SEK 1.94 (pos: 0.57).

FISCAL YEAR SEPTEMBER 2013–AUGUST 2014

• Group net sales amounted to SEK 901.6 M (844.1).
• Gross profit margin was 54.0% (57.4).
• Before depreciation, amortization and impairment, a loss of SEK 16.5 M was reported (profit: 46.5), including a charge for items affecting comparability totaling SEK 9.4 M.
• The loss after tax was SEK 51.8 M (profit: 23.4).
• Earnings per share including newly issued shares amounted to a negative SEK 6.37 (pos: 2.88).
• The Board proposes that no dividend be distributed (dividend: SEK 0.25) for the 2013/2014 fiscal year.

SIGNIFICANT EVENTS DURING THE QUARTER

• The Group’s like-for-like sales declined 3% during the quarter. The corresponding increase in the Swedish market was 2%.
• Susanne Börjesson stepped down from her position as CEO and Christel Kinning took over as Acting CEO from September 1, 2014.
• At the Extraordinary General Meeting on August 1, resolutions were passed to perform a rights issue and elect two new Board members: Bo Eklöf and Jimmy Johansson. The Meeting also elected Ulf Eklöf as Chairman and Tommy Jacobson as Deputy Chairman.
• E-commerce for the Morris chain was launched in June.

SIGNIFICANT EVENTS AFTER THE QUARTER

• The company’s management was strengthened with skills in design, sales and brand development. Efforts to strengthen the customer offering through a clearer concept platform are ongoing.
• The Group’s like-for-like sales declined 7% in September. The corresponding decline for the Group in the Swedish market was 8%.
• The company’s rights issue was oversubscribed and no underwriting commitments needed to be utilized. Accordingly, the company raised about SEK 50 M before issue expenses in September.
• E-commerce for the Rizzo Chain was launched in September.
• In view of the past year’s business trends and the ongoing concept efforts, the Board has decided to defer the date for achieving the previously announced financial targets by 12 months. The Group’s targets for the period until the end of the 2016/2017 fiscal year are as follows (previously 2015/2016):
  • Achieve annual net sales of at least SEK 1.2 bn.
  • Reach and maintain a sustainable EBITDA margin of not less than 8%.
  • Have a long-term, average equity/assets ratio in excess of 40%.

 
CEO’S COMMENTS ON PERFORMANCE

I have been through this before, which means that I know we have a lot of work ahead of us. I also know what we have invested and what led to weak earnings for the past quarter and year. We have closed eight unprofitable stores and we have opened 30 new stores the past year. Our investments for the future with new stores and online shopping platforms, in combination with our lack of relevant skills for critical functions, have held us back over the past year. We have cleared our inventory from old products, resulting in a sharply negative impact on the gross margin. The result was that our fixed costs increased and when we did not reach satisfactory volumes, the cost proportion became too high. Potential continues to be extremely substantial. We have a plan for strengthening our position and efforts to realize this have started.

From a store selling bags to an attractive full-range offering
Over the past year, Venue Retail Group has taken several steps in the right direction but, in my opinion, we have focused on the details and missed the big picture. Today, we have a good store structure, skilled employees and considerable service expertise.

Which is good. However, to attract present-day consumers and those of tomorrow requires more. We need to be a relevant player with stronger concept brands, clearer offerings and more contemporary communication. The greatest challenge – and potential – is in our accessories segment. Here, we need to make the transition from selling bags in stores to creating an offering for modern people with a mobile lifestyle.

We have increased the proportion of external brands, which has increased the chains’ attractiveness, but we have also strong internal brands that can be developed and distinguished, such as DonDonna and Rizzo for which I have identified substantial untapped potential. A clearer product structure with the right brands leads to better stores. However, nice stores with the right brands is not sufficient – we have to create strong offerings and campaigns that make us interesting. A collaboration to design the right concept platform was initiated with Stockholm Design Lab before the summer and the results of these efforts will be visible in the appearance of our accessory stores spring 2015.

People and the platform is in place
I assumed my new role slightly more than one month ago and am pleased to have already gathered a highly skilled management group with experience of strategic brand work, sales management and design. Robert Inghamn, who has joined as Marketing Manager and has previously worked with Reebok, Adidas and Eton, and Ethna Yourell Högberg, who has joined as Sales Manager and has experience from Polarn O. Pyret. Adidas and Twilfit. We also have a Design Director in the form of Lee Cotter, with a background including NK, Solo and Fifth Avenue Shoerepair, who will lead the development of the company’s design and product range.

I am also pleased that over the past few months we have launched online stores for all of the company’s chains, the latest being Rizzo in September. We believe strongly in maintaining a presence in places where the modern-day consumer searches and buys – and even if we have only been up and running for a short while, we can already clearly see how the online stores complement and increase the prerequisites for added sales in our physical stores. We shall continue to work toward securing a competitive digital strategy with the aim of increasing customer value.

Put the plan into practice – secure the position
As mentioned earlier, I have been through this before and know that it takes time to implement changes. The preconditions are already in place. My sole focus now is to increase sales and, as soon as possible, leverage the platform we have built up over the past few years. The stores are in place and now we have people in the right position to enable us to capture the market position that we want.

Stockholm, October 9, 2014

Christel Kinning
Acting CEO, Venue Retail Group

FOR FURTHER INFORMATION, PLEASE CONTACT:
Christel Kinning, Acting CEO,
Tel: +46 (0)8 508 99 253
or +46 (0)70 985 25 96
Lars Ingman, CFO,
Tel: +46 (0)8 508 99 244
or +46 (0)70-639 86 87
Ulf Eklöf, Chairman,
Tel: +46 (0)706 34 30 01

This report has not been audited by the company’s auditors.

The information in this report is such that Venue Retail Group is obligated to publish under the Swedish Securities Market Act. The information was submitted for publishing on October 9, 2014 at 3:00 p.m. (CET).

This is an English translation to the Swedish original version.

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