Interim report 1 September 2007 - 28 February 2008
Continued weak trend for JC and J-Store. Favorable trend for Polarn O. Pyret, Department stores and Brothers and Sisters.
First six months, September 1, 2007 – February 29, 2008
• Net sales amounted to SEK 1,777.8 M (1,770.8). Sales in comparable stores declined 0.3%.
• Operating profit amounted to SEK 28.4 M (228.0). Profit after net financial items amounted to SEK 6.5 M (209.2). Impairment loss of SEK 55 M charged against income for JC´s spring collection. Positive nonrecurring items totaling SEK 84.4 M were included in operating profit for the preceding fiscal year.
• Profit after tax amounted to SEK 9.8 M (176.3), corresponding to SEK 0.18 (3.12) per share.
• Cash flow from operating activities was a negative SEK 100.9 M (positive: 133.2).
Second quarter, December 1, 2007 – February 29, 2008
• Net sales amounted to SEK 854.1 M (881.0). Sales in comparable stores declined 2.1%.
• Operating profit amounted to a loss of SEK 53.1 M (141.2). After net financial items, a loss of SEK 63.8 M (profit: 131.9) was reported. Impairment loss of SEK 55 M charged against income for JC´s spring collection. Positive nonrecurring items totaling SEK 84.4 M were included in operating profit for the preceding fiscal year.
• After tax, a loss of SEK 45.0 M (profit: 114.1) was reported, corresponding to a loss of SEK 0.77 (profit: 2.01) per share.
• Cash flow from operating activities was a negative SEK 101.4 M (positive: 71.2). Extended credit periods within JC had a negative impact of about SEK 100 M on the quarter.
After the close of the period
• Polarn O. Pyret signed a Master Franchise agreement concerning the US.
RNB Group
The RNB Group 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 and has 93 stores, including 52 franchise stores. The distribution platform consists of two business areas: Department Stores and Store Concepts. The Department Stores business area operates through shops in the department stores NK in Stockholm and Gothenburg, Steen & Ström in Oslo, Illum in Copenhagen and Kosta Outlet. In total, the Department Stores business area has slightly more than 23,000 square meters of retail space distributed among 79 store units. The Store Concepts business area consists of JC, J-Store, Brothers and Sisters and comprises 301 stores, including 167 franchise stores. The total number of stores included in RNB at February 29, 2008 was 473, of which 219 were operated by franchisees.
Continued weak trend in JC and J-Store
The J-Store and JC store concepts noted a weaker-than-expected sales trend during the period September 2007 – February 2008, and sales declined about 10% compared with the corresponding period in the preceding fiscal year. The autumn 2007 collections did not satisfy customer expectations. Since the spring collection is also regarded as weak, an extra impairment of inventories attributable to spring products, in an amount of SEK 55 M, was charged against the second quarter. Work on designing new concepts and concept expressions for JC and J-Store is under way and is expected to be completed in time for the autumn 2008 collections.
Polarn O. Pyret signs Master Franchise agreement concerning the US
In March 2008, Polarn O. Pyret signed a Master Franchise agreement concerning the US. The American cooperation partner is SPM Retail LLC. The first store in the US is expected to be opened in the spring of 2009.
Market and demand
Sales in the ready-to-wear and fashion clothing industry in Sweden grew by 1.1% during the period September 2007 – February 2008, according to the HUI index for comparable units, which also showed that sales during the second quarter of the fiscal year declined 0.5%. For RNB’s operations, sales in comparable stores declined 0.3% during September 2007– February 2008. RNB sales in comparable stores during the second quarter declined 2.1%
Revenue and earnings
RNB’s net sales during the period amounted to SEK 1,777.8 M (1,770.8). Sales in comparable stores during the period declined 0.3%. The gross profit margin for the period was 43.0% (46.0).
Operating profit amounted to SEK 28.4 M (228.0). Profit after net financial items totaled SEK 6.5 M (209.2). Profit after tax amounted to SEK 9.8 M (176.3). An extra impairment of inventories attributable to spring products within JC and J-Store, in an amount of SEK 55 M, was charged against the second quarter. Positive nonrecurring items of SEK 84.4 M were included in year-earlier profit.
The weak sales trend for JC and J-Store is estimated to have had a negative impact of about SEK 127 M on earnings, compared with the year-earlier period. JC and JC-Store reported an operating loss of SEK 57.5 M for the period. Brothers and Sisters, however, reported highly favorable development and an operating profit of SEK 33.8 M for the period.
The new units that were opened in August 2007 at the department stores Illum in Copenhagen and Steen & Ström in Oslo developed less favorably than expected and reported a loss for the period of SEK 12.6 M.
Other Group units noted favorable development and reported operating profit that was higher than profit in the year-earlier period.
Second quarter
RNB’s net sales during the second quarter amounted to SEK 854.1 M (881.0). Sales in comparable stores declined 2.1% during the same period. The gross profit margin for the second quarter was 37.4% (43.5).
Operating profit for the quarter amounted to a loss of SEK 53.1 M (141.2). The result after net financial items amounted to a loss of SEK 63.8 M (profit: 131.9). An extra impairment of inventories attributable to spring products within JC and J-Store, in an amount of SEK 55 M, was charged against the second quarter. Positive nonrecurring items totaling SEK 84.4 M were included in profit for the year-earlier period.
The weak sales trend for JC and J-Store is estimated to have had a negative impact of about SEK 97 M on earnings, compared with the second quarter of the preceding fiscal year.
The new units that were opened in August 2007 at the department stores Illum in Copenhagen and Steen & Ström in Oslo developed less favorably than expected during the second quarter and reported a loss of SEK 5.6 M.
Polarn O. Pyret business area
Net sales during the period amounted to SEK 208.2 M (210.7). Sales in comparable stores declined 4.4%.
Operating profit improved to SEK 39.8 M (34.0). The number of proprietary stores at the close of the period was 41 (38). In addition, there were 52 (43) franchise stores, including 15 (16) in Sweden and 37 (27) abroad. Eight new franchise stores were opened during the period outside Sweden. Toward the end of the quarter, one franchise store was acquired in the Swedish market and two proprietary stores were opened.
Second quarter
Net sales during the quarter amounted to SEK 99.1 M (103.2). Sales in comparable stores declined 8.1%. Operating profit totaled SEK 15.8 M (13.6). The lower volume was offset by better gross margins attributable to a decrease in discount sales, which contributed to an improvement in operating profit.
In March 2008, Polarn O. Pyret signed a Master Franchise agreement concerning the US. The American cooperation partner is SPM Retail LLC. The first store in the US is expected to be opened in the spring of 2009.
The establishment of Polarn O. Pyret outside Sweden is proceeding as planned. It is estimated that Polarn O. Pyret will be established in at least 20 countries no later than 2010.
Department Store business area
The business area includes operations at the department stores NK Stockholm, NK Gothenburg, Steen & Ström in Oslo, Illum in Copenhagen and Kosta Outlet. The number of proprietary stores at the close of the period was 79 (65), comprising total retail space of about 23,000 square meters.
Net sales by the Department Stores business area totaled SEK 614.1 M (490.0). Sales in comparable units rose 7.9%. Operating profit amounted to SEK 30.4 M (38.5). The new units that were opened in August 2007 at the department stores Illum in Copenhagen and Steen & Ström in Oslo reported a loss of SEK 12.6 M during the first half of the fiscal year. Operating profit for comparable units improved to SEK 43.0 M (38.5).
Second quarter
Net sales during the second quarter amounted to SEK 325.1 M (256.4). Sales in comparable units rose 7.0%. Operating profit amounted to SEK 13.8 M (18.1). The new units at Illum and Steen & Ström had a negative impact of SEK 5.6 M on operating profit for the quarter.
Store Concepts business area
The business area includes the four separate store concepts JC, J-Store, Brothers and Sisters.
Net sales in the Store Concepts business area amounted to SEK 958.5 M (1,071.0). Sales in comparable units declined 7.5%. Operating profit amounted to a loss of SEK 23.7 M (67.3). An extra impairment of inventories attributable to spring products within JC and J-Store, in an amount of SEK 55 M, was charged against the second quarter. The figures for the preceding year included Solo and Saks, which contributed net sales of SEK 79.1 M and operating profit of SEK 3.3 M.
The weak sales trend for JC and J-Store is estimated to have had a negative impact of about SEK 127 M on earnings, compared with the year-earlier period. JC and JC-Store reported an operating loss of SEK 57.5 M for the period. Brothers and Sisters, however, reported highly favorable development and an operating profit for the period totaling SEK 33.8 M.
Second quarter
Net sales during the second quarter amounted to SEK 430.7 M (522.2). Sales in comparable units declined 8.7%. The operating result amounted to a loss of SEK 69.9 M (profit: 24.7). An extra impairment of inventories attributable to spring products within JC and J-Store, in an amount of SEK 55 M, was charged against the second quarter.
The weak sales trends for JC and J-Store are estimated to have had a negative impact of about SEK 97 M on earnings, compared with the second quarter of the preceding fiscal year.
The number of proprietary stores at the close of the period was 134 (128). In addition, there are 167 (170) franchise stores, including 9 (11) in Norway. Six franchise stores were acquired during the second quarter, comprising two in Norway and four in Sweden.
Financial position and liquidity
The Group’s assets totaled SEK 3,143.5 M, compared with SEK 2,993.0 M at the end of the preceding fiscal year. Shareholders’ equity at the close of the period amounted to SEK 1,488.3 M (1,565.1), resulting in an equity/assets ratio of 47.3% (52.3).
At February 29, 2008, inventories totaled SEK 532.2 M, compared with SEK 490.9 M a year earlier. New units resulted in an increase in inventories of about SEK 55 M.
Cash flow from operating activities was a negative SEK 100.9 M (positive: 133.2). Extended credit periods within JC had a negative impact of about SEK 100 M on cash flow during the quarter. Cash flow after investments was a negative SEK 168.8 M (positive: 207.4).
Net debt amounted to SEK 1,005.0 M, compared with SEK 728.2 M on August 31, 2007.
Consolidated cash and cash equivalents at the close of the period, including unutilized overdraft facilities, amounted to SEK 123.9 M, compared with SEK 305.8 M at the end of the preceding fiscal year.
Investments and depreciation/amortization
Investments during the period totaled SEK 69.8 M (118.4), of which company acquisitions accounted for SEK 7.5 M (74.0). Depreciation/amortization during the period amounted to SEK 41.3 M (38.4).
Personnel
The average number of employees during the period was 1,520 (1,366).
Parent Company
Net sales in the Parent Company amounted to SEK 66.7 M (41.8). The operating result after net financial items amounted to a loss of SEK 44.5 M (loss: 15.6). Investments during the period totaled SEK 14.5 M (78.2), of which company acquisitions accounted for SEK 0 M (74.0).
Future outlook
Earnings for the first half of the year were adversely affected by impairment losses and a weak sales trend for JC and J-Store. The ongoing repositioning of JC and J -Store is expected to be finalized in time for the 2008 autumn collection.
Future publication dates
Q3 interim report for 2007/2008 June 18, 2008
Year-end report for 2007/2008 October 22, 2008
Stockholm, April 3, 2008
RNB RETAIL AND BRANDS AB (publ)
Mikael Solberg
President
If you have any questions about this report, please contact:
Mikael Solberg, President, Tel +46 (0)8-410 520 20/+46 (0)768-87 20 20
Göran Blomberg, CFO, Tel. +46 (0)8-410 520 99/+46 (0)768-87 20 99
Cecilia Lannebo, Investor Relations, Tel +46 (0)8-410 520 45/+46 (0)768-87 20 45
RNB RETAIL AND BRANDS AB 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, Steen & Ström, Illum and Kosta oulet department stores. The store concepts comprise JC, J-Store, Brothers and Sisters.
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