Sportamore interim report January 1 - March 31, 2019
Growth in total sales and stable gross margin development
In a quarter with stagnating market growth and an industry characterized by high campaign intensity Sportamore shows a sales growth of 13.3 per cent and the total sales* totalled SEK 237.7 (209.9) million. We want more, and although this growth rate is just below our recently updated financial goals we do not believe that it affects our ability to deliver on our growth goals on an annual basis. Customer orders grew by 22 per cent during the period while the average order value fell by 7.1 per cent compared to the first quarter last year. The change in average order value is primarily explained by a deferred flow of returns and an earlier seasonal shift than last year.
The gross margin reflects a strong improvement compared to the prior quarter and now totals 36.5 per cent – in line with same quarter last year. We want more in this regard too and the development strengthens the picture of our ability to control gross margin even under more challenging market conditions. The positive margin trend has also been evident at the beginning of the second quarter and we expect continued improved gross margin in the second quarter compared to the previous year.
The customer base continues to grow according to plan and we are seeing a continued annual growth acceleration in the annual growth of the customer base which now totals 1,011,000 active customers. We are also seeing a continued, positive trend in the number of orders per active customer which provides order growth leverage over time. The proportion of customers who returned within 90 days of the previous transaction was over 40 per cent during the period, despite a strong influx of new customers. Customer acquisition cost in terms of absolute numbers and lifetime value remain stable over time, while marketing expenses as a proportion of operating income increased during the period. The latter is a direct result of a lower average order value but based on a stable lifetime value per customer we have actively continued to invest in new customer acquisition.
Unrealized economies of scale affect earnings in the quarter
Sportamore has over the past two years invested in infrastructure and automation for scalability and efficiency. The benefits of this strategy when turnover rises were evident in the fourth quarter of 2018. The Group’s operating expenses, excluding cost of goods, have a smaller linear correlation with sales than before, which is of course favorable during growth, but with a lower turnover during the period, this has had a negative effect on the EBIT margin which amounted to SEK -9.8 (1.3) million for the quarter. We maintain that 2019 on a full-year basis is expected to generate improved earnings compared to 2018, at the same time as the customer base's strong growth increases the future potential. We are confident that continued efficiency gains will contribute to further improvement of the cost structure for the coming quarters.
Updated financial goals
Sportamore will continue its strong growth journey. In our financial goals, we state that we will deliver sales growth of 15-25 per cent annually. We also see that the investments made in infrastructure and automation has given us a fantastic position to enjoy great economies of scale together with future growth.
This is one of the reasons that have strengthen our belief in the Group’s ability and caused Sportamore’s financial goal to be updated. We are moving away from our previous, EBITDA-based goal which is replaced with a goal of an EBIT margin of at least 5 per cent for all markets. The transition to EBIT from previous EBITDA is also related to the fact that our investments in inventory automation have significantly increased our depreciations and thus we consider EBIT to be a more relevant measure in this context.
Expansion to France
Preparations for the expansion to France are continuing according to plan, and we now expect to be up and running in the third quarter 2019. Our focus on automation and scalable processes has simplified the work and lays good foundation for potential to continue to scale up our total addressable geographical market.
Sound finances and healthy inventory level
The Group’s financial position remains healthy, with cash in hand totalling SEK 51 million, excluding an overdraft facility of SEK 40 million. The inventory value at the end of the period totalled SEK 308 (238) million. The inventory remains healthy, with less than 16 per cent being more than six months old. At the same time, we see a higher volume of winter goods in stock than last year, and this will be held in inventory until the autumn, when we believe that it can once more be sold at the planned margin. We are currently well-stocked with seasonal goods – ready to meet the spring and summer of 2019 with accelerating growth. We are maintaining our ambition to increase stock turnover during the year.
* Own sales plus the total value of products sold from commission-based revenues, where own sales refers to operating income less provision from commissionbased sales.
This information is information that Sportamore AB (publ) is obligated to disclose pursuant to the EU Market Abuse Regulation and the Swedish Securities Market Act. The information was submitted, through CEO Johan Ryding, for publication on 30 April 2019 at 08:00 CET.
Fore more information, visit www.sportamore.se or contact:
Johan Ryding, CEO
Phone: +46 705 56 22 26
Sportamore AB (publ) is the Nordic region's leading and fastest growing technology company that sells sport-related products online. In 2018, the Group had sales of SEK 947 million. In May 2015, Sportamore was listed on NASDAQ Stockholm, and has won prices for the Year's Online Store, E-Commerce of the Year, and won the award as the Customer Service of the Year. In 2018, Sportamore and Sportamore Outlet had over 54 million visitors. Sportamore sells over 30,000 products from around 300 different brands representing more than 30 different sports. Sportamore always has focused on an attractive customer offering through free shipping, free returns, 30-day purchase and price guarantee.
For more information please visit www.sportamore.se