XXL is concluding one of its most challenging years with negative sales development and disappointing results, but with full focus on delivering the “Reset & Rethink” plan with underlying positive indicators. In summary 2023 was a year of change, with both a new CEO and Chairman as well as a several new members of both the Board of Directors and the Executive Management team. During 2023 XXL successfully exited its operations in Austria, after several years of losses, and the company will continue to consolidate markets and sales channels by also exiting its operations in Denmark during Q1 2024 as well as closing the mobile app in all markets and relocating and downsizing select stores. Furthermore, cost out ambitions were increased in 2023, with a positive effect already, but even more so in 2024 and fully in 2025. The first phase of the “Reset & Rethink” plan, centered around five must win battles, is expected to deliver an EBITDA run-rate uplift of NOK 500-750 million during the next 12-18 months. The plan is progressing well, and most initiatives are expected to begin to yield positive financial contribution gradually during 2024 and beyond.
XXL delivered negative year over year growth of 9 percent in the fourth quarter 2023, and total operating revenue amounted to NOK 2.0 billion (NOK 2.3 billion). The sports and outdoor retail market in the Nordics continued to be challenging, with yet another challenging quarter, making it the eight consecutive quarter with negative growth, leading to widespread and heavy campaigning and discounting activities in all markets. To strengthen customer loyalty, with increased buying frequency and share of wallet, XXL has renewed its customer club XXL Reward by introducing bonus points. This has led to a provision of NOK 70 million in the fourth quarter, directly impacting sales and gross margin negatively. Moving forward the margin impact will be lower, as the fourth quarter was the launch quarter for the strategically strengthened customer club, with high initial costs that will be lower from January and onwards. The inventory level is back to a normalized level. However, mixed effects of higher share of the inventory on higher price points and capital-intensive products have adversely affected availability and sales on lower price points.
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EBITDA amounted to negative NOK 13 million (negative NOK 236 million). Total liquidity reserve in the quarter ended at NOK 760 million (NOK 746 million) and the net interest-bearing debt amounted to NOK 876 million (NOK 1 054 million). XXL has also made an impairment of its technical goodwill leading to an extra ordinary write-down of NOK 522 million as well as write-down of right-of-use assets of NOK 54 million.
Highlights:
- Concluding a disappointing and challenging 2023 with weak Q4 results
Total operating revenue of NOK 2 049 million (2 264 million)
EBITDA of negative NOK 13 million (negative NOK 236 million)
- But with a strengthened balance sheet going into 2024
Reduced inventory by NOK 552 million and payables reduced by NOK 335 million
Total liquidity reserves of NOK 760 million (NOK 746 million)
Extra ordinary write-down of NOK 576 million related to technical goodwill and right of use assets
-And the “Reset & Rethink” strategy progressing according to plan
CEO Freddy Sobin says:
“As 2023 concluded, we faced a challenging Q4, marking the most difficult year to date in XXL’s history. The industry-wide struggle, characterized by reduced demand, extensive discounting, and oversized inventories, impacted us significantly. Despite these challenges, we are proud of the resilience and dedication shown by our 5 000 employees.
In response to these challenges, we embarked on a new journey over the past year, beginning to lay the foundation for future proofing XXL in 2024 and beyond.
Our new strategy, Reset & Rethink, is designed to fortify XXL’s leading position in the market. This strategy encompasses a suite of critical initiatives: from bolstering our leadership team with key appointments, to implementing significant changes in our operational and strategic directions. We’ve streamlined our inventory and taken decisive steps to normalize and then further optimize our inventory levels, reducing it by NOK 853 million. We have also made strategic exits from non-performing markets and ventures. Additionally, we launched the XXL Reward program and initiated a cost reduction program that will yield gross savings of NOK 300 million. On the operational front, we’ve restructured our purchasing to focus more on lower price points and enhancing availability”.
Outlook
Total operating revenues for the Group in January 2024 decreased to around NOK 550 million. The winter conditions have been favorable and XXL had growth in important winter categories like alpine and cross country. Sales of non-seasonal products and other capital-intensive products have been challenging. Limited product availability on important price points has been holding back sales potential as well. However, gross margin has been materially strengthened compared to the same period previous year. XXL started a massive clearance campaign in late January 2023 with strong sales in the beginning of the campaign also impacting the comparable figures year over year.
As seen in previous quarters XXL expects the market to remain challenging and uncertain going into 2024 and with general high campaign pressure.
XXL is in the phase of implementing several strategic initiatives and projects to improve profitability and operational efficiency moving forward, called “Reset & Rethink”. Five must win battles are expected to deliver an EBITDA uplift of NOK 500-750 million during the next 12-18 months.
XXL’s target and goal moving forward is to come back to sound profitability as well as over time gain market shares in all markets and regain growth in the E-commerce channel.
In line with the existing strategy, XXL will continue to mainly invest in operational efficiency, store footprint optimization, customer experience enhancing projects in both stores and in the E-commerce platform, as well as in IT and tech. Total CAPEX for XXL Group in 2024 is expected to be around NOK 100-150 million.
XXL has thus far no new store openings signed in 2024. Mid- to long-term XXL continues to expect the pace of the store roll-out to be 2-3 new stores per year including relocations of stores. At the same time XXL will be downsizing several existing stores. Short term the Group will continue to focus on optimizing the store portfolio, including evaluation of selective closures of low performing stores with limited turnaround abilities.
Restricted share units program for employees
The Board has decided to implement a program of restricted share units for around 20 key employees. The amount of the program is around NOK 5 million worth of restricted shares to be distributed in total. The allocation price will be equal to the volume weighted average market price the next five trading days, starting today 8 February 2024 and ending 14 February 2024. The shares will vest after three years subject to the holder at the time of exercise is employed in XXL.
As previously disclosed, the restricted share units program for 2021 expires five days after the Q4 2023 report. Consequently, the exercise window opens 8 February 2024 and commences until 14 February 2024.
For further information please find attached the quarterly report and the presentation material.
For APMs please see the quarterly report for further definitions and reconciliations.
The results will be presented at 08:30 CET by CEO Freddy Sobin and CFO Stein Eriksen. The presentation will be held in English and will be webcasted at www.xxlasa.com.
For further queries, please contact:
Investor Relations:
Tolle O. R. Grøterud
Phone: +47 902 72 959
E-mail: ir@xxlasa.com
Jan Christian Thommesen
Phone: + 47 918 21 387
Email: presse@xxl.no
This information is considered to be inside information pursuant to the EU Market Abuse Regulation and is subject to the disclosure requirements pursuant to section 5-12 of the Norwegian Securities Trading Act. This stock exchange announcement was published by Tolle O. R. Grøterud, Investor Relations Officer at XXL ASA, on 8 February 2024 at 07:00 CEST.
About XXL ASA
XXL is a leading sports retailer with stores and e-commerce in Norway, Sweden, Finland and Denmark. It is the largest among the major sports retailers in the Nordics. XXL pursues a broad customer appeal, offering a one stop shop experience with a wide range of products for sports, hunting, skiing, biking and other outdoor activities. XXL’s concept is to have the largest stores with the best prices and the widest assortment of products, focusing on branded goods.
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