Björn Borg Q3’24 preview: Expected to deliver another strong quarter

Björn Borg will report its Q3’24 results on Friday, November 15. We anticipate strong revenue growth compared to the same quarter last year, primarily driven by the integration of the footwear category and continued strong development in the company’s own e-commerce. While we anticipate that reduced discounts within direct-to-consumer sales will continue to positively impact margins, we expect a decline in profitability compared to the same period last year due to increased costs from footwear integration and marketing activities. Given the continued challenging economic environment, our focus will be on demand-related information as well as any insights related to core growth within the footwear category.

We expect continued revenue growth

We expect Björn Borg’s Q3 revenue to increase by a strong 19% year-on-year to 311 MSEK, slightly above Retail Consensus (Pinpoint Estimates). Similar to the last quarter, we expect growth to be driven by the integration of the footwear category, which previously generated revenue through royalties from a licensing partner. With Björn Borg now managing the entire distribution of footwear, all sales from this category will be consolidated, resulting in higher sales growth. Additionally, we observed stable market data from the Swedish clothing market this quarter, along with positive trends among e-tailers. Notably, Zalando, a key e-tailer for Björn Borg in the German market, reported strong third-quarter consumer demand and raised its full-year guidance. Together, these factors are expected to support growth.

By segment, we anticipate the strongest growth in wholesale, with approximately 20% year-on-year, driven by expanded footwear distribution and increased demand from e-tailers. We expect the important consumer direct segment to achieve solid year-on-year growth of around 8%, driven by increased sales in the sports apparel category through Björn Borg’s own e-commerce platform. We estimate that distributors will show good growth during the quarter (around 10%) due to more normalized inventory levels and easier comparison figures. Conversely, the licensing segment is expected to continue showing highly negative growth figures following the integration of the footwear category, which previously constituted a significant part of this segment. However, since the licensing segment's contribution to the group’s topline is modest, the impact on overall results will be minimal.

We expect profitability to decline

We forecast Björn Borg’s Q3 EBIT to increase by 7% to 43.7 MSEK (Q3’23: 40.9 MSEK), slightly higher than Retail Consensus. As a result, we expect profitability (EBIT-%) to decline to 14.0% from the very strong comparison figure at 15.6%. This decline is mainly attributable to increased costs related to the footwear integration and increased marketing expenses, as growth does not come without costs. However, we expect that continued reduced discounts within direct-to-consumer sales are expected to support margins. In the bottom lines of the income statement, we anticipate net financing costs and taxes to remain roughly in line with Q3’23, resulting in an increase in EPS to SEK 1.34 (Q3’23: 1.27).

Our focus remains on demand-related comments

Björn Borg does not provide financial guidance, but we forecast approximately 18% revenue growth and an EBIT margin of 10.8% for the full year of 2024. This is slightly higher than the company’s updated financial targets of annual revenue growth of at least 10% and an annual EBIT margin of at least 10%. Given the strong start to the year and the fact that growth during the year will be supported by the consolidation of the footwear category, we believe the company is well positioned to achieve our full year estimates. However, success will largely depend on consumer demand, especially in the context of macroeconomic conditions. Therefore, we are interested in management's insights into the market environment in the past quarter and the outlook for the coming periods.