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Tiger of Sweden compels IC Group to downgrade outlook

By Prachi Singh

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Management

Consolidated revenue for H1 2016/17 at IC Group amounted to 1,517 million Danish krone (214 million dollars) corresponding to a growth rate of 4.9 percent or 6.3 percent measured in local currency. For the financial year 2016/17, the company expects to report a revenue growth of 5-6 percent measured in local currency against earlier outlook of at least 6 percent due to poor performance of Tiger of Sweden brand.

Second quarter segment-wise performance in Q2

Consolidated revenue amounted to 666 million Danish krone (94 million dollars), growth of 10.4 percent or 12.5 percent measured in local currency in the second quarter. The Group opened 10 stores in Q2 2016/17. The gross profit amounted to 381 million Danish krone (53 million dollars), and the gross margin was thus improved to 57.2 percent. The consolidated operating profit amounted to 45 million Danish krone (6.3 million dollars), corresponding to an EBIT margin of 6.8 percent compared to 3.2 percent for Q2 2015/16.

Peak Performance generated revenue for the second quarter of 267 million Danish krone (37 million dollars) corresponding to a growth rate of 21.9 percent or 24 percent measured in local currency driven by both the wholesale channel as well as the retail channel. IC Group said, timing effects had a positive impact on revenue by approx. 15 million Danish krone (2.1 million dollars). The operating profit amounted to 49 million Danish krone (6.9 million dollars) corresponding to an EBIT margin of 18.4 percent.

Tiger of Sweden generated revenue of 220 million Danish krone (31 million dollars), an increase of 0.9 percent or 3.5 percent in local currency. Revenue from the wholesale channel declined due to closure of franchise stores and lower in-season selling, so the growth was driven by the retail channel where new stores and high e-commerce growth contributed. The operating profit amounted to 6 million Danish krone (0.8 million dollars) against 7 million Danish krone (0.9 million dollars) corresponding to an EBIT margin of 2.7 percent compared to 3.2 percent.

By Malene Birger generated revenue of 77 million Danish krone (10.9 million dollars), growth of 1.3 percent or 3.6 percent in local currency). This increase was attributable to the wholesale channel as well as high e-commerce growth. The company said, gross margin deteriorated due to higher discounts and a larger amount of returned products whereas the cost ratio improved marginally.

Revenue from the Group’s Other brands increased by 6.4 percent or 6.5 percent in local currency to 100 million Danish krone (14 million dollars, which the company said was primarily driven by Designers Remix. The operating profit amounted to 4 million Danish krone (0.5 million dollars) resulting in an EBIT margin of 4 percent compared to 4.3 percent last year.

Segment performance of IC Group in H1

Peak Performance revenue of 615 million Danish krone (87 million dollars) rose 9.4 percent or 10.7 percent in local currency, which the company said was driven by both the wholesale channel as well as the retail channel. The operating profit amounted to 111 million Danish krone (15 million dollars) corresponding to an EBIT margin of 18 percent compared to 17.6 percent.

Tiger of Sweden revenue of 509 million Danish krone (72 million dollars) increased 2.8 percent or 4.6 percent in local currency. Growth, IC Group said, was driven by a positive effect of approximately 18 million Danish krone (2.5 million dollars) caused by a shift in deliveries in Q1 as well as new stores opened during 2015/16 and e-commerce. The operating profit amounted to 61 million Danish krone (8.6 million dollars) corresponding to an EBIT margin of 12 percent.

By Malene Birger’s revenue declined by 2.2 percent to 176 million Danish krone (24 million dollars). Measured in local currency, this amounted to a revenue decline of 0.4 percent. The operating profit amounted to 4 million Danish krone (0.5 million dollars) against 13 million Danish krone (1.8 million dollars). The gross margin, the company said, deteriorated due to higher discounts and a larger amount of returned products whereas costs were negatively affected by non-recurring costs of 4 million Danish krone attributable to a comprehensive brand and positioning analysis carried out in Q1 2016/17.

Revenue from the Group’s other brands increased by 3.9 percent or 4 percent measured in local currency to 215 million Danish krone (30 million dollars) for H1 2016/17. The operating profit amounted to 17 million Danish krone (2.4 million dollars). The EBIT margin was improved by 7.9 percent.

The company said, consolidated revenue increased in both the wholesale channel as well as the retail channel – in the latter driven by new stores and e-commerce. The consolidated operating profit amounted to 180 million Danish krone (25 million dollars) against 182 million Danish krone (25.7 million dollars) resulting in an EBIT margin of 11.9 percent compared to 12.6 percent for H1 2015/16.

IC Group downgrades outlook for the FY16/17

The company said, due to the development in in-season selling to wholesale customers, especially in Tiger of Sweden, the revenue growth rate is now expected to be at a level of 5-6 percent measured in local currency compared to previous guidance of at least 6 percent. Based on the current exchange rates of the Group’s primary sales currencies, this corresponds to a reported revenue growth rate of 4-5 percent against previous outlook of at least 5 percent.

Revenue growth is primarily expected to be driven by the retail channel where in particular new stores will generate growth. At present, IC Group expects to open 15-20 new stores for the financial year 2016/17. The Group opened 13 new stores during H1 2016/17.

The company added that the changes initiated in 2016 in Tiger of Sweden have now resulted in a number of non-recurring costs, in particular severance payments as well as costs related to distribution changes in the brand. So the EBIT margin is now expected to attain a level of 7-8 percent compared to 8-9 percent announced earlier.

Summing up

H1 revenues rise 1,517 mn Danish krone
Q2 revenues up 666 mn Danish krone
  • Despite revenue rise in H1, IC Group has updated its outlook following disappointing performance of the Tiger of Sweden brand and now expects 5-6 percent rise in FY16/17 revenues against earlier outlook of at least 6 percent..
  • The company expects to open 15-20 new stores for the financial year 2016/17
IC Group