Odd Molly International AB (publ)
Stockholm, Sweden, February 14, 2019
October 1 – December 31, 2018
- Total operating revenue decreased 27 percent to SEK 65.7 million (89.6).
- The gross profit margin increased to 52.4 percent (51.6).
- The operating loss was SEK -22.6 million (-11.1).
- The net loss amounted to SEK -20.7 million (-9.2).
- Earnings per share amounted to SEK -2.46 (-1.60).
- The Board of Directors has proposed to the Annual General Meeting that no dividend be paid for the financial year 2018, as was the case in the financial year 2017.
January 1 – December 31, 2018
- Total operating revenue decreased 20 percent to SEK 346.9 million (432.1).
- The gross profit margin was 53.7 percent (53.9).
- The operating loss was SEK -60.6 million (-4.5).
- The net loss amounted to SEK -53.5 million (-6.3).
- Earnings per share amounted to SEK -7.52 (-1.09).
Events during and after the quarter
- During the year, the company performed a strategic review of the business model which, among other things, resulted in a comprehensive action plan and the development of a licensing model for implementation in a number of international markets. With these initiatives Odd Molly becomes a more streamlined and efficient company with a focus on digital sales, branding and product range, while reducing risk and tied-up capital.
- In October, an agreement was signed with an operator in Portugal and Spain, which under the licensing model has taken over sales to retailers in these markets and operations of the existing store in the El Corte Inglès department store in Lisbon. In February, an agreement was signed with the existing partner in the Czech Republic, Slovakia and Hungary, where he continues to operate existing as well as any new Odd Molly stores in each respective market.
- Implementation of the action plan was initiated with the aim to reduce complexity, tied-up capital and operating costs by around SEK 50 million on a full-year basis. The effects are gradually being realized in 2019 with emphasis on the second half of the year. Restructuring costs of SEK 5.8 million were recognized in the third quarter.
- In line with the strategy to ensure continued strong position and physical presence of the brand, while at the same time reducing the number of stores operated by the company, an Odd Molly store was opened in February in the NK department store in Stockholm under the management of a reseller.
Comment from the CEO
Step by step transition to a faster, more cost and capital efficient business
Odd Molly finished 2018 in line with the weak trend from the previous quarters due to a challenging market and initiated comprehensive restructuring efforts. These initiatives will render positive effects materializing gradually during 2019, with emphasis on the second half of the year. The action plan announced in October is being implemented according to plan to more quickly pivot the business model, simplify operations and reduce costs by about SEK 50 million on an annual basis. This means, among other things, that we will significantly reduce both our product range and retail network.
The transition is affecting sales, even in the stores that have not yet closed. Odd Molly’s total operating revenue in the fourth quarter decreased by 27 percent compared with the same quarter in 2017 and the operating loss was SEK -22.6 million. We did not see the same positive effect in revenue during the regular sale periods during the fall as we did in the previous year, which adversely affected sales but did lead to an improved gross profit margin.
The restructuring work entails both savings and reprioritization to enable selected investments. We are shifting the business model by working with selected licensees to strengthen Odd Molly’s international foothold and at the same time drive sales on oddmolly.com, managed by ourselves. Odd Molly is becoming a more streamlined company with a focus on digital sales, branding and product range.
In line with our strategic focus on increased digital sales, we have strengthened the management team through the addition of a new head of e-commerce, who joined us in February and brings with him extensive expertise and experience at a strategic and operational level.
Product range and brand
Odd Molly has reached a strong brand recognition, especially in Scandinavia, but in order to achieve improved development here and internationally we need to vitalize the brand. Therefore, I am pleased that during the quarter we began the work of revitalizing the Odd Molly brand. The new expression, represented by strong ambassadors, will be visible during the first quarter 2019. At the same time, we continue the optimization and alignment of the product range to our strategy, the market conditions and the consumer behavior, which will also render positive effects on the cost base.
Licenses and collaborations
The licensing model is capital-efficient and creates much better conditions for a local partner to grow and invest in the brand and distribution. With a local partner that builds brand presence and awareness in the market, we get support for a positive development of our own e-commerce (oddmolly.com), which we continue to operate ourselves. The first to convert to licensed markets are Portugal and Spain, the Czech Republic, Slovakia and Hungary. In February an Odd Molly store was opened in the NK department store in Stockholm, operated by one of our longstanding resellers.
In summing up, we have now closed the books on 2018, a transition year with lower sales and negative results – but most importantly with a new strategy to be faster and more cost and capital efficient. We follow our new plan with a clear objective, well aware and humble that it takes time to change a business model. The journey with Odd Molly continues, because we know that the world needs more Mollys!
Jennie Högstedt Björk, CEO
Please see the full report in the attached PDF file.