Kappahl keeps operating margin high – will expand global with e-commerce

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The warm autumn affected the fashion industry with lots of offers and prices cuts.

Still Kappahl delivered an improved operating margin – with Norway and Swededn as the best performing markets.

”We are looking into future launches of Shop Online in markets where KappAhl is not yet represented,” says CEO Johan Åberg.

Kappahl

Johan Åberg comments that Kappahl was affected by the warm autumn, but sums up that fashion chain delivers a gross margin and operating profit in line with the previous year. The operating margin for the first quarter landed at 8.1 percent (8.0).

The quarter’s sales challenges differed between Kappahl’s markets. In Norway and Sweden the performance was in line with the rest of the market, while sales in Finland continue weak in the recession.

”In Poland the challenge has continued to increase our sales. We are working further to close unprofitable stores and better adapt our offer to this market.”

During the period Kappahl converted eight stores to a new store concept. Johan Åberg comments that initial measurements indicate positive effects on customer experience and sales in these stores.

”We have good reason to believe that the effects will be apparent in the second quarter figures for the stores concerned. Conversions are continuing at a rapid rate; in the first part of the year we are planning to convert up to 30 stores. The high rate of conversion will double the investment level this year.”

The conversion rate, the percentage of visitors to the store who buy, also showed a positive trend in the autumn.

”An important interim objective in this work was the launch of Shop Online in Norway and Finland at the end of November. The next launch will be in Poland in the first half of 2015 and we are also looking into the possibility of future launches of Shop Online in markets where KappAhl is not yet represented.”

The new brand for small children, Newbie, was established as a separate store concept and opened its first store in Stockholm.

”Understanding the market and relating to customers’ attitudes, behaviour and the trends they recognise continues to be our most important challenge. We will continue to strengthen KappAhl’s brand and we will increase sales in comparable stores. Important activities apart from those mentioned above are improving efficiency of the entire supply chain, for a better gross margin and to redistribute human resources to sales promotion activities,” says Johan Åberg.

KappAhl Q1 2014/2015

First   quarter (Sep-Nov)
2014/2015 2013/2014 Change
Net sales, SEK million 1 174 1 243 -69
Operating profit/loss, SEK million 95 99 -4
Gross margin % 63,3 63,3 0,0
Operating margin, % 8.1 8,0 0,1
Profit after tax, SEK million 61 62 -1
Earnings per share after dilution, SEK (Note   1) 0,81 0,83 -0,02
Cash flow from operating activities, SEK million 68 125 -57

 
”KappAhl, like the rest of the industry, was affected by the warm autumn. Efforts to achieve higher margins and lower costs continue. To sum up we are delivering a gross margin and operating profit in line with the previous year.”

Johan Åberg, President and CEO.