• Operating profit amounted to SEK 81.5 M (86.8). Profit after net financial items amounted to SEK 70.3 M (77.3).
• Profit after tax amounted to SEK 54.8 M (62.2), corresponding to SEK 0.95 (1.10) per share.
• Cash flow from operating activities amounted to SEK 0.5 M (62.0).
• JC/J-Store experienced a weak sales trend during the autumn.
RNB Group
RNB RETAIL AND BRANDS is a retailer that sells ready-to wear and fashion clothing, beauty products, accessories and jewelry. The company is listed on the OMX Nordic Exchange. The RNB Group is organized on the basis of two business areas – Polarn O. Pyret and a distribution platform for national and international brands. Polarn O. Pyret is a brand focused on baby and children’s wear and has 87 stores, including 49 franchise stores. The distribution platform consists of two business areas: Department Stores and Store Concepts. The Department Stores business area operates through stores in the department stores NK in Stockholm and Gothenburg, Steen & Ström in Oslo and Illum in Copenhagen, as well as in Kosta Outlet. In total, the Department Stores business area has 23,000 square meters of retail space distributed among 76 store units. The Store Concepts business area consists of JC, J-Store, Brothers and Sisters and comprises 300 stores, including 170 franchise stores. The total number of stores included in RNB at November 30, 2007 was 463, of which 219 were operated by franchisees.
Weaker-than-expected trend within RNB's JC and J-Store store concepts
During the autumn 2007 season, RNB's JC and J-Store store concepts experienced a weaker-than-expected sales trend, noting a decrease of approximately 10% compared with the corresponding period in the preceding year. The autumn 2007 collections did not satisfy customer expectations. Work on designing new concepts and concept expressions for JC and J-Store is under way and is expected to be completed in the next few months and be presented in time for the autumn 2008 collections.
Market and demand
Sales in the ready-to-wear and fashion clothing industry in Sweden grew by 2.6% during the September/November 2007 period, according to the HUI index for comparable units. For RNB’s operations, sales in comparable stores rose 1.6%.
Revenue and earnings
RNB’s net sales during the period amounted to SEK 923.7 M (889.8), up 3.8%. Sales in comparable stores during the period rose 1.6%.
The gross profit margin for the period was 48.2% (48.5).
Operating profit amounted to SEK 81.5 M (86.8). Profit after net financial items amounted to SEK 70.3 M (77.3). Profit after tax amounted to SEK 54.8 M (62.2).
The synergies generated from the acquisition of JC had a favorable impact on earnings. However, the weak sales trend within JC and J-Store is estimated to have had an adverse impact of about SEK 30 M on earnings, compared with the year-earlier period. Brothers and Sisters, however, developed very well and reported favourable growth.
The units that were newly opened in august 2007 at the department stores Illum in Copenhagen and Steen & Ström in Oslo reported a loss of SEK 7 M during the first quarter.
A favourable trend was noted for others parts of the Group.
Polarn O. Pyret business area
Net sales during the period amounted to SEK 109.1 M (107.5). Sales in comparable stores decreased 0.9%.
Operating profit amounted to SEK 24.0 M (20.4). The number of proprietary stores at the close of the period was 38 (38). In addition, there were 49 (42) franchise stores, including 16 (16) in Sweden and 33 (26) abroad.
The establishment of Polarn O. Pyret outside Sweden is proceeding as planned. It is estimated that Polarn O. Pyret will be established in at least 20 countries no later than 2010.
Department Store business area
The business area includes operations at the department stores NK in Stockholm, NK in Gothenburg, Illum in Copenhagen, Steen & Ström in Oslo and Kosta Outlet. The number of proprietary stores at the close of the period was 76 (64), comprising total retail space of about 23,000 square meters.
Net sales within the Department Stores business area amounted to SEK 289.0 M (233.6). Sales in comparable units rose 10.3%. Operating profit amounted to SEK
16.6 M (20.4). The units that were newly opened in August 2007 at the department stores Illum in Copenhagen and Steen & Ström in Oslo reported a loss of SEK 7 M during the first quarter. Comparable units noted profit growth of slightly more than 10% compared with the year-earlier period, corresponding to an operating margin of 9.3%.
Store Concepts business area
The business area includes the four separate store concepts JC, J-Store, Brothers and Sisters.
Net sales within the Store Concepts business area amounted to SEK 527.8 M (548.8). Sales in comparable units during the period declined 6.2%. Operating profit amounted to SEK 46.2 M (42.6). The figures for the preceding year include Solo and Saks, which contributed net sales of SEK 44.7 M and operating profit of SEK 3.9 M.
During the autumn 2007 season, RNB's JC and J-Store store concepts experienced a weaker-than-expected sales trend, noting a decrease of approximately 10% compared with the corresponding period in the preceding year. The synergies generated from the acquisition of JC had a favorable impact on earnings. However, the weak sales trend within JC and J-Store is estimated to have had an adverse impact of about SEK 30 M on earnings, compared with the year-earlier period.
Compared with the year-earlier period, the combined impact of the favorable trend noted by Brothers and Sisters, synergies from the acquisition of JC and a positive cost trend, more than offset JC’s weak sales trend.
For comparable units, the business area’s earnings rose more than 20%, despite a decrease in sales.
The number of proprietary stores at the end of the period was 130 (140). In addition, there are 170 (170) franchise stores, of which 11 (11) are in Norway.
Financial position and liquidity
Total consolidated assets amounted to SEK 3,060.1 M, compared with SEK 2,993.0 M at the end of the preceding fiscal year. Shareholders’ equity rose SEK 55.7 M during the period amounted to SEK 1,620.8 M (1,565.1), resulting in an equity/assets ratio of 53.0% (52.3).
At November 30, 2007, inventories amounted to SEK 568.0 M, compared with SEK 549.8 M at the same date in the preceding year.
Cash flow from operating activities amounted to SEK 0.5 M (62.0). The weaker cash flow derived from an increase in the capital tied up in the new units at the Illum and Steen & Ström department stores and from increased inventories within JC and J-Store, due to their weak sales trend. Cash flow after investments was a negative SEK 34.6 M (10.1).
Net borrowing amounted to SEK 782.8 M, compared with SEK 728.2 M on August 31, 2007.
At the end of the period, consolidated cash and cash equivalents, including unutilized overdraft facilities, amounted to SEK 207.3 M, compared with SEK 305.8 M at the end of the preceding fiscal year.
Investments and depreciation/amortization
Investments during the period amounted to SEK 36.4 M (101.0), of which the acquisition of companies accounted for SEK 0 M (74.0). Depreciation/amortization during the period amounted to SEK 19.7 M (19.0).
Outlook
The weak sales trend noted by JC during the first quarter of 2007/2008 was caused by an unsuccessful collection, which also expected to have an adverse impact on sales during the second quarter of 2007/2008.
Personnel
The average number of employees during the period was 1,451 (1,332).
Parent Company
Net sales in the Parent Company amounted to SEK 32.4 M (18.9). The result after net financial items amounted to a loss of SEK 21.2 M (loss: 1.1). Investments during the period totaled SEK 7.1 M (77.4), of which company acquisitions accounted for SEK 0 M (74.0).
Future publication dates
Q2 interim report for 2007/2008 April 3, 2008
Q3 interim report for 2007/2008 June 18, 2008
Year-end report for 2007/2008 October 22, 2008
Stockholm, January 29, 2008
RNB RETAIL AND BRANDS AB (publ)
Mikael Solberg
President
If you have any questions about this report, please contact:
Mikael Solberg, President, Tel +46 (0)8-410 520 20, +46 (0)768-87 20 20
Göran Blomberg, CFO, Tel. +46 (0)8-410 520 99, +46 (0)768-87 20 99
Cecilia Lannebo, Investor Relations, Tel +46 (0)8-410 520 45, +46 (0)768-87 20 45