Net sales amounted to SEK 2,554.7 M (2,529.3), an increase of 1%. Sales in comparable stores declined 1.9%.
Operating profit totaled SEK 52.2 M (288.2). Profit after financial net items amounted to SEK 12.5 M (260.3). Nonrecurring items totaling profit of SEK 84.0 were included in operating profit for the preceding fiscal year.
Profit after tax amounted to SEK 15.6 M (213.1), corresponding to SEK 0.27 per share (3.75).
Cash flow from operating activities was a negative SEK 39.2 M (positive: 177.3).
Third quarter, March 1, 2008 – May 31, 2008
Net sales amounted to SEK 776.9 M (758.5), an increase of 2.4%. Sales in comparable stores declined 5.4%.
Operating profit totaled SEK 23.8 M (60.2). Profit after net financial items amounted to SEK 6.0 M (51.1).
Profit after tax amounted to SEK 5.8 M (36.8), corresponding to SEK 0.09 per share (0.64).
Cash flow from operating activities amounted to SEK 61.7 M (44.1).
After the close of the period
Board of Directors proposes rights issue amounting to approximately SEK 350 M.
President´s comments on trends
For RNB RETAIL AND BRANDS, the third quarter involved hard work to turn around the weak sales trend in JC and J-Store. The collection error that occurred in autumn 2007, and which had a strong impact on our earnings in the period September 2007 to May 2008, has been thoroughly analyzed and corrected. Our assessment is that the work to reposition JC and J-Store regarding collection, store expression and market communication is now in its final phase and our confidence in a positive sales trend from autumn 2008 stands firm.
Besides JC and J-Store – in which I now feel we have done a thorough job and the route forward is clear – we are seeing a stable trend for Polarn O. Pyret and Brothers and Sisters. Both business areas improved their profitability during the period and the growth strategy for Polarn O. Pyret and Brothers and Sisters remains.
Department Stores is the business area with which I am least satisfied in this report. We have fine units, with a generally favourable sales trend, but we are unfortunately turning a positive result to a negative one. The most important explanation for this trend is esta in the Illum department store in Copenhagen and to expand our operations at Steen & Ström in Oslo with new sport and leisure floor space. The timing of the establishment coincided with declining consumption in Denmark, which resulted in these units being charged to our earnings for the quarter in the amount of SEK 21.6 M.
To summarize, my foremost task is now to secure a stable platform. To strengthen the company’s financial position and create conditions for future aggressive action, the Board of Directors has decided to propose a rights issue in an amount of approximately SEK 350 M. We now priorities result before top line growth. I feel that we have now made considerable progress in creating the conditions for favorable performance during the next financial year.
Mikael Solberg, VD
Operations
About RNB
RNB is organized in 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 91 stores, of which 50 are franchise stores.
The distribution platform consists of two business areas: Department Stores and Store Concepts. The Department Stores business area operates through shops in the department stores NK in Stockholm and Gothenburg, Steen & Ström in Oslo, Illum in Copenhagen and Kosta Outlet. In total, the Department Stores business area has slightly more than 23,500 square meters of rental space distributed among 80 store units.
The Store Concepts business area consists of JC, J-Store, Brothers and Sisters and comprises 304 stores, including 163 franchise stores.
The total number of stores included in RNB at May 31, 2008 was 475, of which 213 were operated by franchisees.
Continued weak trend in JC and J-Store
The JC and J-store concepts noted a weaker-than-expected sales trend during the period September 2007 – May 2008, with sales declining about 12% compared with the corresponding period in the preceding fiscal year. The autumn 2007 and spring 2008 collections did not satisfy customer expectations. Inventories attributable to spring goods were impaired by an additional SEK 55 M in the second quarter. New content and concept expressions for JC and J-Store has been designed in time for the autumn 2008 collection.
Market and demand
Sales in the ready-to-wear and fashion clothing industry in Sweden were weak during the third quarter of the fiscal year, March – May 2008. According to the HUI index, the market in Sweden declined by 1.4%, while sales in RNB’s comparable stores declined by 5.4%.
Board of Directors proposes rights issue of approx. SEK 350 M
To strengthen the company’s financial position and create conditions for future aggressive action, the Board of Directors has decided to propose a rights issue in an amount of approximately SEK 350 M. The Board intends to convene an Extraordinary General Meeting to resolve on the rights issue. More detailed terms and conditions and a time schedule for the rights issue will be presented no later than in connection with the notice convening the Extraordinary General Meeting.
Revenue and earnings
September 1, 2007 – May 31, 2008
RNB’s net sales during the period amounted to SEK 2,554.7 M (2,529.3). Sales in comparable stores declined by 1.9% during the period. The gross profit margin for the period was 45.0% (46.7).
Operating profit totaled SEK 52.2 M (288.2). Profit after net financial items amounted to SEK 12.5 M (260.3). Profit after tax was SEK 15.6 M (213.1). Nonrecurring items totaling profit of SEK 84.0 were included in year-earlier operating profit.
The weak sales trend for JC and J-Store is estimated to have had a negative impact of about SEK 130 M on earnings, compared with the year-earlier period. JC and J-Store reported an operating loss of SEK 38.5 M for the period. However, Brothers and Sisters reported very favorable development and an operating profit of SEK 44.7 M for the period.
During August 2007, newly opened units in the Illum department stores in Copenhagen and Steen & Ström in Oslo developed less favorably than expected and reported a loss of SEK 21.6 M for the period. Other parts of the Group reported positive trends during the fiscal year.
Third quarter, March 1, 2008 – May 31, 2008
RNB’s net sales for the third quarter amounted to SEK 776.9 M (758.5). Sales in comparable stores declined by 5.4% during the same period. The gross profit margin for the third quarter amounted to 49.5% (48.3).
Operating profit for the quarter amounted to SEK 23.8 M (60.2). Profit after net financial items amounted to SEK 6.0 M (51.1). The new units that were opened in August 2007 at the department stores Illum in Copenhagen and Steen & Ström in Oslo developed less favorably than expected during the third quarter and reported a loss of SEK 9.0 M.
Business areas
Polarn O. Pyret business area
September 1, 2007 – May 31, 2008
Net sales for the period amounted to SEK 294.2 M (291.4). Sales in comparable stores declined 4.1%.
Operating profit improved to SEK 45.6 M (40.7). The number of stores at the end of the period totaled 41 (38). In addition, there are 50 (47) franchise stores, of which 15 (16) in Sweden and 35 (31) abroad.
During the period, nine new franchise stores opened abroad while five stores in the Baltic States were discontinued in conjunction with a change of franchisee. Agreements for the Baltic States have been signed with new franchisees comprising a group of investors including Knut Lysklätt, who is the franchisee for Norway. All Polarn O. Pyret stores in the Baltic States are currently closed. The new franchisee estimates that two or three stores will be opened during autumn 2008.
Third quarter
Net sales during the third quarter amounted to SEK 86.0 M (80.7). Sales in comparable stores declined 3.3%. Operating profit amounted to SEK 5.8 M (5.7). During the quarter, a provision of SEK 0.9 M was posted for a possible loan loss pertaining to former franchisees in the Baltic States.
In March 2008, Polarn O. Pyret signed a Master Franchise agreement concerning the US. The US cooperation partner is SPM Retail LLC. The first store in the US is expected to open in spring 2009.
The establishment of Polarn O. Pyret outside Sweden is proceeding according to plan. It is estimated that Polarn O. Pyret will be established in at least 20 countries no later than 2010.
Department Store business area
September 1, 2007 – May 31, 2008
Net sales by the Department Stores business area totalled SEK 866.8 M (709.8). Sales in comparable units increased 6.1%.
Operating profit amounted to SEK 24.3 M (49.5). The new units that were opened in August 2007 at the department stores Illum in Copenhagen and Steen & Ström in Oslo reported a loss of SEK 21.6 M during the period. Operating profit for comparable units amounted to SEK 45.9 M (49.5).
Third quarter
Net sales for the third quarter amounted to SEK 252.7 M (219.8). Sales in comparable stores increased 1.9%. An operating loss of SEK 6.1 M (profit: 11.0) was reported. The new units in Illum and Steen & Ström had a negative impact of SEK 9.0 M on earnings for the quarter.
Store Concepts business area
September 1, 2007 – May 31, 2008
Net sales in the Store Concepts business area amounted to SEK 1,399.5 M (1,529.4). Sales in comparable units declined 9.2%. Operating profit amounted to SEK 6.2 M (110.2). The figures for the preceding year included Solo and Saks, which contributed net sales of SEK 79.1 M and operating profit of SEK 3.3 M.
The collection failure and the weak sales trend for JC and J-Store are estimated to have had a negative impact of about SEK 130 M compared with the year-earlier period. JC and J-Store reported an operating loss of SEK 38.5 M. However, Brothers and Sisters reported highly favorable development and an operating profit of SEK 44.7 M for the period.
Third quarter
Net sales for the third quarter amounted to SEK 441.0 M (458.4). Sales in comparable stores declined 12.0%. Operating profit amounted to SEK 29.9 M (43.9).
The number of proprietary stores at the close of the period was 141 (129). In addition, there were 163 (169) franchise stores, including 9 (11) in Norway.
Financial position and liquidity
The Group’s assets totaled SEK 3,171.8 M, compared with SEK 2,993.0 M at the end of the preceding fiscal year. Shareholders’ equity at the close of the period amounted to SEK 1,495.8 M (1,565.1), resulting in an equity/assets ratio of 47.2% (52.3).
At May 31, 2008, inventories totaled SEK 616.0 M, compared with SEK 460.4 a year earlier. New units resulted in an increase in inventories of about SEK 80 M.
Cash flow from operating activities was a negative SEK 39.2 M (positive: 177.3). Extended credit periods within JC had a negative impact of about SEK 100 M on cash flow. Cash flow after investments was a negative SEK 139.7 M (positive: 244.4).
Net debt amounted to SEK 975.9 M compared with SEK 728.2 M on August 31, 2007.
Consolidated cash and cash equivalents at the close of the period, including unutilized overdraft facilities, amounted to SEK 136.3 M compared with SEK 305.8 M at the end of the preceding fiscal year.
Investments and depreciation/amortization
Investments during the period totaled SEK 102.5 M (124.9), of which acquisition of companies accounted for SEK 23.1 M (74.0).
Depreciation/amortization during the period amounted to SEK 73.6 M (58.0).
Tax paid
During the period, the Group paid SEK 20.5 M in tax. For the third quarter of 2007/2008, the amount of tax paid totaled SEK 3.0 M. In the third quarter, JC won a case in the Fiscal Court of Appeal, which resulted in a tax refund of SEK 2.1 M.
Personnel
The average number of employees during the period was 1,511 (1,300).
Parent Company
Net sales in the Parent Company amounted to SEK 99.5 M (65.0).
After net financial items, a loss of SEK 60.2 M (loss: 24.1) was reported.
Investments during the period totaled SEK 24.3 M (82.0), of which company acquisitions accounted for SEK 0 M (74.0).
Outlook
Due to the collection misjudgment, which is adjudged to be of a nonrecurring nature, earnings for the period were adversely affected by impairment losses and a weak sales trend relating to JC and J-Store. It is estimated that the ongoing repositioning of JC and J-Store will be finalized in time for the 2008 autumn collection.
Accounting principles
RNB applies the International Reporting Standards (IFRS), as adopted by the EU. This Interim Report was prepared in accordance with IAS 34, Interim Reporting, the Swedish Annual Accounts Act and recommendations from the Swedish Financial Reporting Council for, RFR 2.1, Reporting for legal entities.
Annual General Meeting
Annual General Meeting for fiscal year 2007/2008 will be held in Stockholm on Wednesday, January 28, 2009.
Future publication dates
Year-end report for 2007/2008 October 22, 2008
This is the type of information that must be published by RNB RETAIL AND BRANDS AB (publ) in accordance with the Swedish Securities Market Act and/or the Financial Instruments Trading Act. The information was submitted for publishing on June 18, 2008, at 3:00 p.m.
Stockholm, June 18, 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