Dismal Q3/2023 for Nordic non-food retailers
Last week, some major Nordic retailers reported their performance in Q3/2023. Food retailers could report growth, even though most growth was below inflation. For non-food retailers, the previous quarter has been challenging.
Here are key points from the results of those retailers.
DIY slumping hard
DIY has been one of the hardest-hit retail segments. For a long time, DIY retailers were able to resist the decline seen in many other segments. Last week showed how difficult the situation is for three Nordic DIY retailers.
Kesko reported the steepest decline with -17%. The heaviest country for Kesko was Sweden, with a -23% drop in revenues. The rate of decline has eased slightly for all countries within Kesko, as the revenue decrease for Q2/2023 was -23%. Also, the B2B arm of Kesko DIY, Onninen, saw revenues decline. Onninen has been the most resilient part of Kesko DIY.
Byggmax, on the other hand, reported a -14% decline. However, Byggamx’s problems run longer than other Nordic DIY players. Byggmax reported already a sixth consecutive quarter of declining revenues.
The third Nordic DIY retailer, BHG, reported the smallest revenue decline but with a significant financial loss. The company restructured its Value Home segment by selling two businesses back to the founders. This led to a 1,3 billion SEK operating loss for the quarter.
The companies were sold back to the founders as the BHG Group did not see a clear path toward profitability for the two companies.
“To sum up, our financial focus in 2023 has been on improving our cash flow and strengthening our balance sheet. From a structural perspective, we have simplified our structure by consolidating and divesting operations where we do not see the potential for profitable growth, thereby building a stronger organisation and laying the foundation for a business that will remain cost-efficient and scalable going forward. ”
Others seeing similar trends
The market sentiment for other non-food retailers seemed to be as bleak as it was for the DIY companies. Electronics retailer Verkkokauppa.com saw an 8th consecutive quarter with declining revenues.
With a -15% decline, the company saw revenues go below the pre-pandemic Q3/2019. The revenues declined on all fronts, especially in the non-core businesses.
The outdoor retailer XXL saw revenues decline further, with a -10% drop in an ”unsatisfactory” quarter. Like for Kesko and BHG, Sweden saw the steepest declines with -12,6%. By comparison, Finnish revenues declined only -4,6%.
The company was refreshingly self-critical in its commentary of the quarter. The company has established a ”Reset & Rethink” strategic plan to turn around the ailing business that has seen revenues decline for eight of the last ten quarters.
For fashion retailing, the results were slightly more mixed, with Nelly reporting a significant drop (-17%) in revenues while Lindex had a muted decline. Lindex suffered from the poor exchange rates of the Swedish Krona. The revenues did increase in local currencies by +4,9%.
“More long term, the plan is to reset, rethink. Reset is all about finding the historic key success factors of the company, finding our way back to what made XXL a fantastic company, an unrivalled success in the Nordics, really taking that back to heart. But we think it’s also acknowledging that 2023 does not look like the last 20 years looked like. So, we also need to really embrace the future. We need to evolve, we need to look forward.”
Unfortunately, things did not look as positive for the fashion-focused parent company of Lindex, the Stockmann department stores. They saw a -16% revenue decline.
The Stockmann Group focuses the two businesses in different directions, with the more affordable Lindex growing internationally while the department stores focus more on luxury. It remains to be seen how enormous growth potential the luxury market will have.
“Lindex has improved its profitability significantly in the past years and will continue to grow by entering new markets and sales channels, whereas the Stockmann division will continue its repositioning towards luxury and affordable luxury.”