Revolution race grows outside the Nordics, XXL is dragged by the Nordics
The Nordic outdoor and sports retail market remains challenged in the inflationary market. This is illustrated by two publicly listed Nordic sports retailers, albeit very different kinds of companies: XXL and Revolution Race.
XXL is a giant in the market with a strong presence in Norway, Sweden, and Finland.
Revolution Race sells only outdoor clothing and accessories worldwide, the German-speaking DACH region's biggest market.
This difference is highlighted as one observes the growth trajectories of the different regions of these two companies. XXL has seen revenues decline since the mid-pandemic quarter of Q2/2021. Since then, there have been only a few quarters with slight growth. For the last quarter, Finland was the only market with growth, despite very small growth: +0,5%.
The small Direct to Consumer outdoor clothing brand Revolution Race has grown handsomely even after the rapid growth during the pandemic. This growth has been driven by International businesses, which have now surpassed 75% of the total Revolution Race revenues. The Nordic business has declined for many quarters, whereas the other businesses have grown rapidly.
Revolution race: profitable growth from the International markets
Revolution Race has been a fascinating growth company for the last few years. Despite the strong growth during the pandemic and the difficult inflationary environment during the last year, the company has continued to grow profitably. This growth has been done with robust profitability. As a Direct to Consumer brand, Revolution Race commands high Gross margins as well as Operating margins.
Rapid internationalization has been done without compromising the Gross margins (i.e., lowering prices). However, the aggressive marketing needed for the growth has influenced the Operating margins that have declined from the (pandemic) highs of 2021.
“During the year we have chosen to increase our marketing investments in growth markets for our continued international expansion and our gross margin for the quarter has been positively affected by the market mix.”
XXL revenues and profits in decline
XXL is Nordic sports and outdoor giant compared to its small DTC peer. With revenues of almost 750 M€ for the Last Twelve Months (LTM), XXL is more than five times bigger than its smaller peer. The declining revenues of XXL have led to a decline in profits also. In the case of XXL, profitability has not declined because of international growth but due to inventory challenges. As the company has tried to get into a better inventory position during the last 1,5 years, the gross and EBITDA margins have declined significantly. The EBITDA margin has been negative for the last two quarters.