Updated financial targets roughly in line with expectations

On Monday, Björn Borg updated its long-term financial targets to align with its strategic priorities for sales growth. The company raised its annual sales growth target from 5% to at least 10%, while keeping the other targets unchanged. As expected, this growth will be driven by expansion in its three core categories: Underwear, Sports Apparel, and Footwear. The revised targets roughly align with our expectations and do not necessitate any changes to our forecasts.

Growth target increased in financial targets

Björn Borg’s previous targets had been issued back in 2019. The new targets are for the same four indicators as before and are:

·       Annual sales growth of at least 10% (prev. 5%)

·       Annual operating margin target of at least 10% (unchanged)

·       An annual dividend of at least 50% of net profit after tax (unchanged)

·       The equity ratio should not fall below 35% (unchanged).

The increase in the growth target was not a surprise to us, as the previous target was merely aligned with market growth. In addition, our current forecasts already assume that revenue growth in 2024-2025 will be relatively in line with the new target, while our estimates for 2026 and beyond are slightly below. Regarding profitability, Björn Borg maintained its annual operating margin target of at least 10%. We believe the raised growth target, combined with the unchanged margin target, suggests that the company intends to accelerate growth while maintaining a margin slightly above 10%, rather than pushing the margin significantly above 10%. Thus, we believe that the company considers growth to be more important for value creation than increasing profitability, which is already at a good level. Nevertheless, this aligns with our current forecasts of an EBIT margin of around 11-12% for 2024-2027. The company also reaffirmed its targets of an annual dividend of at least 50% of net profit and an equity ratio of at least 35%. Given Björn Borg’s strong track record of profitable growth, robust operating cash flow, and low investment needs, we believe these targets are realistic.