The March figures for the Swedish clothing market were published this morning. Sales grew by 6.5% from last year.

We have lowered our estimates in response to expectations of slower economic growth and weaker consumer confidence. Despite these downward revisions the current valuation offers an attractive risk/reward profile, as the share price has fallen by around -17% and the expected return exceeds our required return. Consequently, we raise our recommendation to Accumulate (prev. Reduce) but lower our target price to SEK 55 per share (prev. SEK 62), mainly due to lower estimates.

Björn Borg delivered weak Q4 earnings due to a lower gross margin and higher operating expenses, which more than offset the benefits of strong revenue growth. The company’s earnings multiples for this year are at the upper end of our acceptable valuation range, with a P/E ratio of approximately 18x and an EV/EBIT of ~14x. At current valuations, we would like to see clearer evidence that the company can successfully expand its footwear category while maintaining solid profitability. Based on our updated estimates, we believe the stock is relatively fairly valued. As a result, we lower our recommendation to Reduce (prev. Accumulate) and adjust our target price to SEK 62 per share, primarily due to revised estimates.

Björn Borg will report its Q4’24 results on Friday. We anticipate good growth in revenue compared to the corresponding quarter last year, primarily driven by the integration of the footwear category, increased sales in the sports apparel category and continued strong development in own e-commerce. We estimate a lower gross margin due to a shift in the sales mix, as well as higher operating costs mainly due to increased marketing activities. Overall, we anticipate that this will offset the benefits of strong revenue growth, leading to relatively flat absolute EBIT development. Our focus in the upcoming report will be on demand-related information and updates on the footwear transition.

The January figures for the Swedish clothing market were published this morning. Sales grew by 4%, continuing the positive sales growth seen at the end of last year.

The operating environment continues to be challenging due to low consumer purchasing power and confidence. In addition, Björn Borg has, during the past year, struggled with internal challenges in integrating the footwear distribution from the previous partner that went bankrupt early this year. Despite these factors, we believe that Björn Borg delivered a stable third quarter, although it was somewhat below our expectations in terms of sales. The valuation of P/E 17x and EV/EBIT 13x for 2025 looks quite attractive and a combination of dividends and earnings growth should give around 10% total shareholder return.

Björn Borg will report its Q3’24 results on Friday, November 15. We anticipate strong revenue growth compared to the same quarter last year, primarily driven by the integration of the footwear category and continued strong development in the company’s own e-commerce.