Recalibrated strategy and new lean operating model for long term competitiveness
October –
- Net revenue decreased by 10%, totalling
SEK 382 (427) million. - Operating profit (EBIT) was
SEK -45 (-31) million. Adjusted operating profit (EBIT) wasSEK -24 (-23) million and the adjusted operating margin was -6.2% (-5.4%).
- Items affecting comparability were
SEK 21 million , primarily fromSEK 18 million in organisational downsizing costs. - Impairment of goodwill attributable to segment Other impacted amortisation and impairment by
SEK 17 million . - Cash flow for the period was
SEK 61 (16) million. - Earnings per share before and after dilution was
SEK -0.62 (-0.29).
January –
- Net revenue decreased by 8%, totalling
SEK 1,537 (1,670) million. - Changes to assumptions underlying a provision for slow moving inventory led to a net increase of
SEK 39 million , which constitutes 2.6 percent of revenue, affecting cost of goods sold. - Operating profit (EBIT) was
SEK -111 (-68) million. Adjusted operating profit (EBIT) totalledSEK -85 (-53) million and the adjusted operating margin was -5.6% (-3.2%). - Items affecting comparability were
SEK 26 million , primarily fromSEK 18 million in organisational downsizing costs. - Impairment of goodwill attributable to segment Other impacted amortisation and impairment by
SEK 17 million . - Cash flow for the period was
SEK 91 (117) million. - Earnings per share before and after dilution was
SEK -1.21 (-0.98).
Oct-Dec | Jan-Dec | ||||
SEKm (unless stated otherwise) | 2023 | 2022 | 2023 | 2022 | |
Net revenue | 382 | 427 | 1,537 | 1,670 | |
Growth (%) | -10% | 3% | -8% | 5% | |
Growth in local currencies (%) | -15% | -3% | -13% | 1% | |
Gross profit | 171 | 161 | 607 | 657 | |
Profit after variable costs | 80 | 60 | 256 | 252 | |
Overhead costs | -72 | -71 | -267 | -256 | |
Operating profit (EBIT) | -45 | -31 | -111 | -68 | |
Adjusted operating profit (EBIT) | -24 | -23 | -85 | -53 | |
Profit/loss for the period | -49 | -23 | -96 | -58 | |
Gross margin (%) | 44.7% | 37.8% | 39.5% | 39.3% | |
Profit after variable costs (%) | 20.9% | 14.0% | 16.7% | 15.1% | |
Adjusted operating margin (EBIT) (%) | -6.2% | -5.4% | -5.6% | -3.2% | |
Cash flow for the period | 61 | 16 | 91 | 117 | |
Net debt (+) / Net cash (-) | -222 | -136 | -222 | -136 |
Significant events during the reporting period
Trademarks
To accelerate the development of market-leading private brands, on
Change of Chief Financial Officer
On
Rightsizing the Company – Operational efficiency program
In order to improve efficiency and agility, the Company conducted an operational efficiency program to adjust the structure of the organisation. This affected approximately 50 employees, across all functions and countries where Pierce has offices. The goal was to implement a more team-based operating model with fewer managers and a greater individual mandate and responsibility. To support this planned organisational simplification, the Company has started to improve its core processes through the implementation of lean methodology across the organisation accompanied with an increase of digitalisation and automation. The ambition for the new operating model is to generate annual cost improvement of approximately
Physical store closure
To continue moving forward to increased efficiency, the Company has closed the physical store in
The Company performed the annual impairment test and the calculated value in use,
CEO comments
Despite facing persistent challenges in consumer demand, we maintained a steady course, adhering to a more conservative approach during the black month period as planned. This strategy aimed to safeguard cash by taking a lower risk regarding purchasing and stock levels. This strategy and the weak market impacted our volumes in the fourth quarter, with sales declining by 10 percent in SEK and 15 percent in local currencies compared to the same period last year.
However, amidst these headwinds, we continued to fortify our margins, primarily through price adjustments increasing the gross margin with 6.9 percentage points versus last year to 44.7 percent. Notably, we observed no reduction in in-freight costs, versus the previous quarter, for the first time in five quarters, attributable to our focus on selling off overstocked inventory with higher associated in-freight costs. Looking ahead, we anticipate a continued decrease of in-freight costs, albeit at a more moderated rate than previous quarters. There is also a risk of potential increases in the coming quarters due to ongoing situations in the
Despite underlying inflationary pressure, we managed to keep our fixed costs in SEK in line with the same period last year. In the quarter, our adjusted EBIT was
Adjusted EBIT for the full year 2023 was SEK ‑85 million. Adjusted EBIT was affected by a total of
Our focus on optimising inventory levels through targeted campaigns and pricing strategies, coupled with enhanced purchasing controls, resulted in a robust cash position of
Looking forward, we see a prevailing weak consumer demand as we enter the new year. The market outlook remains uncertain, but we anticipate a modest improvement in consumer sentiment over the course of 2024.
Pierce has navigated through a period of formidable market challenges during the past two years. In response, during the third quarter, we embarked on a strategic shift to what we term "Pierce 2.0", with a resolute aim to establish ourselves as the unquestionable leading pure-play online retailer in
- To achieve absolute leadership in the Offroad segment and profitable growth in the Onroad segment
- To have the highest customer loyalty in the industry
- To create a simple and powerful go-to-market approach
- To be the best in the industry in pricing and purchasing
- To have market-leading value-for-money own brands
- A modern and scalable tech stack
- A lean, fast and agile organisation
Throughout the fourth quarter, our primary focus was on creating a leaner and faster organisation, a pivotal initial step in realising the Pierce 2.0 strategy. This involved a reduction in workforce of approximately 50 FTEs (white-collars), constituting some 25 percent of our white-collar workforce (excluding customer services personnel and certain production staff). Concurrently, we transitioned to a more collaborative team-based operational model, fostering increased individual empowerment and accountability, and embraced lean methodologies to refine our operational processes. This transformation represents a significant cultural shift, impacting the daily work of the vast majority of our employees.
With the foundation of our leaner structure in place, we are now poised to advance on the remaining pillars of our strategic roadmap. We are working hard and dedicated with this, but it's imperative to underscore that there are no quick fixes in the task ahead. Significant transformation is required to realise the objectives outlined within the seven pillars. 2024 will be a year of transformation where we lay the foundation for Pierce being a prosperous company many years ahead.
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