Accelerating growth and improved gross margin

During the second quarter of the year, Sportamore increased its rate of growth to 18.3 per cent and total sales* reached SEK 244 (206) million. The gross margin is stronger, compared with both the previous quarter and the previous year, totalling 37.6 (37.4) per cent for the period. The acid test for the physical sports retail sector is continuing in the wake of the rapid transition to digital shopping, and despite good weather prospects the market has been characterised by a high level of campaign intensity. Sportamore is showing that we can control our gross margin even in these conditions. We expect, during the second half of the year, to further strengthen the gross margin compared with the previous year and at the same time to deliver growth in accordance with our financial goals.

Increasing value

We can confirm a significant improvement in the average order value, which increased by six per cent for the period. This trend is being driven by both an increasing number of items per order and a rising average sale price. Towards the end of the period we also introduced a minimum order limit for free delivery in all markets. This change was preceded by a detailed analysis of customer behaviour and is expected to have a number of positive effects. Not only is it expected to contribute to increasing the average order value in the quarters ahead, it will also free up resources from less profitable customer orders that we can use instead to improve our delivery offering and service level for our profitable customer orders. Another important aspect is that this change has the potential to drive rapid change in the cost structure per order, which is expected to make a positive contribution to Sportamore's profitability trend.

New market - France

Towards the end of the period we launched Sportamore in France and are now starting work to grow and adapt this market. Through our focus on automation and scalable processes we have laid strong foundations for the opportunity to scale up our overall geographical market. The customer base is growing according to plan with an annual growth rate of around 175,000 customers and now totals 1,041,000 active customers, at the same time the average number of orders per active customer is increasing. Furthermore during the second quarter we invested in the development of both brand concept and a new platform for managing our existing customer base - an exciting project, the results of which will start to be implemented during the third quarter.

Scalability and efficiency for an improved full-year profit

During the period we have been significantly affected by increased freight costs as a consequence of capacity restrictions, exchange rate changes and rising oil prices. This had a negative impact on EBIT for the quarter that totalled SEK -9.5 (-6.2) million. With this background, the importance of the investments we made in infrastructure and automation for scalability and efficiency is growing.The benefits of these investments when net sales increase was seen not least in the fourth quarter of 2018. Scalability is also evident in the fact that operating expenses excluding product and marketing costs as a proportion of sales during the period developed positively during the period and fell from 28.8 per cent in the first quarter to 28.3 per cent in the second quarter as an effect of rationalisation and growth in net sales. We are now moving into a phase with profitability focus and are taking a number of measures to drive our development, the first of which is the implementation of a limit for free delivery. It is our assessment that continued rationalisation combined with a rising order value will contribute to an improved cost structure in the quarters ahead and that 2019 on a full-year basis will generate an improved profit compared with 2018, while at the same time the strong growth of the customer base increases the potential for the future.

Healthy finances and saleable stock

The Group's financial position remains healthy, with cash in hand on the balance sheet date totalling SEK 25.5 (44.0) million, excluding an overdraft facility of SEK 40.0 million. The value of stock at the end of the period totalled SEK 275 (229) million, a planned reduction compared with both the turn of the year and the end of the previous quarter, which means that the stock turnover rate is now rising in accordance with previous communication. The stock remains saleable, with less than 18 per cent being more than six months old. We also maintain our ambition to increase the stock turnover rate during the second half of 2019.

* Own sales plus the total value of products sold from commission-based revenues, where own sales refers to operating income less provision from commissionbased sales.

This information is information that Sportamore AB (publ) is obligated to disclose pursuant to the EU Market Abuse Regulation and the Swedish Securities Market Act. The information was submitted, through CEO Johan Ryding, for publication 19th of July 2019 at 08:00 CET.