Continued growth and increased profitability

This year's third quarter has been an enjoyable and important one for Sportamore. We continue to deliver growth according to plan, with total sales* growing by 17.4 per cent and totalling SEK 252.4 (214.9) million, while our long-term work on automation, efficiency and scalability is taking the tangible form of actual profitability. The EBIT figure for the third quarter was boosted to SEK 2.8 (-0.5) million, signalling a distinct reverse in the Group's profit trend. This is done in a quarter where the market continues to be characterized by high campaign intensity.

Significantly increasing order value and gross margin

The average order value increased by no less than 13 per cent during the period. This trend is being driven by the introduction of a minimum order value for free delivery in all markets, which resulted in an increasing number of products per order but also an increasing average sales price. This change is having a major impact on the Group's cost structure per order which means that profitability is seeing a radical improvement. In addition, an increased element of automated pricing and more surgical campaign work means that we have boosted the gross margin by 1.6 percentage points.

Strengthened cost structure and efficiency improvements for improved profitability

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Our enhanced focus on profitability is now starting to seriously improve the Group's income statement. Alongside work to increase the order value, we have also introduced several initiatives in automation for scalability and efficiency. This is contributing to the operating expenses excluding product and marketing expenses as a proportion of operating income during the period reflected a positive development, falling from 28.8 per cent in the first quarter (28.3 per cent in the second quarter) to 25.9 per cent in the third quarter. We look forward to the increased benefit of these initiatives when turnover keep growing and continue along with unstinting work to rationalise and automate all of Sportamore's processes.

Looking ahead, we expect a continued strong gross margin compared with last year, and at the same time expect continued rationalisation combined with increasing order value to contribute to an improved cost structure in the fourth quarter as well. This means that we still believe that 2019 will generate an improved profit on a full-year basis compared with 2018, while at the same time the growth in the customer base is increasing our future potential.

New markets

During the period, we have started our active customer recruitment in the newly-launched French market and we are now working to ensure the right key indicators and cost structure before investing in further growth. We have made good progress in our investment in automation and scalable processes, laying a solid foundation for the opportunity to continue to scale up our total geographical market. Against this background, we are now investigating the potential in additional geographical regions.

Healthy finances and saleable stock

The Group's financial position remains healthy, with cash in hand on the balance sheet date totalling SEK 67.2 (90.9) million, excluding an overdraft facility of SEK 40.0 million. The value of stock at the end of the period totalled SEK 322.0 (275.9) million, and the stock has good saleability with less than 17 per cent more than six months old. The stock turnover rate is increasing in accordance with the previously stated ambition, which is of course positive, while at the same time we still feel that the correlation between sales and stock has to be improved, which is why we will be focusing on making sure that this happens in the periods ahead. 

 All in all, we are better positioned than ever to face the all-important fourth quarter.

*Own sales plus the total value of products sold from commission-based revenues, where own sales refers to operating income less provision from commission-based 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 22nd of October 2019 at 08:00 CET.