Malene Birger and Tiger owner IC Group has tough year, will become holding company

By

Sandra Halliday

Published
Aug 28, 2018

The owner of By Malene Birger and Tiger of Sweden has confirmed that its latest year really was a tough one and on Tuesday its 2017/18 financial report contained a string of disappointing figures. 

However, its two star brands are forecast to have a slightly better 2018/19 financial year, despite the massive change the company is going through.

But more of that later. First, let’s look at how it fared in the latest year. With its biggest and most profitable brand (Peak Performance) having been divested, revenue from the group’s continuing ops dropped by 9.2% in local currency to DKK1.535 billion. While the gross margin edged up, that was because the prior year had been hit by higher-than-usual one-off costs so this year’s profit figures weren’t quite the triumph that they looked to be. 

Operating profit (EBIT) rose this time to DKK57 million from DKK24 million and after-tax profit from continuing operations rose to DKK36 million from DKK16 million. For the group as a whole, with Peak Performance included, revenue declined by 3.9% in local currency to DKK2.602 billion and operating profit rose to DKK184 million from DKK125 million.

And while we’ve already seen sluggish performance from some individual brands in quarters one-through-three, how did they do in Q4? In a quarter that saw overall group revenue down 10.8%, Tiger of Sweden revenue fell 6% (or 3% in local currency) to DKK188 million, but at least wholesale increased. The revenue decline was driven by the brand’s own retail channel, especially its physical stores as same-store revenue dropped 12.9% and all geographies were affected. The brand saw an operating loss of DKK15 million, not as bad as the prior Q4’s DKK27 million loss.

Revenue for By Malene Birger fell 8.5% (7.3% in local currency) to DKK75 million as both wholesale and retail struggled and same-store sales dropped 11.4%. Again, the decline was spread across all regions but the brand swung to an operating profit of DKK1 million after a loss of DKK7 million a year ago. The performance was negatively affected by write-downs in retail distribution in the UK and France.

Saint Tropez revenue plunged 27.3% to DKK56 million as same-store sales plummeted 19.2%. The problem was the Nordic region as other geographies saw growth. But the brand made an operating loss of DKK4 million, the same as a year ago.

Designers Remix revenue fell an even worse 37.5% to DKK10 million as same-store sales fell over 20%. With all geographies suffering, the operating loss was DKK3 million, worse than the earlier DKK1 million loss.

BIG CHANGE AHEAD

Does the company expect any upturn in the current financial year? Partially yes, but first we need to explain what else is happening at the group.
 
For 2018/19, following the removal of profitable Peak Performance from the equation, the board is changing the business model with IC Group set to be a listed holding company owning shares in its remaining brands and continuously considering “when it is in the best interest of the shareholders to divest” those brands.

It all means that individual brands will now be responsible for what used to be group functions and the transformation is expected to be complete during fiscal 2019/20, meaning significant costs, but also savings from the following year. 

Meanwhile for 2018/19, we’re left with a prediction of flat group revenue in local currency and an EBIT margin of between zero and 1% prior to non-recurring costs.

Tiger of Sweden revenue should increase, driven by international wholesale and e-tail, and By Malene Birger, revenue is also expected to rise, driven by pre-order revenue and e-commerce. But Saint Tropez and Designers Remix are both expected to continue to see falling revenues.