STOCKHOLM, Sweden, July 7, 2004 (PRIMEZONE) -- President and CEO Roland Nilsson comments on Wedins' interim report: The process of creating an efficient and profitable chain is continuing. A large part of the extensive change program has been completed, and today we have a totally different platform to work from with a streamlined brand and chain structure.
Weak market and falling prices
It is frustrating, therefore, to have to report that the market is being weighed down by slow activity and falling prices, which makes our turnaround work that much harder. Sales during the important spring season failed to meet expectations, both within Wedins and the industry. Consequently, the report we are releasing today contains a result for the third quarter that we are not satisfied with.
Our objectives remain firm, and we will continue to work aggressively with our change program, as planned. The transition to a harmonized assortment of shoes and accessories is continuing, and we can see that the stores that already have a mixed product range on average perform better. A changeover from small to larger stores is under way to improve profitability per store and to make it easier to adapt to short-term fluctuations in demand. In the long term we are planning to have a number of small stores operating on a franchise basis.
To counteract the effects of deflation, our price and product mixes are being changed to increase the chain's gross profit contribution per man- hour. Rizzo, which is active in the higher fashion and quality segment, continues to develop positively, with a more stable average price level.
The ongoing restructuring of the store network is cutting into sales in the short term in part due to operating disruptions during renovation and rebuilding and in part when we close stores.
Sko-City acquisition -- transition to larger stores On June 2 we were happy to announce that we are acquiring Sko-City's stores: nine large stores in prime locations around Sweden. The acquisition is expected to boost results, primarily because the higher sales volume (approximately SEK 90 million on an annual basis) can be handled with unchanged costs for marketing, purchasing and administration. We thereby strengthen our position in the shoe and accessories market in the Nordic region. The Sko-City units will be taken over as of August and gradually reprofiled as Wedins stores.
Efficient supply chain
A new IT platform is now being tested locally and will be fully operational from the first quarter of next fiscal year. The system will lead to improved product range planning and a demand-driven supply chain. Efficiency in the Group's central warehousing operations is being further improved by coordinating Rizzo's inventory with Wedins' in June, while the Norwegian inventory will be integrated with the Swedish central warehouse as of January 2005. The Group will then share a single warehouse for all stores in the Nordic region.
We continue to work purposefully to improve internal efficiency by adjusting the store network and expenses and by transitioning to a shared product range. The market situation, with falling prices, means that we must increase the gross profit margin through active development of the product range and efficient purchasing in order for profitability to reach the sought net margin of 5-6 percent in two to four years.
Stockholm, July 7, 2004
Roland Nilsson
Wedins' store network currently consists of 119 Wedins Accent stores, 70 Wedins stores (of which 3 flagship stores) and 13 Rizzo stores. Around twenty stores underwent reconstruction/renovation during the quarter. Five stores were closed and one was opened.
Interim report September 2003 - May 2004
- The Group's sales amounted to SEK 720.5 million (793.1). The decrease is mainly due to a scheduled reduction in the number of stores to 202 (220) and a change in price mix.
- The gross profit margin rose to 56.2 percent (50.3).
- The loss before depreciation was SEK -3.9 million (-51.3).
- The loss after tax amounted to SEK -52.0 million (-187.4).
- The loss per share was SEK -0.25 (-24.73).
- The long-term change program is progressing according to plan.
- Acquisition of Sko-City's retail operations, comprising 9 stores in prime locations, effective August 1.
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http://www.waymaker.net/bitonline/2004/07/07/20040707BIT00180/wkr0001.pdf
The full report