XXL (XXL) Q2 2024 earnings summary

Executive summary

• EBITDA improved to NOK 39 million in Q2 2024 from negative NOK 57 million last year, driven by stronger gross margin despite an 8.7% sales decline and challenging comparables.

• The "Reset & Rethink" plan is progressing, focusing on cost control, inventory management, pricing, and operational efficiency, with early signs of market recovery in Sweden and Norway.

• Turnaround efforts include commercial initiatives such as XXL Pay, new controlled brands, and loyalty program expansion above 3.8 million members.

• Successful capital raise through private placement and subsequent offering, totaling NOK 560 million, strengthened liquidity.

• Leadership transition with new CFO Lars Syse Christiansen joining in August 2024.

Financial highlights

• Revenue declined 8.7% year-over-year to NOK 1,776 million, mainly due to lower product availability and weak demand for capital-intensive goods.

• Gross margin improved to 35.7% (up from 27.6% in Q2 2023), supported by healthier inventory and less discounting.

• EBITDA margin improved to 2.2% in Q2 2024 from -2.9% last year.

• Net income was negative NOK 283 million, impacted by a NOK 72 million tax provision and NOK 14 million in interest expenses related to tax negotiations.

• Inventory reduced by NOK 319 million year-over-year, now at NOK 1,804 million, a 15% reduction to record lows.

Outlook and guidance

• Focus remains on commercial development, sales recovery, and improving product availability, with an emphasis on leveraging gross margin improvements.

• Five "must win battles" under the "Reset & Rethink" plan are expected to deliver an EBITDA uplift of NOK 500-750 million over the next 12 months.

• No new store openings signed for 2024; mid- to long-term plan is 2-3 new stores per year, with selective closures and downsizing ongoing.