Kjell Group Q1 2025 slides: Sales decline as profitability improves

Introduction & Market Context

Kjell Group AB (STO:KJELL) presented its Q1 2025 results on April 24, 2025, revealing a company navigating challenging market conditions while making progress on operational efficiency. The consumer electronics retailer reported that while the end of 2024 had shown signs of recovery, the first quarter of 2025 was marked by renewed market uncertainty, particularly in its home market of Sweden.

The company’s stock reacted negatively to the results, falling 11.6% during the trading session following the announcement, despite some improvements in profitability metrics.

Quarterly Performance Highlights

Kjell Group reported a 5.1% decrease in net sales to MSEK 561.3 for Q1 2025, compared to MSEK 591.4 in the same period last year. Despite this decline, the company managed to improve its gross margin by 0.2 percentage points to 42.1% and reduced its adjusted EBITA loss to MSEK -2.3 from MSEK -5.6 in Q1 2024.

As shown in the following quarterly sales development chart, Kjell Group has experienced declining like-for-like growth over the past year, with Q1 2025 showing a 5% decrease:

The sales decline was primarily driven by fewer transactions, especially in Sweden where store traffic decreased. However, the company noted higher average order values in both Swedish and Norwegian markets, partially offsetting the impact of reduced customer visits.

Detailed Financial Analysis

Kjell Group’s adjusted EBITA margin improved by 0.5 percentage points year-on-year to -0.4%, despite the challenging sales environment. This improvement was largely attributed to operational efficiency measures and a positive currency effect of MSEK 11.9 for the quarter.

The following chart illustrates the company’s adjusted EBITA development over the past five quarters:

Performance varied significantly across the company’s three geographic segments. Sweden, which accounts for 72% of total sales, saw a decline in revenue but improved its adjusted EBITA margin from -2.8% to -0.7%. Norway achieved positive sales growth but experienced margin pressure, while Denmark faced both sales decline and margin compression.

The company’s cash flow from operating activities improved to MSEK 9 in Q1 2025, compared to MSEK -5 in the same period last year. Core working capital decreased by MSEK 10 year-on-year, reflecting improved inventory management. However, financial net debt increased by MSEK 28 compared to Q1 2024, with the debt-to-EBITDA ratio rising to 4.7x from 3.7x.

Strategic Initiatives

A key development for Kjell Group was the completion of a fully subscribed rights issue, which secured SEK 199.1 million in new capital. This funding is expected to significantly improve the company’s debt ratio and provide financial flexibility for future investments.

As illustrated in the following chart, the rights issue is projected to reduce the company’s net debt to adjusted EBITDA ratio from 4.1x to 2.6x:

The company is also making progress on its automated central warehouse project, with first inbound deliveries scheduled for the coming quarter. This initiative is part of Kjell Group’s strategy to scale logistics operations and support long-term growth.

Forward-Looking Statements

Kjell Group presented a clear roadmap for improving profitability from the current 1.9% level to a target of 6-8% in the future. This plan includes several key initiatives:

The strategy focuses on four main pillars: optimizing the product assortment, implementing the new automated warehouse, improving operational efficiency, and benefiting from eventual market recovery. Management emphasized that these initiatives, combined with the strengthened financial position from the rights issue, will enable the company to invest in logistics, digitalization, and further development of its customer offering.

CEO Andreas Rylander highlighted that in the current uncertain market environment, "relevance is key," with the company focusing on understanding customers and adapting its offerings accordingly. He also noted that previous restructuring efforts had enhanced efficiency and flexibility, positioning the company to better navigate challenging conditions.

While Kjell Group faces continued headwinds in consumer spending, particularly in Sweden, management expressed confidence that its operational discipline and strategic investments will drive long-term profitability improvement, even if market conditions remain challenging in the near term.

Full presentation:

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