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Introduction & Market Context
Nordic sporting goods retailer XXL ASA (OL:XXL) reported a return to growth in its Q1 2025 financial results presentation on April 29, 2025. The company’s shares closed at 10.90 NOK on April 28, 2025, and have experienced a 6.45% increase, reflecting positive market reaction to the results.
XXL’s performance is particularly notable given the challenging conditions in the Nordic sporting goods market, which has experienced 11 consecutive quarters of negative growth. Despite this headwind, the company has managed to implement its "Reset and Rethink" turnaround strategy effectively enough to drive meaningful revenue growth.
As shown in the following market analysis chart, XXL believes the Nordic market is poised for a gradual recovery during 2025, with Sweden already showing early signs of improvement following interest rate cuts:
Quarterly Performance Highlights
XXL ASA reported operating revenue of 1,670 million NOK in Q1 2025, representing a 7.2% increase compared to 1,558 million NOK in Q1 2024. This growth accelerated throughout the quarter, with month-by-month sales development indices versus last year showing January at approximately 101, February at 111, and March maintaining the 111 level.
The company’s return to growth is clearly illustrated in the following chart, which shows the positive sales trend continuing into Q1 2025 after several challenging quarters:
All product categories showed growth despite challenging winter conditions. The top performing categories were Lifestyle Apparel, Running and Training, Outdoor Apparel, and Kids Apparel, while various Winter Equipment and Winter Apparel categories underperformed, as shown in this category development bridge:
Gross margin slightly decreased from 38.8% in Q1 2024 to 38.2% in Q1 2025, a decline of 0.6 percentage points. According to the company, this margin effect was balanced by the necessity to push out winter products. Operating expenses increased from 593 million NOK to 625 million NOK, primarily driven by volume increases and salary inflation.
Strategic Initiatives
XXL’s "Reset and Rethink" turnaround strategy appears to be gaining traction. The strategy consists of two main components: "Reset," which focuses on top-line quick wins and cost control, and "Rethink," which aims to accelerate key top-line growth levers.
The comprehensive strategy is visualized in this slide from the presentation:
Under the "Reset" pillar, XXL has made progress across several must-win battles. The company has improved inventory composition, with a 4% increase in inventory value but a significant 25% increase in the number of pieces. Store operations have shown improvement with a 3.3 percentage point increase in conversion rate and 9% growth in revenue per worked hour.
The "Rethink" pillar focuses on four key initiatives: restructuring physical stores, accelerating e-commerce, doubling down on private labels, and leveraging service offerings. E-commerce revenue grew by 9.7% compared to Q1 2024, and the company has launched BOUNCE, a new private label that had a promising start in Q1:
XXL is accelerating its store portfolio restructuring with plans for 2025 that include opening one new store in Trollhättan, Sweden (the first new store since 2023), closing the store in Lappeenranta, Finland, completing 10-15 store refits, and executing 17-19 store re-concepts. The company also plans to reduce its total store footprint by approximately 10,000 square meters.
Detailed Financial Analysis
XXL’s Q1 2025 financial results show some mixed indicators. While revenue growth is strong, the company continues to face challenges in other financial metrics.
The following financial summary highlights key performance indicators:
EBITDA showed marginal improvement, driven primarily by revenue increases. The EBITDA bridge below breaks down the contributing factors, including the positive impact of revenue growth and the offsetting effects of increased personnel costs:
The company’s cost-out program has achieved approximately 300 million NOK in gross savings since its launch in Q2 2023. XXL has set an ambition to achieve an additional 300 million NOK in cost and capital savings by the end of 2026:
Balance sheet and cash flow metrics show some areas of concern. Net debt stands at 968 million NOK, down 102 million NOK. Liquidity reserves are at 344 million NOK, down 247 million NOK, with the company noting that liquidity "continues to be priority #1." Year-to-date operational cash flow is negative at -124 million NOK, down 148 million NOK from Q1 2024:
In March 2025, XXL completed a 600 million NOK rights issue and repaid a 300 million NOK bridge loan. The presentation also noted that Frasers Group launched a mandatory offer on April 15, 2025, with an expiry date of May 13, 2025. A statement from the Board of Directors regarding this offer is expected around May 5, 2025.
Forward-Looking Statements
Looking ahead to the remainder of 2025, XXL plans to continue driving its "Rethink" initiatives to fuel continued growth. The company’s outlook focuses on four key areas: store restructuring and elevation, modernizing media mix, value for money, and increasing customer loyalty.
The company’s 2025 outlook is summarized in this slide:
XXL characterized its turnaround effort as a "marathon" that will continue throughout 2025, with three main focus areas: returning to growth through continued commercial renewal, implementing lean and modern operations through accelerated internal transformation and cost-out objectives, and maintaining disciplined capital and inventory steering.
Despite the positive revenue growth in Q1 2025, XXL acknowledges the ongoing challenges in the Nordic sporting goods market. However, the company believes in the long-term resilience and growth potential of the market, supported by key global megatrends including consumer price sensitivity, health and wellness trends, increased interest in equipment-focused sports, and growth in e-commerce.
Full presentation:
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