Earnings call transcript: Bang & Olufsen sees Q1 revenue dip, stock falls

Bang & Olufsen reported a challenging start to its fiscal year, with Q1 2025 revenue declining by 4% in local currencies. Despite achieving a record-high gross margin of 58.7%, the company’s stock fell 7.95% following the announcement, closing at 12.50. The market reacted to a combination of factors, including an EBIT margin of -5.2% and a negative free cash flow of DKK 135 million.

Key Takeaways

• Revenue decreased by 4% in local currencies, with regional declines across EMEA, Americas, and APAC.
• The gross margin reached a record 58.7%, a 3.5 percentage point increase from the previous year.
• The stock price dropped 7.95% after the earnings release, reflecting investor concerns about profitability.
• New product launches and strategic store openings are planned for the coming quarters.

Company Performance

Bang & Olufsen’s Q1 2025 results reveal a company navigating a complex market environment. While revenue fell, the company managed to improve its gross margin significantly. The decline in revenue was felt across its key regions, with EMEA down 7%, Americas down 3%, and APAC down 2% in local currencies. Despite these challenges, the company remains focused on its luxury and technology strategy, aiming to strengthen its market position through new product launches and retail expansion.

Financial Highlights

• Revenue: Declined 4% in local currencies.
• Gross Margin: 58.7%, up 3.5 percentage points from last year.
• EBIT Margin: -5.2%.
• Free Cash Flow: -DKK 135 million.

Market Reaction

The immediate market reaction to Bang & Olufsen’s earnings call was negative, with the stock price dropping by 7.95%. This decline reflects investor concerns over the company’s profitability and cash flow situation. The stock’s movement places it closer to its 52-week low of 8.43, a stark contrast to its high of 15.8. The broader market trends also show a cautious sentiment among investors, influenced by macroeconomic uncertainties.

Outlook & Guidance

Looking forward, Bang & Olufsen projects full-year revenue growth between 1% and 8%, with an EBIT margin ranging from -3% to +1%. The company anticipates free cash flow to be between -DKK 100 million and zero. Strategic investments will continue, with a focus on new product launches, including the Beograce earpieces and audio technology partnerships for AR glasses. The company is also preparing for centenary celebrations and expanding its retail presence in key global markets.

Executive Commentary

CEO Kristian Teär emphasized the company’s strategic execution, stating, "We are executing according to our plan, and we try to actually do it as fast as we can." CFO Nikolaj Wendelboe highlighted the positive trajectory of the gross margin, saying, "We are continuing to move the gross margin in the upwards direction." Teär also expressed enthusiasm about upcoming product launches, describing the new earpieces as "nothing short of extraordinary."

Risks and Challenges

• Tariff costs are expected to impact the company, with a full-year cost of approximately DKK 40 million.
• Macroeconomic uncertainties may affect consumer spending and market dynamics.
• Inventory reduction in the monobrand channel could pose a challenge to sales growth.
• The company’s ability to execute its retail expansion plans amid global economic pressures remains a risk.

Q&A

During the earnings call, analysts inquired about the impact of tariffs, which cost the company approximately DKK 6 million in Q1. Executives also addressed questions regarding the timing of new product revenue, which is expected to materialize primarily in Q3 and Q4. Despite the economic challenges, Bang & Olufsen remains committed to its growth investments and strategic initiatives.

Full transcript - Bang & Olufsen (BO) Q1 2026:

Moderator/Operator: All participants will be on listen-only mode throughout the presentation, and afterwards, there will be a question-and-answer session. I would now like to introduce CEO Kristian Teär and CFO Nikolaj Wendelboe. Kristian, you may now begin.

Kristian Teär, CEO, Bang & Olufsen: Hello everyone, and thank you for joining the call. With me today, as always, is our CFO, Nikolaj Wendelboe. As reported during our last webcast, we are now publishing trading statements for Q1 and Q3 instead of a full quarterly report. Today, I will begin by outlining our key highlights for the past quarter and providing an overview of our business performance as it aligns to our strategy. Following that, Nikolaj will take us through the financials and our outlook in more detail before we open the session for questions. Please move to slide 3. Let us begin by looking at Q1 performance highlights. After our full year 2024/2025, which was our best year within the last two decades and covered our efforts to successfully rebuild a solid foundation and ensure a resilient business, we have been moving forward according to plan.

Therefore, our focus for Q1 has been on investments for future profitable growth, with particular attention to retail excellence, marketing, and product development. In Q1, we continued to post a record-high gross margin of 58.7%, and our company-owned stores and e-commerce posted double-digit growth. Revenue fell 4% in local currencies due to monobrand partners reducing inventories. We continue to see positive momentum in key areas, including growth in like-for-like sellout and strong demand across our four wind cities, which posted collectively sellout growth of 16%. We continue our strategic execution with the addition of new wind cities throughout this financial year as we look to accelerate this successful approach.

We ended the quarter with a free cash flow of -$135 million and an EBIT margin of -5.2%, both of which were driven by our strategic investments, scaling up our resources, and general seasonality, as well as low net working capital at year-end. Please move to the next slide. Moving into a strategy update and how we have been continuing to move our luxury timeless technology strategy forward. Let’s move further one slide again. We stayed focused on opportunities for long-term growth, including optimizing our retail footprint, enhancing our product portfolio, and elevating brand awareness and brand equity. Retail excellence has remained one of our highest priorities, and during Q1, we continued to open and uplift experience in a number of our stores.

Notably, this included the opening of a partner store in Andorra, while our store within Harrods in London went through an extensive upgrade to our new and revitalized luxury store concept design. We are planning for more openings during this financial year. During the quarter, we have been laying the groundwork for these upcoming openings, with preparations for a new company-owned store in Paris expected within 2025/2026, and three stores in California as part of our ongoing efforts to establish a solid presence on the U.S. West Coast. These stores are also due to open within this financial year, and in the meantime, our products have been on display in high-end design and furniture stores in West Hollywood and in San Francisco. All of this work reflects the positive opportunities we continue to see in the U.S. despite the tariffs.

As part of our ongoing retail footprint optimization strategy, we have closed 14 stores during the quarter, while focusing on uplifting the stores where we see increased potential. More broadly, our channel development. We took over the online flagship store on the e-tail platform Tmall in China in April 2025, thereby operating the two largest e-tail platforms in China directly this quarter. During the quarter, we have also been preparing for the announcement of our upcoming launch of Beograce, our new earpiece within wearable sound, which will be delivered to our clients towards the end of quarter two. These new earpieces are nothing short of extraordinary. They have been born from our relentless pursuit of perfection in every detail of the development process, inspired by fine jewelry to ensure a sculptural design and a luxury feel that can be an extension of our client’s style.

They also achieve sound excellence through our innovation in audio miniaturization. Our goal has been to challenge the status quo and bring something completely unique to the market by marrying an impeccable highest performance sound experience with a new level of intricate craftsmanship and beauty, all built into a sophisticated aluminum design and fully developed in-house. Perfecting this complex product marks a true milestone. We’re glad to have seen strong pre-order levels since our announcement. Preparations for our centenary, particularly in product development and marketing teams, are well underway, and we look forward to celebrating everything that we at Bang & Olufsen have stood for since 1925: beautiful sound, unrivaled craftsmanship, and timeless luxury. More brand moments to honor this 100-year legacy are coming. Nikolaj, I will now hand over to you to take us through the numbers. Thank you, Kristian. Now, please move to page 7.

I’ll begin with our like-for-like sellout, which reported 1% growth for the group. Looking at the regions, like-for-like sellout declined by 5% in EMEA. Lower footfall impacted the monobrand stores across most markets, while the company-owned stores and e-commerce reported growth, totaling a single-digit decline for the branded channels. The multi-brand and e-tail channels reported like-for-like sellout growth after years of work to reset the channels. In the Americas, like-for-like sellout grew by 18%. Branded channels combined reported a double-digit increase with growth across channels. Sellout growth from e-tail also increased double-digit. Like-for-like sellout in APAC grew by 5%. This was mainly driven by growth across monobrand and company-owned stores. The multi-brand channel reported like-for-like sellout growth, while sellout in the e-tail channel declined due to more extensive campaigns last year where the e-tail was run by our partner.

For our wind cities, New York, London, Paris, and Hong Kong, combined sellout growth was 16%. We are pleased to report double-digit growth rates and are adding more cities to the concept in the coming period. As Kristian mentioned, we have three stores opening in California this year, which will be in West Hollywood, in San Francisco, and Palo Alto. We expect that these openings will fuel growth in the Americas, and in addition, we are planning to open our company-owned stores in Tokyo. We have initiated the first phase of development for our upcoming wind cities, Los Angeles, San Francisco, and Tokyo, to further enable accelerated growth in these cities. Please go to the next page. Moving to group revenue and margins for Q1. Our revenue declined by 4% in local currencies, mainly due to a lowering of inventory levels in most markets.

Revenue from our branded channels declined by 10% in local currencies, while our company-owned stores and e-commerce reported double-digit growth. The monobrand channel was impacted negatively in all regions, and I will come back to this in a moment. In terms of product categories, revenue for the States and flexible living category decreased, reflecting the revenue development in the monobrand channel. Revenue from the undergo category increased, supported by H100 and the launch of A1 third generation in May 2025. We are pleased to continue the positive trajectory of the gross margin and once again reported a record-high level, reaching 58.7% for the quarter, which is 3.5 percentage points above last year’s level. This was also supported by currency movements of the dollar, which positively impacted the gross margin by 0.5 percentage points.

Improvements were seen across product categories and largely driven by price increases and the Tmall takeover in China. First of May 2025, we implemented global price increases, which were followed by additional adjustments for the U.S. market in June 2025 in response to changes in tariffs. Finally, the EBIT margin was negative 5.2%, which was driven by strategic investments and scaling up of resources aligned with strategic direction, especially in sales, marketing, and retail. Please turn to the next page. Now, looking at the results on a regional level, EMEA reported revenue of DKK 234 million, which was a decline of 7% in local currencies compared to Q1 last year. We saw positive traction for our company-owned stores and e-commerce with double-digit growth, while the monobrand channel, on the other hand, declined double digits as we are seeing reduced inventory levels among our partners.

The gross margin rose to 53.9% from 48.9% in Q1 last year, and improvements were seen across all categories. For Americas, revenue was DKK 62 million, which was a decline of 3% in local currencies. Revenue from branded channels declined, mainly driven by the monobrand stores, as we saw lower footfall and partners being hesitant in terms of replenishment due to general uncertainty introduced after the tariff announcement. The gross margin was 39.3% compared to 51.3% in Q1 last year. Net of price increases, tariff payments had a negative impact on the gross margin in Americas. The decline was also impacted by a change in product mix towards undergo products and marketing-related product sales. For the APAC region, revenue was DKK 159 million, which was a decline of 2% in local currencies. Revenue from China grew by 6% in local currencies. Excluding one partner, revenue from our monobrand channel increased.

In addition, the e-tail channel reported strong double-digit growth, which was highly driven by the fact that we on April 25 took over the online flagship store on the e-tail platform, Tmall, and thereby converting from wholesale to retail revenue. While we continue to see good seller traction in South Korea, revenue declined due to high inventory levels with our partner. Gross margin in the APAC region was 59.8%, an increase of 5.8 percentage points compared to Q1 last year. The increase was driven by improvements across product categories and supported by the mentioned change for Tmall. Looking at the performance for brand partnering and other activities, revenue was DKK 62 million, which was a 4% increase in local currencies compared to last year. The development was driven by increased license income from automotive. The ramp-up of TCL continued as planned.

In September, Rayneo, a subsidiary of TCL, announced an audio partnership with Bang & Olufsen. This development extends the existing relationship with TCL to include AR glasses, and the integration of our audio technology into Rayneo’s AR glasses is planned for this financial year. We continue to pursue expansion of existing partnerships and new partnerships in line with the strategic direction. The gross margin from brand partnering and other activities was 93.2% compared to 89.3% in Q1 last year, driven by a relatively higher share of license income. Please move to the next page. Before concluding on the outlook for the year, I will go through the balance sheet items.

Free cash flow was negative DKK 135 million for the quarter, reflecting strategic investments and general seasonality. Net working capital came from a low level at year-end and increased by DKK 100 million to DKK 316 million at the end of Q1. Inventories increased by DKK 27 million during the quarter to DKK 474 million. In addition, we increased our CapEx investments to DKK 58 million compared to DKK 39 million in Q1 last year. Net available liquidity was DKK 198 million compared to DKK 139 million at the end of Q1 last year and DKK 350 million at year-end. Finally, capital resources were DKK 448 million compared to DKK 299 million at the end of Q1 last year and DKK 600 million at year-end. Now, please turn to the next page. Moving to the outlook for the financial year 2025/2026.

We are staying focused on the next steps of strategic acceleration to drive future profitable growth while continuing to monitor challenging macroeconomic developments and geopolitical uncertainties. As we have previously mentioned, our channel development plan includes an ambitious plan for store openings, uplifts, relocations, and closings in 2025/2026. We expect these initiatives to drive future growth. In addition, we expect new product launches to drive growth in the second half of this financial year. We maintained the full-year outlook, which is as follows: Revenue growth is expected to be in the range of 1% to 8%. EBIT margin before special items is expected to range from minus 3% to plus 1%, and free cash flow is expected to be in the range of minus DKK 100 million to zero. Finally, we continue to monitor the development in tariff changes and take the necessary mitigating actions.

We do not see any significant changes at this point compared to the assumptions when the outlook was communicated in July. Further details on our assumptions for the outlook can be found in the annual report. To conclude, we remain on track with our strategic execution and investments and will continue our efforts towards excellence in retail, marketing, and product development. We will now move on to the Q&A session. Please move to the next page.

If you do wish to ask a question, you will need to press five-star on your telephone. To withdraw a question, press five-star again. There will be a brief pause while questions are being registered. Our first question comes from the line of Nils Leff from Carnegie. Please go ahead. Your line is now unmuted.

Good morning. First question: to what extent would you say that buying hesitance among your store owners was explained by preparations for upcoming product launches here in the coming quarters? To what extent was it explained by weak end-user demand or expectations for weakening end-user demand? That’s my first question. My second question would be on tariffs in quarter one. Could you quantify the effect of tariffs?

I think it’s a mix on the first question. Our monobrand channel is especially our, what we call the legacy monobrand channel in EMEA, where we have the biggest transformation going on in terms of retail excellence ahead of us. It’s also the channel that is mostly reliant on new product introductions, and we haven’t had any new product introductions in Q1. We now have launched Grace here in the middle of September, but with real financial effect coming from November 17 when the products are shipped to our clients. That is, of course, part of the explanation for why they are low on replenishment. The other thing is, as we also said, is that the sellout in the monobrand channel has been lower in Q1 this year compared to Q1 last year, as we have seen lower footfall in the store. It’s a combination.

For us, it’s important to stay focused on doing the retail transformation that we are doing across the board, and we can see in the Koko stores and in the wind cities where we are further ahead with the retail transformation that here we are seeing double-digit growth. This is what we have to continue to focus on. In terms of tariffs in Q1, the tariff payment is approximately DKK 6 million.

You previously provided a guidance on tariffs for the full year, if I remember correctly, $40 million. Would that still?

Yes. That is still in that range that we are expecting. Of course, Q1 being a lower quarter, you have less tariff payments, and then, of course, there’s also a product mix impact to tariff payments that is leading us to maintain around DKK 40 million for the full year.

Is tariff cost fully compensated for by price increases?

On a global scale, they are. On the U.S. specifically, there is, on a gross margin perspective, a net-negative impact. Gross profit is more flattish.

Great. I’ll jump back on the queue. Thank you, Nils.

As a reminder, press five-star to ask a question. There will be a brief pause while new questions are being registered. We have a follow-up from Nils. Please go ahead, Nils.

Okay. In that case, I’ll just continue here. Could you just talk about when you expect to recognize the revenue from the new products that you’re expecting to present here in the next couple of quarters? You mentioned earlier that new products would affect your second half, but shouldn’t we expect any revenue from new products here in the second quarter? In terms of free cash flow, I presume that payments will first hit your cash flow in the second half. That means free cash flows here in the second quarter would also be negatively affected by the timing of these product launches. Thank you.

Yeah, I think it’s a good analysis that you’re making. Obviously, when we launched Beograce here, 23rd of September, with pre-orders and shipment going out from 17th of November, there will be some Q2 revenue to a product like Beograce. Of course, the bulk of revenue from that product will come in Q3 and Q4, and that’s why we are skewed towards the second half of the year when it comes to impact from product introductions in this financial year. That also has an associated impact on timing of free cash flow.

Does that mean that we should expect negative free cash flow in Q2?

We don’t guide on quarters, but I think your analysis was good.

Perhaps just a question on the progression of these growth investments running here over the next few years. To what extent are you ramping up the growth investments as planned for, or are you holding back given the global macroeconomic uncertainty?

I can start with that one, Nils. No, we’re not holding back. We’re executing according to our plan, and we try to actually do it as fast as we can because we have so many positive signs from the places and cities where we have implemented the new store concepts and where we are doing the wind city concept with marketing and, of course, with the products as well. From our point of view, it’s to try to do it as fast as possible, but it takes time to build a retail network, to upgrade the retail network. We obviously need to find new locations, we need to find agreements with landlords, we need to make the store designs, etc. That’s one time-consuming piece, but we are on track with that.

Of course, there are many other things related to this retail excellence as well, which relates to training, store staff, expansion, etc. Those are quicker and taking place in parallel with all of this, but we are not holding anything back. We are executing according to the plan that we have laid out.

If we think of your OpEx expansion, as far as I remember, your plan was to increase OpEx by DKK 150 million this year, if I remember correctly. You increased OpEx year on year by DKK 17 million in this first quarter compared to quarter one of last year. You would say that you’re still on track to expand your OpEx by the number that I just mentioned for this fiscal year?

Yeah, we are on track on that. I think one of the things to take into mind is that the biggest part of our marketing spend is coming in Q2, especially this year in connection with the centenary events and celebrations. Our Q2 spend is going to be probably higher than normal from that perspective. That’s why we are only sort of $17 million of the way in the first quarter.

Could you just remind us how many stores are under your ownership as of now?

13.

Still 13?

Yeah.

When would you expect to end this fiscal year?

Yeah. We would probably add two this fiscal year under our own ownership. If we’re lucky, three, but it’s a little bit on timing on finding the right locations in the cities that we are working in. We have a location secured in Paris that is going to open soon, and in New York, that would be at the end of the year. We are looking into Tokyo, Ginza area. Whether we will make it at the end of the year or not is a little bit up to timing on the project that we have there. In addition to that, we have a few LOIs secured as well for other locations, but still pending contract negotiations.

Yeah. And then just finally, how should we think of your brand partnering revenue progression here for the coming quarters? You have a few moving parts here, some partnerships running off and some new partnerships coming in. How should we think about the coming quarters?

Yeah, I think overall the development is going to be, compared to Q1, stable, quite a little bit on the growth trajectory towards the end of the year as we get more and more ramp-up of TCL. Compared to last year, on the licensing income, as we said, all the time is going to be flattish this year as we have the HP TCL transition. We are going to be lower on the product sales this year in the brand partnering segment than what we were last year. I think net-net year on year, the revenue is going to be lower, the gross margin is going to be higher, and it’s basically developing as planned.

Great. Thank you so much. I’ll jump back in queue.

Thank you, Nils. We have Paul Jessen from Danske Bank. Please go ahead. Your line will be unmuted.

Yes, thank you. I have a quick question about the U.S. You said that on the go was very strong due to campaigns, and there were lower footfall into the branded stores. I was just thinking, do you have any indication now about the price increases you did? Is that keeping people out, or is it in the general spending levels that keep people out of the stores?

I can start. We have good sellout in the U.S. We actually had double-digit growth in sellout in the U.S., and the on-the-go category thing that you’re referring to is an enterprise deal that we have done that was done on prior price levels and a contract that we are honoring and fulfilling.

Okay. Even though you talk about lower footfall to the branded stores, you have increasing sellout?

Correct.

How you handle that San Francisco and Los Angeles is going to be wind cities when you report a like-for-like sellout. Does that mean that they will enter the numbers from Q3 next year, but this financial year in the sellout numbers?

In the wind city reporting, they will enter the numbers when they have a full cycle, when they are like-for-like. It depends a little bit, of course, on exactly the timing of the openings, which would be, yeah, here Q3 most likely. That’s how you would see it.

It would be in the like-for-like sellout from Q3 2026/2027?

Yes, that would be a good assumption.

Are there no stores now?

Yeah.

Okay. The gross margins in the on-the-go, let’s say it’s 100, and the A1, that is taking the gross margins up.

Yes. H100, A1, third gen as well. Generally, working with our price stability, also what we’re seeing in e-tail in China, where we’re taking over Tmall, is also improving our on-the-go margins as we go from wholesale to retail, and especially are selling out at full prices in that channel as well now. There are many factors impacting it.

How much is the impact from Tmall? Is that the majority on this one?

That is something I have to come back to. In the APAC numbers, it is a significant contributor. At group level, I have to come back exactly on that.

No, it’s just to see 40+ is a new normal. You had no comment on that?

No, of course, we are moving the gross margin in the upwards direction, and we are continuing to do that. As we talked about many times, on the longer term, the overall target is to also beat the 60% mark over the years. Of course, in order to do that, on-the-go has to move upwards as well. We are definitely getting in that direction. It’s also helped by the launch of Beograce.

Yeah, that’s not in the Q1 numbers.

No, not going forward for sure.

Yeah, about new product launches, you say it’s going to impact H2. Shouldn’t we expect that they will be launched within this quarter to have something at the anniversary?

Yeah, that’s a good assumption, but we will not comment on that as we never do. Of course, we want to make a fantastic anniversary. We have announced Beograce obviously now, and we are proud about that. It’s an amazing product from all aspects. You have to be patient, Paul, and wait and see what’s coming for the anniversary.

It’s just because you say H2, I would assume that if you launch this quarter and be there before the anniversary, there should be a number of selling display products, which would then have an impact on both revenue and margins in the second quarter.

That depends on when in the quarter it is coming, obviously, and what the numbers are. They will be selling when we announce a new product. That’s always the case.

Okay. About the royalty extension to Rayneo, is that one which we should see as significant? Of course, it depends on the expectations that TCL has on it. Shouldn’t it be seen as a niche product at this stage in AR glasses?

Yeah, it’s not going to be significant in our numbers, especially not this year as it’s coming late in the year. Of course, it’s a display of our licensing technology opportunities and how we’re expanding a partnership with a company like TCL and their subsidiaries. We’re working on more exciting things to come. As we said, the target is over the years again to grow this category compared to where we are today on the licensing business outside automotive.

I have two more. One, the networking tariffs are $100 million addition. You have $27 million from inventories.

Yeah.

Is it receivables going down because of the decline in sales, or is it payables going down before you get the delivery of new products?

Payables is going down, and other liabilities is actually the main contributing factor, which is a normal thing in Q1, which is related to building up liabilities on performance-based payment for the entire organization that is then being realized in the first quarter. That has a big impact. You have, of course, as I said, payables to our suppliers going down, and you have inventories a little bit up. That’s the mix that gets you to the DKK 100 million.

Okay. The final one, could you repeat the tariff impact in Q1 that you mentioned?

Approximately DKK 6 million.

Six?

Yeah.

Okay, that was all for me.

Thank you.

Thank you, Paul. As a final reminder, press five-star to ask a question. As no one else has lined up for questions in this call, I’ll now hand it back to the speakers for any closing remarks.

Thank you very much for joining today and for your questions. If you have any additional questions, don’t hesitate to reach out to our fantastic IR department, and they will help you out.

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