Earnings call transcript: Pierce Group Q3 2025 sees 17% revenue growth

Pierce Group AB reported a robust performance in Q3 2025, with a 17% year-on-year revenue increase. Despite a dip in gross margin, the company improved its adjusted EBIT to SEK 11 million from zero last year. However, the stock price reflected a cautious market sentiment, falling 2.33% pre-market.

Key Takeaways

• Revenue grew by 17% year-on-year, with a 20% increase in local currency.
• Gross margin decreased by 5.5 percentage points to 40.1%.
• Adjusted EBIT improved significantly to SEK 11 million.
• Workforce reduction led to a 35% decrease in white-collar employees.
• New market localizations and product category expansions are underway.

Company Performance

Pierce Group demonstrated strong revenue growth in Q3 2025, driven by an increase in sales per full-time employee and a reduction in overhead costs. The company’s strategic focus on efficiency and market expansion appears to be paying off, despite a reduction in gross margin. The company continues to hold a leading position in the European e-commerce market for motorcycle gear.

Financial Highlights

• Revenue: 17% increase year-on-year
• Gross Margin: 40.1%, down from the previous year
• Adjusted EBIT: SEK 11 million, up from zero last year
• Cash Position: SEK 161 million

Outlook & Guidance

Pierce Group is focusing on expanding its market presence through new localizations and product category growth, particularly in mountain bikes and scooter motors. The company expects an EBIT improvement of SEK 30-40 million annually from Q2 2026, driven by ongoing IT system transformations and workforce optimizations.

Executive Commentary

CEO Göran Dahlin highlighted the company’s growth ambitions, stating, "We are absolutely classifying ourselves as a growth company." He also emphasized the potential for market consolidation, noting, "It’s not a question of if; it’s just a question of when and by whom this consolidation will be driven."

Risks and Challenges

• Gross Margin Pressure: The decline in gross margin could impact profitability if not managed.
• Market Fragmentation: The European market remains fragmented, posing challenges for consolidation.
• Economic Conditions: Broader economic pressures could affect consumer spending on discretionary items like motorcycle gear.
• Competition: Intense competition in the e-commerce space could impact market share.

Q&A

During the earnings call, analysts inquired about the Black Friday outlook, to which the company responded with cautious optimism. Questions also focused on the new e-commerce platform, expected to enhance cross-sales, average order value, and conversion rates. The potential for further operational efficiencies through automation was also a key topic of discussion.

Full transcript - Pierce Group AB (PIERCE) Q3 2025:

Conference Operator: Welcome to Pierce Group Q3 Report 2025 presentation. During the Q&A session, participants are able to ask questions by dialing #5 on their telephone keypad. Now, I will hand the conference over to the speaker. CEO Göran Dahlin, please go ahead.

Göran Dahlin, CEO, Pierce Group: Good morning, everyone, and welcome to Pierce Group’s presentation on our third-quarter results for 2025. I’m Göran Dahlin, CEO of Pierce Group, and thank you for joining me today. Today, I’ll begin with a brief recap of who we are and our position in the European market, followed by a summary of our financial performance in the quarter. Then, I’ll provide updates on our ongoing transformation and strategic initiatives before we look ahead to our outlook and growth drivers for the coming quarters. We will close with a Q&A session at the end. For those of you less familiar with Pierce, we are the leading European e-commerce platform for motorcycle gear, parts, and accessories. We are not just an e-tailer; we are a specialist with three stores: 24MX serving off-road riders, XLMOTO serving on-road riders, and Sledstore serving snowmobile riders.

Our assortment is uniquely attractive, combining the strongest brands on the market with a leading portfolio of private labels. We are the number one player in the off-road category and amongst the top in on-road, and we’re proud to be a truly pan-European company in the market. We operate localized websites in 20 markets and serve more than 1 million customers each year. The total addressable market was estimated at around SEK 100 billion in 2021. Although it’s likely contracted somewhat since then, it remains substantial and critically still largely offline and fragmented. To the right, you can see some basic information about us. Two-thirds of the sales are outside the Nordics, almost two-thirds is off-road, one-third is on-road, and 4% is other, which primarily is SledStore. Parts and accessories are each 20%, and more than half of the sales is gear.

Own brand’s share is slightly lower than 40%. The market we operate in consists of several different market categories, and each category behaves a bit differently. Items like parts and protection gear have a high rate of wear and tear, especially for frequent riders in off-road, making replacement a constant demand driver. Others, like clothing, align more with fashion cycles. Importantly, most of this market is still served through offline retail. In fact, we estimate that only 19% of the European market was online in 2021. The online penetration varies significantly amongst geographies and categories, but for Europe overall, the shift to online will continue for quite some while in our core customer segments. The reasons for this, the growth drivers here are that online can offer a much wider selection and better availability than offline, and this provides a superior convenience for the customers.

The products are also very well suited for e-commerce. A general growth driver long-term is that the base of motorcycle riders are steadily increasing across Europe. The competitive landscape is fragmented and constituted of five different segments: leading online retailers such as ourselves, 24MX and XLMOTO; general and diversified marketplaces such as Amazon; leading omnichannel players. This is our strongest competitors, and they combine the benefit of physical presence in store with online presence. Brick and mortar, typically local physical retailers, many of them since COVID, but some online presence. We have the direct-to-consumer model. The brands in the markets sell mainly through distributors and directly to large retailers, but some are also operating their own web shops and sell directly to consumers. We have a handful of direct competitors. The largest ones you can see in the table to the right.

To summarize this table, we are the largest e-commerce player in the market. We are the champions in the Nordics, and we’re a clear leader in off-road across Europe. Pierce is also the only pan-European player with local sites in 20 countries, soon to be 28, where we have local language, local payment options, and local delivery partners. The other players are primarily local champions in the main European markets. Most of them focus on on-road, and they have significantly lower private label share than Pierce. Many of them are very well-managed companies with healthy growth history and good profitability. Several of them have financial owners, which we believe will facilitate the future market consolidation. The investment case for Pierce remains unchanged. We operate in a large, fragmented, and structurally attractive market that is ripe for consolidation.

We have taken many steps by enhancing the business and have a very good growth the last 12 months with improved profitability. We have also increased our efficiency. Sales per FTE are up 67% over the last two years, or if we calculate the white-collars, it’s up more than 80% per white-collar employee. We continue to enhance our customer experience while driving operational efficiency. Our mid-term goals are to grow faster than the market, delivering a profitability of 5%-8% and maintaining a net debt below two times EBITDA. Now, I’ll walk you through the Q3 financial performance. Q3 was a good quarter for us. We continued to deliver strong growth, 17% year-on-year or 20% in local currency.

Growth was primarily driven by improved stock availability of external brands, and the quarter began very strongly with solid demand throughout July and August, and then moderated slightly towards the end of the period as we were meeting stronger comps from last year. Gross margin came in at 40.1%, which is down quite significantly, 5.5% versus last year. The main reason for this are obsolescence provisions, which I will come back to, and targeted price reductions to sell through slow-moving inventory together with mix effects. The variable cost decreased as a share of net revenue as we continue to drive efficiency in our performance marketing. Overhead costs were down SEK 5 million year-on-year to SEK 61 million, and this is despite transformation expenses of SEK 6 million related to our new SaaS systems.

These costs cannot be capitalized and overlap with ongoing depreciation of our legacy on-prem systems, a temporary effect that will fade as the transformation completes. From Q2 2026 and onward, we expect to unlock some SEK 30-40 million in annual EBIT improvement versus peak levels in 2025 as we launch our last two remaining systems. Adjusted EBIT for the quarter strengthened from zero last year to SEK 11 million this year, despite high obsolescence, transformation cost, and trademark amortization. This demonstrates the underlying improvement that is not yet fully visible in our P&L. We ended the quarter with a strong cash position of SEK 161 million. This was down from unusually high levels during 2024, but it’s still a very solid position. Inventory levels are slightly lower than last quarter and will remain quite high to support continued growth.

Cash flow was negative, mainly due to a big VAT payment from a very strong quarter two and temporary prepayments to secure stock as we exceeded certain supplier credit limits due to our rapid growth. Overall, Q3, I’m very pleased with Q3, and it was another step forward, delivering solid growth, improving efficiency, and strengthening the foundation for sustained profitability. Looking into our KPIs, we have a strong offering of private brands. Our last 12 months, private label share was 37%, one of the absolutely highest shares in the industry. This should compare to 40% in Q3 last year. We have grown in absolute terms in private label, but we have grown exceptionally well in external brands. We do not foresee any major shifts in the private label share going forward, but we aim to remain at a leading level in the industry.

Customer satisfaction has increased from 4.3 in Q1 2024 to 4.4, and we remain at the 4.4 level, which is one of the absolutely highest in the industry in Europe. Moving forward with our KPIs, the active customer base is increasing. Those of you that have listened to me before, this is a key target for us to continue to increase the customer base. I used to say it’s a bad strategy for a growth company to have a decrease in customer base, and I’m very pleased that we continue to grow the active customer base in a stepwise manner. Also, I’m pleased that our AOV is increasing. Even if it’s at a fairly slow rate, it is still in the right direction, and that’s very positive for our overall economics.

Looking into our gross margin a little bit closer, we can see that it decreased compared to last year, landing at 40.1%. Again, the main driver of the decline was increased obsolescence provisions and mix effects and aggressive pricing on overstocked items. If you remember last year, we made quite a strong increase in the stock levels. As we want to reconfirm our position as leading specialists in the industry, it is absolutely pivotal that we have the broadest and most attractive assortment in the industry. This has yielded really good growth for us. Of course, when we increase our stock level to 50%, some of the bets that we make on sizes and colors will not prove correct.

As a share of our total inventory, our obsolescence provisions are not higher, but due to the increase of the stock one year ago and the 12-month grace period that we have for new products, we have some extra obsolescence in a temporary manner in Q3. Looking ahead, we expect the markets to remain fairly price-sensitive, and our target is to maximize gross profit in absolute terms, staying competitive, but not being the cheapest in the market, and of course, have consideration of the gross margin levels. On shipping costs, we saw a freight price increase versus last year, while quarter on quarter remains stable. We expect continued volatility in freight rates, but we are taking active measures all the time to manage this exposure to secure favorable terms with key carriers and balancing inventory planning to limit margin impact going forward.

Looking at our adjusted EBIT, let me say some words on this. It needs some explaining, as again, all the underlying improvements that we have are not yet visible in our P&L. I am trying to visualize this here. We have two main items that are not classified as items affecting comparability that are still unusual and temporary. They are impacting EBIT quite a lot. Number one is the trademark amortization that followed the discontinuing of a number of trademarks from our private label portfolio and consolidating them into ProWorks to create a stronger focus on our efforts on building brands, making our private label into real brands. We choose to focus part of this into ProWorks. This affects us SEK 2 million per quarter until quarter one 2026.

We also have the transformation cost as we are changing the vast majority of our IT system to overcome tech debt legacy and making the company more scalable. We are investing in cloud-based or SaaS systems, and as such, we cannot capitalize these costs, but we have to take them in the P&L as OPEX. This is primarily double licensing during the transformation period, and it is external consultants focused on this transformation. This is quite a hefty sum. It is SEK 6 million this quarter and SEK 29 million year-to-date. Looking at if we compensate for this, we see that Q3 we would have delivered SEK 19 million in EBIT, and on top of that, we took an extra SEK 13 million in obsolescence, I should mention. Even if our transformation costs will never go down to zero, we expect them to considerably decline from Q2 2026 going forward.

Also, which is not visible here, we have a fairly high rate of depreciation to depreciate our old on-prem systems until we have launched the new systems. We will have a double positive impact next year from decreasing depreciation and decreasing transformation costs and decreasing amortization of trademarks. We expect that to deliver some in the range of SEK 30 million-SEK 40 million on an annualized basis from Q2 2026 and onwards. Moving into our overhead cost development, we decreased by SEK 5 million year-on-year to SEK 61 million despite the SEK 6 million in transformation expenses. Since Q2 2023, when I started, we started the Pierce 2.0 program, where one of the main things was to right-size the company. We have been continuously reducing the number of white-collar workforce, and we are now at 166 at the end of quarter three.

This means that we have decreased from 257 to 166, more than 35%. At the same time, we have increased net revenue by 18% in local currency in the last 12 months, and this results in a roughly 80% higher sales per white-collar FTE. I think this is a clear demonstration of the scalability of our model and the efficiency gains from streamlining processing, empowering teams, reducing bureaucracy, and making faster decisions. The networking capital development, our networking capital has increased since the exceptionally low levels we saw in Q2 last year, where we clearly went too low and lost sales or lost growth. This is mainly the result of our efforts to strengthen the assortment and improve product availability, which are key enablers of growth. The increase this quarter primarily reflects temporary prepayments to secure stock as we exceeded credit limits with some of our largest suppliers.

You might argue this is a pleasant problem, but we’re working to solve it. We do want the cash flow to reflect our underlying business in a better way. We expect networking capital to remain somewhat above 2024 levels going forward as we balance strong availability with disciplined inventory management. Our focus remains to continuously improve our purchasing methodology to drive higher efficiency. We want to keep the stock levels roughly where they are today, while at the same time expanding our reach in new verticals or improving our verticals and improving product availability. Now I’m moving into the final section. I’ll share with you some of our high-level plans for the future. Looking back from 2023, we have been very busy with the Pierce 2.0 transformation, and we call this phase of the development of Pierce for enhance.

We have enhanced the business, enhanced the fundamentals. We also named it back to basics. We have improved the customer experience, we have streamlined operations, and we have improved the scalability of the company. This has delivered very strong growth and profitability improvements. We say that we will complete the Pierce 2.0 transformation program when we have launched the final systems, which is the warehouse management system and the new e-commerce platform, which we aim to be ready with by the end of quarter one 2026. It is important to reiterate that the negative cost gearing that we currently have will come to an end in Q2 2026, yielding, according to our estimates, SEK 30-40 million EBIT annualized. We also expect that growth from stronger fundamentals will moderate as we face tougher comps.

Thus, it’s very important for us to get acceleration in the next phase, which is expand. First we had enhance, and now we’re moving gradually into expand. What do we mean with that? We want to focus on expanding reach across markets and verticals to sustain the growth momentum. We are targeting localization on 12 markets that has previously been done in English with EUR from our .eu site. These are high-growth markets, primarily in Eastern Europe. This also will complete our pan-European presence. Step one of this is to grow 12 new markets or localize 12 new markets. We have localized four today with very good results so far, but it’s very early days still. We also have a target to gain momentum in the mountain bike and scooter motor categories.

In the mountain bike category, we already have a large customer base because motocross riders very often are mountain bike riders, as it is a very good complementary training. We already have a lot of scooter moto riders that, for example, buy our Raven, very, very priceworthy helmets, etc. We have not really done this well. We will focus more on this, and we’re building up the inventory, building up the brand presence or brand offering in these categories. We expect that we will get good growth momentum from that. In a stepwise manner, these things often take time, but in a stepwise manner from Q2 and onwards.

In this way, we hope to be able—we aim to be able to mitigate the moderated growth that we will probably see from enhance with growing more from the expand growth stream. We have a very, very interesting option, and that is to be participating in the consolidation of the European market. To me, it’s not a question of if; it’s just a question of when and by whom this consolidation will be driven. We have the opportunity to build a fantastic company that is a clear leader in the European market and that can have an amazing assortment, stocked with superior delivery lead times. That company can put enormous resources into developing private label, fully in line, fully comparable with the leading brands in the market.

That company will be much bigger than anyone else in the market and thus having a completely different negotiation power with the suppliers and will also be a very attractive route to the market for the suppliers. Really creating win-win with good improved gross margins for such a company. Finally, a consolidation like this will open up huge possibilities for increased efficiency across especially the back office functions. Scale advantages on strong tech-enabled platform are huge, and Pierce is the largest, only pan-European, and only listed player in the market. We are uniquely positioned to take part in market consolidation if such would start happening. Thank you for your attention, and with that, we’ll open up for questions.

Conference Operator: If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Eric Tysel from Garn Invest. Please go ahead.

Göran Dahlin, CEO, Pierce Group: Good morning, Göran. First off, congratulations to a great result. It’s great to see the continued improvement in line with your stated strategy. I have two questions. First is regarding the Black Friday period. If you could please elaborate on your current standing and planning compared to last year. Thank you, Eric. We do not give guidance yet. Possibly this will change sometime in the future, so I’m unable to comment on how we are doing in the Black Friday period, but I can reiterate what we have mentioned before. In the last quarterly report, we said that we are in general fairly positive to the Black Friday period. We feel that we have good inventory levels and are ready for the challenge.

Having said that, we also saw that last year we had a really bad snow season, which means that we expect our sled riders to be quite cautious in the beginning of the season until the snow falls. This can, of course, impact our Black Friday period. We also mentioned that we see much less clearance deals and overstock with our large suppliers. That has in 2024 been a very good growth driver for us. With those two caveats, we communicated that we were positive to the Black Friday period. Thank you. Last question with regards to the e-comm platform you soft launched this quarter. We have tried it, and the speed is very tremendous. What impact do you believe this will have, for instance, on cross-sales in order to increase the average order value, conversion rate, and particularly the organic visibility?

Yeah, it is really a step forward, and it’s so much faster than our old system. You asked the right questions. We have internal targets for this, of course. We have not shared them, but we expect this to be very positive for us. The early signs on the new markets that we have launched are encouraging. I cannot really say more than that, that this is, to be frank, our old systems were so bad that we just had to change. What we’re doing now is a really good uplift from many aspects. It will also impact our SEO in a quite good way, or should impact our SEO in a quite good way, as Google tends to favor fast sites over slow sites. Perfect. Thank you for your answers, and congratulations again to a great result. Thank you. Thanks, Eric.

Conference Operator: The next question comes from Adrian Elmlund from Nordea. Please go ahead.

Adrian Elmlund, Analyst, Nordea: Hi there. Good morning, Göran. A couple of questions from me, please. I can begin with one, and then I’ll take them in order here. First off, could you give us some—you basically gave us some growth drivers here for the long term, right? Your financial target is to outgrow the market, but I kind of wonder if you can help us with the growth rates in the more near or more longer term. Basically, you’re reaching, or you will end up here into some tougher comps. You also guided for this yourself. Could you kind of bridge where the growth comes from specifically, and perhaps what do you expect in terms of the market growth as well in the coming years?

Göran Dahlin, CEO, Pierce Group: Yeah. So basically, I cannot give guidance in figures, but just to say that we have had a very good growth, as you know, the last 12 months. I think that we have reached another level where we rightly should be, if I can say it like that. Therefore, we expect we still have a lot of things to do and to improve, and we’re working on that. Step by step, this growth from enhance will moderate. Again, it’s very important that we get the expand growth to start kicking in. My experience is that that type of growth takes a little while. It takes a while to get going with improved verticals, to get traction with the customers and with Google, and it takes some time also with new markets.

Whether that will mean that we overall will see a decrease in our market, in our growth rate or not, I cannot really say. I think probably it is fair to expect that it will be difficult to have 20% growth quarter over quarter over quarter. We are absolutely classifying ourselves as a growth company. Again, I can just iterate that we really want the expand growth avenues or growth drivers to start kicking in as soon as possible.

Adrian Elmlund, Analyst, Nordea: Right, right. Okay. Could you, as a follow-up to that, could you give us any comments on basically how large the scooter and mountain bike sales are and kind of what you expect of this?

Göran Dahlin, CEO, Pierce Group: Yeah, the mountain bike, I think I said in some quarter before that our mountain bike segment is between 1% and 2% of our total sales. So it’s not insignificant, and the margins are fairly good. Regarding the moped, it’s frankly so we do not know because we sell the same helmet to motocross riders, to moped riders, to on-road riders. So there we do not have a tracking of this, or it’s not possible for us to track currently. It will be in the future, but we just know that it’s a big market, and we know from experience that we have a lot of moped riders that buy, especially on 24MX, actually.

Adrian Elmlund, Analyst, Nordea: Okay, thanks. Another question I have is you clearly demonstrate here that you can grow the business without increasing overhead costs. Speaking of cost cutting, could you give any comments with regards to how much more costs that you can reduce from the current business, and perhaps when should we start to see that investments into operations are moving up in absolute terms?

Göran Dahlin, CEO, Pierce Group: Yeah, so we are doing both at the same time. We both have decreased the overall white-collar FTE number, and at the same time, we have strengthened a few positions here and there where we see that we are in need of specialist competence that we currently do not have. This is something that we will continue. It will be very challenging to keep up the minus 90 people in two years for the coming two years, and there will be no one left here. I would say that I’m very satisfied with the team we have today. The ambiance is—what we’ve been through is not easy, and I’m very, very proud of the team. I think they’ve done a fantastic job, and this is the reason why we have developed so well.

I don’t foresee any—yeah, I foresee that we still have room to become more efficient through automation, through further simplification of our processes, but I do not see that we will make—it will be in the same tempo as we’ve had in the last two years.

Adrian Elmlund, Analyst, Nordea: Okay. Last question from my side. It’s kind of a similar question here, really, but regarding the marketing. Could you give us any more detailed comments regarding your marketing strategy? You claim that you’ve become more efficient, right?

Göran Dahlin, CEO, Pierce Group: Yeah.

Adrian Elmlund, Analyst, Nordea: You have decreased marketing costs in both percentage and absolute terms. Surely you have to spend some money on marketing to grow sales. Could you give any comments on the marketing strategy?

Göran Dahlin, CEO, Pierce Group: Yes. We have where to begin. I think that in general, we have in the past been very focused on the lower funnel in spite of us being the leading investor when it comes to branding in terms of sponsorships and influencers, etc. We are very visible on the tracks in off-road, while it’s more expensive and difficult to get good reach, efficient reach in the on-road segment. Looking forward, I would love to be able to spend more money on branding and making the lower funnel even funding that by growth and funding that by becoming even more efficient in the lower funnel. In the lower funnel, we have a very complex challenge. We’re on many markets. We have some 215,000 products listed. Our product feed is enormous, and that means that it’s very difficult to select the right products to market on Google and other platforms.

This is something that we have worked quite a lot with. We have a great team in the performance marketing that is supported by an external company also, which is a strategy that we embarked on a year ago. Now we’re starting to see the effects. We changed the part of the team here, and we also added on an external partner. This has proven to be, so far, a very good move for us.

Adrian Elmlund, Analyst, Nordea: Okay. That was all for me. Thank you very much.

Göran Dahlin, CEO, Pierce Group: Thank you, Olga.

Conference Operator: As a reminder, if you wish to ask a question, please dial Pound Key 5 on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.

Göran Dahlin, CEO, Pierce Group: Thank you for joining me today, and I wish you a great continuation of the day. Thank you.

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