KappAhl too needs more money

Fashion chain KappAhl’s (STO: KAHL) President & CEO Johan Åberg claims the company is on the right track, doing the right things and that the company’s 2011/2012 fiscal year the details of which were reported this morning includes many bright spots. What truly sunk the stock today is an announcement of an upcoming 375 million share issue proposal with preferential rights to existing shareholders. This combined with a near 500 million property sales that have been contracted for would allow the firm to reduce interest bearing debt by two thirds and reach its Net Debt/Ebitda target of below 3.0.

KappAhl: Disappointing Q3

Clothes retailer KappAhl (STO: KAHL) reported Q3 March-May results this morning. The company managed to reduce costs by 5.7% vs Q3 last year but net sales dipped to 1.15 billion from 1.24 billion SEK a year ago, a 74% slide. Operating profit of 29 million halved from last year while gross profit margin was down by a single percentage point to 59.1%. After tax loss of -10 million means 4 öre loss per share for the period. Cash flow remained positive at 117 million.

The inventory composition adjustment is now supposedly behind and President and CEO Johan Åberg feels present normal inventory level will benefit the company going forward. At the close of the period inventories were at 678 million SEK, down 122 million from last year. Expectations are high for improvement this autumn with new marketing concept coming to fore involving input from a new marketing director. Mr. Åberg did however characterize Q3 sales as weak

KappAhl : Inventory clearing sales affected margins

Fashion chain KappAhl’s (STO: KAHL) second quarter report for December-February was released on Friday. Net sales decreased by 5.8 per cent for the quarter to just over 1.1 billion SEK and 8.6 per cent for the first half compared to previous fiscal year. Impairment loss of 83 million mainly from write-downs of non-current assets on poorly performing shops further reduced earnings.

Operating cash flow turned positive at 68 million where as profit after tax was minus 163 million. The company is disappointed with the performance and says some of that poor run will continue on Q3. Sluggish demand for its products has led to a lot of inventory clearing sales. This in turn affected margins, with gross margin down to 51.9% from 57.2%.

The focus in 2012 is to prioritize on women. The initiatives in the segment have caused much of the sales decline as of late. The main target group is women in the 30-50 range with families. The company admits their recent initiatives in the segment were poor and ill-timed. Winning back market share is the current aim. As one might expect, the company wasn’t very clear on how exactly the new initiatives differ from the old, but it seems even more customer profiling is behind the new offering.

With the profitability in mind, the rate of expansion has been slowed down on purpose and some shops will be closed. A rights issue towards the end of 2011 gave proceeds of around 600 million before costs means that equity/assets ratio increased to 27.7% Gross profit has matched previous year’s level in March. The company expects moderate recovery in the industry in 2012 and to start to see improvement on its own operations. The share was unchanged at 7 SEK on Friday close.

Handels strike would affect many listed companies

Swedish Commercial Employees' Union Handels has issued a strike warning. It would start after Easter celebrations on April 13th. While strikes are rare in Sweden, Handels has used the threat on occasion in recent years.

Negotiations with employer’s organization Svensk Handel broke down several days ago. Naturally Svensk Handel is opposed of such a move and thinks it would be very damaging to the Swedish economy. The union demands 860 SEK wage increase to retail sector employees plus 100 SEK extra to narrow the gap in between male-female earnings.

The warning covers warehouses and stores with some 5600 employees and 65 workplaces. Since certain big wholesalers are involved, it could also have a trickle down effect on other smaller companies. Among listed companies affected would be

Clas Ohlson (OMX: CLAS B)
Lindex fashion chain, a subsidiary of Finnish Stockmann (OMX: STCAS, STCBV)
Hemköpskedjan AB and WiLLY:S AB, subsidiaries of food retailer Axfood AB (OMX: AXFO)

Building, contracting and industrial sectors retailer Swedol AB (STO: SWOL B)
Steel trading and services firm BE Group Sverige (STO: BEGR)
Industrial consumables and components provicer B&B TOOLS (STO: BBTO B)

H&M Hennes & Mauritz (OMX: HM B)
Large retailer ICA AB, which is 40% owned by Hakon Invest AB (STO: HAKN)
KappAhl (STO: KAHL)
Car spare-parts chain Mekonomen (STO: MEKO)