Kappahl has strong quarter, speeds up investment to overcome "cautious market"

By

Sandra Halliday

Published
Apr 6, 2017

It was a story of rising sales, good news on margins and improved operating profit for Swedish fashion group Kappahl during Q2 and the first half, with the company saying that its work to rationalise its collections, together with its pricing and campaign strategy, are all paying off.

The company’s sales rose 6.5% year-on-year in the quarter to February to reach SEK1.189bn, with comparable sales up 1.9%. And they rose 7.4% in H1 to SEK2.45bn. This meant operating profit of SEK47 million for the quarter, a sharp improvement on the prior year’s SEK31 million. And profit of SEK190 million for the half was up from SEK148 million a year earlier. The quarter’s gross margin also improved.

The company has been active on the store front both opening and closing locations. During Q2 it completed its restructuring programme in the Polish market with seven Polish stores shuttered to leave it with 25. But it expects to open new stores there this year.

And since the quarter ended, it has opened a new store in New York City, developed under its new concept that puts the customer at the heart of the store’s services. The company said it has been designed based on customer feedback and makes it easier for shoppers to find what they are looking for in a more spacious location that offers plenty of inspirational ideas.

Back with Q2, President and CEO Danny Feltmann said that KappAhl faced the Christmas trading period “with clear campaigns and an attractive range. Our strategy of incorporating more fashion in the Christmas campaigns boosted sales while communicating well that KappAhl is a destination for buying Christmas presents.”

But he said that the start of the new season in February was “initially characterised by a cautious market” and that the weak Swedish currency has presented challenges.

However, he was upbeat, referring to the firm’s continued and accelerated investment in store openings and conversions, as well as IT and process development, where services to integrate e-commerce and physical stores are the focus.

This has included the planned expansion of its Newbie chain in all markets, a focus on using sustainable materials (with over half its denim range now using more sustainable cotton) and more work to boost its online operations.
The latest earnings report came just a month after the company announced a reorganisation that saw it merging its marketing and retail functions, with its current VP of marketing, Joakim Holmstrand, set to leave in August. It will also be creating a new VP for customer experience role, a that is yet to be filled.