Pandemic challenges weighed down the fourth quarter
October – December 2021
- Net revenue totaled SEK 413 (414) million, which was in line with the equivalent period last year. In local currencies, growth was 1%.
- EBITDA totaled SEK 18 (37) million. Adjusted EBITDA was SEK 18 (50) million, equivalent to a margin of 4.2% (12.0%).
- Operating profit (EBIT) was SEK 6 (26) million. Adjusted operating profit (EBIT) was SEK 6 (39) million and the adjusted operating margin was 1.4% (9.3%). This decline was primarily due to higher shipping costs from Asia, a lower gross margin level and increased costs for online traffic-driven marketing activities.
- Cash flow for the period was SEK -5 (-105) million. Last year’s cash flow was impacted by the repayment of shareholders loans of SEK -115 million.
- Profit/loss for the period amounted to SEK 6 (6) million.
- Earnings per share before dilution was SEK 0.14 (0.17) and SEK 0.14 (0.17) after dilution.
January – December 2021
- Net revenue increased by 5% to SEK 1,594 (1,523) million. In local currencies, growth was 7%. The previous year was positively impacted by Covid-19 related effects.
- EBITDA amounted to SEK 93 (121) million. Adjusted EBITDA was SEK 104 (137) million, equivalent to a margin of 6.5% (9.0%).
- Operating profit (EBIT) amounted to SEK 46 (81) million. Adjusted operating profit (EBIT) amounted to SEK 58 (97) million and the adjusted operating margin was 3.6% (6.4%). The change was mainly due to increased shipping costs from Asia, of SEK 29 million.
- Cash flow for the year was SEK -71 (-19) million, primarily due to increased inventory levels.
- Financial net was -20 (-73) MSEK of which improvement was largely due to the change in financing structure undertaken in conjunction with the listing. Profit/loss for the year amounted to SEK 26 (-1) million.
- Earnings per share before dilution was SEK 0.68 (-0.02) and 0.68 SEK (-0.02) after dilution.
- The Board of Directors’ proposal to the annual meeting of shareholders is that no dividend will be distributed for the financial year 2021.
|SEKm (unless stated otherwise)||2021||2020||2021||2020|
|Growth in local currencies (%)||1%||25%||7%||24%|
|Profit after variable costs||81||110||343||358|
|Adjusted operating profit (EBIT)||6||39||58||97|
|Items affecting comparability||0||-12||-12||-17|
|Operating profit (EBIT)||6||26||46||81|
|Profit/loss for the period||6||6||26||-1|
|Gross margin (%)||44.5%||49.8%||45.7%||46.7%|
|Profit after variable costs (%)||19.5%||26.5%||21.5%||23.5%|
|Adjusted EBITDA (%)||4.2%||12.0%||6.5%||9.0%|
|Adjusted operating margin (EBIT) (%)||1.4%||9.3%||3.6%||6.4%|
|Cash flow for the period||-5||-105||-71||-19|
Continued pandemic challenges weighed down the fourth quarter
The quarter was characterised by a lower level of online-traffic in the market together with increased shipping and purchase costs. We deem that these effects are of a transitional nature related to the pandemic, and we continue to feel confident with the potential for long-term growth in the online market, as well as Pierce.
In Q4, net revenue totaled SEK 413 million, which was an increase of 1 percent in local currencies. Stock availability in the market was, in general, positive but our assessment is that the total European online market decreased compared with the same quarter last year. This led to price-aggressive offerings in the market, especially during Black Week. We therefore chose to reduce the prices on selected assortment and increase our investments in marketing activities to drive online-traffic. In this manner, we successively increased the growth rate during the quarter, however, at lower margins.
Online-traffic growth on our sites was somewhat negative, while the conversion was in line with last year’s rate. Sales growth in local currencies was thereby driven by a 4 percent increase in the average order value compared with Q4 2020. This was primarily an effect of targeted activities focused on increasing the total value of customers’ shopping carts.
In local currencies, Onroad grew by approximately 9 percent and Offroad decreased by approximately 4 percent compared with Q4 2020. Developments within Offroad were primarily a result of the weak online-traffic following a fantastic year in 2020. Within Onroad, we drove growth through a stronger customer offering, including, amongst other things, an improved assortment and more competitive pricing.
During the quarter, we had a major focus on handling sales during Black Week. Amongst other things, we recruited a great number of temporary staff to our distribution warehouse in Poland. Furthermore, we undertook several measures to secure our IT infrastructure in advance of the high level of visits to our web sites. In spite of the pressure on the organisation and IT system, we delivered without disruption and the customer satisfaction, which we measure via TrustPilot, has reached record high levels.
The need to stimulate growth, together with increased costs, pressured the profitability and therefore adjusted EBIT totaled SEK 6 million, a decrease from last years’ SEK 39 million. The adjusted EBIT margin declined from 7.9 percent to 1.4 percent. The following five items affected the EBIT margin:
- Increased shipping costs from Asia, which totaled SEK -19 (-12) million, corresponding to -1.8 percentage points.
- Less favourable revaluation of working capital items of SEK 2 (6) million, corresponding to -1.1 percentage points.
- Other gross margin items, mainly adjusted prices to customers and somewhat higher purchase prices, corresponding to approximately -2.3 percentage points.
- Increased variable costs primarily related to marketing to drive traffic, corresponding -1.8 percentage points.
- Increased overhead costs primarily related to investments within IT, corresponding to -1.0 percentage point.
At the beginning of the quarter, we saw indications that the price levels in the market had somewhat increased and we also implemented certain price increases, primarily on products containing a major portion of shipping costs from Asia. However, these were offset by volume-driven price adjustments.
During the second half of the year, particular focus was placed on optimising sales growth vis-à-vis price and margin development.
Prior to the campaign season in the fourth quarter, the inventory was adapted to a higher growth level and included an increased buffer inventory due to the uncertainty in the production chain. Hence, the lower growth affected the net working capital increase to SEK 260 million at quarter end.
Continued uncertainty in forthcoming quarters
The latest quarters have been challenging and difficult to forecast given a volatile market and we believe that these uncertainties will remain during the forthcoming quarters. Our current primary focus is to increase sales and decrease the inventory, even if we are also working with the transfer of cost increases to the customer. This is accomplished by, amongst other things, focused price increases when the markets allow, amended campaign activities and amended purchasing routines.
Our long-term targets are not affected
Our long-term growth target is to grow on average 15-20 percent per year. It is expected that this growth will be driven by a continued channel shift in the market when sales move from physical stores to online. In the long-term, the pandemic is deemed to not have negatively impacted this development as a larger number of customers, primarily on the Continent, discovered e-commerce during the recent restrictions. A comparison with 2020 is clearly difficult due to the effects of the pandemic. If we extend the perspective and make a comparison with 2019, we see that the average annual growth (CAGR) for Pierce during the two last quarters, was just under 15 percent in local currencies, in spite of all of the external challenges.
Profitability has been affected by pandemic-related effects for some time, but our long-term target of an adjusted operating margin of around 8 percent remains unchanged. Some of the cost increases impacting us are of a transitional nature and we expect that with time the market will adapt to the cost level. Going forward, we also see good opportunities to improve profitability through reduced overhead costs in relation to net revenue as we, amongst other actions taken, in recent years launched a new and scalable platform.
Our leading position in the European market, with a broad assortment and competitive prices, represents a good timing. We know that motorcycle riding is a passion and that it is a prioritised activity with our customers. All things considered, we are carefully optimistic in our view of the future, as well as in regards to the good opportunities for continued profitable growth in the near future.
Finally, I would like to thank all of our personnel in Poland, Spain and Sweden who, every day, and in the most excellent manner, deal with all of the challenges we face and who succeed in improving our customers’ experience.
Stockholm, 16 February 2022
CEO, Pierce Group AB
For further information, please contact:
Henrik Zadig, CEO
Tel: +46 73 146 14 60
Tomas Ljunglöf, CFO
Tel: +46 73 378 01 54
About Pierce Group
Pierce is a leading e-commerce company selling gear, parts, accessories and streetwear to riders across all of Europe via some forty websites adapted to local markets. Pierce has two major segments, Offroad – sales to motocross and enduro riders, and Onroad – sales to high road riders. Pierce also has a smaller segment, Other, which primarily focuses on sales to snowmobile riders. With a large and unique product assortment, including several private brands, an excellent customer experience and attractive prices, Pierce is changing the motorcycle enthusiast market in Europe. Headquarters are located in Stockholm, the central warehouse is in Szczecin in Poland, and the major portion of our customer support services is located in Barcelona. The Company has approximately 450 employees.
The information was submitted for publication by the above-mentioned contact individuals on 16 February 2022 at 08.00 CET.