Source: Inderes & Pinpoint (retail consensus 23.04.26, 63 estimates)  (consensus)

Björn Borg's Q1 revenue growth was better than our expectations, which in combination with increased gross margins resulted in a strong earnings beat. In our view, we view positivley on that sports apparel category contniues to show double-digit growth, however, there were yet no clear signs of an overall turnaround in the footwear category, which we belive will be key for the company to accelerate its revenue growth going forward.

Solid revenue growth despite challenging comparison figures

We consider Björn Borg's Q1 revenue growth of 10.9% in local currencies to be strong. However, due to a negative FX impact from a strengthening SEK, reported revenue increased by 7.3% year-on-year to 301 MSEK. Nevertheless, this was above both our and Retail Consensus expectations, and we view this as a strong outcome given the challenging market climate.

By segment, Wholesale stood out on the positive side, with Q1 revenue growth of around 11%, well above our expectations. We identify the underwear category as the main driver for growth, noting its impressive 28% growth in the segment alongside increased sales at e-tailers. While the Wholesale segment beat our expectations, the company’s second largest segment, Own e-commerce, came in below our expectations and reached only 2% growth in Q1. We note, however, that Björn Borg faced tough comparison figures in this segment (Q1’25 revenue growth of 26%). While we believe the segment's expansion was modest, we view it positively that the key product areas, Sports apparel and Footwear, both achieved double-digit growth in the segment. Geographically, Germany stood out on the positive side, as we had expected, with Q1 revenue growth of around 39%. Also, Finland was strong (20% y/y), which also benefited from favorable year-over-year comparisons.

Overall, we find it very positive that the sports apparel category has now maintained double-digit growth for 15 consecutive quarters. On the other hand, footwear, a focus area and key category for expansion, has disappointed our expectations over the past year, and the Q1 report showed few signs of a turnaround as overall footwear sales decreased by around 19%.

Outstanding profitability fueled by strong growth

The absolute highlight of the quarter was profitability, as operating profit surged 37.0% year-on-year to 46.9 MSEK, well above both our and Retail consensus estimates. We attribute the earnings beat primarily to higher revenue growth than we had expected, as well as a higher gross margin (54.0%) than our 52.0% estimate. Worth noting, however, is that the gross margin likely was supported by favorable FX tailwinds. Overall, we believe this margin expansion, coupled with higher sales volumes, allowed the company to demonstrate solid operational leverage during the quarter. As a result, EPS landed at 1.47 SEK (Q1’25: 1.43 SEK).

Strong start to the year puts upward pressure on our estimates

Björn Borg does not provide explicit short-term financial guidance. However, the impressive Q1 results demonstrate that the company's operational efficiency and sales growth are progressing faster than we anticipated. Following the substantial profitability beat and stronger top-line momentum, we expect to make upward revisions to our estimates for the remainder of the year.