An extraordinary shareholders’ meeting will vote before Dec. 17 on a proposed equity increase of 150 Swedish kronor (e16.5m-$21.4m) to help this large struggling Nordic shoe and leathergoods retailer to speed up its financial recovery, investing on bigger stores that can offer various categories of products.
Meanwhile, the Wedins retail group is adding hair fasteners and other such accessories to its product offer at 40 locations, projecting sales of some 40 million SEK (e4m-$6m) a year of these items by 2006. This new project is steered by Marten Crifält, former buying director of Glitter, a Swedish chain of accessories.
Wedins’ new managing director, Roland Nilsson, has already closed about 30 small stores and opened 15 bigger ones, whose sales results have been positive. His goal is generate annual sales of 7 million SEK (e0.8m-$1m) a year per store, up from the current average of 4 million SEK. Earlier this year, he also approved the acquisition last Aug. 1 of 9 large Sko-City shoe stores with excellent locations, which should contribute annual sales of about 90 million SEK (e10m-$13m).
The Swedish group posted another pre-tax loss of 85.6 million SEK (e9.4m-$12.2m) in the financial year ended last Aug. 31, down from a pro forma loss of 198.9 million SEK recorded in the previous 12-month period, which included a shorter financial year After his appointment at the end of 2002, Nilsson had predicted that Wedins would become profitable again within 3 to 5 years’ time, but the process is taking longer than expected, due in part to relatively weak market conditions and to a series of mistakes, including more recently some price mix issues and some delivery problems. The start-up of a new information technology platform is taking longer than expected, but it should be up and running by the beginning of 2005.
In the last financial year, Wedins’ sales declined by 7.7 percent to 957.6 million SEK (e105.3m-$136.9m)from level of the previous 12-month period, due in part to a reduction in the number of stores from 219 to 201, excluding Sko-City. Leathergoods and other accessories generated sales of 403.6 million SEK (e44.4m-$57.7m), with the balance represented by footwear.
On a same-store basis, sales were off by 4 percent, with a 2.9 percent drop in footwear. The rate of decline reached 6 percent in the 4th quarter, partly because of poor market conditions that led to earlier summer clearance sales. Average selling prices were cut by 5-6 percent in the course of the year, largely because of the weaker dollar. Wedins’ mass market business fared worse than its 13 upmarket Rizzo stores, whose sales were relatively stable at 154.4 million SEK (e17m-$22.1m) for the year.
The gross profit margin improved to 54.4 percent from 49.5 percent in the previous 12-month period, which had been negatively affected by large inventory writeoffs. The number of employees was reduced from 733 to 700, but higher wages and higher leases, coupled with the cost of restructuring and the acquisition of Sko-City led to a higher operating loss of 42.8 million SEK (e 4.7m-$6.1m) in the latest quarter. A previous equity increase of 58 million SEK (e6.4m-$8.3m) earlier this year improved Wedins’s equity/debt ratio, but the new loss has reduced it to 13.8 percent.