Ingrid Osmundsen, the fashion retailing expert who took over as managing director of Wedins last Apr. 1, will have a tough time to try to improve the accounts of this large Nordic shoe and leathergoods retailer. The results just published for the six months ended last Feb. 28 show a net loss of 30.1 million Swedish kronor (€3.3m-$4.3m) up from 18.2 million SEK (€2.0m-$2.6m) in the year-ago period, in spite of an 8.7 percent sales increase to 550.5 million SEK (€60.0m-$78.5m) that was partly due to the acquisition of the Sko City chain last August.
Trading through 212 stores in Sweden, Norway and other Nordic countries, up from 206 a year earlier, the group generated sales of 243.5 million SEK (€26.5m-$34.7m) in the footwear sector, compared with 193.9 million SEK (€21.1m-$27.6m) in the year-ago period. That doesn’t include the classier Rizzo stores, whose sales rose a bit to 89.9 million SEK (€9.8m-$12.8m).
After a relatively positive first quarter, which went with an estimated 8 percent increase in the overall Swedish shoe retailing market, the results deteriorated in the 2nd one, as the market dipped by 3 percent and the group suffered from disruptions in the supply chain, largely related to the installation in February of a new data processing system. Several stores didn’t get the merchandise in time. Furthermore, Wedins disposed of inventories inherited from Sko City at low prices.
The inventory situation is cleaner now, and the company says that the new supply chain management system has been working correctly since last March 20. Nevertheless, the price cuts and the delayed deliveries to the stores caused the gross margin to fall to 54.6 percent during the 6-month period from the year-earlier level of 56.2 percent. The group incurred an operating loss of 1.3 million SEK (€0.1m-$0.2m) before amortization for the period, compared with a profit of 12.2 million SEK (€1.3m-$1.7m).
Cash flow ended up negative. However, debt was reduced to 307.9 million SEK (€33.5m-$43.9m) and the equity was increased to 207.6 million SEK (€22.6m-$29.6m) through an issue of new shares that generated net proceeds of 151 million SEK (€16.4m-$21.5m). Run by the former managing director, Roland Nilsson, the board has already decided to launch another share issue of 65 million SEK (€7.1m-$9.3m)to help finance the previously reported acquisition of the Don Donna brand.