"KappAhl’s activities in the full year 2018/19 have been marked by hard work to meet hard competition and declining footfall. They were also characterised by development to meet the industry’s transformation, in both the short and long-term. Sales in the fourth quarter increased by 6.7 per cent compared with the same period of the previous year, a considerable improvement compared with the weak sales we reported in the third quarter. Total sales for the year increased by 3.0 per cent, which is mainly attributable to new stores and exchange rate effects. During the year we opened ten KappAhl stores and closed nine, opened our first KappAhl Kids store and ten new Newbie stores and closed
two. Sales in Poland continue to grow, this year by a total of 17 per cent and business in the United Kingdom and Norway is also showing a positive trend," said Elisabeth Peregi, president and chief executive officer of KappAhl.
"Throughout the year competition has been very tough in all markets, with increasing price reductions as a consequence. This, along with increasing purchase prices, has had a negative impact on the gross margin in all quarters. At the close of the financial year inventory value had increased by SEK 90 million, mainly due to a higher dollar exchange rate.
We see clear effects from the SEK 100 million performance enhancement programme launched during the second quarter. Operating profit in the fourth quarter was positively impacted through lower costs both in store and administrative functions, with a total effect for the year of about SEK 32 million. We will see the full effect in the next financial year. As we announced in the previous interim report, the performance enhancement programme will be extended. In the present situation we will add another SEK 50 million where rents and store areas, other overhead expenses and continued review of the organisation will account for approximately equal amounts. Work is continuing to identify more performance enhancement opportunities.
Our vital sustainability work, Responsible Fashion, has this year achieved several important interim targets. As of this autumn, our entire denim range is manufactured in more sustainable material (grown with more sustainable methods) and through more sustainable production processes (less water, energy and chemicals). We have augmented our efforts to achieve the UN climate goals by being an initiator of the Swedish Textile Initiative for Climate Action (STICA) and as a new partner in the textile recycling company Re:newcell increasing our contribution to the work of creating industrial methods for recycling textiles.
The year’s operating profit was SEK 168 (282) million, corresponding to an operating margin of 3.4 (5.9) per cent. The operating profit adjusted for non-recurring costs of SEK 43 million, referring to the performance enhancement programme, was SEK 211 (282) million. We are now intensifying work on our business plan. Focusing strongly on business model and brand strategy, we are taking a fresh approach to the challenges to create a womenswear range with improved relevance to our customers. We will also further develop our already strong childrenswear business. Examples of this to date are the opening of our first KappAhl Kids store in February and the continued growth of Newbie as a shop-in-shop at KappAhl and in its own stores and markets. What we need to do to be the first choice of each priority customer group is becoming increasingly clear."
KappAhl, founded in 1953 in Gothenburg, is a leading fashion chain in Nordic region.
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