The initiated organizational changes, including a significantly reduced head office function, have essentially been implemented, and the Board of Directors has now appointed a new CEO of IC Group A/S as well as concluded on the future management structure.
Analysis carried out during the past two to three months has identified operational challenges in respect of distribution, discounted sales and substantial inventory overbuying.
The Board of Directors expects to realize a revenue growth rate of 3-4% measured in local currency (previously 5-6%) and an EBIT margin of 4-5% (previously 6-7%) for the financial year 2016/17. At present, the Board of Directors expects to realize a minor revenue reduction and an improved EBIT margin for the financial year 2017/18.
New CEO of IC Group A/S and management structure
As informed in Company Announcement no. 1/2017, on 2 February 2017, the Board of Directors initiated structural changes of IC Group for the purpose of better harvesting the potentials of the three core brands. These structural changes have been implemented during March and April, and the impact hereof was described in the Group’s interim report for H1 2016/17, cf. Company Announcement no. 3/2017 dated 28 February 2017.
As a conclusion to the implemented changes, the Board of Directors has now decided on the Group’s future management structure.
Consequently, Peter Thorsen will step down as Interim Group CEO of IC Group A/S. As informed previously, Peter Thorsen will take up the role as Deputy Chairman of the Board of Directors where he together with Henrik Heideby will form the Chairmanship in preparation for taking over the role as Chairman and Henrik Heideby as Deputy Chairman at the next general meeting.
Alexander Martensen-Larsen has been appointed new CEO of IC Group A/S with effect from 1 June 2017. Since January 2008, Alexander has held various management positions as well as directorships within the Group, most recently as Group CFO since September 2015.
As part of the new management structure, the CEOs of each of the three Premium brands; Peak Performance, Tiger of Sweden and By Malene Birger will be responsible for the financial performance and development of their respective business units whereas the CEO of IC Group will be responsible for ensuring maximum value creation for the Group as a whole. They will all report directly to the Board of Directors.
In practical terms, the new management structure entails that the Board of Directors will work closer with the individual Premium brands in order to ensure optimal execution of the strategy. The Board of Directors considers all three brands to hold considerable potential for international expansion even though the readiness of each of the three brands is at different stages.
Peak Performance has come far with the repositioning of the brand both in terms of product and distribution which resulted in a revenue reduction for the financial year 2015/16. For the financial year 2016/17, Peak Performance has regained a more positive development trend where in particular the effect from a focused store expansion has contributed. The wholesale distribution has been strengthened, however, there are still some areas within this distribution channel which the brand may further develop. The same applies on the product side where the core categories hold a strong position.
Tiger of Sweden is a strong brand within the Nordic region and it holds considerable international expansion and growth potentials. A number of changes to the management team have been initiated preparing the brand for embarking on its international expansion. However, the initiated management changes have also revealed several critical issues, mainly in respect of the distribution. In this context, it is also necessary to consider the future strategy of Vingåker Factory Outlet, which today is part of Tiger of Sweden but operated separately as a multi-brand outlet. Vingåker Factory Outlet generates a substantial revenue and earnings to the brand. A new CEO of Tiger of Sweden has now been recruited who has the right combination of competences and international experience from other international Premium and luxury brands. Until the new CEO commences, the brand CFO is acting as interim CEO. The remaining executives of the brand’s management team have also been recruited and will commence work during the coming months. However, it should be expected that it will take some time before the full management team is in place and the effect hereof materializes.
By Malene Birger has implemented a more commercial approach to its business which in practical terms has resulted in adjustments of the product development process and collection structure. The distribution has also been strengthened, however, certain areas of both the wholesale as well as retail distribution will be restructured. Overall, the implemented and initiated changes are important in order to gain a stronger foothold in competitive international markets where the brand awareness is lower compared to the Nordic region.
Operational challenges across the three Premium brands
During the past few months, all three brands have, with Peter Thorsen as Interim Group CEO, been working on improving the operational execution of being a Premium brand, particularly in respect of purchase of goods, inventories and, subsequently, discounted sales. Across all brands, the inventory levels have been too high, due to overbuying, leading to discounted sales. Consequently, several specific changes must be expected, since a different and more focused performance is required in the future in respect of actual size and composition of inventories, purchase of goods in general as well as volume of revenue realized at reduced prices.
Given the above, the Board of Directors expects the Group to realize a revenue growth rate of 3-4% measured in local currency (previously 5-6%) for the financial year 2016/17. Based on the current exchange rates of the Group’s primary sales currencies, this corresponds to a reported revenue growth rate of approx. 2-3% (previously 4-5%). The EBIT margin is expected at a level of 4-5% (previously 6-7%).
At present, the Board of Directors expects to realize a minor revenue reduction and an improved EBIT margin for the financial year 2017/18 compared to the expected, realized EBIT margin for the financial year 2016/17 after costs for structural changes (4-5%). This is based on an expected moderate revenue and earnings growth in Peak Performance, a revenue reduction and considerable earnings decline in Tiger of Sweden as well as a flat performance in By Malene Birger.
IC Group A/S
Chairman of the Board of Directors
Interim Group CEO
Please direct any questions regarding this announcement to:
Head of Investor Relations
+45 21 28 58 32
This announcement is a translation from the Danish language. In the event of any discrepancy between the Danish
and English versions, the Danish version shall prevail.