Björn Borg

Björn Borg will report its Q1’25 results on Thursday, May 15. We expect solid revenue growth compared to the same period last year, primarily driven by the integration of the footwear category, increased sales in the sports apparel category, and continued good development in own e-commerce. We estimate a lower gross margin due to a shift in the sales mix, as well as higher operating costs, mainly due to increased marketing activities. However, we believe that the strong sales growth should provide some operational leverage leading to a slight increase in absolute EBIT. Our focus in the upcoming report will be on updates regarding the footwear transition, as well as demand-related information.

The March figures for the Swedish clothing market were published this morning. Sales grew by 6.5% from last year.

We have lowered our estimates in response to expectations of slower economic growth and weaker consumer confidence. Despite these downward revisions the current valuation offers an attractive risk/reward profile, as the share price has fallen by around -17% and the expected return exceeds our required return. Consequently, we raise our recommendation to Accumulate (prev. Reduce) but lower our target price to SEK 55 per share (prev. SEK 62), mainly due to lower estimates.

Björn Borg delivered weak Q4 earnings due to a lower gross margin and higher operating expenses, which more than offset the benefits of strong revenue growth. The company’s earnings multiples for this year are at the upper end of our acceptable valuation range, with a P/E ratio of approximately 18x and an EV/EBIT of ~14x. At current valuations, we would like to see clearer evidence that the company can successfully expand its footwear category while maintaining solid profitability. Based on our updated estimates, we believe the stock is relatively fairly valued. As a result, we lower our recommendation to Reduce (prev. Accumulate) and adjust our target price to SEK 62 per share, primarily due to revised estimates.