We have lowered our near-term estimates to reflect softer end-market demand than previously anticipated. While we also adopt a more cautious stance in our mid-term forecasts, given weaker overall consumer confidence, we leave our long-term estimates largely unchanged. As a result, we maintain our target price of SEK 67 per share. However, the share price has risen by nearly 20% since our latest report, and we believe the valuation is stretched on actual earnings basis. Consequently, we downgrade our recommendation to Reduce (previously Accumulate).

Investment case relies on increased sales growth

In our view, Björn Borg’s investment case depends on the company’s ability to sustain profitable growth while successfully expanding its footwear and sports apparel categories. While the biggest positive driver for Björn Borg is clearly topline growth, the main near-term risks to achieving this are slow integration of footwear, a lack of brand traction, and prolonged weak consumer confidence.

We expect continued margin expansion in Q1’26

Björn Borg will publish its Q1’26 results on Wednesday, April 29, 2026. We forecast Björn Borg’s Q1 revenue to reach 292 MSEK, in line with Retail consensus, representing reported growth of 4.4% y/y. In local currencies, we estimate growth to be stronger at approximately 7.0%, due to negative FX impacts from a strengthening SEK. According to our estimates, the primary engine of this growth remains the Own e-commerce segment, with the sports apparel category as the standout performer. Overall, we believe the combination of solid sales volumes and continued good operational cost control will allow the company to demonstrate healthy operational leverage. We expect Björn Borg to deliver EBIT of 38.7 MSEK in Q1, corresponding to an operating margin of 13.2%, slightly above Retail consensus. This represents a solid increase from the 12.2% margin reported in the corresponding period last year. While we estimate the FX-adjusted gross margin to decline slightly from 50.9% in Q1’25 to 50.0%, due to a continued focus on gaining market share, we expect FX tailwinds to support the reported figures. We, therefore, forecast a reported gross margin of 52.0% for the quarter.

Near-term caution, long-term case intact

Geopolitical tensions following the Iran war have pushed up energy prices, reigniting inflation concerns, keeping interest rates higher for longer, and weakening consumer confidence. Against this softer demand backdrop, we have taken a more cautious stance and lowered our revenue forecasts by some 2% for the coming years. At the same time, higher input and logistics costs are expected to weigh on profitability, leading us to reduce our EBIT estimates by some 6-3% in the coming years. Over the longer term, we still expect some good 6-7% annual revenue growth, which should support continued operating leverage. We forecast the EBIT margin to rise from 10.7% in 2025 and stabilize around 12% long term, supported by solid sales growth and continued operational efficiencies.

We stand on the sidelines for now

We forecast good earnings growth in the coming years, driven by revenue growth and a gradual margin increase. We expect Björn Borg to distribute most of its earnings and free cash flow as dividends, resulting in a good dividend yield of around 5%. However, the share price has increased almost 20% since our latest report and the earnings-based valuation multiples for 2026 are relatively high (P/E: 19x, EV/EBIT: 15x). The DCF and peer valuation paint a similar picture. As a result, we believe that Björn Borg’s expected return is below the required return. Consequently, we turn to a Reduce recommendation (prev. Accumulate) but maintain our target price of SEK 67 per share.