Björn Borg Q3'25: Solid Q3 report, but valuation remains stretched

Björn Borg’s Q3 report was overall roughly in line with our estimates. In our view, the company continues to show good revenue growth, but it does not come without cost as gross margins (FX adj.) have declined in the past three quarters. At current valuations  (2026 P/E: 17x and EV/EBIT: 13x), we would like to see clearer evidence that the company can successfully expand its footwear and sports apparel category while maintaining solid gross margins. As a result, we reiterate our Reduce recommendation but raise our target price to SEK 57 per share (prev. SEK 55), mainly due to a slight increase in short-term earnings estimates.

Q3 broadly in line with our expectations

Björn Borg’s Q3 revenue grew by 7.2% in local currencies; however, due to a negative FX impact from a strengthening SEK, reported revenue increased by 5.2% y/y to roughly 300 MSEK. Given the tough comparison figures and the still challenging market environment, we feel the company delivered solid revenue growth, although it came in slightly below both our forecasts and Retail Consensus. In our view, the clear highlight of the quarter was the sports apparel category, which again outperformed our expectations and grew a strong 24% despite very challenging comparison figures. On the negative side, the footwear category continued to underperform, declining by 5% in the quarter. For Björn Borg to achieve higher sales growth in line with its long-term targets, we believe the footwear category will need to improve, as it remains one of the company’s key growth areas. However, as we have previously emphasized, significantly scaling footwear sales will likely take time, as the company needs to improve quality, enhance design, and streamline distribution.

Profitability-wise, the company performed broadly in line with our estimates. Björn Borg’s Q3 gross margin increased to 52.5%, supported by positive FX effects. Adjusted for these, however, the gross margin declined from 51.2% in Q3’24 to 49.9% in Q3’25. The company attributes this decline to a higher share of sales to larger key accounts receiving higher discounts. We also believe the company’s focus on growth continues to be reflected in lower gross margins aimed at increasing market share and driving revenue expansion. Q3 EBIT increased slightly from 42 MSEK in Q3’24 to 45 MSEK in Q3’25, roughly in line with our estimates in absolute terms.

Estimates remain broadly unchanged

While Q3 revenue came in slightly below our expectations, the shortfall was modest in absolute terms. Consequently, we have kept our revenue forecasts largely unchanged for the coming years. For the current year, we expect the company to grow its revenue by around 7% in local currencies, driven mainly by the expansion of the sports apparel category within its own e-commerce channel. For 2026–2027, we have also left our revenue estimates unchanged, expecting growth of around 6-8%. While sales growth should provide some operational leverage, continued expansion, particularly in e-commerce and the German market, is likely to require additional costs. Overall, we continue to expect Björn Borg to deliver an EBIT margin slightly above its 10% target in the coming years, supported by steady sales growth. In the lower lines, Q3 EPS beat our expectations mainly due to a lower relative tax rate and net financial items. This has a positive effect on our full-year EPS estimates for 2025.

We wait for a more attractive entry point

We forecast good earnings growth in the coming years driven by revenue growth and solid margins. We expect Björn Borg to distribute most of its earnings and free cash flow as dividends, resulting in a dividend yield of 5-6%. However, the share is expensive on an actual earnings basis, and in our view, Björn Borg’s expected return is lower than the required return. The DCF and peer valuation paint a similar picture. Thus, we wait for a better entry opportunity.