Björn Borg Q4'25: Margin strength drive an upgrade

Björn Borg delivered strong Q4 earnings, due to solid sales volumes and good cost control. In our view, the outlook for next year is positive, and combined with a strong finish to last year, this has led us to raise our earnings estimates for the coming years. With our updated estimates, the company’s earnings multiples for this year are at the lower end of our acceptable valuation range, with a P/E ratio of around 15x and EV/EBIT of 12x. As a result, we raise our recommendation to Accumulate (prev. Reduce) and increase our target price to SEK 67 per share (prev. SEK 57 per share), mainly due to increased estimates.

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.

Concludes 2025 with strong earnings growth

Björn Borg delivered Q4 revenue growth of around 1.5% y/y, which was in line with our estimates. However, adjusted for negative FX effects, revenue growth amounted to 5.0%, with the sports apparel category continuing to outperform. While revenue growth in Björn Borg’s largest segment, Wholesale, was in line with our expectations, Own e-commerce stood out positively, with Q4 revenue growth of around 24%, above our expectations.

The clear positive highlight in the report was the profitability that significantly exceeded our expectations, driven by solid volumes and good cost control. EBIT increased from 16.8 MSEK in Q4’24 to 21.6 MSEK in Q4’25, corresponding to an operating margin of 9.1%, well above our expectations. FY2025 EPS amounted to 3.66 (FY2024: 2.89), but the company proposed to leave the dividend unchanged at SEK 3.00 per share. While the payout ratio is at high levels, around 82% of its earnings, we believe that it is sustainable given the company’s solid balance sheet and net debt/EBITDA of 0.4x, excluding leases. Over the long term, we expect Björn Borg to continue distributing a large share of its earnings through dividends.

We have increased our earnings estimates for the coming years

Since Q4 revenue came in well in line with our estimates, we have kept our revenue forecasts unchanged for the coming years. However, due to the stronger-than-expected operating margin outcome, and that we expect the profitable Own e-commerce segment to continue to grow and constitute a larger share of the company’s revenues, we have increased our earnings estimates by some 9-10%. While we expect continued expansion, particularly in the Footwear segment and the German market, to require additional costs, we believe that the solid sales growth should provide some operational leverage. As a result, we expect an EBIT margin expansion from 10.7% in 2025 to 11.8% in 202´7.

Current valuation invites a good risk/reward

We forecast good earnings growth of around 8% in the coming years, driven by solid revenue growth. We expect Björn Borg to distribute most of its earnings and free cash flow as dividends, resulting in a dividend yield of some 6%. Although we expect some downward pressure on LTM earnings multiples, we believe the expected return is slightly higher than the required return. In addition, the DCF model and peer valuation paint a similar picture. As a result, we raise our recommendation to Accumulate (prev. Reduce) and increase our target price to SEK 67 per share (prev. SEK 57 per share), mainly due to increased estimates.