Norwegian furniture manufacturer Ekornes, owner of the Stressless brand, has reported a growth in fourth quarter sales within the UK while company-wide revenues also increased.
According to its latest Q4 2023 and full year trading update, fourth quarter revenues came in at NOK 1 124 million, up 4% from the fourth quarter 2022. The increased revenues are mainly related to higher prices and positive currency development, while underlying volumes were down.
Sales revenue from Stressless® was NOK 829 million (786), a 6% increase from the fourth quarter 2022, mainly driven by higher sales in southern Europe and the UK. Revenue from IMG grew by 5% to NOK 225 million (214) while revenues from Svane® decreased by 8% to NOK 70 million (76).
Operating earnings (EBIT) for the quarter came in at NOK 60 million (-26), corresponding to an EBIT margin of 5.4%. This compares to negative 2.4% in the fourth quarter 2022 and positive 9.7% in the previous quarter. “The improved margin from last year reflects lower raw material prices and effects from the “Focus 23” programme including a lower cost base and reduced operational capacity,” Ekornes said.
UK and Ireland sales during Q4 rose 22.7% to NOK 113.5m (£8.4m) from NOK 92.5m (£6.9m), while full year revenues declined 11.4% to NOK 321.9m (£24m) from NOK 363.6m (£27.1m).
For the full year 2023, Ekornes generated operating revenue of NOK 4,219 million (4,928). “The decline in revenues compared to 2022 largely reflects sales coming down from the elevated levels during the Covid-19 pandemic, and weaker consumer spending from higher interest rates and rising living costs. The lower sales volume was partly offset by increased product prices and growing sales of the dining segment and motorized products.”
Operating earnings (EBIT) for the year came in at NOK 105 million. This compares to NOK 356 million in 2022. Ekornes said: “The weakened operating result is mainly attributed to lower sales in challenging markets, high raw material prices, shifting product mix and unrealized losses on currency forward contracts. Ekornes experienced effects from the improvement programme during the second half of the year.”
In Q4, Stressless® experienced soft sales in the quarter as demand continued to be impacted by tightening consumer finances from high inflation and rising living costs. This was particularly evident in the Nordics and Europe, while North America and the Asia-Pacific region performed better. Fourth-quarter revenues increased to NOK 829 million from NOK 786 million in the same period in 2022, corresponding to an increase of 6%. Compared to a seasonally weaker third quarter, revenues were up 23%.
Meanwhile, the UK experienced a “solid” increase in sales. “This was partly due to stock purchases, with retailers buying stock for January, combined with targeted promotion campaigns. Classic recliners have been a major success for the UK,” the company said.
For IMG, revenues amounted to NOK 225 million, unchanged from the previous quarter and up 5% from NOK 214 million in the corresponding period in 2022. In Europe, IMG fourth quarter order intake was down compared to the corresponding period last year, with Central Europe and the UK seeing the “weakest development”.
“The current market situation is challenging and requires actions to secure sustainable operations, including cost reduction, capacity adjustments and unfortunate temporary layoffs. However, we are working relentlessly to maintain our position as a leading furniture producer and offering innovative and relevant products to our customers is high on the agenda. Combined with our solid distribution network and favourable diversification of supply and market demand, we will be in position to capitalize on market opportunities as market conditions change”, says Tine Hammernes Leopold, CEO of Ekornes.
Looking ahead, Ekornes added: “The furniture market continues at a slower post-pandemic pace as consumer finances remains constrained by rising living expenses. Ekornes has throughout 2023 adapted through several initiatives aimed at reducing cost and safeguarding profitability while delivering high-quality products timely and effectively. This includes capacity adjustments, portfolio optimization and efficiency gains, which have realised considerable cost reductions and released significant working capital.
“However, with a weaker than expected second half of the fourth quarter and a slow start to 2024, order reserve continues to decline. Although the demand for quality furniture is expected to return in the longer term, the length and magnitude of the current downturn remain uncertain. The company sees the next 6-12 months as challenging and is prepared to initiate further initiatives if required, ensuring resilience and long-term competitiveness.”
