Norwegian furniture manufacturer Ekornes, owner of the Stressless brand, has reported a decline in second quarter sales, while the UK market saw a slight uptick in performance.
According to its latest trading update for Q2 2023, total group sales came in at NOK 1,007m (£74.5m), down 18% from NOK 1,232.7m (£91.2m) in Q2 2022. Half year sales were also down 21% to NOK 2,141.5m (£158.6m) from NOK 2,720.2m (£201.4m).
UK and Ireland sales during Q2 rose 0.7% to NOK 78.4m (£5.8m) from NOK 77.8m (£5.7m), while half year revenues declined 12% to NOK 166.1m (£12.3m) from NOK 189.8m (£14m).
Revenue from the Stressless® segment was NOK 744.5m (£55.1m), down 18%, while half year sales stood at NOK 1,640.3m (£121.4m), down from NOK 2,008.9m (£148.7m). “Sales of Stressless® were impacted by lower demand for furniture in the second quarter, with higher interest rates and rising overall living costs reducing consumers’ purchasing power,” the group said. “However, as these effects impact the overall industry, the brand has maintained its strong position across core markets.”
“Market conditions in Europe remained challenging during the second quarter with fewer visitors in stores and reduced consumer spending. Sales were also impacted by retailers working to reduce their in-house stock. In addition, markets in Southern Europe were impacted by numerous strikes during the period,” Ekornes added.
“Despite slowing overall demand, Stressless® remains one of the top performing brands in the European markets, and the successful launch of new products has offset some of the lower activity. Recliners have benefitted from the introduction of new models and the refreshing of classic products, while Stressless® Dining continues to grow sales. However, the outlook in Europe remains uncertain and Ekornes has a strong focus on promotion initiatives and product development to stimulate growth in the region.”
IMG delivered a solid performance, driven by the ramp-up in production at the facility in Thailand and positive development in order intake. IMG revenues for the quarter came in at NOK 209m (£15.4m), down 21%, but up 27% from NOK 166 million (£12.2m) in the previous quarter.
Meanwhile, the low demand for beds and mattresses continued to weigh on Svane® in the quarter, with revenues of NOK 53m (£3.9m), down 18% from the second quarter 2022 and down 28% from the previous quarter.
“Operating earnings (EBIT) for the quarter came in at negative NOK 17m (£1.2m), corresponding to an EBIT margin of -1.7%,” Ekornes said. “This compared to 7.0% in the second quarter 2022 and -2.7% in the previous quarter.
“The negative margin reflects continued cost inflation, losses on currency forward contracts and changes in product mix due to shifting consumer patterns after the Covid-19 pandemic.
“Addressing the weaker margin, Ekornes continues cost reductions, price increases, concentration of operations and product portfolio optimisation. The company expects the initiatives to gradually materialise during the second half of 2023.”
To improve operations and sharpen its product offering, Ekornes continues to optimise production and streamline its organisation. This includes combining Stressless® and IMG operations and organising product development and production in one unit. These efforts aim to stimulate product development while increasing operational efficiency and will continue going forward.
Fredrik Ødegård Nilsen, CFO and interim CEO in Ekornes, added: “We are adapting to current market sentiment by implementing the improvement program as planned. Production capacity has been right-sized throughout the organisation and operations in Asia have been restructured, concentrating production in Thailand. Combined with price increases, declining raw material prices and stringent cost management, profitability is expected to gradually improve throughout the second half of 2023. As we realise effects from the “Focus 23” programme, we lay the foundation for long-term competitiveness and renewed profitable growth.”
