Norwegian furniture manufacturer Ekornes, owner of the Stressless brand, has reported a decline in fourth quarter sales, while the UK market saw an uptick in revenues.
According to its latest trading update for Q4 2022, total group sales came in at NOK 1,076m, down 7% from NOK 1,174m (£95.3m) in Q4 2021 and down 5% from NOK 1,132m (£91.6m) in Q3 2022. The decline reflects lower consumer demand due to rising inflation and interest rates.
Revenue from the Stressless® segment was NOK 785m (£63.7m), down 7% from Q4 2021, but did improve in Europe after a ‘slow summer’. Revenue from IMG decreased 12% to NOK 214m (£17.3m), while Svane® revenue for Q4 2022 decreased 7% to NOK 77m (£6.2m). Group earnings before tax for the quarter was NOK -140m (£11.3m).
UK and Ireland sales during Q4 rose 7.4% to NOK 92.5m (£7.5m) from NOK 86.1m (£6.9m), while full year revenues rose 37% to NOK 363.6m (£29.4m) from NOK 265.3m (£21.5m).
As for overall full year sales, Ekornes generated revenues of NOK 4,929m (£400.3m), up from NOK 4,318m (£350.6m). The increase compared to 2021 was driven by higher prices and increased sales, particularly during the first half of the year, while the second half of the year was affected by a sequential slowdown.
Sales were higher in all segments except Svane®. Underlying sales revenue from the Stressless® segment was NOK 3,646m (£296.1m), revenue from IMG was NOK 994m (£80.7m), while revenue from Svane® amounted to NOK 288m (£23.3m). Earnings before tax for the full year came in at NOK 165m (£13.3m), down 51%.
Commenting on its results, Ekornes said: “While demand for home furniture increased significantly during the Covid-19 pandemic from 2020 and into the beginning of 2022, demand is now returning to pre-pandemic levels. This has a negative impact on Ekornes’ sales and order development. At the same time, cost inflation is putting pressure on margins, particularly within raw materials and transportation, negatively affecting Group earnings.
“Ekornes has launched several initiatives to protect profitability and stay competitive through the Focus 23 program. The objective of the program is to increase margins and efficiency, reduce the company cost base and to safeguard cash flow.
“To improve margins, the product portfolio will be optimized, and further price increases will be implemented. Reduction in material and logistics costs will be targeted through a structured program of renegotiations with suppliers and partners. A stringent cost improvement program is being implemented with a broad range of initiatives, seeking to harvest operational synergies across regions and segments. The operational capacity will be rightsized, and administrative costs will be trimmed. By the end of 2023, the target of Focus 23 is to reduce operating expenses by NOK 200 million.”