Ekornes: UK market struggling; shoppers lean to lower prices

Norwegian furniture manufacturer Ekornes, owner of the Stressless brand, has reported a decline in first quarter revenues with the UK market continuing to struggle.

According to its latest Q1 2024 trading update, operating revenues came in at NOK 973 million, down 14% from the first quarter 2023, reflecting lower demand as consumer purchasing power remains subdued due to the overall increase in the cost of living.

“First quarter revenues were also impacted by a weak order intake towards the end of 2023, entering 2024 with a low order reserve,” Ekornes said. “Generally, the decline occurred across the product offering, although sales of sofas and dining products held up better.”

Operating earnings (EBIT) for the quarter were NOK -40 million (-31), corresponding to an EBIT margin of -4.1%. This compares to negative 2.7% in the first quarter 2023 and positive 5.4% in the previous quarter. “The negative margin reflects weaker revenues for the quarter, one-offs related to capacity adjustments and unrealized losses on currency forward contracts,” the group said.

Revenues from the Stressless® segment was NOK 730 million, down 19% from the first quarter 2023, with market development being particularly weak in Europe and China.

Revenues from IMG grew 10% to NOK 182 million, driven by resilient demand for mid-segment products and improved efficiency at the Thailand production facility. Svane® revenues decreased by 16% to NOK 61 million, in line with a weak market development.

Within its European market, including the UK, Ekornes said within its report: “The European markets were volatile with significant fluctuations throughout the quarter. This particularly impacted the Stressless® segment which has a relatively larger market share in Europe compared to other brands in the Ekornes group.

“In the UK, the overall furniture market is struggling in the post-pandemic phase with lower consumer activity and spending. This has driven consumers to lower priced alternatives, resulting in larger furniture chains gaining market shares. The same pattern is seen in Central Europe, notably due to the weak German economy, which has increased price sensitivity, supporting sales growth of IMG products. However, Stressless® recliner sales have also held up well, while sofa and dining products posted softer sales.

“In Southern Europe, furniture markets were affected by a housing market in decline, impacting household spending and increasing focus on discounting campaigns. Addressing the weaker European markets, Ekornes is intensifying promotion campaigns and has several initiatives planned for the summer. The company is also maintaining a selective partnership strategy and has attracted new large retailers in the region which have several events planned in the upcoming period.”

With the weak trend continuing into the second quarter, the outlook remains “challenging as higher volatility has reduced market visibility for the coming 6-12 months”.

Tine Hammernes Leopold, CEO of Ekornes, added: “Amidst a continued weak market sentiment, our strong brands and market positions generated revenues of NOK 973 million during the first quarter. Adjusting to this challenging environment of lower consumer demand and high uncertainty, we continue to take actions across the group. We are streamlining operations, maintaining strict cost controls and improving productivity.

“Ekornes has a flexible operating model and has proven resilient in previous economic downturns. While managing the current situation, we continue to invest in long-term sustainable and profitable growth. Optimizing the product portfolio and time-to-market for new products is at the core of this effort.”

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