Bang & Olufsen’s interim report for the first quarter of 2022/23: difficult

The company continued to see strong demand for its products. Sales in EMEA were down 2% as demand shifted to more travel-related and outdoor products compared to a year ago. Sales in America increased by 14%, while Asia decreased by 27%, mainly due to China, which was affected by lockdowns and declining consumer confidence. Overall, sales were down 9% from the first quarter of last year.

Turnover decreased by 8.2% (-10% in local currencies) to DKK 612 million. The company continued to be affected by lockdowns in China. Additionally, heightened uncertainty and declining consumer confidence has led some of the company’s retail partners to reduce inventory and be more cautious when restocking.

Gross margin was 36.6%, negatively impacted by product mix, higher cost of components purchased last year, lockdowns and the sale of a large quantity of headphones at a lower price. This also had a negative impact on the company’s EBIT margin before special items and free cash flow, which amounted to -14.1% and -81 million DKK respectively.

Bang & Olufsen has taken steps to mitigate the effects of increased uncertainty and declining consumer confidence. These included a general hiring freeze, a downward revision of production forecasts and a staggering of investments. The company will continue to execute key elements of its strategy, accelerate select marketing efforts and make the United States a priority market.

CEO Kristian Teär comments:

“The challenging macroeconomic environment continued into the first quarter of 2022/23, which seasonally is our smallest quarter of the year. Despite this, we saw strong demand for our products with strong sales performance higher than sales in all markets except China. However, regional shutdowns and the economic climate in China have had a direct impact on our sales, and rising interest rates, the war in Ukraine and rising inflation have affected consumer confidence across Europe, resulting in lower incomes compared to last year.

“We can see that our strategy is working. We have created a strong portfolio of award-winning products and significantly improved our sales and marketing efforts, which will help us realize our growth potential. We are focusing heavily on our cost base, adjusting our investment plans to reflect the high uncertainty. However, we will continue to invest in building resilience and launching products and initiatives that can help drive near-term growth and also ensure our long-term success. This includes our city-centric strategy, where we will build on the success of London and expand the concept to New York and Paris over the coming quarters.

Financial Highlights, Q1 2022/23

  • The company continued to see strong demand for its products. Sales in EMEA were down 2% as demand shifted to more travel-related and outdoor products compared to a year ago. Sales in America increased by 14%, while Asia decreased by 27%, mainly due to China, which was affected by lockdowns and declining consumer confidence. Overall, sales were down 9% from the first quarter of last year.
  • Compared to last year, revenues decreased by 8.2% to DKK 612 million. The decrease is linked to sales of regional products, which fell by 13.7% (-16% in local currencies). Brand Partnering and other activities increased by 51.7% (44% in local currencies). The company’s exit from the Russian and Belarusian markets had a negative impact of 1 pp on growth.
  • Due to heightened uncertainty in the markets, the company has seen its retail partners reduce inventory and be more cautious about restocking. This had an impact on financial performance, particularly in EMEA and Asia.
  • Gross profit was DKK 224 million (Q1 21/22: DKK 299 million). This equates to a gross margin of 36.6% (Q1 21/22: 44.8%). The decline reflects product mix, higher costs, mostly components purchased late last year, and the sale of a large quantity of headphones at a lower price. Finally, the increase in the fixed costs to revenue ratio and currency fluctuations contributed to the overall margin decline.
  • EBIT was -85 million DKK (Q1 21/22: 7 million DKK). This corresponded to an EBIT margin of -14.1% (Q1 21/22: 1.1%). No special items were recognized in Q1 and the EBIT margin before special items was therefore also -14.1% (Q1 21/22: 1.4%).
  • The result for the period was a loss of DKK 100 million (Q1 21/22: profit of DKK 1 million).
  • Free cash flow was -81m DKK (Q1 21/22: 21m DKK), driven by EBITDA. Available liquidity was DKK 207m (Q4 21/22: DKK 301m).

Progress on Strategic Initiatives

  • In the first quarter, the company launched its most modular product design yet with the Beosound Theater soundbar. Beosound Theater’s modularity value is twofold, as the soundbar adapts to almost any TV screen and survives traditional product cycles due to its scalability in design and technology.
  • With the ambition to build an ecosystem of seamlessly connected products, the company continued to strengthen its software capabilities. In the first quarter, Bang & Olufsen opened a new office in Sofia, Bulgaria, which will complement the company’s software team in Denmark.
  • Bang & Olufsen also launched the Balenciaga Speaker Bag, one of its most successful brand collaborations to date, thanks to global media reach and brand interest.
  • The company continued its growth trajectory in London, with sales at company-owned stores up 71% year-on-year. The Win London project continues and the company has decided to expand to New York and Paris in the coming quarters to leverage the methodology and learnings.

Outlook 2022/23
The company maintains its outlook, which is as follows:

  • Revenue growth (in local currencies):
-4% to 5%
  • EBIT margin before special items:
-2% to 3%
-50 to 100

The outlook for 2022/23 is subject to unusually high uncertainty related to consumer confidence due to high inflation, rising interest rates and the war in Ukraine, which together have increased the risk of recession. Additionally, there is higher geopolitical uncertainty and risk related to current and future regional lockdowns related to COVID-19, particularly in China.

Conference call for analysts and investors
The company will organize a webcast on October 5, 2022 at 10:00 CEST, where the financial evolution of the first quarter of 2022/23 will be presented.

The webcast can be accessed at https://streams.eventcdn.net/bo/2022q1

Contact details for Q&A participants:
DK: +45 7876 8490
UK: +44 203 769 6819
USA: +1 646 787 0157
PIN for all incoming calls: 193621

For more information, please contact:

Martin Raasch Egenhardt
Investor Relations
Telephone: +45 5370 7439

Jens Bjornkjaer Gamborg
Global sustainability and communication
Telephone: +45 2496 9371

  • Interim report Q1 2022-23

  • BO_2205_Interim report Q1 2022-23_FR

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