First-half results are in for IC Companys, and while it managed to eke out a 1 percent increase in sales to 2,041 million Danish kroner (€273.9m-$373.2m), the operating profit dropped by a third to DKK 202 million (€27.1m-$36.9m). The unfavorable market was blamed for the decline, and comparable store sales for the half, ended Dec. 31, fell by 4 percent. For the second quarter it saw a drop of 8 percent.
The gross profit margin was down by 1.7 percentage points to 59.3 percent for the half-year, which the company said was because of higher discounts and increased write-downs from the year before. The operating margin (Ebit margin) was 9.9 percent, a drop of 5.0 percentage points from the same period the prior year.
Among its divisions, sales grew at Peak Performance by 9 percent to DKK 597 million (€80.1m-$109.2m). Jackpot’s sales remained flat at DKK 221 million (€29.7m-$40.4m). Orders for all the four collections due to be delivered in the current financial year were up by 11 percent for Peak Performance, while they fell by 10 percent for Jackpot.
For the second quarter of the fiscal year, Peak Performance had a sales increase of 5 percent to DKK 258 million (€34.6m-$47.2m), while Jackpot again dropped, this time by 8 percent to DKK 82 million (€11.0m-$15.0m).
Wholesale revenues for IC Companys increased by 1 percent to DKK 1,377 million (€184.8m-$251.8m) for the first half. Retail sales also grew by 1 percent to DKK 580 million (€77.8m-$106.1m). In the six months, the company opened 31 new own stores and closed 17. The number of franchises grew by five units. Among the company’s outlet stores, turnover was up by 18 percent to DKK 84 million (€11.3m-$15.4m).
Geographically, IC Companys’ sales increases were most impressive in Switzerland, where they rose by 21 percent in the half, and in Austria, up by 16 percent. Spain, however, saw a 35 percent drop in revenues. The company has decided to close its subsidiaries in Spain as well as in China.
The Spanish business will be transferred to an external distributor. The group has also decided to eliminate 150 jobs from other operations, including 60 in Denmark. Another 110 positions have been eliminated since last August.
Orders for the summer season are down by about 21 percent from last year, and another decrease for autumn is expected.
Last year management undertook some changes to increase earnings capacity and revenues. Some restructuring has led to Jackpot and Cottonfield sharing a brand director. A major “adjustment of staff,” according to the company’s report, led to the loss of 140 jobs, 60 in Denmark. Another 150 employees will be going to other distributors. For the third quarter of this year, IC Companys plans to shut down some loss-making units, for example divesting businesses in China and in Spain to local distributors.
Also through the rest of this year, IC Companys expects to open new own stores for Peak Performance and Jackpot. Sixteen contracts have been signed to open stores over the next 15 months. Peak Performance will expand mostly in Scandinavia, while Poland, the Czech Republic and Hungary will be the focus of Jackpot. It is also looking to strengthen its franchise operations among several of its brands, including Peak Perfomance and Jackpot.
For the full year, IC Companys expects revenues to be slightly below those of 2007-08. It forecasts a huge operating loss for the second half, with an operating profit for the full year of DKK 110 million to DKK 160 million (€14.7m to €21.5m-$20.1m to $29.3m). This includes non-recurring charges of DKK 100 million to 120 million. The company still plans to carry out investments of DKK 120-140 million, mostly toward directing sales-promoting activities, such as store design.