XXL ASA - Challenging markets and results – exiting Austria, waiver agreement and new equity secured

08 Feb 2023 07:00 CET

XXL will exit Austria in 2023 and is working on several different solutions,
including sale of the Austrian entity. Consequently, the Austrian operations are
classified as a disposal group held for sale in the balance sheet and presented
as discontinued operations in the income statement. It is already decided to
close 3 of the 8 stores as well as the central warehouse facility. XXL has an
ambition of having no negative cash effect in 2023 from the Austrian operations
and exit.

XXL delivered total operating revenue of NOK 2.3 billion (NOK 2.6 billion) in
the fourth quarter 2022 driven by low consumer confidence and reduced demand for
sporting goods in general. The industry sees a buildup of inventory and heavy
discount activities. XXL has prioritized strict liquidity management with sales
and inventory actions over gross margins. The results are also significantly
impacted by an additional write-down of inventory of NOK 301 million.

Under these conditions XXL has launched a massive clearance campaign in all
markets.

XXL has obtained a waiver agreement with its bank consortium, following which
only liquidity covenants will apply from December 2022 to November 2023 before
returning to leverage covenant in December 2023. At least NOK 500 million in new
equity will be raised in Q1 2023, through a private placement and a potential
subsequent offering, where the net proceeds from the private placement will be
applied to repay loan facilities.

Highlights:
- Historically low consumer confidence, reduced demand for sporting goods
- Additional write-down of inventory of NOK 301 million
- Exiting Austria during 2023
- EBITDA of minus NOK 236 million (NOK 403 million)
- New equity and waiver agreement with bank consortium

CFO and Interim CEO Stein Eriksen says:
• “The retail market is still tough and sport is no exception. Many customers
have less money to spend on sports and outdoor equipment because prices on
"everything else" are rising. As we also reported before Christmas, this has led
to weaker results in the fourth quarter.
• Our answer is to step on the gas to secure liquidity and win back market
shares in the Nordics. We are currently in the market with our biggest campaign
in three years where we will sell out goods worth NOK 500 million.
• We have also implemented several other measures to adapt to the market
situation: We have cut purchases and investments, reduced costs, secured equity
from our owners and negotiated a new loan agreement with the banks. These
measures will also support XXL in challenging markets”.

Outlook
Total operating revenues for the Group in January 2023 decreased around 5 per
cent to around NOK 650 million. All markets have continued to be challenging
with low consumer confidence and reduced demand for sporting goods in general.
The heavy campaign activities continue due to the buildup of inventory in the
sporting goods industry. Under these conditions XXL has launched a massive
clearance campaign last days of January for the benefit of all our customers.

XXL’s target and goal going forward is to over time gain market shares in all
markets and continue the growth in the E-commerce channel.

XXL is in the phase of implementing several strategic initiatives and projects
to improve profitability and operational efficiency going forward. The
longer-term target is “40-30-10” on gross margin, OPEX and EBITDA respectively
and when excluding IFRS 16 effects.

In line with the existing strategy, XXL will continue to invest in operational
efficiency, selective new store openings, E-commerce platform, existing stores,
infrastructure and IT. Total CAPEX for XXL Group in 2023 is expected to be
around NOK 150-200 million.

Going forward XXL expects the pace of the store roll-out to be 2-3 new stores
per year. XXL has signed 2 new lease agreements for store openings in 2023,
whereof 1 in Norway and 1 in Sweden. At the same time XXL will be downsizing
several existing stores. The Group will continue to focus on optimizing the
store portfolio.

XXL will exit Austria in 2023 and is working on several different solutions,
including sale of the Austrian entity. It is already decided to close 3 of the 8
stores as well as the central warehouse facility. XXL has an ambition of having
no negative cash effect in 2023 from the Austrian operations and exit.

Restricted share units program for employees
In accordance with the guidelines of remuneration in XXL ASA, as approved by the
Annual General Meeting in XXL ASA, the Board has decided to implement a program
of restricted share units for around 50 key employees. The amount of the program
is around NOK 10 million worth of restricted shares to be distributed in total.
The allocation price will be equal to the volume weighted average market price
the next five trading days, starting today 8 February 2023 and ending 14
February 2023. The shares will vest after three years subject to the holder at
the time of exercise is employed in XXL.



For further information please find attached the quarterly report and the
presentation material.

For APMs please see the quarterly report for further definitions and
reconciliations.


The results will be presented at 08:30 CET by CFO and Interim CEO Stein Eriksen.
The presentation will be held in English and will be webcasted at
www.xxlasa.com.


For further queries, please contact:
Investor Relations:
Tolle O. R. Grøterud
Phone: +47 90 27 29 59
E-mail: ir@xxlasa.com

Press contact:
Andreas Nyheim
Phone: + 47 952 11 779
Email: presse@xxl.no

This information is considered to be inside information pursuant to the EU
Market Abuse Regulation and is subject to the disclosure requirements pursuant
to section 5-12 of the Norwegian Securities Trading Act. This stock exchange
announcement was published by Tolle O. R. Grøterud, Investor Relations Officer
at XXL ASA, on 8 February 2023 at 07:00 CEST.

About XXL ASA
XXL is a leading sports retailer with stores and e-commerce in Norway, Sweden,
Finland, Denmark and Austria. It is the largest among the major sports retailers
in the Nordics. XXL pursues a broad customer appeal, offering a one stop shop
experience with a wide range of products for sports, hunting, skiing, biking and
other outdoor activities. XXL's concept is to have the largest stores with the
best prices and the widest assortment of products, focusing on branded goods.

More information:
Access the news on Oslo Bors NewsWeb site

581583_Q4 22 presentation.pdf
581583_XXL ASA Interim report Q4 2022.pdf