Great Interest For XXL IPO
Giant stores, tight cost control and low prices have in just over a decade made XXL the leading sports retailer in Norway and a major player in the Swedish market. In the recent IPO, its shares were just as popular with investors as its stores are among sporting enthusiasts.
When EQT V came on board as new majority owner in XXL in 2010 the sports retail chain was just about to launch in Sweden, the largest sporting goods market in the Nordic region. Just three-and-a-half years later, XXL has captured a 7% market share and is the fastest growing sports retailer in the Nordic region.
Growth in the past few years with the backing of EQT has been phenomenal. In 2013, XXL grabbed the slot as Norway’s largest sports retailer, 12 years after the company opened its first store. Today, XXL operates 41 stores in Norway, Sweden and Finland which is more than double the 17 that existed at the start of 2011. Of the 41, 15 are in Sweden and three in Finland where the first store opened in April this year.
In 2013, revenue grew 29.1% to NOK 4.1 billion and in 2012 revenue growth was 25.5%. For 2014, total sales are expected to approach NOK 5 billion and profitability is healthy with an EBITDA margin of 11.5% in 2013. Even so, the plans for further growth are ambitious.
"Over the next five years our target is to double the total number of stores in Norway, Sweden and Finland," said Fredrik Steenbuch, CEO of XXL since 2007.
In addition to the Nordic region there is also the possibility to venture into new markets where consumer characteristics, climate and seasons are similar to XXL’s current markets. Countries with such hallmarks include Switzerland, Austria and Germany.
The combination of an impressive growth track record and continued strong growth opportunities going forward proved to be very attractive to investors. The share offering by EQT and other owners was heavily oversubscribed and shares were sold at NOK 58 which was in the upper half of the price range. After the IPO, EQT remains one of two main owners with 28% of the shares assuming that the overallotment option is exercised in full.
"Being a listed company brings a lot of advantages for XXL and we are of course very happy for the tremendous interest among investors. For EQT this is however not the end of the road. We will continue to help with the future development of XXL and we believe the company still has a lot of potential," said Anders Misund, Partner at EQT Partners, Investment Advisor to the EQT V Fund.
Driving the XXL success is a carefully crafted and executed strategy using very large stores in urban areas with a wide range of branded goods at the lowest prices in the market. High gross sales per store and an efficient and centralized supply chain provide a lower cost base than competitors, allowing for attractive prices while maintaining strong margins.
One challenge that all retail businesses face is how to combine physical stores with a growing e-commerce operation. XXL has a well established e-commerce platform for all markets which had close to 10 million unique visitors in 2013. Although e-commerce still represents a very modest part of sales it is growing fast and will gain in importance. In the first six months of 2014, online sales doubled compared with the same period a year earlier and in 2013, sales rose 61% compared to 2012.
"I believe we have found a good formula for combining the reach and ease of e-commerce with the efficiency we have achieved in our logistics and distribution organization," said Fredrik Steenbuch.
The XXL shares started trading on the Oslo Stock Exchange on Friday October 3 and on Wednesday October 8 it closed at NOK 61.