May 29, 2022

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The brakes on sales and decline in profits of Elkjøp Group - burdened by shortages of Playstation 5 and Apple products

The brakes on sales and decline in profits of Elkjøp Group – burdened by shortages of Playstation 5 and Apple products

“We measure ourselves against an extraordinary year last year, and in addition, we operate in a challenging market with access restrictions, high logistical situation and uncertainty,” says CEO Eric Sonnstrode at Elkjøp Nordic.

The Northern Electronics group consists of Elkjøp Norway, Elgiganten Sweden, Elgiganten Denmark and Gigantti Finland, and had sales of NOK 23.3 billion in the first half of the 2021/22 financial year. The company has skewed fiscal years from May to April.

This is a one percent decrease in turnover from last year. However, CEO Eric Sonnstrode is satisfied, and notes that sales are affected by a stronger kroner value. Business volume remains 25 percent higher than it was in the first half of fiscal year 2019/2020.

Operating profit (ebit) ended at NOK 672 million, compared to NOK 876 million in the same period last year. Sønsterud blames upgrades of IT systems and e-commerce platforms for much of the decline in profits.

– There have been significant investments that mean we are now better equipped for the future. Sønsterud says half of the decline is also due to a different gradual elimination of costs this year compared to last year.

Unusual competition

The product category with the strongest growth is gaming devices, with sales increasing 61 percent. This is despite the fact that Elkjøp, like most other electronics retailers, has struggled with limited access to Playstation 5 and some Apple products due to a global shortage of chips.

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The Nintendo Switch has sold a lot. We’ve also sold a lot of the Xbox S series, says Norway president Trygve Hillesland.

In the first two weeks of December, Elkjøp organized a somewhat unusual competition. You didn’t have the chance to win a Playstation 5, but you did have the chance to win the right to buy one.

– We had over 100,000 registered, but only had 6000 Playstations in stock. It’s a special situation, says Hellesland.

The shortage of merchandise made Black Week a challenge.

– It started a little slower than last year, but Black Friday itself was a little better. The main reason is that we have had challenges in accessing commodities in a number of key products. These brands account for such a large portion of sales that they have dire consequences for us when the show fails, Hellesland says.

Moreover, Elkjøp has not been hit hard by other disruptions in the value chain, such as extremely high freight rates and a sharp increase in raw material prices, according to the managers.

– We weren’t particularly impressed with the shipping rates, but it’s a bit about fixed agreements. Prices from suppliers are currently at a stable level, but we can still rule out price adjustments during the new year, says Sønsterud.

drop list

Karez, the main owner of Elkjøp, formerly Dixons Carphone, last year considered listing a minority stake in Elkjøp Nordic on the Oslo Stock Exchange. The company ran a survey, but didn’t get the rating it wanted — and so it canceled plans to list this summer.

– The owner decided that it would be more profitable to own Elkjøp one hundred percent, says Sønsterud.

It would be a good time to get access to the capital markets, Sønsterud said in June, and noted that the Oslo Stock Exchange was at an all-time high.

– What are you thinking of now?

– I think the most important thing is that we can continue to develop Elkjøp in the Nordic region, and we can do that just as well with the existing ownership structure. It would be exciting to be listed on the Oslo Stock Exchange, but now we can spend one hundred percent of the energy on business, says Sønsterud.

– Uncertainty in the world

In the 2020/2021 financial year, Elkjøp generated sales of NOK 49.8 billion, consistent with a 21 percent turnover growth over the previous year. Sønsterud has made no secret of the fact that the pandemic has had a huge impact.

– Sønsterud says: – We have clearly had a positive sales impact as a result of Corona, as people moved into home offices and spent more money on products for the home.

The effect appears to be gone. Now omikron is blooming. Several countries have reintroduced infection control measures.

– There is doubt in the world in general. It’s not good, even if it gives us opportunities. The most important thing for us, Hellsland says, is that we can still keep the stores open. (Conditions)Copyright Dagens Næringsliv AS and/or our suppliers. We would like you to share our cases using a link that leads directly to our pages. All or part of the Content may not be copied or otherwise used with written permission or as permitted by law. For additional terms look here.