CEO's review Q4 2023
“In 2023, we continued our transformation and bold strategic actions, such as the acquisition of Georg Jensen, despite a challenging operating environment. During the year, we also delivered our all-time high free cash flow, which was driven by our systematic inventory management.
Nevertheless, low consumer confidence and retailers’ focus on managing their inventories impacted demand negatively in most of our key markets, especially in the retailer customer segment. As a result, comparable net sales decreased by 10% in 2023. Comparable EBIT declined to EUR 110 million for the full year, which is a solid result considering the drop in volumes. The fourth quarter developed as we had expected, with stable comparable net sales against an easier comparison period. Comparable EBIT increased to EUR 38 million in the fourth quarter, including now also Georg Jensen.
The acquisition of the Danish luxury lifestyle brand Georg Jensen is a good example of our transformation. Georg Jensen is a great strategic fit to Fiskars Group and exemplifies the type of brand we want to accelerate; a sizeable lifestyle brand with high-end positioning and a strong presence in direct-to-consumer channels. The acquisition was completed swiftly in the beginning of October 2023 in only two weeks after signing. This allowed us to fully consolidate Georg Jensen’s fourth quarter, the brand’s most important quarter, to Fiskars Group. Despite the acquisition temporarily increasing our net debt, we have already returned to our leverage target level, driven by our determined cash flow management. Our focus is now on integrating the brand into Fiskars Group, which is progressing well.
During 2023, we simplified our organizational structure and strengthened the role of the Business Areas. The Group’s role is to act as an active portfolio manager and to enable the Business Areas to fully focus on what matters to the consumers and employees—the brands. The implemented organizational changes included combining Business Areas Terra and Crea into one Business Area called Fiskars, and this is the first quarter we are reporting with the new structure. During the fourth quarter, we concluded consultations with employees related to the planned organizational changes we announced in September 2023. As a result, the targeted reduction of 400 roles globally was completed. After the reporting period, we announced plans to integrate sales operations into the Business Areas as a logical continuation to the earlier changes. The brands, assortment and customers of Business Area Vita differ from those of Business Area Fiskars, which is why it makes sense for the sales operations to be more specialized as well.
Looking at our strategic transformation levers, three of the four levers—commercial excellence, direct-to-consumer (DTC) and China—showed positive development in 2023. Our organic gross margin, which is our key performance indicator for commercial excellence, increased by 100 basis points in 2023. Comparable DTC sales increased by 4%, driven by continuous growth in e-commerce. Including Georg Jensen, DTC amounted to 25% of the Group’s sales. In China, comparable net sales increased by 25%. In the U.S., which is the fourth transformation lever, comparable net sales decreased by 14% during the year as retailers’ focus on inventory management affected demand.
We continued to make good progress in sustainability. One of our key targets is that majority of our sales comes from circular products and services by 2030. At the end of 2023, we were already at 14%, almost tripling from previous year’s 5%. We still have a lot of work to do, and we are constantly developing new solutions. To reinforce the commitment to achieving this ambition, advancing circular products and services was included as a target in the share-based incentive plan for our key employees during the year.
I would like to thank all our employees, customers and partners for the year 2023. I look forward to continuing the good collaboration in 2024, which marks the 375th year of Fiskars. Pioneering design, high quality and craftsmanship are values that have guided us throughout the centuries, and they continue to be at the heart of everything we do.
Looking at 2024, the operating environment is expected to remain challenging and impact demand. Based on the current visibility of the market development, this applies especially to the first half of the year. We are expecting comparable EBIT to be slightly above the 2023 level. The savings from the completed organizational changes are expected to support EBIT, although they will be partially offset by wage inflation. As a result of the Georg Jensen acquisition, the Group’s EBIT generation will shift even more toward the end of the year, highlighting the importance of the second half and especially the fourth quarter.
I am confident that the actions taken throughout 2023 have strengthened our foundation and will support our performance going forward.”
President & CEO