Despite growing sales in the first half of its financial year – revenue and same-store-sales grew by 6.0% and 9.2% – Danish global furniture retail brand BoConcept is launching "a strategic transformation of the business model to reorganise the chain, consolidate its franchise model and reduce the complexity" due to profit reduction caused by "high costs incurred in the collection switch-over and poor performance in parts of the chain".
BoConcept reports that these measures will necessitate extraordinary write-downs and provisions totalling DKK70m (c.£7.5m) in 2014/2015.
"After a significant upgrade of BoConcept's concept and collection, management is now implementing an adjustment of its business base and model," reads the report. "35-50 of the worst performing stores will either have new franchisees or be closed, the group will adopt a narrower focus on its market portfolio and improve efficiency, and the franchise model will be optimised.
"To ensure that these operational adjustments receive maximum backing and can be executed, the group will make the following internal changes to BoConcept's supervisory board – Peter Thorsen will be appointed chairman and Viggo Mølholm deputy chairman. In addition, the board has decided to extend the executive board with a COO as head of logistics and production.
"With the positive contribution of growth in same-store sales, revenue will grow in the remainder of the financial year, but closing stores will reduce revenues more than previously predicted. Growth in profit from ordinary activities in the remainder of the financial year will offset losses from ordinary activities in the first half of 2014/2015, and the strategic transformation process will result in extraordinary expenses."
