A Clas Ohlson AB and an InterSport International Corp. retail store stand side by side on Drottninggatan shopping street in Stockholm, Sweden. (Photographer: Johan Jeppsson/Bloomberg)

Clas Ohlson Throws In Towel in U.K., Germany by Closing Stores

(Bloomberg) -- Swedish home improvement chain Clas Ohlson AB will close all its stores in the U.K. and Germany following years of losses at its operations there and as the retail market increasingly shifts to online sales.

  • The closures will affect about 150 employees, cost some 210 million kronor ($23 million), and set forth a "completely new direction" for the company’s operations outside the Nordics, Chief Executive Officer Lotta Lyra said in the company’s second-quarter report on Wednesday.
  • Clas Ohlson currently has six stores in the U.K. and four in Germany.

Key Insights

  • Clas Ohlson, which sells everything from gardening tools to electrical appliances and leisure products, is making a u-turn in markets where it was planning to expand rapidly as recently as two years ago.
  • It originally saw potential to go nationwide in Germany and mimic Ikea Group and Hennes & Mauritz AB’s’ expansion in Europe’s largest economy. Clas Ohlson had focused its German entry to the northern parts of the country, and opened its fourth store in Hamburg only a year ago.
  • In the U.K., Clas Ohlson had hoped that its U.K. operations would turn a corner amid a new strategy to own clusters of stores in urban areas.
  • The decision to shutter the stores in the U.K. and Germany follows the appointment of Lyra, a former Ikea executive, as new CEO in June 2017. Since she started, she has mapped out a new course for the 100-year-old company, placing increasing focus on digital channels and home deliveries while downplaying the importance of store networks.
  • It will retain a presence in the U.K. and Germany by keeping online sales there. It may also expand that business to other markets in the future.

Market Reaction

  • Clas Ohlson initially fell as much as 6.3 percent after the report, but then reversed losses to gain 4.9 percent as of 10:17 a.m. in Stockholm.
  • The stock has slumped almost 30 percent so far this year.

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  • Clas Ohlson’s second-quarter operating profit fell to 33 million kronor from 125 million kronor, missing even the lowest analyst estimate.
  • The company blamed the weaker retail climate and costs associated with its digital transformation for the decline in operating profit.
  • On a positive note, its online sales rose 43 percent in the quarter.

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