Crisis at Bang & Olufsen Deepens With Fourth Warning in a Year

(Bloomberg) -- Bang & Olufsen A/S laid bare the full extent of the crisis engulfing the Danish maker of high-end televisions and music systems with its fourth earnings revision in a year, raising the pressure on its new leader to accelerate a turnaround or find a partner.

Sales last month were considerably lower than expected, B&O said in a statement, prompting the shares to plunge 25% in Copenhagen. The decline takes this year’s stock loss to almost 63%, the second-worst return on the 132-member OMX Copenhagen Index.

“All alarm bells are ringing, and who can have the confidence that there won’t be a fifth, or maybe even a sixth profit warning,” said Per Hansen, an investment economist at Nordnet in Copenhagen. “It ought to be clear that B&O’s future is not as an independent company.”

The company’s troubles highlight the changing tastes of consumers who prefer listening to music on mobile devices or choose unobtrusive speakers over extravagant sound systems. It’s also a study in a brand struggling to cater to two extremes: the sound aficionado worshiping music at an elaborate speaker shrine like the Beolab 90 that cost more than $80,000 and weigh 300 pounds (136 kilograms) each; and the young user on the go and on a budget who switches devices every other year to enjoy the latest tech gadgetry.

Sales this year will be down as much as 18%, compared with a previous forecast for an expansion. Operating profit and cash flow will also be worse than predicted earlier. Investors won’t get the full details until Jan. 14, when B&O is due to publish its fiscal second-quarter results, though a new three-year plan won’t be presented until April.

The latest revision heaps more pressure on Kristian Tear, a former Blackberry Ltd. manager who joined as chief executive officer in October. Tear said the strategic direction of the company remains unchanged, but that “fundamental change of the sales and marketing efforts is required.”

Among the problems ailing B&O are increased competition, slower sales execution, and excess inventory levels at partners that led to sales through “unauthorized channels,” the company said. Combined, the issues create “an increased degree of uncertainty” related to a business transition, it said.

The company, which traces its roots back almost a century when two Danish engineers began making radios, has attracted suitors in the past. In 2016, Sparkle Roll -- a company controlled by Chinese billionaire Qi Jianhong -- indicated it was interested in B&O, buying a major stake that it holds to this day.

But B&O Chairman Ole Andersen rebuffed the overture, citing uncertainty surrounding a potential bid. Since then, Andersen -- best known for once leading Danske Bank A/S’s board, a role from which he was ousted last year as the lender is investigated across the globe for money laundering -- has presided over a steady stream of profit warnings, management changes and a sliding stock price.

--With assistance from Sally Bakewell, Lisa Wolfson and Catherine Larkin.

To contact the reporters on this story: Christian Wienberg in Copenhagen at cwienberg@bloomberg.net;Ryan Vlastelica in New York at rvlastelica1@bloomberg.net

To contact the editors responsible for this story: Tasneem Hanfi Brögger at tbrogger@bloomberg.net, Benedikt Kammel

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