While Björn Borg's Q2 report came in below our expectations, and our near-term estimates have come down slightly as a result, it has no material impact on our medium- to long-term estimates. While we will keep an eye on the Wholesale segment, which has been a drag in H1, we continue to see good opportunities for the company to get back on track and deliver profitable growth and solid value creation. As a result, we continue to view Björn Borg as an interesting investment opportunity, given the attractive combination of expected earnings growth and dividend yield, and therefore reiterate our Accumulate recommendation and target price of SEK 69 per share.

The investment case relies on increased sales growth

In our view, Björn Borg’s investment case depends on the company’s ability to sustain profitable growth while successfully expanding its core categories. While the biggest positive driver for Björn Borg is topline growth, the main near-term risks to achieving this are slow integration of footwear, a lack of brand traction, and prolonged weak consumer confidence.

Margin strength cushions significant revenue miss

Björn Borg reported Q2 revenue of 198 MSEK, a clear miss against our 241 MSEK estimate and a 12.2% year-on-year decline. The shortfall stemmed from weak Wholesale sales, which the company attributes to distribution timing, as 2026 summer deliveries were booked in Q1 rather than Q2 as in 2025. Although we had anticipated this shift, the effect was more pronounced than expected, with Wholesale down 26%. Even excluding timing, first-half Wholesale revenue fell 4%, which we find disappointing. One explanation was a lower opening order book, reflecting a weaker market when Wholesale orders were placed in Q3’25. More positively, own e-commerce returned to double-digit growth after a temporary Q1 setback, supported by strong momentum in sports apparel and coming in above our expectations. In our view, this signals resilient demand, which should bode well as spring 2027 Wholesale orders are placed in Q3. In our view, the standout in the report was the gross margin, which surged to 56.2% (Q2'25: 50.6%), well above our 51.0% estimate, driven by a favorable channel mix as higher-margin e-commerce gained share. This lifted EBIT 11.0% year-on-year to 11.8 MSEK, though the absolute figure slightly missed our 13.1 MSEK estimate on lower volumes.

Near-term estimates revised down slightly

While Björn Borg's Q2 report came in below our expectations, and our near-term estimates have come down slightly as a result, it has no material impact on our medium- to long-term estimates. We continue to expect that revenue will grow at an annual rate of around 7% in the mid- to long-term, driven by continued expansion in its core categories of sports apparel and footwear, while maintaining steady growth in the more mature underwear segment. That said, we believe overall consumer demand remains relatively sluggish, which continues to create uncertainty around the near-term revenue outlook. We expect profitability (EBIT margin) to be around 12% in the coming years, helped by operating leverage from sales growth, though continued expansion, particularly in Björn Borg's own e-commerce and in the German market, is likely to bring additional costs.

Earnings growth and dividend yield support good expected return

In our view, investing in Björn Borg exposes the investor to a profitable growth company with a solid balance sheet and potential for high dividend yield. While we are relatively neutral on the valuation on a current earnings basis (P/E Q2’26 LTM: ~16x), we see medium-term earnings growth of a good 7% and a dividend yield of some 5-6% per year, which together offer a total expected return above our required return. We therefore consider the risk/reward ratio attractive.