Oriflame - comment

Q4 was positive for Oriflame, as was the call. The company confirmed that it has moved all exporting operations out of Russia and so our fear of latent dependency on this region for more than its stated share of EBIT has been quelled. Going forward, however, Euro-denominated costs will be featuring more strongly again and Asia continues to struggle with cheap online distribution.

This morning’s Q4 results suggest we have been overestimating the company’s cost inflation. Sales were overall on target as lower volumes continued to be offset by price mix and FX, and so somewhat in line with Douglas, margins have been defying the cost-of-living crisis. The outperformance vs. our initiation primarily lies in Selling and Marketing expenses, which are flat YoY - again on lower volumes. We had expected a continued YoY increase here to push product out the door. Ultimately the cash position is a fair bit stronger than modelled, also due to seasonal WC inflow (where we were less bullish on this Q4) and much lower extraordinary items.