Swedish private equity firm looks to turn around Norwegian sports retailer

Company has taken a 20 per cent stake in XXL, describing it as an 'attractive opportunity'

Buildings in the centre of Oslo. Hugo Maurstad, partner at Swedish private equity firm Altor, is betting shoppers will continue to use high streets to shop in chains like sports retailer XXL, in which it has taken a stake, as opposed to online. Vegard Giskehaug for The NationalShow less

Private equity firm Altor is betting that fitness and outdoor activities have a bright future in Norway.

The Swedish investor, which became the biggest owner in struggling Norwegian sports retailer XXL last year, has so far racked up losses on its investment as the entire industry suffers from fierce competition from web-based sales and a mild winter. But Altor is aiming to turn the company around and says the market will improve.

“XXL is by far the best platform in the Nordics,” Hugo Maurstad, partner at Altor Equity Partners and chairman of XXL, said by phone. “It’s an attractive opportunity.”

The Oslo-based retailer just filed its second profit warning since October and had to seek easier loan terms as well as raise capital last year, allowing Altor to raise its stake to 20 per cent. The stock has dropped almost 90 per cent since a peak in 2016 and most analysts still recommend clients sell the share.

Altor bought about 10 million shares at 25 kroner (Dh9.50) apiece in June, according to a company announcement, before adding about 17 million more at 15 kroner a share in a placement later. Those shares have lost about 150 million kroner in value since, according to Bloomberg calculations.

“Market conditions are challenging,” Mr Maurstad said. “A lot of the capacity taken out of the market has been much smaller stores. But several major players are adjusting and reducing capacity. That will have to happen in some shape and form.”

Beyond capacity adjustments, Altor is betting XXL can revitalise its stores. The company has hired a new chief executive, the outgoing head of discount retailer Europris, Pal Wibe, to lead the effort. XXL wants to make the stores “more fun”, betting that sports and leisure is one area where the physical world will keep an edge over digital sales, Mr Maurstad said.

“We’re talking about your hobby — you’re not going there to get milk and bread,” he said. “I don’t think brick and mortar retail will be gone.”

Maurstad sees a an upside for lifestyle-oriented companies as Scandinavians live longer and get richer. Altor, which manages about €8.3 billion (Dh33.9bn), is also invested in fitness chain Sats and Nordic Leisure Travel Group, the former Nordic business of Thomas Cook.