Bang & Olufsen: cracked record
The Danish group’s chief executive must look harder at his products to get things bangin’ again
Bang and Olufsen’s new chief executive thinks better marketing will turn it round. That is as clear as the sound from one of the Danish group’s luxury stereos. Appointed in October, Kristian Teär unveiled second-quarter sales that were down almost a third. It was the company’s fourth profit warning in a year. Shares opened at levels last seen in the mid-1990s, before bouncing back.
B&O has been here before. Before the financial crisis the company was worth almost $1.5bn, before collapsing to less than $150m. At the start of 2018 it was valued at more than $1bn, compared with just $200m today.
The latest hiccups are unlikely to be the end for B&O. The brand is still powerful and the financial position is better than the share price suggests. Mr Teär, though, must look harder at his products to get things bangin’ again.
B&O considers itself the Ferrari of consumer electronics. That is reflected in its prices. Here, it has got ahead of itself. Its Beovision Harmony television costs almost €20,000. The same LG screen can be bought for a third of that price without the B&O sound system. It's hard to imagine Ferrari selling many cars by slapping badges and body kits on to Alfa Romeos.
Product is ever more important in light of growing competition from the likes of Sonos and Bose. Both have taken market share over the past five years. Sonos of the US doubled to 1 per cent of global sales while Germany’s Bose added almost two percentage points for a total of more than 7 per cent last year, according to Euromonitor. B&O’s market share is tiny. It will get tinier without urgent remedies.
All is not lost. Cash at the end of the second quarter stood at DKr298m ($45m) due to better stock management. By Mr Teär’s bearish predictions, that will halve by year end. If things get worse than expected the balance sheet, with only $10m of debt, can still be brought into play. Bang and Olufsen has a history of bouncing back from the brink. Contrarians should hit the replay button.