Inspiring. Fashion is here and now. beneath. fashion for children. Beauty comes from. Lindex Women s Wear reaches new heights

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1 Lindex GroupAnnual Report 2004/2005 Company Presentation Inspiring fashion for children Fashion is here and now Beauty comes from beneath Lindex Women s Wear reaches new heights

2 Lindex in one minute Since the first store was opened in Alingsås in 1954 Lindex has grown significantly. With over 330 stores in Sweden, Norway, Finland, Germany and Estonia, Lindex is now one of the leading fashion chains in northern Europe. The Lindex business concept is to always offer women inspiring, value-for-money fashion. Lindex inspires women and their children with its co-ordinated fashion. Lindex offers a product range that all women can afford. Always with the right quality and fit. The range includes a variety of concepts in lingerie, women s wear, children s wear and cosmetics. The typical Lindex customer is a modern woman who does not regard age as being particularly important. A woman who is aware of her body, her appearance and what suits her. She is not a slave to fashion but views it in a conscious and mature way and wants to be inspired when she shops. The Lindex head office is in Göteborg. The number of employees in 2005 was approximately 3,000. Since 1995 the Lindex share has been listed on the Stockholm Stock Exchange A-list.

3 Contents 4 Interview with the President 7 Business concept, objectives and strategies 8 How we work with fashion 10 Lingerie 11 Cosmetics 12 Women s Wear 14 Children s Wear 17 The market 20 Marketing 22 Stores 23 Employees 24 Environmental and social responsibility 26 Feature writer Emma Wiklund Lingerie for all occasions Top quality, good fit and the broadest range on the market have made Lindex the market leader in lingerie in Sweden, Norway and Finland. Lindex has lingerie for all occasions: weekdays, parties, relaxing at home or a run in the forest. Apart from lingerie, the range also includes socks and hosiery. The assortment is characterised by fashion, trend, good 10 fit and value-for-money. 14 Inspiring fashion for children Children are active, conscious and demanding clothing consumers and nowadays children s fashion change just as quickly as for adults. Lindex children s wear involves listening to parents and children, with function, quality and fit as the guiding features. 12 Women s wear that reaches new heights Fashion has never been as individual as it is today. To satisfy the demand from customers for freedom of choice, the collections are designed so that the garments can be easily combined, mixed and matched to suit an individual s personality and needs. Carefully considered collections, a feeling for fashion and a high degree of innovation are characteristic of Lindex women s wear. 11 Exciting development in cosmetics The focus on cosmetics has proved successful. Cosmetics are now sold in over 130 stores in Sweden and Norway and fit well into the Lindex range, reinforcing key values such as femininity and inspiration. The focus is on make-up and hair care products. 3

4 Interview with the President A strong year that has created the scope to expand! Y ou have been President of Lindex for about 12 months. How would you sum up the past year? In many ways it has been a fantastically good year for Lindex. We have reinforced profitability in our Nordic operations even further and in Germany we are definitely heading in the right direction. We have worked hard with both collections and costs and this has produced results. As regards our collections, it really feels as if we have begun to find the right path. Whilst the collections are still characterised by high quality, good fit and value-for-money, we have had the courage to be bolder and this is appreciated by our customers. Women s wear in particular has developed very well. The concerted effort made by everyone has given us a stable base, which is very gratifying after a number of difficult years for Lindex. The positive development is reflected in our operating profit, which increased to SEK 391 M (28). There has also been a significant improvement in profit after tax to SEK 309 M ( 76). What have been the major challenges? By far the biggest challenges have been to improve profitability and reinforce the feeling for fashion in our offering. A key element has also been to reinforce self-confidence in-house and considerable progress has been made in all areas. We are currently working in a very focused way and we are extremely keen to make up lost ground. As regards profitability, we have increased margins substantially, largely by adapting our volumes and selling more garments at full price. This has been aided significantly by the new business and logistics system, which is now fully operational. The closure of a number of unprofitable stores in Germany has also made a positive contribution. How has the market developed? With the exception of Germany, the retail clothing trade is growing on all our markets. At the same time, competition is keener than ever. Today we are not only competing with other national and international players in the industry but also with entirely different products and services, such as electronics, travel and experiences. It is therefore vitally important to have a strong brand name and a consistently high degree of innovation. In terms of market shares we maintained our leading position in lingerie during the year. We also have a strong position in women s wear and children s wear. Costs are falling and profitability is increasing. How will you boost sales? We will continue to enhance our collections and increase our marketing. During the past year we chose to hold back on marketing and advertising. In effect, all marketing has been focused on the Lindex Club. During the coming year we will be much more visible in different areas. We have 4 Lindex Group 2004/2005

5 It has been a fantastically good year for Lindex. We have worked hard with collections and costs and we have reinforced profitability even further. Göran Bille, President and CEO, AB Lindex also formulated a new marketing strategy, which we will begin to implement during autumn We will continue to broaden our range, particularly women s wear. Previously, the focus was very much on daywear. In the future we will complement the range with more stylish fashion. During the year the decision was made to sell Twilfit. What is your view on this? It is simply a matter of accepting that we did not succeed in handling Twilfit within the organisation. The benefits for Lindex that were envisaged when the company was acquired at the beginning of 2002 failed to materialise. Twilfit has weighed us down financially and it is a relief that we can now devote all our energy to developing the Lindex brand name and our stores. We are retaining six of the Twilfit stores in Stockholm and Uppsala and transforming them into Lindex stores. Germany has been a problem for a long time. What is the current situation? The negative trend has been reversed and we are definitely beginning to bring our operations in Germany into line. During the year we continued with our action programme and closed another four stores. At present we have 22 stores, although plans are in place for cautious expansion. A great deal still remains to be done but our fashion is popular and slowly but surely we are beginning to imprint ourselves on the mind of the German woman. Estonia was a new market last year. How have things progressed? Very well. The store reached profitability after just six months. There is substantial market growth and we are in the process of establishing a very good position. The whole of the Baltic region is exciting and we intend to play an active part in developments there. What is your aim for the coming year? With a continued focus on costs and profitability we are now concentrating on expansion and growth. We are planning to open twenty to thirty new stores, the majority in Finland, Germany and the Baltic States. In the Nordic market our aim is to increase both sales and profitability. In Germany, the main aim is to further improve profitability. The work we have done during the year has given us a stable base on which to expand and I am looking forward to 2005/2006 with great anticipation! 5

6 6 Lindex Group 2004/2005

7 Business concept, objectives and strategies Inspiring, value-for-money fashion for women vision Our passion is to inspire women to look and feel great. business concept The Lindex business concept is to always offer women inspiring, value-for-money fashion. Lindex inspires women and their children with co-ordinated fashion. We offer a product range that all women can afford. Always with good quality and stylish fit. We are the lingerie specialist. We are efficient and cost conscious in everything we do. We have a high degree of availability through our exciting and inspiring stores. Lindex is located close to the customers with its own stores in Europe. objectives and challenges Lindex has the aim of achieving the following financial objectives by the 2005/2006 financial year at the latest: A turnover rate of four times per year Fashion is constantly changing. By increasing the turnover rate the capacity is created to constantly renew the range. This leads to inspiring stores and a range that is in line with current fashion and what customers actually want. Challenge Increasing the turnover rate sometimes requires a reduction in inventory volumes, more rapid order processes and more efficient handling in the stores. A sustainable gross margin of per cent A higher turnover rate will have a positive impact on the gross margin. The aim is to achieve a sustainable gross margin of per cent. Challenge Achieving this target requires, not only a more rapid turnover rate, but also an increase in full-price sales and more efficient purchasing processes. A sustainable EBITA margin of 12 per cent in Nordic operations A higher gross margin improves the potential for a better EBITA margin. The aim is to increase the EBITA margin to 12 per cent in Nordic operations. Challenge An increase in the EBITA margin depends, among other things, on increased sales but with no increase in costs, fewer price reductions, better distribution of goods, improved efficiency in the stores, internal commitment and a continued focus on the customer. Conditions to achieve the aims and meet the challenges: A strong brand and an effective communication strategy. Well co-ordinated collections with a strong feeling for fashion. A broad level of in-house commitment. An efficient business and IT system that offers a good overview. Inspiring stores with a high degree of innovation. 7

8 How we work with fashion Fashion is here and now The Lindex customer is conscious. She knows that fashion is short lived and that fashion is here and now. This requires Lindex to be constantly aware of trends. Lindex must know what the customer wants tomorrow and next season and ensure that the right products are in the store at the right time. Virtually all garments at Lindex are designed in-house and it is at the Lindex Purchasing Department that the lingerie, women s wear and children s wear collections are created. Within each business area there are several design teams that are responsible for different concepts and product groups. The teams are made up of designers, purchasers, pattern designers, assistants and controllers. Common to everyone in the team is a great passion for fashion, design and retail. The capacity to interpret trends and create collections that inspire customers to buy is crucial for Lindex. The whole world as a source of inspiration Fashion and trends can appear anywhere and the Lindex design teams are constantly on the lookout for new ideas. Fashion magazines, centres of fashion such as London and Milan, films, music and second-hand stores are just some examples of where the design teams find their inspiration. By looking at what sold in previous seasons and capitalising on the ex perience of the sales personnel in the stores the team can build up a good picture of what the customers are looking for. Using these elements as a foundation, the task of creating the collections for forthcoming seasons commences. Well co-ordinated collections The team works together to produce a picture of the range and the balance between the different product groups. It comes down to creating a well co-ordinated collection and identifying key garments for the season. If skirts are in focus instead of pants then Lindex needs to purchase the right volumes. When the collections have been decided it is time for the designer to make detailed sketches, for the stylist to draw up size lists and for the buyers, together with the production offices, to choose the right supplier. The chosen supplier then produces the first sample, which is checked carefully. Is it the right quality, colour and size? The garment is also tested on a model. Fit is one of Lindex s major strengths and competitive advantages and it is important to get it right. Close to the suppliers Lindex has a network of production offices around the world. This network offers the conditions to guide purchases to the right country in terms of price, quality and volume. Being close to the suppliers also makes it easier for Lindex to ensure that they follow the code of conduct. Lindex has production offices in Turkey, India, Pakistan and Bangladesh. In China, which is one of the major purchasing markets, Lindex has three offices. It is at these offices that a great deal of the day-to-day, practical purchasing work is done, allowing the design teams to concentrate on creating new, winning products. Business and IT systems create a good overview Having the right products out in the store at the right time means that a good business and IT system is crucial. With the investments Lindex has made in recent years the conditions have been created to further increase control and follow-up to make it simpler and quicker to regulate the flow of products based on customer demand. 8 Lindex Group 2004/2005

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10 Lingerie Beauty comes from beneath Lindex s position in lingerie, socks and hosiery is hard to beat. The broad range, the good fit and the high level of quality have made Lindex one of the market leaders in lingerie, socks and hosiery in Sweden, Norway and Finland. The range includes everything from basic, functional, value-for-money garments to the very latest in fashion. Lindex has one of the broadest lingerie ranges on the market for all occasions: weekdays, parties, relaxing at home or a run in the forest. The range not only includes lingerie but also socks, hosiery and cosmetics, characterised by style, trend, good fit and value-for-money. Increased profitability despite keen competition The market during the year was characterised by keener competition and weak or non-existent growth, particularly for less expensive products. Players on the market have become more active and have devoted more effort to marketing. Lindex s position on the Nordic lingerie market continued to be strong during the year. In Sweden, the market share was just over 20 per cent. Compared with other garments, the lingerie market is relatively stable. Once a customer has found her favourite model she tends to remain faithful to that model. At Lindex, volumes fell slightly during the year although profitability increased. Extensive work in-house on improving purchasing processes, as well as differentiating the range on the various markets to a greater extent than previously, have improved profitability significantly. A high degree of innovation is vital as the fashion level increases Lingerie fashion has a life of its own although it is obviously affected by fashion in general. As women s fashion changes new cuts for lingerie could be required. The trend of having a greater element of fashion in lingerie continued during the year. On the Swedish market, however, it is still basic products with a high degree of functionality that top the list. In line with the increase in the level of fashion, the life span of the collections is shortened and there is more demand for innovation out in the stores. To satisfy this need, there is a more distinct focus on design and fashion trends without sacrificing fit and quality. Lingerie for all tastes Lindex sells women s lingerie under both its own brand names and leading external brands. The garments sold under the company s own brands are created by Lindex s designers. Prior to each season hundreds of new bras and briefs are produced. The aim is to offer everything required to create a varied lingerie wardrobe. Regardless of whether it is basic garments or more luxurious, more trendy lingerie it should always be possible to find what you are looking for at Lindex. Lindex is not only at the forefront in fashion and design but also in function and materials development. Lindex Under the Lindex brand name there is a wide range of basic and fashion garments for a broad target group. The garments are produced with the aim of being able to mix and match to satisfy current demand exactly. Within the framework of the Lindex brand there are also functional innovations such as the Memory Pad bra and the Bum Booster briefs. 10 Lindex Group 2004/2005

11 Our quality and fit have for a long time been key reasons why the customer chooses us. The fact that we also have the market s broadest range of fashion and basic lingerie naturally makes our offer even stronger. Malin Helde, Director, Lingerie Business Area. Ella M Ella M is a slightly more luxurious, flamboyant brand and sales have increased considerably in recent years. The collection includes lingerie with a high degree of fashion for a target group that is very much aware and constantly looking for that little extra. So.U. So.U. offers a trendy, colourful range directed primarily at the younger target group who want to be the first with the latest. Socks and hosiery Lindex s position in socks and hosiery continues to be strong. The market share for socks and hosiery in Sweden is over 20 per cent. Design, function and innovation are key factors in this range. cosmetics The sale of cosmetics continued to grow during the year. In spring 2005, a further ten cosmetics departments were opened in stores throughout Sweden. In total, cosmetics are now sold in some 135 stores in Sweden and Norway. Cosmetics fit well into the Lindex range and reinforce key values such as femininity and inspiration. The focus is on make-up and hair care products. 11

12 Women s wear It has been an intensive yet very enjoyable year. We have put an enormous amount of work into our new collections and it really feels as if we have found the right path. We have dared more, we have a clearer concept and we have a good mix of basic garments and garments that are more fashion-oriented. We have succeeded in incorporating a sense of cohesion into everything we do: from design and purchasing to the way we market and present the collections in the stores. We are very proud of what we have achieved. Marita Wadenfalk, Director, Women s Wear Business Area. 12 Lindex Group 2004/2005

13 Lindex women s wear reaches new heights With more carefully considered collections, an increased feeling for fashion and a high degree of innovation, Lindex reinforced its position in women s wear during the year. Both margins and profitability improved considerably. The past year was something of a consolidation year for Lindex Women s Wear. A great deal of effort was directed at developing Lindex s identity in the collections and establishing the framework for the company s product offering. The effort made in recent years to focus on reinforcing the feeling for fashion in the garments will continue. Intensive work during the year has resulted in carefully considered collections that are bolder than in the past. All the garments retain the Lindex character with regard to fit, quality and value-for-money. Combine, mix and match! Women of today often have less time for shopping and consequently purchase more garments on each occasion. Fashion is also more individual than ever before. The collections have therefore been designed to make it easier to combine, mix and match different garments. As they need to suit the individual s personality and requirements, a good balance is required between a distinct basic range and more rapidly moving fashion products. Inspiring stores crucial Entering a Lindex store should be an inspiring experience. Apart from satisfying the basic demand for quality, fit and value-for-money, it is crucial that the stores clearly demonstrate how the various garments can be matched and combined. There must be constant innovation in the stores to ensure that the fashion level feels right. Accessories are important to complete the overall impression. Generous Generous is the Lindex collection for fashion-conscious women who require slightly larger sizes. Generous follows the same fashion trends as the rest of the women s wear range. The collection was developed considerably during the year and the range includes everything from jeans and pullovers to blouses, skirts, jackets, coats and lingerie. MOM Even in the Lindex maternity collection, MOM, the feeling for fashion is important. From the very beginning in 2003 MOM has been a great success. Considerable emphasis is placed on maternity wear being as comfortable as possible and pliant materials, such as knitted cotton and stretch, dominate the choice of fabrics. 13

14 Children s Clothing Lindex target groups Four-year olds who like nursery and friends but most of all mum and dad. The average four-year old is inquisitive, determined and learns quickly. Ten-year old independent pupils in the fourth grade who feels that friends are really important and that clothes are fun. 14-year-old girls who like clothes and fashion. Baby parents. Often mothers who are in the store and take the opportunity to buy children s clothes. They are looking for innovation and inspiration. Inspiring fashion for children Interest in clothes and fashion is filtering down through the age range. Children are creating their own trends more and more. The ability to be attentive to both children and their parents has put Lindex among the market leaders in this segment. Despite keener competition as a result of more players, continued pressure on prices and a reduced market, Lindex managed to retain a strong position in children s wear. Children s Wear sales fell slightly during the year, due mainly to a low birth rate in Sweden during the middle and end of the 1990s. This has meant that clothes sales, particularly for slightly older girls, have been affected negatively. To counter the keener competition, a review is being made of the range to improve the product offering even further. In recent years, however, the birth rate has risen again, resulting in an increase in demand, particularly for clothes for very young children. In total, children s wear accounted for approximately one-third of Lindex s sales during 2004/2005. Alert to rapid changes in fashion Lindex s capacity to grow in a weak market is due largely to strong brand names and the ability to be alert to what children and their parents are looking for. Interest in fashion is filtering down through the age range and the level of fashion has gradually increased in recent years. Children are active, conscious and demanding clothing consumers and nowadays children s fashion changes just as quickly as adult fashion. Trends in children s clothes differ to some extent compared with other areas. Children are inquisitive and constantly on the lookout for new impressions. Friends, pop stars, celebrities and sports personalities are among the biggest sources of inspiration when it comes to fashion. At the same time, quality and price are still very important. 14 Lindex Group 2004/2005

15 Children today are often very interested in fashion and they are the ones who choose what they want to wear. Our success is based on listening to children just as much as to their parents. Many of those who work with children s wear also have children of their own which gives us rapid feedback on what we do. Ann-Christine Bergstrand, Director, Children s Wear Business Area. Fashion on children s terms Lindex children s wear is characterised by a combination of the right level of fashion, quality, fit, function and value for money. The clothes are marketed under four different brand names: Lindex, FIX, Heartquake and Bamse. matched to create a personal look. The collection follows current trends and exudes a hip, streetwear feeling. To make it possible to create an individual style and enhance the wearer s personality the collection also includes bags, belts, headbands and other accessories that complement the garments and reinforce the look. Lindex Lindex is by far the largest brand for both girls and boys in the age range 0-14 years. The clothes can be divided into three segments. The first segment, fashionable, value-for-money basic garments, is the core of the collection. In the middle there is the season s fashion with inspirational garments that are in keeping with the times and easy to co-ordinate. At the top there are the very latest garments, which are aimed at attracting attention in the stores. All Lindex children s wear is co-ordinated to allow customers to match as they wish. For smaller children, the clothes are slightly cuter and the models more consistent. The basic Lindex babywear collection comprises simple, colourful garments that are easy to combine with the rest of the range. FIX FIX is by far one of the strongest brand names on the children s wear market. The brand has been around since the 1930s and at Lindex since The clothes are designed with primarily for children up to seven years of age. This means classic colours and comfortable, high-quality materials. Heartquake Heartquake is the Lindex collection for girls aged years who are interested in fashion. This includes garments that can be mixed and Bamse For the youngest children there is also a popular range of Bamse clothes, where the garments are decorated with figures from the world of the cartoon figure Bamse. Comfortable, high quality garments in classic colours for both babies and young children. Children s safety at the forefront It should be safe to use children s clothes from Lindex. Lindex has for a long time been at the forefront with regard to safe children s clothes. To ensure the garments are as safe as possible, a detailed checklist is used to, among other things, govern the length of the drawstrings, the placing of reflector strips and the use of hoods. Lindex is also involved in a collaborative project to develop a European standard for safety in children s clothes. Constant development Lindex is working constantly to develop the children s range. This has led to pants with a narrow, wider or adjustable waist to take into account the various needs of different children. For the coming year the aim is to retain sales volumes despite demographic changes arising from the lower birth rate during the 1990s. This will be achieved by selling more garments per child and having a range that continues to be correct in terms of fashion and yet at the same time is safe, has high quality and the right price. 15

16 Marknad 16 Lindex Group 2004/2005

17 The Market Record profit in Nordic operations With over 330 stores in Sweden, Norway, Finland, Germany and Estonia, Lindex is one of the largest fashion chains in northern Europe. The total value of the clothing markets where Lindex operate is approximately EUR 72 billion.* Even if there are differences in consumer patterns between Lindex s different markets they are all essentially similar with regard to purchasing behaviour, lifestyles and market structure. The Nordic re gion is characterised by being particularly homogeneous, with a considerable interest in fashion and trends. Demand is influenced by a number of factors: disposable income, consumer inclination, demographic changes and changes within the industry. Even the weather has a part to play. Autumn and winter are normally the strongest sales periods. Strong brand names and a clear concept crucial Apart from competition within the clothing industry, customers are to an increasing extent setting the purchase of clothes against travel and goods such as mp3 players and computers. This competitive situation is making considerable demands on the whole of the clothing industry, particularly the marketing. To grow ahead of the market, strong brand names are required as well as clear concepts, inspiring stores with a high degree of innovation. A clothing industry undergoing change All Lindex markets are characterised by structural changes, internationalisation and shifts within the sector. A greater proportion of consumption is concentrated on highly populated regions and out-of-town shopping centres. At the same time, the market is moving towards fewer yet larger players. The Internet and access to international media mean that trends spread rapidly throughout the world, with more frequent changes in fashion as a result. Shifts within the industry are becoming more extensive. An increasing number of clothing and fashion companies are expanding their range to include accessories and beauty products. Competitors The clothing market is a mature market characterised by tough competition. In Sweden and Norway, Lindex is competing in particular with H&M and KappAhl. In Norway, the competitors include Cubus and Vero Moda. Seppälä, H&M and KappAhl are Lindex s main competitors in Finland. The keenest competition is on the German market, where virtually all the major international players are established, such as Benetton, Esprit, H&M, Zara, Orsay/Pimkie, C&A and Mango. In the lingerie sector there is also competition from individual specialist stores in the different countries. *Source: Mintel 17

18 Sweden Established: 1954 Sales: SEK 3,104 M (including Twilfit) Number of stores: 181 Country manager: Mats Gärdsell For Lindex Sweden, 2004/2005 was a record year in terms of profit. The level of conversion, i.e. the number of visitors to the stores who make purchases, also increased. The improvement in profit is due to a combination of factors: a review of internal routines and costs, more inspiring stores and a clearer concept with bolder collections. According to the Swedish Trade Research Institute, HUI, clothing sales in Sweden, which is the largest Lindex market, increased by five per cent during Sales were SEK 40.9 billion. For the clothing trade, growth for 2005 is expected to be 3.5 per cent. Sweden the largest Lindex market Sweden is by far the largest market for Lindex. During the financial year the 181 Lindex stores accounted for 60 per cent of the Group s total sales. Three new stores were opened and three were closed. Unique market position The Lindex position on the Swedish clothing market is unique. Lindex is the leader in lingerie and among the leaders in women s wear and children s wear. Around 60 per cent of all Swedish women visit a Lindex store each month. The position within Lingerie was reinforced even further during the year. Above all, Ella M continued to develop very well. Within Women s Wear, the new collections were well received, resulting in an increase in sales. A weakening could be noted in Children s Wear, which is largely due to demographic loss as a result of a low birth rate during the middle and end of the 1990s. The market is largely characterised by keener competition and more new players, including the Spanish company Zara and the Norwegian company Cubus. Challenges For the coming year the aim is to continue to grow and improve profitability. There will be a considerable focus on measures to increase fullprice sales. Among other things, the level for newly purchased volumes must be reviewed. Marketing will increase, both in-store and through the Lindex Club. There will also be a greater degree of differentiation to meet demand on the various Lindex markets. Norway Established: 1969 Sales: SEK 1,228 M Number of stores: 84 Country manager: Hanne Leino The Norwegian market was characterised by keen competition during 2004/2005, particularly within children s wear. In local currency, Lindex sales fell by 2.7 per cent on a market that increased by 6.6 per cent (HSH). Thanks to an extensive review of costs, profitability has increased and Lindex in Norway reported record profits. Market leader in lingerie Lindex has for a number of years been the market leader in lingerie in Norway. This position was reinforced further during the year by the opening of a pure lingerie store, located centrally at Aker Brygge in Oslo. The concept will be tested for a while and, if things prove positive, it will function as a complement to the normal store network. During the coming year several stores with large lingerie departments will be rebuilt and refurbished. Lindex s second largest market Norway is the second largest market for Lindex. Lindex s strengths in Norway have mainly been in children s wear and lingerie. As a result of several years work, however, the position has also been reinforced within women s wear during the year. The aim is to develop even further in the next few years and stores that offer inspiration are the most important component in this endeavour. In recent years several stores have upgraded the visual element by highlighting focal points, such as the entrance, even better. Norway s third largest store chain Lindex is the third largest store chain in Norway, with stores from Kristiansand in the south to Alta in the north. At the end of the financial year there were 84 stores in Norway. One new store was opened during the year and three were closed. In total, Norway accounts for 24 per cent of the Lindex Group sales. Powerful reduction in absenteeism due to illness In October 2004, Lindex Norway was named the IA Company of the Month for its work in reducing absenteeism due to illness at the company. Thanks to an ambitious programme of activities and broad-based support internally, absenteeism due to illness fell during the first nine months of the year by 6.5 per cent. IA stands for Inkluderende Arbeitsliv and is a project initiated by the Norwegian government to reduce absenteeism due to illness in Norway. 18 Lindex Group 2004/2005

19 Finland Established: 1987 Sales: SEK 603 M (including Estonia) Number of stores: 46 Country manager: Ari Isohella Lindex continued to develop well in Finland during the year. Following the closure of two stores total sales did not quite keep pace with the market in general, although there was a significant increase in profitability. In local currency, Lindex sales rose by 3.1 per cent. Within children s wear, Lindex grew twice as much as the market in general. Despite a fall in the number of stores from 48 to 46 during the past four years, Lindex sales have been double what the market has been in general during the same period. In total, Finland accounted for 12 per cent of the Lindex Group sales. No new stores were opened during the year and two were closed. Powerful growth within Children s Wear and Women s Wear Growth has been most noticeable in Children s Wear and Women s Wear. The reason for the Germany Established: 1998 Sales: SEK 266 M Number of stores: 22 Country manager: Anita Strandberg Lindex s operations in Germany continued to improve during the year. For the first time operations generated a positive cash flow. The gross profit development was very good and at the same time costs were reduced. In total, German operations accounted for five per cent of Lindex Group sales. The positive development is a direct result of the measures initiated in previous years. The focus has been on cost control, the closure of stores and more efficient working methods in the stores. The new Lindex reporting system has also improved the follow-up of sales development considerably. Four more stores closed As part of the task of increasing profitability a further four stores were closed during the year. Lindex now has 22 stores in Germany, of which the majority are located in Nordrhein-Westfahlen. The focus on a limited area leads to sigsuccess is the focus on creating inspiring stores with an increasingly differentiated range. This makes it possible to adapt the range more optimally based on local conditions and customer groups. Continuing image build-up in marketing has resulted in a steady increase in brand name awareness. Alongside H&M and Stockmann, Lindex is at the top with regard to awareness. In Finland, the brand name is perceived as being younger and trendier than it is in Sweden and Norway Major success for the Lindex Club A further measure of the success in Finland is the powerful increase in the number of members of the Lindex Club during the year with the addition of 89,000 new members. In total, there are 500,000 members, which means that every third woman in the age range years is a member of the Lindex Club. Several new stores planned Lindex intends to expand its operations in Finland during the coming year. The test in Iisalmi nificant co-ordination benefits and offers the best potential for generating an impact in, for example, marketing campaigns. Positive development in all areas A more even flow of fashion news and collections, which proved popular among customers, contributed to the increased demand in Women s Wear despite the highly competitive climate continuing. Lindex fashion is popular and the sale of the Generous range garments in slightly larger sizes grew most. Women s Wear accounted for almost 50 per cent of total sales in Germany during the year. Sales of children s wear and lingerie developed positively. An increasing number of German women are discovering and appreciating the breadth of the Lindex range. In children s wear, which is a price-sensitive market, clothes for young girls made particularly good progress. New stores planned The positive trend is opening up the potential for cautious expansion. Strict cost control and a focus on profitability will continue to be priority areas. with a smaller store, a so-called compact store, proved very successful. During the coming year logistics solutions will be developed to allow the concept to be implemented in more towns. Successful establishment in Estonia The first Lindex store in Estonia reached profitability after just six months. The store, which was opened in April 2004, is 780 sq. m. and has the full Lindex range in all business areas. The collections have attracted considerable interest among fashion-conscious Estonians. Children s wear has sold particularly well. The store is located in a large, new shopping centre at Tallinn Airport and is run as part of the Finnish operations. Estonia is an interesting and rapidly growing market and Lindex is planning more stores. The clothing industry is going through a strong period of change and the trend is moving away from smaller, individual retail outlets to major international players. Estonia s membership of the EU in May 2005 is also making a positive contribution to development. Locally adapted marketing An important aim during the year has been to work closer to the customers. The organisational change that was implemented, with greater responsibility at the individual stores as a result, has meant more involvement and initiative. The store managers, for example, have to a large extent been given the opportunity to influence local product marketing, which has in turn presented the opportunity for rapid, continuous feedback. Overall, the marketing was concentrated on the Lindex Club. Extensive structural transformation The German market is Europe s largest clothing and retail market. As a result of the continuing recession, the market in recent years has been very weak. The 2004/2005 financial year was no exception. The market is undergoing an extensive structural transformation. Traditional department stores and smaller specialist retailers are experiencing problems whilst chains and centrally located shopping centres are making good progress. In total, the market fell by one per cent. 19

20 Marketing New marketing strategy Increasingly keener competition requires a strong brand name and a clear product offering. To reinforce its position, Lindex has worked intensely during the year to examine and improve co-ordination of all its marketing activities. This covers everything from campaign structures to image style. All Lindex marketing has three objectives: to increase visits to the stores, to convert visitors into customers and at the same time to reinforce the brand name. In order to increase the impact of Lindex s advertising and marketing, a review of the whole marketing strategy commenced during the year. A great deal of the work has been devoted to changing the campaign structure. All marketing is now built up around an overall theme, within which a number of campaigns are run. Integrated marketing The campaigns and offers have been better adapted to the customers purchasing patterns and what is considered to be in line with current fashion. To succeed with this, the current campaigns are being integrated to a greater extent with the Lindex purchasing department, the Lindex Club and the individual stores. The aim is a continuous degree of innovation in both the offers and in the stores. Fashion Report with Emma Wiklund The work of refining the marketing strategy will continue during the coming year, including the launch of an overall concept, Fashion Report. The concept will co-ordinate and form the basis for all Lindex marketing. International model Emma Wiklund will front the campaigns during the year. Starting in London, Emma will report from different fashion cities. Working with an overall theme will continue but with an even stronger emphasis on fashion. One of the principal objectives is to reinforce Lindex s position as a fashion company. The Lindex Club, an important marketing channel The Lindex Club is one of the largest customer clubs in the Nordic region. The club has been in existence since 1995 and has become one of the principal marketing channels for Lindex. The Lindex Club members receive regular offers and information about the latest fashion and they are invited several times a year to special club activities at the stores. The most active members receive the Lindex fashion magazine, Fashion Report, a couple of times a year. The Lindex Club keeps the relationship with the customers alive and helps us to direct the right offer to the right customer. Details of each purchase are gathered in a computer-based customer care system. The system makes it possible to direct offers and information about children s wear to parents, whilst women who purchase mostly for themselves receive information about women s wear and lingerie. It is also possible to measure the impact of various campaigns. The Lindex Club is to be found on all Lindex markets. In Sweden, Norway and Finland the card functions both as a charge card and a credit card and as a pure benefit card without a credit function. In Germany, the card is a pure benefit card. pink ribbon Each year around 6,500 women in Sweden are diagnosed with breast cancer, which is the most common form of cancer among women. This means that every tenth woman will be affected, and also those close to her. The aim of the Swedish Cancer Society s Pink Ribbon campaign is to increase awareness of breast cancer and to collect money for breast cancer research. During October, Pink Ribbons will be sold in Lindex stores. All the proceeds will go directly to breast cancer research. In addition, one SEK from every bra that is sold during October will be donated to the campaign. During the past two years Lindex Group employees and customers contributed approximately SEK 5 M to breast cancer research. Collaboration with the Swedish Cancer Society will continue during 2005/2006. In addition to Pink Ribbons, a specially written book and an in-house designed T-shirt will be sold in all Lindex stores to the benefit of cancer research. 20 Lindex Group 2004/2005

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22 Butiker stores Inspiring Lindex s aim to inspire women to look and feel great is highlighted in the store. This is where it is decided. It is here that visitors are transformed into customers. One of the aims for the year was to adapt the stores better to the way the customers actually move around in them. The stores are the primary marketing channel for Lindex. The stores should mediate the same feeling as Lindex s other forms of marketing. They should create a feeling of fashion and femininity, they should be inspirational and it should be easy to find your way around. Constant innovation Inspiration is the be-all and end-all when it comes to fashion and shopping. In order to inspire and stimulate a purchase, constant innovation in the stores is crucial. Each time the customer enters a Lindex store it should feel new and fresh. It is therefore vitally important which garments are highlighted that little bit extra and how the garments are presented. Regardless of whether the customer is looking for a single item or a combination, she should receive hints and ideas about how different garments can be matched with each other. Three important areas Three areas in the stores are particularly important the window display, the entrance and different focal areas: Window displays The window displays should be attractive and inspiring. The aim is to attract the customers attention and to induce them to enter the store to look around. The new system has helped us to acquire better control over purchases, inventory and sales. We have reduced inventory and increased the turnover rate through a better div ision between the stores. This makes it possible for us to create a feeling of continuous renewal. Each time the customer comes into a Lindex store the range should feel new and she should feel inspired. Thomas Enwall, Director of IT and Logistics. Entrance area Once inside the store, the customers should rapidly acquire an overview of the current campaigns and interesting offers. Accessories and other goods adapted to the style are also presented. Focal areas The focal areas show the different styles by combining basic and volume goods with accessories. This is reinforced with the aid of large images and dummies. The right products in the right store at the right time An important element in improving profitability is to increase full-price sales and reduce the volume of products that need to be disposed of at reduced prices. To succeed in this requires effective products flows and the right stock levels. As customer demands differ from one market to another it is also necessary to differentiate the range in the stores to a greater extent. Knowledge about which garments are in demand is therefore crucial. Business and IT system The Lindex business and IT system is an important tool in this work. The system comprises three parts: budgeting and planning, order and stocks, follow-up and analysis. Implementation commenced in 2002 and all Lindex products have been introduced gradually into the system. The system became fully operational during the year. 22 Lindex Group 2004/2005

23 Passion for fashion, customers and retailing Lindex is endeavouring to be an employer that invests in its employees in a committed and focused way and provides them with good opportunities to make a career within the company. The capacity to attract new employees, retain them and contribute to their development is vital in achieving the company s vision and objectives. Lindex is focusing to a greater extent on developing employees, recruiting the right people and creating even better leadership. The most important qualities in Lindex employees are a passion for fashion, customers and retailing. Development of knowledge and skills The development of knowledge and skills is a continuous process. It is planned in the first instance during the appraisal discussion that takes place each year between the leader and the employee. This discussion leads to an individual knowledge and skills development plan. The development of knowledge and skills takes place partly through formal training, although primarily through an exchange of experience between employees in the different positions at the company. The majority of programmes are run by Lindex in-house, including sales, service and leadership development. An induction programme for new employees has also been introduced to ensure that everyone has a common basis on which to work. Leadership development During the year the focus on leadership development continued. Lindex has created a forum for leaders and produced tools aimed at strengthening them and helping them feel more secure in their professional roles. The customers should feel that this passion permeates everything, from the fashion level of the clothes to dealing with people and the design of the store. Sofia Brax, Director of Human Resources. Among other things, a company development leadership programme has been run as well as a programme for potential future leaders within Lindex. Lindex has also run a programme for new leaders, which included support in the form of coaching, HR and financial training. In-house recruitment Lindex focuses in the first instance on in-house recruitment and works to stimulate and encourage internal mobility in order to increase know-how, experience and understanding throughout the whole organisation. Values and company culture Extensive work has been done to establish common values and a strong company culture. The Lindex culture will be based on the values of inspiration, simplicity and togetherness. Everything is done with a focus on the customers. Common values are the guiding principles in the day-to-day work and in relationships with others. Lindex will create an open culture, marked by clarity and commitment to the company s objectives. Diversity Lindex is endeavouring to create diversity throughout the whole organi - sation. Ethnic and cultural diversity is a competitive advantage for Lindex as it offers more varied experience, knowledge and views, which are vital to achieving success. The Lindex diversity and equality work has been laid down in a plan, which is measured and followed up continuously. 23

24 Environmental and social responsibility Lindex takes responsibility for sustainable development We share the earth with over six billion other people. Together we have a shared responsibility to take care of each other and our environment and to create a good world in which to live. For Lindex this means treating customers, employees, investors, shareholders and suppliers with respect and care. Overall responsibility for Lindex CSR (Corporate Social Responsibility) work rests with the executive management. A special CSR group handles matters such as the environment, the code of conduct and the products. Lindex does not own any factories but instead works with independent textile producers in Europe and Asia. In several of the countries where Lindex produces clothes, views on working conditions and environmental issues differ from those of the western world. Producing clothes and other goods in developing countries creates job opportunities and production conditions should naturally be good. At Lindex it is self-evident that suppliers offer their employees a good working environment and good social conditions. Lindex code of conduct The tool used by Lindex when working with its textile suppliers is the company s code of conduct, which has been implemented for many years. Since spring 2004, it has been part of the large European cooperation, BSCI Business Social Compliance Initiative a collaborative undertaking involving several European retailers, including C&A, Inditex and Esprit. Everyone has the ambition to improve the social situation and working conditions in the producing countries. BSCI s code of conduct is based on the UN Declaration of Human Rights, the UN Convention on the Rights of the Child and the ILO (International Labour Organisation) conventions. The code of conduct means, among other things, that Lindex s suppliers are required to follow the labour laws in the manufacturing country as well as other applicable laws, rules and instructions. The supplier should also allow Lindex and external in dependent inspectors to check that the code of conduct is being followed. Lindex will achieve better results through collaboration. Through BSCI all members make the same demands on the suppliers. In doing so, the member companies can together influence suppliers to a greater extent than previously. A common code of conduct also makes it easier for the suppliers to follow the code. Each supplier often produces goods for several different fashion companies and previously this also meant many different codes of conduct, each varying in content and demands. Now it often is sufficient to follow just one joint code of conduct. Independent checks To check that Lindex s suppliers are complying with the demands that have been presented, regular inspections are made at the factories. This takes place both through announced and unannounced visits by Lindex inspectors or independent inspectors under the auspices of the BSCI. The results from the BSCI inspections are stored in a database and are available to all members. By co-ordinating time-consuming and costly inspections, more resources can be devoted to reinforcing collaboration with Lindex suppliers in a joint endeavour to improve conditions in textile production. Environment We both can and want to assume responsibility for sustainable development, says Maria Länje, environmental manager at Lindex. We can influence the environment and working conditions, both in our immediate surroundings and at our suppliers. Producing fashion is a complicated process and we must ensure that we do it in a good way. A way that does not jeopardise the environment or people s well-being but at the same time provides us with the opportunity to offer our customers good quality fashion at a good price, continues Maria. Lindex has for a long time had a well-established environmental programme and environmental policy, where the guidelines follow the principles laid down in ISO We are extremely committed to environmental issues. Our environmental work is an integral part of our day-to-day work, says Maria. Every second year, Lindex sets internal environmental objectives for Lindex as a whole and for each individual department. One example is that Lindex is now going through environmental demands for construction material for stores and the procurement of office materials and IT products. Setting this kind of in-house objectives has, among other things, led to Lindex producing a policy that includes environmental demands for packaging and reduced paper consumption at the offices. The Lindex environmental programme should be part of the day-today work and environmental thinking should be part of every process. The employees know-how and commitment are an important feature of this work. Consequently, all employees at Lindex undergo environmental training and at the stores there is an environmental handbook that includes instructions on the sorting of waste. Environmentally aware suppliers When it comes to environmental impact at Lindex s suppliers, demands are made regarding water purification, waste and chemical handling through the Lindex code of conduct. Through BSCI we can, together with many other companies, exert an influence and in doing so bring about change, concludes Maria. 24 Lindex Group 2004/2005

25 no environmental disputes Lindex is not involved in any environmental disputes. Lindex operations do not entail any environmental risks other than what have been mentioned. In the opinion of the executive management there is no significant risk of future costs to rectify environmental damage. more eco-friendly transport Safe and more eco-friendly transport is something that the National Road Administration, Lindex and a number of other Swedish fashion chains will create as part of a two-year collaboration project. The idea is that the companies should benefit from each other s experience and together formulate transport demands that are adapted to the Swedish fashion industry. Working together, the prioritised areas are reduced emissions, safe speeds, use of seatbelts, drivers not under the influence of alcohol or drugs and safe vehicles. the global compact The Global Compact was founded by the UN and is aimed at promoting responsible business practice throughout the world. Through affiliation to the Global Compact Lindex undertakes to realise and integrate ten important principles regarding human rights, working conditions and the environment in the day-to-day work. More information about the Global Compact is available at the climate duel The magazine Sveriges Natur has in recent years examined Swedish companies climate work in what is known as the Climate Duel. In the Climate Duel a comparison is made of carbon dioxide emissions and en vironmental measures at different com panies in the same industry. In 2004, Lindex came out the winner in this duel. green electricity All Lindex stores and offices use green electricity. Green electricity comes from renewable energy sources such as the sun, wind, water and bio-fuels. Green electricity has less impact on the greenhouse effect than normal electricity and by choosing this alternative Lindex is contributing to a more sustainable development of our environment. three questions about sustainability work five-star environmental programme Lindex reduced its carbon dioxide emissions by ten per cent between 2003 and This led to Lindex being awarded the maximum five stars in the annual Folksam climate assessment. Lindex has also been environmentally approved by Robur s Environmental Fund, the reason cited in 2004 being: For several years Lindex has worked with assessments of its suppliers based on a code of conduct. A special code of conduct for the environmental field was produced in 2000 and at the beginning of 2003 the first pure environmental assessments of suppliers were made. The Lindex environmental management system according to ISO was completed in 2000 and the company is currently working on concrete environmental objectives and a broad-based environmental training programme. Sara Winroth works with CSR issues at the Lindex head office in Göteborg. What is Lindex s responsibility? Lindex has the potential to influence working conditions for employees at the factories Lindex uses for its production. We are working actively to bring about long-term sustainable development and good conditions at our textile suppliers. How can Lindex bring about change? We cannot change the world alone we must collaborate with our suppliers. Through our code of conduct we present demands which the suppliers undertake to follow. Co-operation and respect are key words in the work surrounding our code of conduct. Through respect for human rights, respect for different cultures and co-operation with our suppliers we are endeavouring to bring about change. We are convinced that the only way to bring about improvement is to do it step by step and to combine demands and controls with education. Should there be repeated infringements of our code of conduct Lindex will consider terminating co-operation with the supplier. What are conditions like at Lindex suppliers? The situation varies from country to country and also between different regions within the same country. The biggest problems in the textile industry are excessively long working hours and in some cases inadequate payment. Belonging to a trade union is a difficult issue in many of our production countries. Independent trade union activities as we understand them could be an unknown concept and both workers and suppliers feel uncertain about how they should handle these questions. Fortunately, child labour is nowadays extremely rare among our suppliers. By signing our code of conduct suppliers undertake to comply with our demands. The BSCI code of conduct can be found at You will also find more information and who are behind the initiative. 25

26 Feature writer Emma Wiklund Shopping is one my absolute favourite pastimes. I love it. Shopping alone has been a kind of everyday Prozac for as long as I can remember. shopping Shopping is one my absolute favourite pastimes. I love it. Shopping alone all the bulky clothes in the car, avoiding the stress of dressing and undressing the children between the shops. has been a kind of everyday Prozac for as long as I can remember. When the children came along everything changed. Tyra and Elis, who If you can ensure that you plan your shopping for a normal weekday are four and two years of age, are more into playing on the swings, messing with finger paints, riding their bikes, playing horses, digging in the are fewer people in the stores on a Tuesday than a Saturday and children morning and try to be there as early as possible. I can assure you that there sandpit and threading beads. Shopping comes way down the list of their are generally easier to handle at ten in the morning than four in the afternoon. favourite pastimes and they have no understanding whatsoever of my passion. Unfortunately, I am forced far too often to take the two of them Preferably begin by visiting a toyshop to buy time. A small, cheap, silly along with me when shopping. In the past, shopping made me feel good. toy can buy you a couple of minutes of peace. Bribes are very definitely Now spending a few hours with the children in town brings me to the permitted in such a situation. You also avoid hearing the constant Mummy, verge of a nervous breakdown, heart attack and migraine. Mummy can we go to the toy shop now for the rest of the day. What do you do when you have no choice but to take two shopping Dispel any thoughts you might have about trying on clothes. The last destroyers into town? What strategy is required to avoid a premature time I did it I succeeded in flashing to half the store whilst trying to stop death in some fitting room? Elis from running down the escalator. At the same time, Tyra insisted on Begin by having a well-ordered plan. Forget impulses and spontaneity. crawling under the changing booths shouting Boo! to disgruntled customers. To avoid embarrassment and inevitable ejection by security staff Decide the day before exactly what it is you need to buy. It comes down to rapid, smooth procurement of the bare essentials. Don t dress in clothes I recommend that under no circumstances do you try on clothes. Take that are too warm. Prepare for a sweaty day even if it is minus ten outdoors. receipt and try it at home when the children have gone to bed. If you are what looks good on the hanger and in a size that usually fits. Save the Pack a bag with plenty of provisions. Biscuits, juice, fruit, buns or anything that can keep yours and the children s blood sugar levels at their you need to do then is simply repeat the procedure with light clothes, lucky it will fit, otherwise it is simply a case of changing it another day. (All peak. Hungry children are not fun children, and a hungry mother is a bribes and so on.) mother from hell. Stores where you can find most things in the clothes line (i. e. Lindex) Avoid visits to expensive luxury stores and instead find the nearest large are also preferable. You can find almost everything you need, both for shopping centre. You don t want your two-year old messing with some yourself and for the children, in the shortest possible time. ridiculously expensive boots in light-coloured suede whilst stuffing an My very last trump card to keep the children in good humour is usually overripe banana into his mouth and all over his face. the sweet shop. Like many other children Tyra and Elis should preferably Visits of this nature are usually very, very expensive. Staff in the more only eat sweets on Saturdays but in a crisis and when faced with the need exclusive stores just love it when you rush in with a pram full of snow and to buy a little extra time the promise of a visit to the sweet shop to round screaming children. It is not exactly a welcoming look and open arms that off the day usually works a treat, even if it does happen to be a Tuesday. greet a tired mother with small children. I am eternally grateful for large, robust, child-friendly shopping centres with all the stores under the same roof. In a shopping centre you can park in a spacious car park and leave Emma Wiklund 26 Lindex Group 2004/2005

27 Name: Emma Wiklund Age: 37 Family: Married, two children Career: Emma s name was firmly imprinted on the minds of the Swedish people when she made a name for herself in the Arla campaign for low-fat milk. Her international breakthrough came when she took part in George Michael s video for the song Too Funky. Emma has been on the cover of many international fashion magazines, done shows for the major fashion houses and has been involved in Luc Besson s Taxi films. Two other parts of Emma s exciting career are her job as presenter of the TV4 programme Babyboom and as a writer for the magazine Mama. 27