Orthex Q1'25 preview: Sluggish quarter expected

Translation: Original published in Finnish on 5/14/2025 at 7:29 am EEST.

Orthex will publish its Q1 report on Thursday at 9:00 am EEST. Despite sluggish sales performance among Nordic retailers and the loss of distribution channels in growth markets, we expect cautious revenue growth. Orthex does not provide short-term guidance. We expect the company's revenue to grow by 3% this year, a bit more moderately than the targeted 5% revenue growth, while our EBIT margin forecast of 11.2% falls clearly short of the company’s ambitious adjusted EBITA target of over 18%. We will review the interim report on Thursday in our earnings live (in Finnish) starting at 8.55 am EET.

Demand environment remained subdued in Q1

Based on retail sales figures, Orthex’s business environment has remained subdued in Q1, although there have been signs of recovery in furniture and home furnishing stores in Sweden, which supports Orthex. We expect Q1 revenue to have grown by 1% to 22.2 MEUR. Growth in export markets is facing some headwinds, as a few of Orthex's distributors were in the headlines at the end of last year due to financial difficulties, and Orthex already limited deliveries to them during Q4, which we expect to have continued in Q1 as well. This development lowers our forecast for invoiced sales in the rest of Europe in Q1 to 3% from 5% in Q4. We would like to point out that this development due to the weakness of the distribution network should not be extrapolated beyond the current year.

The mismatch between growth and growth investments weighs on our profitability forecasts

In terms of profitability, Q1 is a seasonally moderate quarter for Orthex, although campaign sales typically weigh on the gross profit. In our estimate, Orthex's raw material prices have been roughly at the level of the comparison period during the quarter, but prices have fallen since the end of the quarter, which supports the Q2 outlook. For Q1, we expect Orthex's growth investments to have increased more than revenue from the comparison period, which will weigh on relative profitability. Our Q1 EBIT forecast is 2.6 MEUR, which is in line with consensus.

We expect growth to accelerate during the current year, but to remain more moderate than the target

Orthex has not provided guidance during its time as a public company, and we do not expect the company to begin providing guidance this year either. We forecast the company's revenue growth to accelerate towards the end of the year and settle at 3%, and the EBIT margin to strengthen to 11.2%. In general, we expect the business environment to be more favorable for Orthex this year than last year, thanks to stronger purchasing power due to strengthening consumer confidence and falling interest rates, but we believe that reduced distribution coverage in Europe will overshadow sales successes.