Husqvarna: A fresh strategy required
Shares of the Swedish company Husqvarna plunged 6% last Tuesday following the release of its third-quarter results. Year-to-date, the stock has declined approximately 26%, and from its Covid-era peak in 2021, the stock has lost two-thirds of its value.
Husqvarna is one of the oldest companies in the world, with a history spanning nearly 330 years. The company is named after the town of Husqvarna in southern Sweden, near Jönköping. Originally a firearms manufacturer, Husqvarna’s activities today are entirely different, focusing on the development, production, and sale of gardening tools and equipment. Its portfolio includes robotic lawnmowers, garden tractors, chainsaws, cultivators, consumer watering products, and diamond tools for the construction and stone industries. The company’s well-known brands include Husqvarna, Gardena, Jonsered, Flymo, and Orbit. In 2023, the group generated sales of approximately 53 billion Swedish krona (EUR 4.6 billion) and employs around 13,000 people in 40 countries. The company’s financial targets of 5% organic growth and a 13% operating margin appear far out of reach. Over the first nine months of 2024, Husqvarna’s sales fell by 11% (a 7% decline in organic sales), while operating profit dropped 20%. The operating margin of 9.7% has returned to levels last seen in 2013.
Several factors contribute to these disappointing results. The company continues to feel the effects of the Covid-era boom, during which homebound consumers purchased significant amounts of gardening equipment. Weak consumer confidence and a softening economy, particularly in Europe, have further compounded challenges. Gardena sales have been impacted by unfavorable weather conditions, while growth in robotic lawnmowers in the latest quarter faces intense competition from Asian players. The transition to boundary wire-free robotic mowers has allowed Chinese manufacturers - such as Sunseeker, which offers attractively priced products - to gain market share, intensifying price pressure. Meanwhile, in the handheld garden equipment segment, the industry’s shift from combustion engines to battery-powered devices has opened the door to new competitors, disrupting the market further.
Some analysts suggest Husqvarna should consider divesting low-margin activities or discontinuing the sale of commoditized products to focus on its most profitable lines. One thing is clear: CEO Pavel Hajman, who took the helm in January 2023, and his team will need to make difficult decisions to restore profitability and improve the company’s share performance.