Norway

The Norwegian market developed positively in 2006.

Ekornes's sales revenues fell by NOK 26.4 million in 2006 (a drop of 6.5 per cent). Stressless® increased by NOK 15.3 million (17.7 per cent), whereas Ekornes® Collection (sofa) and Svane® revenues fell by NOK 14.3 million (15.5 per cent) and NOK 32.3 million (17.1 per cent) respectively.

The drop in the turnover of Svane® was caused by the implementation of a major reconstruction of the distribution structure in 2006, which involved termination of the agreement with Skeidar. At present, Møbelringen and Living plus a number of independent retailers act as distributors in Norway. This is a far more selective distribution with fewer retail outlets which allows the remaining distributors to focus on and give greater priority to our products. The new distribution structure is now fully implemented and the results are expected to emerge in 2007.

 

Sweden

The Swedish furniture market developed positively in 2005, particularly with respect to Ikea and the low-cost segment.

Ekornes's sales revenues were unchanged in 2006 compared to 2005. However, Stressless® had an increase of NOK 7.7 million (32.2 per cent), while Svane® suffered a setback of NOK 8.3 million (or 27.5 per cent). The drop in sales revenues for Svane® was a result of the collaboration with the MIO chain being terminated.

In 2006, it was decided to terminate collaboration with the MIO chain in 2007. The work to establish a new distribution structure was started in the autumn of 2006 and is expected to be complete in the first half of 2007. A new agreement for Svane® has been formed with the Sova chain, which specialises in mattresses and bedroom equipment.

 

Denmark

The furniture market in Denmark developed positively in 2006.

Ekornes's sales revenues increased by NOK 26.9 million (31.0 per cent). Stressless® increased by NOK 23.9 million (36.8 per cent), Ekornes® Collection (sofa) has increased by NOK 3.4 million (36.7 per cent), whereas Svane® had a NOK 0.9 million (7.5 per cent) reduction in sales revenues.

Throughout the year Ekornes had a beneficial collaboration with Denmark's most important furniture chain, Inbodan. Following the Norwegian home market, Denmark is the market that has the highest Stressless® sales per inhabitant and the highest Stressless® brand awareness.

Finland

The Finnish furniture market saw only a marginal increase in 2006. The market is dominated by large changes in the chain structure and major chains experiencing operational problems.

Ekornes had an increase in sales revenues in 2006 of NOK 2.5 million (8.6 per cent). Sales of Stressless® increased by NOK 5.1 million (47.3 per cent), while Svane® dropped by NOK 2.3 million (15.5 per cent).

Ekornes is cooperating well with the nationwide Masku chain. Several effective marketing activities have been conducted with this chain. Sales of Svane® suffered a setback during the initial ten months as a result of a steep increase in imports of cheap mattresses. Some of this was remedied towards the end of the year following a successful marketing effort.

Central-Europe (Germany, The Netherlands, Austria, Switzerland and Luxembourg)

Ekornes's Central European office is located in Hamburg, Germany. The individual markets have their own sales forces.

 

In 2006, the Germany furniture market increased by a couple of percentage points. A stronger market increase had been expected prior to the increase in VAT that was introduced on 1 January 2007. The other countries in this market area have had no perceptible development in 2006 compared to the previous year.

Ekornes has had an increase in sales revenues of NOK 104.0 million (20.3 per cent) in 2006. At the beginning of the year the company had a particularly high order backlog and the inflow of new orders during the first six months was also good. However, the amount of incoming orders in the autumn of 2006 was more normal. Orders on hand in the beginning of 2007 are fewer than the previous year but the number is nonetheless satisfactory as this is related to significantly shorter delivery times.

Effective marketing activities throughout the year have resulted in a strong improvement in brand awareness for Stressless®. Stressless® is now the best known furniture brand in Germany and Austria, and among the three best known brands in Switzerland and the Netherlands.

 

UK/Ireland

Ekornes's UK/Ireland office is located in London.

The UK furniture market saw a minor setback in 2006. The general range of furniture is strongly characterised by imports of low-price products from Asia with a corresponding price pressure and focus on discounts.

 

Ekornes had increased sales revenues of NOK 4.8 million (2.1 per cent) and an increase in order reserves of NOK 4.0 million (1.9 per cent).

 

A lot of resources have been invested in building the Stressless® brand by means of targeted marketing activities where regional TV advertising in cooperation with the distributor is the largest and most important communication channel. The most recent survey, made at the end of 2006, shows that brand awareness has now reached 23 per cent in the target group of people over 35.

 

The number of distributors rose during the year and there is still room for more in areas where market penetration is low compared with the potential.

 
USA/Canada

Ekornes's North American office and warehouse are located in Somerset, New Jersey.

The furniture market in USA has experienced a difficult year marked by low demand and pressure on prices. An increased interest rate level, stagnating property prices, high oil prices and turbulence in the car industry are factors that have influenced this.

The situation in Canada is brighter with a more stable economy and an even growth in the demand for furniture throughout the year. The growth throughout the year in this market has been good and now represents about 10 per cent of total turnover in the market area.

Sales revenues increased by NOK 24.8 million (4.7 per cent). Incoming orders increased by NOK 24.3 million (4.5 per cent) compared with 2005.

 

The work to expand distribution in areas where the market potential is not fully utilised has been going on throughout the year. This effort will continue in 2007. A mapping of the furniture market in Mexico has also been started with a view to cover this market from the office/warehouse in New Jersey.

Developments of Stressless® sofa has been good, and Stressless® Paradise section sofa in particular has achieved record sales.

Throughout recent years, prices have been adjusted to adapt to a lower exchange rate for US dollars.

 

The market for armchairs is large and a stable growth is expected during the years ahead in keeping with an increase in the number of retail locations and investments in marketing,

 

Southern Europe (France, Belgium, Spain, Italy and Portugal)

Ekornes's Southern European office is located in Pau, France. Each country, apart from Portugal, has its own sales force reporting to the office in Pau.

Portugal is serviced entirely from Pau. The furniture markets in Southern Europe have in general seen a weak but even development throughout the year.

Ekornes had an increase in sales revenues of NOK 44.6 million (13.3 per cent). The order reserve increased by NOK 26.7 million (7.8 per cent).

Ekornes enjoys a strong position in Southern Europe, particularly in France and Belgium, with a brand awareness of 26 per cent and 19 per cent respectively in the target group over 35 years, which makes Stressless® one of the best-known furniture brands in these markets.

In Spain, Ekornes has increased its marketing effort throughout the year along with existing distributors, while continuing the work to build up distribution networks in areas with low coverage. In Italy, Ekornes has concentrated its marketing efforts in the northern part of the country, but has now strengthened seller capacity to cover the southern parts of Italy as well. Portugal has limited potential compared with Spain and Italy, and Ekornes currently has only a few selected distributors in this market.

 

Japan

Ekornes's office in Japan is located in Tokyo, while warehousing services have been outsourced to a logistics company located just outside the capital.

Ekornes has had an excellent development throughout the year and is now the foremost supplier of armchairs to the Japanese market. The market niche for armchairs continues to be relatively small, but is on the rise due to increased exposure in the media and shops.

 

Ekornes's sales revenues increased by an impressive NOK 16.5 million (24.1 per cent). New orders rose by NOK 14.3 million (21.1 per cent).

 

There was a significant increase in marketing activities in 2006 in cooperation with distributors, which is one of the most important reasons for the growth in sales. In parallel, an effort to achieve greater commitments with respect to in-store displays at each distributor's premises is being made, along with regular staff training. This is in line with Ekornes's global marketing concept.

Brand awareness for Stressless® is still low among the consumers in this market. Despite this, Ekornes appears as a supplier of branded goods with a sterling concept, which is crucial in a market where branded goods are so important.

Marketing in Japan is demanding; relations have to be built gradually and quality and precision are expected at all times. However, Ekornes is well equipped to meet the challenges of further growth with a well-functioning organisation and a motivated and efficient sales force.

 

Asia/Oceania

In an effort to strengthen Ekornes's position in the Asiatic markets, a new company was established in Singapore in January 2006. The purpose is to improve service to existing markets and to establish new markets.

 

Existing markets are Korea, Taiwan, Australia, New Zealand and Singapore. New markets entered during the year are Malaysia, Indonesia and India. In addition, negotiations are ongoing concerning distribution agreements for China, and a few countries in the Middle East.

 

In 2006, the market area represented a turnover of NOK 43.0 million, which is a growth of 55.6 per cent compared to the previous year.

 

The markets in Australia and New Zealand have performed well, and cooperation with the importers in these markets is good.

 

The Asian markets are characterised by large populations and polarised purchasing power. The market potential in Asia for Stressless® is relatively large, but it is necessary to monitor the importers in each country to keep focus on Ekornes's market concept where Stressless® Studio, target-oriented marketing activities and training of retail staff are central success factors.

 

Poland

Ekornes's office and showroom are located in Warszawa. From late 2007, the Polish market will be administrated from Hamburg.

The Polish furniture market in the upper price range is relatively limited compared with other, major European markets, but both purchasing power and a preference for exclusive furniture are strongly on the increase. Ekornes currently has a network of distributors in the major cities and sales are on the increase.

Currently, systematic efforts are being made in marketing and PR activities aimed at distributors and consumers to gain market shares and build the Ekornes® ands Stressless® brand names. Another important part of the work is a continuous expansion and upgrading of Stressless® Studio in retail outlets.