Net sales for the period were EUR5m. According to the management, this result fell short compared to our estimate of EUR8.3m mainly because of weak Health & Wellness products. During the quarter, Strax took a EUR14m inventory write-off (following EUR5m last quarter). COGS came in at EUR-17m. Adjusted for the write-down, COCS was EUR-3m vs our estimate of EUR-5m. OPEX EUR-25m vs our estimate of EUR-3m due to non-recurring costs and charges. EBIT came in at EUR-14.6m.

There is still work to be done by management to reduce debt and get sales back on track. Our projection for net sales is EUR15.8m for the full year 2024E with a positive EBIT of EUR0.6m. Remember that Strax is still going through a very tough time, and more or less everything is on the table, so our estimates are highly uncertain. Moreover, we adjusted the Redeye Financial rating from 1 to 0 due to the uncertainty in the case. It do not affect the cost of capital, WACC is still at 14%.

We made minor adjustments to our growth projections and margin expectations for Own Brands. The negative sentiment is still affecting Strax accessories and audio products. With the new estimations, we derive a new valuation range of SEK0.016 (0.02) to SEK1.48 (2.1), with a base case of SEK0.43 (0.5) using DCF valuation with a WACC of 14%.