CDON: Risky Management Changes

The CEO Is Leaving At A Critical Time For The Company

Kristoffer has been Chief Operating Officer and member of the CDON Executive Team since June 2017 and was appointed to the role of Chief Executive Officer in September 2018. The goal was to expand CDON’s operating profit margins while turning the company into a marketplace.

“Qliro Group has communicated that the group's companies will in future stand on their own two feet to a greater extent than before, and for CDON's there are two long-term strategic goals to focus on. One is that the marketplace's external traders will have an annual growth of 20 percent, and the other is that the company's operating margin in the long run will be 3 percent.” by Johanna Allhorn for Ehandel.se

Fast forward to 2021, and the CDON marketplace Gross Merchandise Volume (GMV) has grown from SEK 400m in 2017 to SEK 1,777m in 2021 (1 SEK is 0.12 USD as of May 11, 2021) while the CDON retail GMV has decreased to SEK 598m in 2021 from SEK 1,800m in 2017. Here is an extract from CDON’s Annual Report (2020):

CEO Departure

On March 5, 2021, the company announced that Kristoffer Väliharju was temporarily stepping down from his position as CDON's CEO due to illness. The company expected the CEO to return within 6 months.

“Kristoffer Väliharju has for some time experienced problems with irregular heartbeat, which has affected Kristoffer's physical ability. To address this, Kristoffer has undergone a planned surgical procedure and therefore now needs a period of rest. He is expected to return to his position as CEO of CDON within 6 months.” CDON Press Release

On April 20, 2021, the company announced that Kristoffer Väliharju would return to his position by the May 1. However, on May 10, 2021, the company announced that Kritoffer would retire as CEO of CDON.

“My assignment to transform CDON from a traditional e-commerce business to a profitable marketplace and to take the company through the listing process have now been completed. CDON has a great platform to build from and an exciting journey ahead” Kristoffer Väliharju

BENCHMARK'S TAKE

• Kristoffer Väliharju, was instrumental to CDON’s transformation into a fast-growing and (nearly) profitable e-commerce marketplace
• CDON may suffer from weaker post-pandemic demand as is shown by decreasing website visits
• The company also has to compete with Amazon, whose website visits have increased in Sweden
• We believe the risk of our investment in CDON increased considerably without meaningful upside as Kristoffer abruptly departed the company. Certainly, at a time where CDON needs to fight off Amazon’s growing presence
• Investors should note that the decrease in website visits isn’t specific to CDON and could be explained by the post-December sales season. Bol.com, one of the leading e-commerce player in the Netherlands, and Amazon.nl have also seen their website visits decrease. The same is true for Cdiscount.com and Amazon.fr, two leading e-commerce players in France

Disclaimer

Please note that this article does not constitute investment advice in any form. This article is not a research report and is not intended to serve as the basis for any investment decision. All investments involve risk and the past performance of a security or financial product does not guarantee future returns. Investors have to conduct their own research before conducting any transaction. There is always the risk of losing parts or all of your money when you invest in securities or other financial products.

Disclosures

The author has no business relationship with any company mentioned in this article and the author is not receiving any form of compensation for this article other than contributions from paying subscribers.

Credits

Photo by Wesley Tingey on Unsplash.