Products 

Products include intimate apparel, underwear, swim and sportswear, as well as nightwear and lingerie, mainly for woman. In-store services that support customers in finding the right product in terms of style and size are also important, highlighting the importance of product functionality for many women. 

Product life-cycles 

The life cycle of underwear is usually relatively short and very sensitive to fashion. As a consequence, the main products are often renewed in the spring/summer and autumn/winter collections. These collections are developed about a year in advance, which requires precise anticipation of upcoming trends. The key to success in the market is the ability to manage consumer preferences. A successful lingerie company needs to lead fashion trends, not follow them. 

Industry supply chain 

The production of garments in Europe is becoming less and less competitive as European costs have come under severe pressure compared to foreign manufacturers in recent years. Underwear production is increasingly taking place in Asia due to lower wages, which is also the case of the COS Group. 

Distribution channels have evolved from mainly traditional department stores to a combination of department stores, specialty stores, supermarkets, retailers-distributors, as well as an e-commerce market that is growing significantly, especially since the beginning of the COVID-19 pandemic. 

The decline in the market share of department stores and the growth of specialty stores is a recent phenomenon. As with the COS Group, the number of concept stores around the world is increasing significantly.  

Competitive and market situation 

The underwear industry is a very competitive market. The more brands and styles on the market, the greater the choice of consumers, hence the competition between brands is more and more intense. Good quality is just a basic requirement in this market. The attractiveness and fascination of products are also decisive for the consumer's willingness to spend money. Additionally, due to the high competition in the market, the barrier to entry is also considered high, as building a new brand in the market requires significant investment and time. 

The Change of Scandinavia Group is positioned as a value leader in the industry, offering high quality products and a wide range of products.  

Key value drivers 

A strong brand with clear positioning and unique sales characteristics, vertically integrated value chain and customer loyalty programs are considered some of the key success factors in the underwear market. 

General threats and challenges 

The underwear industry is undergoing the same transformation as other industries, with sales moving from brick-and-mortar stores to online stores. For companies that manage to benefit from the combination of brick-and-mortar stores and e-commerce business, the windfall is smaller and can become an opportunity. The COS Group is investing heavily in the so-called “omni-channel” technology to combine two distribution channels. 

The underwear business can be divided into two main categories. The first category is characterized by relatively low quality, small availability of sizes, low prices and focus on trends.  

The second category, to which CHANGE belongs, is characterized by higher quality, more complex products, large size availability and emphasis on functionality. The main sales channel in this category are specialist stores, where the quality of goods and service is much more important. Since retail prices are often determined by the recommended retail prices of various brands, and the margins offered to retailers are relatively tight, industry discounts are relatively low unless list prices approach luxury levels. Profitability in the sector is therefore relatively stable among higher quality brands. 

Unusual events 

The bottom line of the lingerie business has been impacted recently by the COVID-19 pandemic as many businesses have had to close retail stores due to government restrictions and global lockdowns. 

2. Actual and potential adverse impacts, measures the enterprise has implemented or plans for improvement. 

General risks 

It is assessed that the Company is not exposed to any special business or financial risks apart from risks common to the industry. 

Foreign exchange risks 

The Company is exposed to general currency risks as regards its operations, however the risk mainly relates to CNY. The majority part of the Company’s purchasing of goods and material is done in CNY while the Company invoices in DKK, SEK, NOK, EUR, PLN and CAD. 

According to the policy approved by the Board of Directors, the risks related to purchases done in CNY are hedged using forward exchange contracts running for up to 12 months. 

The risk of the Covid-19 pandemic 

The Company is exposed to the risk of a general decline in consumer consumption, should new governmental restrictions be imposed to the retail market due to the Covid-19 pandemic. Based on the company’s financial performance from the outbreak of the Covid-19 pandemic and until the date of this report, it is assessed that the company has a strong business model and will be able to cope with a temporary decline in the general retail activity.  

A severe and long lock-down of our production and retail activities due to new Covid-19 restrictions is considered a special risk for the company, but it is also assessed that the effect will be less severe than for other retail companies. 

Research and development 

The Company’s intellectual capital resources are related to the development of products and future sales activities. Good quality, production of new products and the right market approach is sufficient to ensure return on the research and development activities. 

Environmental performance 

The Company’s environmental impact on its surroundings is very limited. We are aware of the environmental risks related to this type of business with energy consumption in our factories, transportation of goods from Asia to Europe and running physical stores. 

The Company strives to improve and optimize its energy consumption. we don’t have an official politic on this area. It has been down-prioritized due to Covid crisis where all focus has been on coming through the crisis. The board of Directors has started a project on working with this in spring 2023 where it will be anchored in the group management team. 

Social and employee Conditions 

For us it’s important to take responsibility as an employer both in our Stores, Factory, Warehouse and Offices. 

We have initiated several projects with the aim to mitigate risks related to our employees, such as harassment, and health & safety incidents. During autumn 2022 we have made a harassment policy and a whistle blower both will go live in January 2023. As a company we have a zero-tolerance policy, all employees should experience a healthy working environment. 

In August 2022 we implemented a hybrid working policy for our office staff, to balance the match to our culture, our ambitions and at the same time create possibilities for our employees in their work-life. Which has resulted in stability in our teams. 

For our factory we have an Occupational health and safety (OHS) policy which is a standardized management system. Our own factory has developed a work plan for the establishment of safety standardization, and in 2022 a safety committee has been set up to promote the implementation of improvements and to limit risks. In 2023 we will be able to measure the effect of this committee. 

As an employer it’s also important to take a social responsibility giving opportunities and educate, at our Headquarter we have trainees and interns. In 2022 we had one trainee graduating. We have donated underwear to women in need. 

We have made a difference for women who are abusing and/or street prostitution. 

Human rights 

Risks related to human rights breaches are primarily related to the suppliers in our supply chain. As a result, we have an official policy in place for our vendors that they need to comply with our Code of Conduct.  

We comply with all local and national applicable laws and regulations, including, but not limited to, those related to employment/labor, child labor, involuntary labor, coercion harassment, nondiscrimination, associations, health & safety as well as compensation and wages. 

Our supplier portfolio is very stable and we strategically use mainly long-term cooperation suppliers in our set-up of supply chain, for raw materials, sewing factories and ready-made products. All to avoid any irregularity or risk in comply with the Code of Conduct as well as to secure the fundamental set-up of quality assurance. 

As a result of the long-term policy of comply with the Code of Conduct, we have medium to high end portfolio of suppliers and vendors, which also allow us to secure the conditions at the factories and locations. As a constant security, our own quality controllers and staff visits regularly. This is an on-going work and a standard process of working procedure, anchored to the top of the management. In 2022, we were satisfied with the results and insights obtained from our quality controls. 

Approved and signed Code of Conduct by our suppliers include statements related to: child labor, involuntary labor, coercion and harassment, association, health and safety, compensation, resource management and environmental responsibility, ethical sourcing, product quality and safety, confidentiality and data protection, training and capacity building, communication and grievance mechanisms, subcontracting, due diligence and reporting, monitoring and compliance, compliance with other laws.  

Supply chain for all the COS Group goods (i.e. lingerie, swim and sportswear, nightwear and underwear for women), which are a part of manufacturing, wholesale and retail has been presented in the chart below.

Anti-corruption and bribery: 

We have a zero-tolerance for Corruption and bribe and does not accept this. This zero-tolerance is anchored in the board of directors. 

We see the largest risks related to anti-corruption and bribery related to our vendors. Therefore, when going into new production agreements we are performing due diligence of the potential new vendor to secure these are trustworthy. 

Data Ethics 

In CHANGE, we collect, generate and process data of both personal and non-personal nature across our entire business. We apply customer data from our Change Customer Club in marketing to secure personalized targeting. We do GDPR audits in the countries to recognize the GDPR obligations. We secure that we use the data with purpose and that the data is only available for employees that are working with the data. 

Decisions and use of data and new technology is taken by the board of directors. We are following the data ethic guidelines and are on an ongoing basis evaluating and taking the guidelines into consideration when using data and bringing in new technology.