Equity research Candles Scandinavia: Manufacturing and brand integration on track

Candles Scandinavia AB (“Candles” or “the Company”) is a leading manufacturer of sustainable scented candles and home fragrance products. Headquartered in Örebro, Sweden, the Company is recognised as a prominent large-scale producer of scented candles made exclusively from plant-based, biodegradable wax, primarily derived from locally grown rapeseed oil.

Brand relaunch looks like a wise move

Today, 27 May, Candles announced the launch of its new AVA&MAY collection of scented candles and fragrance sticks. The new series is produced at the Örebro facility, representing a transition from external suppliers. The launch is the start of a previously communicated “profitability lift” following the acquisition of HashtagYou in July 2025. By utilising the existing factory’s capacity, the company expects to see stronger gross margins and improved cash flow, with clearer effects on profitability anticipated in the second half of 2026. In addition, the new candles are made with plant-based, paraffin-free waxes. While based on established best-selling fragrances, the products have been refined to achieve a higher perceived quality. The launch is further accompanied by an updated visual identity for AVA & MAY, featuring hand-illustrated packaging and a more premium product experience.

Vertical integration creates significant profit potential

We are encouraged by the news that signals that the integration with HashtagYou is following previously communicated timelines (“launch of in-house manufactured products expected towards the end of Q2”). We believe it aligns with our view of strong profitability improvement in H2 2026. We do not make any immediate adjustments to our sales and earnings estimates or valuation following the news. However, it should help reduce the perceived execution risks associated with the significant acquisition and transfer of manufacturing. We also note that the company’s total revenue amounts to approximately SEK 500 million and that the repurchase rate among AVA & MAY’s customer base is reported to be around 75 percent, which provides good visibility into the D2C segment’s revenue. Continued scaling of HashtagYou’s sales volume, combined with improved production efficiency, points to a positive profit trend in 2026 and 2027, provided that demand dynamics in key European markets remain strong. All in all, we believe the news will underpin improved investor sentiment.

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