COPENHAGEN, Feb 9 (Reuters) - Danish hearing aid company GN Store Nord has extended a supply agreement with U.S. retailer Costco, removing a major risk to its business model and sending its shares four percent higher.
It avoids the fate of rival Danish hearing aid maker William Demant which had to cut its 2014 earnings forecast in November after its products were displaced by rivals in Costco stores.
It is especially important as Costco sales of hearing aids have outpaced the market average, analysts said.
“Losing the contract would have reduced the sale of GN ReSound hearing aids by six percent,” Jyske Markets wrote in a note to clients on Monday, following GN Store Nord’s announcement.
Bernstein analyst Lisa Bedell Clive said Costco now accounts for around 10 percent of all volumes sold in the U.S. private market. Sydbank analysts reckon Costco sales have been growing by 20 percent a year in the last five years.
“As we expect this channel to continue growing strongly in the coming years, it is an attractive channel to be involved in for the hearing aid manufacturers,” Bernstein’s Clive wrote in a note.
GN Store Nord shares rose 4.2 percent to 153.20 crowns, having earlier hit their highest level since July 2014.
GN Store Nord made waves in the industry last year when it launched a hearing aid it developed with Apple that streams iPhone content directly to the user’s ear.
Chief Executive Niels Jacobsen of William Demant, the largest hearing aid maker in the world after Swiss-based Sonova , emphasised his company was fighting back with its own new products.
“We have faith in our pipeline which we count on to deliver a technological lead,” he told daily Berlingske on the weekend. (Reporting By Alexander Tange; Editing by Keith Weir)