Bang & Olufsen
Luxury audio maker achieving record 55.8% gross margins through costly aesthetic signaling rather than competing on price or volume.
The bowerbird doesn't compete on function alone—it wins through aesthetic excess. Bang & Olufsen operates on the same principle, positioning luxury audio as theater rather than mere sound reproduction. In fiscal 2024/25, the Danish company achieved a record gross margin of 55.8% in Q4, ending the year at 55.0%, while posting modest revenue of DKK 2.6 billion (down 1% in local currencies). The company delivered EBIT margin of 1.0% and generated DKK 16 million in free cash flow—the numbers of a business prioritizing margin over volume.
This represents costly signaling at industrial scale. Rather than chase mass-market share, Bang & Olufsen invests in partnerships with Ferrari, appointing F1 driver Charles Leclerc as global brand ambassador. In November 2024, it raised DKK 217 million through a directed share issue to fund a three-year growth plan targeting 8% annual revenue growth and 8% EBIT margin by 2027/28. The company launched Beoplay H100 headphones, Beogram 3000c turntable recreation, and introduced Bang & Olufsen Atelier for custom products. It also shed 41 monobrand stores (net), closing 56 while opening 15, focusing on "Win Cities" that reported 38% year-over-year sell-out growth in Q4.
Like the bowerbird that survives on elaborate courtship displays rather than efficient foraging, Bang & Olufsen bets that enough buyers will pay the signaling premium. The 55% gross margin suggests they're right—but only if the company can scale without diluting what makes the signal costly in the first place.