Europris Asa

Good morning and welcome to the third quarter presentation of Europris. My name is Espen Eldahl, CEO of the company, and joining me on stage later today will be Stina Byhre, the CFO, and Trine Engløkke, the ER officer, will manage the Q&A session we have at the end of the presentation. Please feel free to type in your questions as we speak. I'm very happy to have the event here at the DNB office in Bjørvika, Oslo. Thank you for arranging this and a great thank you to the people that actually have showed up in person today. Today we actually have the biggest audience for the quarterly presentation for at least two years, so that's great. Let's get started. This is a slide that I'm very proud of in AWS, and it serves as a motivation for many of our employees. Every year since we opened the first store, we have had growth. And of course, no one wants to be the one that misses the streak, so we will make sure that it continues. And I think it shows some of the strength of the concept of Abidopis. Regardless of financial climate, we have been able to grow sales every year. Some years, acquisition has been a big part of that growth. But in every year, we have also delivered organic growth. And 2025 also demonstrates very high growth. And I think we have to go back at least a decade to see the same strong organic growth in Norway as we have seen this year. If we look at some highlights for the third quarter, Stina will provide more details on the financials later on. But overall, it was a sales growth of 9%, driven by strong performance in segment Norway. The gross margin increased. We have demonstrated good cost control, so OPEX to sales ratio is reduced. And that has resulted in an EBIT for the group of 250. 56 million, which is an increase of 53% from last year. So all in all, a very solid third quarter for the Europis Group. We'll talk a little bit about the Europis chain before we continue with the ÖB chain. Europis has, over many years, built the position as a seasonal destination in Norway. And this year we really managed to capitalize on the nice summer weather and we saw large traffic to our stores and we were well prepared. We were well stocked with good shelves, we had a very good base assortment and we capitalized on the increased traffic and the demand that arised from the warm summer in Norway. So it's a strong execution of the campaigns, also a strong execution of the seasonal sales. And the growth has been driven by higher footfall as the nice summer weather creates some demands. And we see growth not only in the seasonal items, but also in the base assortment is where we have seen high sales growth during the summer. But it has been a strong market as well. The European chain grew by 12.1% in the third quarter. And according to Statistics Norway, the broad variety retail market in Norway grew by 9.5%. So it's been a strong market and we have been able to outperform in that market. So it's good sales. If we look at the financial climate we're in, we see that the consumer spending has been positively impacted by real wage increases and lower interest rates. Not only Europis has benefited from that, we see that the total retail market in Norway is very positive. But we also see that consumers are becoming more and more price conscious, and that is something we have seen over the last couple of years, driven by the high inflation, but this is kind of sticky. The shopping pattern has changed among the consumers, and they keep following the prices more regularly, and they also shop more on campaigns. And this is strong and good news for a concept like Autopeace. We have driven more sales towards campaigns, as we are a campaign-driven concept. We have been able to attract new customers on our private labels. We have increased the share of private label sales. And these are, of course, low price points. And we managed to give the customers what they want. They want low prices. And it was a big price test in Netavisen this October, where they... looked at Europis compared to the three large grocery chains in Norway. And Europis was a clear winner on price, just like we were last year as well. And that is good for a low price concept as Europis. If we look at the ÖB chain, We have done several changes over the last year, and we see that the category upgrades give good sales development in kitchen, home, interior, and DHRI, but it's not material enough to really change the bottom line. We see that we managed to shift the consumers to buy more non-food items. We see we managed to get them to buy more campaigns. So, you know, the retail basics, that mechanism we introduced, that works. But still, the results are not material enough to give significant results. We have changed from negative like for like to positive like for like. We have lifted the gross margin. but it's not enough to make the turnover we need. So what becomes more and more clear for us is that we need to do the full remodeling of the stores in order to get the turnaround process we want in Sweden and especially to attract new customers to the stores. We need to re-establish ÖB as a relevant shopping destination for more customers. And we see very good results from the pilot stores where we have built two new stores or remodeled two stores in Sweden based on the outer piece concept. The first one was opened in Uddevalla in June. And that store basically tickes off all the boxes that we want. We see increased sales from higher footfall to the stores. We see increased sales of non-food items. We see a higher margin and we also see a higher basket. So very promising and good results from that remodeling. The second remodel store in Arning outside of Stockholm was opened early in September. And that basically gives us the same results of what we have seen from Uddevalla. And the third pilot opened three weeks ago in Malmö, and the fourth pilot will open next week outside of Stockholm. So we will have then four pilots, and we will run that for a period. We get very positive feedback from the customers and the staff on the store layout, on how it works. And we see that it's evident that we do these remodelings to get the turnaround process in Sweden. We are now executing a large store remodeling program over the next two years. We will remodel 40 to 45 stores every year in 26 and 27. And there will be some initial negative financial impacts. During the remodeling, the stores will be closed for two to four weeks, which means that we will have lost sales. In addition, we will do some discounting ahead of the closing period, where we will sell out the discontinued goods in order to have fresh goods when we open the new stores. And we will do the remodeling with our own staff, so it will be dedicated remodeling teams employed by OOBE, and that will of course be part of the OpEx for next year. So any improvements from sales uplifts anticipated with the remodeling next year will be offset by the costs associated with the remodeling of the stores. We expect then the financial results in Sweden in 2026 to be on par with 2025, and then we will see a gradual uplift in the profits from 2027, and the major uplift will come in 2028, the year after all stores are modernized. We will provide some more detail on the rollout plan and the financial impacts in the next quarterly presentation, after we have evaluated the four pilot stores. We maintain firm on the high ambitions we have in Sweden. We will grow the revenues to 5 billion with a 5% EBIT margin by the end of 2028. The first step in this plan is to do category harmonization and joint sourcing. That is well on the way, and this is the base for the store remodelings. And then improving the customer experience, that is the store remodeling plan. And that is the key to really get the results. But you need to do the category harmonization and joint sourcing first. And then we will improve the customer experience. And that is needed in order to attract new customer segments into the stores. Besides that, we're working on strengthening the execution across the value chain, which means that we are sharing the best practice, implementing the retail mechanisms from Avidopis also into Öbe and working on the sales culture in the company. As part of that culture, we have hired a new CEO to ÖB, Anders Luridsson. He has a strong track record with more than 20 years' experience in the Swedish retail sector. He's worked with food retail in the ICA Group, he's worked with electronics in Expert, and he's most recently worked with non-food items and home textiles as CEO of Hemtex since 2018. Anders will join us actually next week, starting off with a month in Norway to learn the commercial tricks and treats of Europeis. And then he will take over full responsibility sometime in December in Öreberg. But we're really looking forward to have Anders joining the Öreberg team and the Europeis group. With that, I will leave the floor to Stina to take the financial details.

Thank you, Esben. And good morning, everyone. I will start with the financials for segment Norway. The strong performance this year continued in the third quarter, with sales of 2.5 billion, up 11.6%, and an EBIT of 293 million, up almost 38%. The Avdopris chain had a total sales growth of 12.1%, and a like-for-like growth of 10.7%. As Espen said, a warm summer had a positive impact on a seasonal destination like AvroPris. Higher footfall was the main driver behind the strong performance, but we also saw more articles in the basket. Sales growth was broadly based from seasonal items, campaigns and the base assortment. One store was opened in the third quarter, bringing the total number of new stores this year to six. Our pure play companies had sales of 155 million, and if we exclude the Lundhjem last year, that's a growth of 3.5%, where Lekerkassen has improved their performance while there is a challenging knitting market in Norway for strikkemekka. The gross margin was 44.6%, up 0.9 percentage points, or up 0.5 percentage points if we exclude impact from unrealized currency on hedging contracts and account payables. Seasonal items had a higher gross margin this year, impacting the gross margin positively. The OPEX increase of 8.7% was impacted by eight more directly operated stores this year, and also costs related to higher volumes. We are happy to see that measures taken to improve efficiency in the value chain continues to pay off, and we saw that the OPEX to sales ratio improved by 0.7 percentage points. Moving on to segment Sweden. Sales were 1 billion with a reported sales growth of 3.1%. But in local currency, sales were down 0.2%. The ÖAB chain had two fewer stores, and in local currency, the like-for-like sales improved by 0.4%. And this means that although we do see positive development from upgraded non-food categories and remodeled stores, and also that initiatives to improve campaign sales have given results, this has yet to add materially to the total. As Espen said, to attract new customer segments, there is a need for story modeling, and we see higher footfall and sales in our pilot stores. The gross margin was 31.1%, up 0.4 percentage points. Half of this improvement was related to unrealized currency effects. In addition, an uplift in non-food sales had a positive product mix. OPEX showed a reported increase of 1.8%, but was down 1.4% in local currency. And this change was positively impacted by one-off costs and costs related to IT projects last year, with a total of SEC 13 million. The segment had an EBIT loss of 37 million, an improvement of 8 million compared to last year's loss of 45 million. I will briefly sum up the third quarter for the group. Sales were 3.5 billion, up 9% or up 8% in constant currency. The gross margin was 40.7%, an improvement of 1% or up 0.6% if we exclude impact from unrealized currency. I would like to give a reminder that the group hedges up to six months and that the inventory also takes some time to turn. This impacts when any changes in NOC compared to purchasing currency has an impact on the cost of goods sold. And as far as any margin impact is concerned, that will depend on sales prices in the market when a product is sold. The OPEX to sales ratio improved by 0.6 percentage points to 25.9%. EBIT grew by close to 53% to 256 million. And the net profit to parent was 154 million up 70 million, which 14 million of the increase was related to unrealized impact from interest rate swaps. For the first nine months, it's important to keep in mind that group figures include Segment Sweden for four more months this year. This obviously has a positive impact on sales, but on the other hand, it has a dilutive impact on both the gross margin and the OPEX to sales ratio. Sales were 10.3 billion and EBIT was 642 million, where segment Norway delivered a strong EBIT growth of almost 23%, while segment Sweden for the first nine months delivered an EBIT loss of 186 million. Net profit was 350 million, down 46 million. And last year was positively impacted by financial effects from the OAB transaction with a net 34 million. And in addition, there is a higher unrealized loss on interest rate swaps this year compared to last year. I will comment on the figures for the first nine months. Cash from operating activities were 254 million. Change in networking capital is normally negative in the first nine months due to seasonal fluctuations, but the minus 735 million this year was more negative than last year. That was primarily from timing of account payables, but also from a planned inventory buildup to support sales. Net cash from financing activities were less negative than last year as more of the credit facilities have been drawn upon. Net change in cash was minus 247 million and the net depth was 5.1 billion or 1.8 billion excluding lease liabilities. Cash and liquidity reserves decreased by 200 million to 1.16 billion. And then I will hand it back to Espen to give you the outlook.

Thank you, Stina. We are entering now the fourth quarter, which is historically the most important quarter in retail. And the small seasons are coming almost every week. We have Halloween this week, a big event starting off the Christmas season next week. And of course, you have not only Black Week or Friday, you have Black November. So it's a pretty good lineup of events ahead of us. And I think we delivered a strong start to this year with a good performance in the first three quarters. And we see that consumer spending is driven by the better financial situation in the markets. We have seen now decreased interest rates. We have also seen lower inflation and a real wage growth for the consumers. And we expect that to drive sales also into the fourth quarter. The most important event ahead of Europe right now is the store remodeling program that we will launch in Sweden in next year. So remodeling 40 to 45 stores both in 26 and 27. And in the first year the positive effects from those remodelings will be offset by the project cost associated. We remain confident in our long-term ambition and target, which is to grow sales in Sweden to 5 billion with the 5% EBIT margin in 2028. I think that closes the presentation and I will invite Stina back on stage and we will actually open up for questions. So Trine, maybe we should, if there are any, we could start with the questions from the room. Then we move on to the web.