Europris Asa

Good morning, everyone, and welcome to Avrupee's presentation of results for the third quarter. My name is Espen Eldahl, I'm CEO of the company, and joining me on stage today, you will see CFO Stina Byhre, who will present the financial details. And after the presentation, we will host a Q&A session, and that will be managed by ER officer Trine Engløken. We will start with questions from the live audience here in Oslo today, and then we will take questions from the web. And those of you who are online, please feel free to type in your questions as we speak. Before we get started, I would like to thank Nordea for hosting today's presentation and also for arranging the investor meetings we have later today. Europis is a discount retailer operating the Europis store concept in Norway and ÖOB in Sweden and in addition we have the online companies Lekekassen and Strikkemekka mainly operating in Norway but also into all the Scandinavian countries Both Europis and ÖB operates seasonal concepts and in this in the third quarter this summer season has been challenging which resulted in the third quarter that was below our own expectations. In addition we had some issues with our campaign program which fell short of the expectations we had. When we look at the numbers, total sales in the quarter ended at 3.5 billion, which is a reduction of 1.6% from last year, but up 0.6% in constant currency. And despite an increased gross margin, the EBIT ended at 244 million, which is a reduction of around 5% from last year. When we look at the first nine months, total sales was 10.5 billion. That's an increase of 1.9% and 3.1% in constant currency. The gross margin has increased, and that resulted in an EBIT of 710 million, which is an increase of 10% from last year. I started to talk about the season, and of course, timing of summer impacts the seasonal concept like Avidopis. And this year, we had an early start of the summer season compared to a late summer last year, and that impacts sales in the quarter. This year, we had good sales for the summer seasonal goods in the second quarter, while the sales was moved to the third quarter last year. Year to date, the figures are of course comparable and overall we are very satisfied with the summer season we have delivered. We met our sales targets and we have a healthy inventory at the end of the season. The Norwegian consumers and also the Swedish ones, they remain very price conscious and private labels and campaigns are key sales drivers in the quarter. But despite our campaign sales, the overall campaign program fell short of the expectations we had, and we have taken some corrective actions. And the outer piece concept is based on low prices, seasons, and campaigns. And all these three elements are important drivers of traffic to our physical stores. and the position we have on low prices is undisputed and with this high sales of private labels that demonstrates that we are very relevant for the consumers and drive traffic but when the season comes short we should have had a stronger campaign program to compensate for the lost traffic due to a bad season and the campaign program was simply not robust enough to drive traffic during the season and we should have had the broader range of traffic driving initiatives to ensure that the customer football was still there despite a slower summer season. We were simply too dependent on the summer seasonal goods in our campaign program and should have had the broader program to attract more traffic and be relevant when the summer was difficult. But the good thing is, of course, that out of this is a relevant concept for the price conscious consumers. And we offer value for money and growth is driven by the campaigns and the private labels. And even though we see real wage growth in Norway this year, the consumers have become more price conscious. And you might say that perception beats reality because statistically, the consumers are better off than before. Yet they feel that everything has become more expensive. And we see that in the way they shop in our stores. They choose campaigns, they choose the low price points and especially they choose the private label products. A high share of private labels is not only driving sales, but it's also important for increasing the gross margin. If you go some years back and look back to 2020, the share of private label sales in Europe was 40%. Now in 2026, that has increased to 48%, and that is also a very significant key factor for the good increase we have seen in the gross margin for the company over this period. We're not only working with the products, we also work with the store portfolio and we opened one new store in the quarter. We relocated and expanded three stores, but we also closed one store. And the board has approved another eight openings for 2026 and beyond, of which four are subject to planning approvals locally. If we move to Sweden, the turnaround program continues at full speed. One of the most important things is to harmonize the assortment and try to position ÖB as a relevant destination for non-food products and also for the seasonal products. And the Swedish consumers, they really welcome the upgraded non-food range we have introduced in the stores. And that delivered 9% sales growth in the quarter and 10% for the first nine months. And the share of non-food is now increased by two percentage points up to 28% so far this year. and a stronger non-food offering in Sweden is crucial to attract new customer groups and increase longer-term profitability. So it's a key activity in the turnaround plan we have for Sweden. But despite the positive development we've seen on the non-food goods, we are not satisfied with the development in Sweden in the third quarter. The timing of summer and the campaign program, of course, also had negative effects in Sweden. I think that we actually got a larger hit in Sweden because we are not there in the robust market position as we are in Norway. In Norway, we are market leaders and we can live with a weak campaign. The customers know us and come anyway. But in Sweden, we have to fight harder for the consumers as we are a challenger in the market. And I think that the hit was bigger in Sweden than in Norway on December. the campaign issues we had and also the seasonal issues. Another key element in the turnaround plan in Sweden is to remodel the stores and make it a more attractive and nicer shopping experience for the customers and during the third quarter we have remodeled another 10 stores bringing now the total of remodeled stores to 38 by the end of the quarter. We have planned to upgrade another 10 stores in the fourth quarter. Four of them are already done today. And we will then have 48 upgraded stores at the end of the year. The remaining store portfolio will be upgraded next year. With some exceptions, there will be around five to 10 stores that will not be remodeled due to the fact that they are potential relocation candidates or we have issues with negotiations with the landlord. So We're not investing if we're not going to stay. So basically there will be a handful that is not remodeled at the end. Now we are approaching the fourth quarter, and honestly that will be a test for ÖLB. This is the first time we have a fully harmonized assortment for important Christmas season across Norway and Sweden. And we will do some extra marketing activities. We will go broader into the market and communicate that Ölby has something new to offer for Christmas this year. And we are expecting that this test must position Ölby as a stronger seasonal destination in the markets. But of course, we have more Christmases to come. You know, we have 26 is the first year we are the full aligned assortment. Then we will test more in 27. And of course, we are up for exams in 28. But it's going to be a test for a bear to really position themselves and deliver in the fourth quarter. So we are raising the bar and saying that we have to do better seasonal performance in the fourth quarter and what we saw in the in the third quarter. Regarding the store portfolio, we will do a broader full-scale national marketing by the marketing activities next year when we have upgraded most of the store portfolio. The EOB turnaround plan stays firm. Our ambition is to lift sales to 5 billion and also with an EBIT margin of 5% in 2028. And it's built on these three key drivers we have been talking about all the time. And they come also in a natural sequence. First, it's about harmonizing the categories and do joint sourcing. That is more or less done. And then it's about strengthening the execution across the value chain. And then we talk about doing the same campaign structure that is almost done. It's about doing the same seasonal experience. And that we have the full scale test now in the fourth quarter. and lately it's about improving the customer experience that is remodeling the stores and there we are basically halfway into the project. So we're making good progress despite that we see that the results we deliver now in the third quarter did not meet neither yours expectations or our own expectations. With that I will leave it to Stina to present the financial details.

Thank you Espen. Sales for Segment Norway in the third quarter was 2.5 billion, slightly above last year. Europris is a seasonal concept, meaning that good seasons attract more footfall to stores. And while a seasonal need may trigger a store visit, customers also fill their basket with other items when they come to shop. And this year, as summer came early, the corresponding footfall and sales fell in June. Well, last year, as summer came later, this fell in July. And this was a timing effect. And looking at the first nine months, the summer season and overall sales performance was good. And the Avdopris chain showed growth higher than the broad variety retail index. And we still see price-conscious consumers. And private labels and campaigns had sales growth both in the third quarter and for the first nine months. That said, the campaigns drew less footfall than expected in the third quarter and corrective measures have been initiated. The sales development for the PurePlay companies was impacted by lower sales outside of Norway. On the 1st of July the EU introduced a customs duty on imports from non-EU countries which negatively impact profitability on these sales. and our peer players have done a tremendous job with mitigating measures. Strikke Mekka has expanded its already existing warehouse operations in Sweden and expects to be fully stocked in the beginning of next year. For Lekakassen, it is more complicated, but measures on what products to offer, pricing, campaigns, freight terms, etc., have been implemented and will be further worked on. and why the P&L impact for the group is more limited. This is a clear competitive disadvantage for our pure players with a negative impact on sales and profit. The gross margin for the segment showed strong improvement in the quarter at 45.8%. This is an uplift of one and a half percentage points excluding unrealized currency. OPEX grew moderately and EBIT was 294 million just above last year. And while EBIT was largely in line with last year, in the third quarter, the segment delivered an EBIT growth of close to 5% for the first nine months, following sales growth combined with improved gross margin. Sales increased by 4% to 7.5 billion, with Avdopris demonstrating its relevance through higher footfall and a volume-driven uplift in the basket. The gross margin improved somewhat, while the OPEX was negatively impacted by the combined effect of volume-driven sales growth with high wage growth and increased distribution costs. And all in all, this accumulated into an EBIT of 867 million, an improvement of 4.7%. Asa An important part of the turnaround is succeeding with the harmonized non-food range. And it is evident that customers appreciate the upgraded assortment as these sales increased by 9%. And the gross margin improved by 1.2 percentage points, excluding unrealized currency. And in local currency, the OPEX increased by 9.7%, significantly impacted by the story modelings. The EBIT loss grew to NOK 50 million. For the first nine months, sales were 3 billion, down 3% on a reported basis, but up 0.9% in local currency. Remodeling and temporary closure of 34 stores had a negative impact on footfall and sales. But we do see overall better performance on key KPIs for the remodeled stores. Non-food sales increased also for the first nine months and the gross margin improved by 2.2 percentage points, excluding unrealized currency. OPEX was impacted by the story modelings this year and the segment had an EBIT loss of 157 million and improvement of 29 million compared to last year's loss. Summing up the third quarter for the group, sales were 3.5 billion, slightly up versus last year in constant currency. And while the sales development was below expectations in the quarter, the gross margin showed significant improvement. But costs related to the remodeling program weighed on the results and EBIT was 12 million below last year. For the first nine months, sales reached 10.5 billion, an increase of 3.1% in constant currency. And the gross margin improved. And despite headwind on the OPEX, EBIT increased by 10.6% to 710 million. Earnings per share were 2.31 NOC, up 8.1%. cash flow from operating activities for the first nine months was 900 million a significant improvement from last year and this was from year-on-year improvement in the change from inventory as last year included a planned inventory build-up and from timing of accounts payable between the years higher capex was from the store remodeling program in sweden in addition to category upgrades and investments at the central logistics center in norway all in all net cash increased by 54 million and the group has a solid financial position with cash and liquidity reserves of two and a half billion and then Espen will take you through the outlook

Thank you, Stina. When we look at the market and especially the macroeconomics affecting our customers, we see that the interest rate hike we had in Norway in September was not expected a year ago. And we also see that the policy rate path has been revised upwards in both Norway and Sweden. And how this will affect the consumers is a little bit difficult to say. We said earlier that perception beats reality. We see that they are acting more price conscious, which should be positive for a concept like Europis. And we also know that it's expected to be real wage growth in both Norway and Sweden in 2026 and also 2027. So up until now I think that the retail market is you know dealing with these issues quite well and it seems like they are still you know growth in the overall retail markets. But we believe that the consumers will remain price conscious and that concepts with clear priorities on price will be among the winners and I think that we are well positioned in this market. But more importantly and short term we are well stocked and prepared for the important Christmas season. We have received all the goods and now it's just to do Halloween this weekend and then it will be Christmas in all stores from next week. Then we are having the Black Weeks or Black Month and then of course the important Christmas sales season in December. So you know the biggest sales days are ahead of us and we are looking forward and we are well prepared for the final sales seasons of the year. And with that, I will actually invite Stina back on stage and we will do the Q&A. And till then, we will start with questions from the live audience.