Verkkokauppa Com Oyj

Good morning everyone and welcome to the first quarter of Verkkokauppa.com. If you have any questions, you can send them to investorsatverkkokauppa.com. The questions will be answered in the Q&A section at the end of the presentation. In my own presentation, I will go through the main points of the part-year review published in the morning. After that, I will briefly tell you how the company's new, updated strategy has started to progress. In the end, we will share our views and thoughts on the end-of-year market environment and questions and conclusions if there are any. The market environment has been quite similar in our field for a long time and here in the Finnish market, perhaps such a note that if you look at the last quarter of the year, there seemed to be some more demand than now in the first quarter at the beginning of the year, so consumers probably used a bit more than it was in the past, and now through the credit cards, we can see that during the first quarter, the demand was very, very soft. The trust of consumers is still low. It is very difficult to find positive signals from the political or economic view of the world. Consumers' views on their own employment situation have not gone in any better direction. The whole environment is reflected in our business, our channels and segments. We believe that the biggest bubble at the moment is that consumption will start to go up. These are the indexes that are historically high in Finland. Before the indexes go down, we don't believe that purchasing power will go up, which would be reflected in our business. If we look at the Finnish home electronics market, it collapsed during the first quarter, with a drop of about 10%. These drops have rarely been seen in the history of measurement. The numbers of categories reported by our market were the same, so we were able to hold on to market shares. In the bottom right corner, we can see the Finnish market's special trade, which has been in the market for a year now, which is also very, very exceptional. This difficult environment and soft demand are now reflected in the special trade for all consumer goods and, above all, in high-value products. If we look at our performance, it's a bit of a double-edged sword. If the turnover drops over 11%, we can't be satisfied. On the other hand, if we look at the environment where we worked, our performance is likely to be quite good. It's probably the best we could get out of this environment. But this environment was reflected in our business, in all our channels, segments and almost all categories in the same direction. Maybe it's worth noting that our network business performed a little bit better. Of course, one of the positive things is that one of our strategy's cornerstones is to develop our own products and bring good results. In the demand environment, consumers have found our high-quality products and their sales have grown considerably, more than 7%. And now for the first time, we are also telling you about their share of total sales, so 6% of the entire turnover is already generated through our own product brands, through our own product brands, which is of course a great thing. The main thing is that the deadline for Q1 is not a commercial season for us. It has negative effects on the upcoming March. The weather in Finland doesn't mean that we haven't had a good start of the season. That doesn't mean that we haven't had positive results in the season categories. Of course, we have had some individual successes in the home machines. We have been doing well in both components and operations. On the other hand, we saw a good performance in terms of sales. We were able to defend it well in the price competition environment. The total sales sales percentage has grown considerably in the previous year and in the last quarter. It also has a positive impact on The sale of our financing products, which is written there, positively affects the positive sales development of our own products, because it is of higher value. And then again, the pressure on the product sales value comes from the price-intensive market, which in turn eats up that value. We did a good job there. We were able to defend it well. We can see from our data that most of our sales come through campaign products. This is very typical in this kind of question environment. Customers are very actively looking for products that are on offer. Of course, we also need to find ways to find good solutions together with the product operator so that this is not just out of our reach. When we look at the totality and the revenue calculation, we couldn't compensate for the loss of sales. Even though the sales profit percentage was at a good level, the total profit margin clearly decreased from the previous year's level. And even though we kept a good cost curve, Other costs increased marginally, so the inflation effects were mitigated. In terms of personal costs, there was a clear boost to the previous year. Despite this, we weren't able to get a return improvement. The return was slightly weaker, 0.5 million compared to the previous year's 1.4 million. A good note is that the comparison efficiency of last year affected the interest rates. Due to the changes in the negotiations, this year's comparison efficiency is affected by the follow-up fee of TSV, which has been taken as a whole, as a reserve, and of course, it will be mitigated by the law itself. Also positive, In this rapidly decreasing market environment, we can be quite satisfied with the level of our reserves. We have a certain view that we have perhaps done a better job in the market. Our current reserves have dropped by 9% from the level of last year. Of course, there has been growth. At the end of last year, we had a bit of a downfall in our reserves. On the other hand, we have brought all the products of the spring and summer seasons to our reserves. This is reflected in the cash flow in principle. On the other hand, when we look at the financial side, we have a good cash situation, it has improved, our equity level is going in the right direction, not yet where we want it to be. A small amount of investment is required to maintain or develop business, so the overall financial situation of the company is stable. A few words about our responsibility work. A few weeks ago, we published the responsibility report of last year, which contains our activities and focus areas. It's good to remember that responsibility is very much part of our core business. We always sell quality products to our customers, We need to make sure that the life span is as long as possible, that the products are not returned and that we are responsible for the business. These are extremely important adventures for us and they are also shown in our report. Of course, at this point, like all other listed companies, we are working. In the coming year, we will do an analysis and build our reporting skills, through which we will determine our focus areas, our activities and our goals. More about that at the beginning of next year. If we jump to the next topic, that is, the development of a new strategy, we have a very clear and concrete strategy that will be built on the basis of four pillars. Our main task is to speed up the transition of the trade network. We believe in it very strongly and we will win with it here in the Finnish market, and it will also build us the capabilities for the future. Based on that, we have an extremely good operating network and operating chain capability. We have invested in our stock automation, packaging automation, automation in our internal logistics processes. We have the capability to be efficient and fast, and on top of that, we build the fastest operations in Finland. We believe that it will move the market to the network. We are building a choice that is primarily adapted to this business. Products adapted to the network, at home in an hour, on the side of that, quality, good quality, own products. That is our second core. In addition, we are looking for new ways to use our equipment, bring new services. to find new segments and possibly new markets where we can look for growth in the future. This is the focus area of this year's strategy. We have been discussing the cornerstones for a long time. Our brand work has also been added to that. We want to be the preferred brand that comes to our core business. But we also want to expand our preferences to new areas. Through that, we want to gain the ability to grow outside home electronics and technical products. This speed is actually something that we have already raised the bar in Finland and we are doing it on purpose. We want to show that everything other than buying from the network of Verkkokauppa.com is slow, troublesome and unreliable. Already today, more than a quarter of our online purchases In the area where we offer these quick operations, we are talking about 20 minutes to an hour, more than a quarter of these purchases come through these products and services. It shows that there has been a significant change in what the customer is expecting and what the norm is for today. This is what we will emphasize in our campaigns. We have strongly highlighted this in our message. The products are often the same. The pricing may be the same, but when it becomes easier, more flexible and faster to operate at home, we believe that it will be the key to move the business online. What's great is that when we look at the quality criteria of our service, the speedy operations are extremely maintained by our customers. The customer's NPS is almost 95, so that clearly shows that now we have found the product and service that customers need. This is not the end, we will continue this. Our plan is to expand Finland to all major growth centers. We will hear more about this during this year, possibly already on our main market day. On the service side, there are many new sources. I would like to talk a bit more about our exchange service. It has been live for about a year. It is not a big commercial service yet. We are very happy that we have been able to move forward and build business activities that might be significant in the future. It may be that in five or ten years we will have a big part of our business. So customers can take care of the fact that the used devices return to use, their lifespans are long, it is responsible and on the other hand it also enables customers to move to a new device after the improvement. This is completely digitally possible through us and two-thirds of consumers do this in a fully digital form. Another thing worth noting is that our exchange rates are as high as 133 euros. This means that our customers have a lot of valuable products at home that they don't necessarily use. On the other hand, these products have a lifetime of another consumer. Thirdly, this enables consumers to buy new applications for themselves. This is a great service and we believe that it will also bring commercial success in the future. Finally, our estimates for this year. We will not promise any significant rapid recovery of the market. No indicator speaks for itself. Now we have to wait and be patient with what we do. We have to take care of reserves, prices and costs. We don't believe that through purchasing power and consumption, there will be any significant positive change before the guidance sheets start to return. At the moment, according to the bank estimates, this is what will happen in June, and the research institutes say that there will be some changes at the end of this year, during the first year, but before this cycle starts, and it's a positive signal for consumers, we don't believe that the question will change significantly. This will probably also be reflected in the business sector and in our other categories as a whole. There has been a lot of discussion and consideration about the increase in the average price level. The change is relatively small in percentage when it comes to price levels. On the other hand, eat some of the buyer's purchasing power, and when that purchasing power is eaten, it also has an impact on our business. But of course, we believe that these guidelines have a significantly larger counter-power if this were to happen. What we believe in is that we have chosen the right path in how we operate, how we lead the company, what we focus on. At this point, we are avoiding these barriers, we are doing things so that we stay on the surface, we are going in the right direction, our reserves are in good condition, we are protecting the market. At the moment, it is impossible to achieve growth in the industry in this environment. We also believe that we have a very good, clear strategy. We know what to do now, what skills to build and develop, so that the future will grow and we get profitability. At this point, there is no need to update the guidance. As you all know, in the business sector, income and business exchange are mainly done in Q3 and Q4, so that's why our guidance is expected to last. So a brief summary of the whole thing. It was a difficult environment and perhaps a bit more difficult than I could have expected for the consumers. Purchases were closed. We saved. The question did not come up in our categories. We made the right decisions. Despite that, our stock levels are at a good level. We successfully defended our market share. we did things cost-efficiently, we took the strategy forward, we increased our own product sales, we accelerated the market transition to the network through quick actions. In that sense, we have done the things that we have focused on and believed in. We still believe that we have an extremely good strategy that will follow our path for the next five years. As a reminder, we have announced the date of this year's Päivä Oma Markkinapäivä, which is 30th of May, and there we will be deepening the strategic themes and the outlook of our future. So, welcome! Tässä kohtaa kiitos kaikille ja oikein hyvää kevään jatkoa. Toivotaan, että se kesäkin tulee. Tällä hetkellä näyttää, ettei ole kysymyksiä. On vilkas julkistuspäivä, niin ei muuta kuin hyvää torstaipäivää. Kiitos. Good morning all and welcome to Verkkokauppa.com Q1 presentation. I will start my presentation typically with highlight out of the report that was published this morning. Then give you some insight on our strategy execution. and at the end we have our look on the market guidance and then if you have any questions you can send them to investors at verkkokauppa.com and then those will be handled at the end of the presentation. The market surroundings facing us has been pretty much the same throughout last year and time before that as well. If we compare maybe to the last quarter of last year, the consumption was slightly on a higher level. It seems that consumers wanted to utilize or at least some consumption towards the Christmas sales. Now, when we started this year, we saw that the market drop down heavily and consumption as well. The uncertainties regarding geopolitical situations and customers own finance has maintained on a really low level, which is impacting the purchasing decisions and impacting discretionary shopping. We also believe that the biggest bottleneck for purchasing power starting to increase again are the interest rates, which are normally high and have stayed on a high level in the Finnish market. And this is really pushing down the purchasing power and therefore the consumption. If we then look solely at the consumer electronics in the Finnish market, it collapsed almost down by 10%. We have not seen these kind of collapses often. Our sales in those reported categories were on the same level, so we maintained our market position in these tough surroundings. You can also see bottom right is the Finnish specialty retail market, which has also been decreasing for a year in a row now. So the tough conditions impacting everything with slightly higher purchasing price, items with a higher price throughout the market. So our performance during the first quarter somewhat two-folded. If you look at the revenue development, we are far from being satisfied with losing more than 11% of revenue. But if we take in consideration that we were facing in the consumption, in the market side, I think we need to be satisfied with the outcome, probably the best we could get out. The low demand impacting basically all channels or categories, almost all segments. Online channels may be slightly better than the average. Also positive is to see that our strategic cornerstones developing our assortment throughout private label products is having nice traction again, and categories in own brands and private labels increasing by 7%. And now we have also for the first time disclosed the internal market share of own brands, which is 6%, and this is something that we keep on focusing on. Easter situation totally during the first quarter in March time doesn't have a positive impact on consumer electronics and it's fair to say that the weather conditions here up north in Finland has not really been having a positive impact on kick-starting the upcoming seasons or no positive impact coming from pre-season sales for example. Some positive performance in certain categories in home appliances. We have been strong throughout the year and also office supplies and components. On the other hand, we can be pleased with the outcome on the cross-margin side. Our cross-margin improving from previous year and also from previous quarter. Positive impact on the cross-margin comes from own financial services which is reported on that one and also own brands, sales, positive development is increasing the average margins. On the other hand, if you look at the product sales margin, which is heavily under pressure due to the price campaign driven market, So we defended that quite decently. We see in our own data that the share of campaign sales in our total revenue is increasing for several months now in a row. So the consumer is more and more tempted to purchase certain products and SKUs only if they are discounted. And this is something that we need to work on together with suppliers, that it's not always coming then out of our pockets. In the sales mix in total, no significant changes to be seen. Due to these circumstances and due to the significant revenue loss, which we were not able to mitigate with higher cross margin, the cross profit, the drop down and this impacted our comparable EBIT, although we were quite cost-efficient, we were able to mitigate inflation in other operating expenses, personal expenses actually going down almost by 10%, but despite these internal efforts the comparable EBIT decrease from previous year so stood at 0.5 million compared to 1.4 million previous year. Good to mention that in previous year comparability was affected by one-offs regarding the restructuring and this year comparability impacted by one-off provision related to an administrative fine. Then if you look at the balance sheet and the finance, we have been quite successful in our category and inventory management. Despite market going down almost by 10%, we have been able to maintain a nice inventory turn, make sure that our obsolete stock is on a healthy level and there are no surprises to be from this side. we saw that the inventories increased from previous quarter during the last quarter the inventories were aggressively driven down and typically during the first quarter we are stacking up our inventory towards the spring and summer season so that is impacting our cash flow during the first quarter. Cash position is strong, improving from previous year. Equity ratio going into the right direction. So all in all, it's fair to say that the finances of the company are solid. A few words about the sustainability work we just released some weeks ago, our sustainability report regarding last year's operation. It's good to mention and understand that sustainability is actually totally incorporated in our ways of working in our business. How we conduct retail, how we sell for a cause, high quality products only for a need. bringing low return rates for example always on customer side so being the sustainable retailer for the customer. We are obviously working on double materiality at the moment as all listed companies we are identifying new focus areas and therefore updating our sustainability program our targets and what we report then coming out of this year at the beginning of next year. So let's jump into the next topic, strategy execution. We released a new strategy end of last year. We believe we have a good, solid and crisp strategy for cornerstones. The main focus, the main vision is to accelerate online shift. We have identified that we have built capabilities in our fast fulfillment in our supply chain. operations to be the fastest in Finland, to deliver as fast and smooth products which are purchased online. So we will be the ones accelerating the online shift. We built an assortment, a hero assortment, totally curated and tailored to fulfill these needs. Fast deliveries, suitable for online, fueled by high quality own brands to improve the margin development. And on top of that, we are identifying new ways of of making revenue streams or finding out profitability streams, utilizing our platform, searching for new segments, new categories and also new markets in the years to come. And these are the focus areas for this year, pretty much in line with the cornerstones added with the brand work. To be the fastest, and raising the bar in the Finnish retail landscape is the most biggest focus area for us. We are also working on how we are known to be the fastest, the most preferred e-tailer, the most preferred operator in the consumer electronics, but also building up awareness outside the consumer electronic markets is something that we are working on for future growth. We have actually set a new standard in the Finnish landscape in online business throughout our fast delivery capabilities. In the area where we have offered one hour express delivery, more than every fourth online customer is chosen that way of delivering. And on the other hand, it makes everybody else look clumsy or slow and this is the idea of raising the bar, rewriting the rules and making everybody else look quite not so fast as we are. Also what is important for us is that The customer satisfaction, it's not only measured in minutes, it's also measured that the customer is really truly happy with that certain service provided. And the NPS in fast delivery is as high as 95. It is the highest that we measure in all of our operations in NPS. So customer is really, really satisfied of us being as fast as possible. And this is the way of accelerating the online transition. This is not all. We have plans on expanding this service throughout Finnish landscape in all major cities. And this is, for example, a topic that we will be looking closer in the upcoming Capital Markets Day. So stay tuned. On a service level, new businesses, we are quite proud of our trading service, which we have developed ourselves. It has been now up and running for a year. It is not a huge commercial impact on the total business, but it can be in five or ten years time. So it's important to have new ways of conducting business in an even more sustainable way, making life cycles of products even longer and therefore being another option for consumers who tend to prefer reused products, for example. We have thousands and thousands of SKUs that we are taking in. typically phones, tablets and computers. It's interesting to see that the consumer can conduct this in total digital environment. So two thirds of all interactions are conducted through only online. So this is also a way of making refurbish or trading services digital and accelerating the online shift. And also interesting is that the average payback value is as high as 133 euros, so the customers have actually quite valuable items at home which are not used, so it's a good Reminder for the customer, if you have any SKUs, any kind of equipment that you don't use, come to our site. We get it refunded for you and you can utilize that credit throughout our assortment in 70,000 different SKUs and the products are brought back to life, back to life cycle. So as last let's have a look on the market. We will not promise or expect any market recovery coming months and we believe that the market will not start to recover before the interest rates start to go down because it is the actual purchasing power which is it at the moment. We know that there are no salary increases or any kind of other circumstances, which impact positively the purchasing power. Actually, there was a political decision in Finland that starting 1st of September, there will be a VAT increase from 24 to 25.5%. It's not a huge uplift but that's also something which is impacting the purchasing power and therefore it will be also impacting our line of business. So we need to have some kind of positive signals from the market for the consumers for them to start purchasing and increasing the consumption. What we do believe is that we have the best possible business model in these kind of circumstances. We strongly believe that we have made the right business decision on securing profitability, being most cost efficient, making sure that inventories stay at a decent level and therefore be ready when the market opens up. We also strongly believe that we have a good solid strategy which is then giving us direction we have a nice good road road map on how to execute the strategy and make sure that we gain traction gain market share and gain growth and profitability when the market opens up again so out of these reasons At the beginning of the year there's no need to update any guidance of us. We all know that in retail during the third and fourth quarter revenue and EBIT is made. So at this point it stays intact and no need to update our guidance. So as a summary, Tough market, maybe tougher than we expected, significantly tougher than during the last quarter of last year. Our market dropping down by almost 10%. We maintained market position. We defended our margins. We made sure that the inventory levels stay at the healthy level. We did cost efficiency measures to be cost efficient. So we did all the things that we could and came out with the decent outcome. We were able to continue executing our strategy, pushing private label, pushing fast deliveries. So we believe that we are in a good position when the market opens up. We have done the right things in these stormy weathers. And when the wind turns and we have back wind, we are ready for growth again. Thank you all and have a great Thursday.