Clas Ohlson AB (publ)

Good morning and welcome to the Claes Olsson Q2 report presentation. My name is Erik Stocktonström, I'm the CEO and I'm here with Pernilla Walfridsson, CFO. We will do a short presentation before we move into the Q&A. So I'll cover the business updates, Pernilla will take us through the financial development and then I will go through the events after reporting period and a summary. So looking into the second quarter, we have delivered strong sales development with 10% organic growth across the quarter. We've also been able to improve both gross margin and operating profit. And we have continued with our cost saving programs and thereby also focused on becoming even more efficient and flexible. The good news is that we see that the growth is broad based from across all our key categories. And also we have a high amount of new products being launched that also drives sales growth. Also operating cash flow has recovered versus last year. And today we also reported November. where we saw 7% organic growth and we'll come back to that a bit more in detail. So starting with the business update, just reminding ourselves about our targets. We want to deliver 5% organic growth per year with a 7 to 9 EBIT margin and we want to become industry leading in terms of sustainability. So those are the overarching objectives. Looking at the focus areas for this year relating back to our strategy that we launched back at our Capital Markets Day in 2022. We have three main focus areas. The first one is to make our assortment relevant 12 months a year. And the second one is to drive profitable growth on ecom. And the third one is to start expanding our store network. So just briefly touching what has happened over the quarter across each of these. So first of all, in terms of assortment, I'll come back to a bit more detail, but all in all, we do see that the growth is broad based across the categories that we have prioritized. We have done a lot of work to ensure that we can adapt quickly to changing consumer needs. We see the flexibility in the assortment as critical. And we have also launched thousands of new products this year. And we do see an effect of the product news also driving sales growth. On our e-commerce business, the online sales have grown 15% now in the second quarter. And our online business this quarter now versus end of pandemic has actually doubled. So we have seen good progress there. Still 50% of online orders are delivered via our store network. So obviously the combination of our fiscal store with our e-comm is continuously helping us to deliver great service and also enabling good profitability. We also see that we have become even more efficient in terms of having products available. And we have also, as part of the product launches that we have done, we have launched a lot of new products exclusively online. to try out new ideas before we roll it out more broadly or products that are more suited for a specific ecom purchase behavior. On the store network, obviously we have a few years behind us of optimization of the store network in the quarter that we're reporting. We had one store less than last year, but already in November we opened three new stores. and we have also rebuilt or moved stores so the optimization of the network continues and we're on track to open the 10 stores that we've communicated for this year and we've also signed already now four quarters or sorry four stores ahead of next fiscal year Obviously, the growth drivers, the focus areas are all enabled by being very efficient in terms of how we communicate to customers. And here we are shifting. We have shifted most of our spend online and we do a lot of work in terms of digital marketing, both in social and paid search, etc. And it's playing out well. Also, Club Klaas is a great enabler. Looking at Club Klaas this quarter versus last year, same quarter, we actually have half a million more members, so a membership group of 5.2 million members, which also allows us to communicate frequently with the most important customers. Our work with ensuring a competitive cost base has continued, and as previously announced in the last few reports, We aim to save 210 million on an annualized basis, and all the plans have progressed as planned. And on sustainability, one of the key things we've done this quarter is to roll out bigger parts of our spare part assortment. For us at Karlsson, it's critical that we sell high quality products at good prices. That consumers can keep in use for a long time and if something happens that they can also repair what they bought. So having a broad spare part assortment available is critical for us. Looking then a bit more deeply into the way we work both with assortment but also in terms of the categories that we're prioritizing in our communication. Since our capital markets day, we have talked a lot about our five consumer missions. So tied up your home, light up your home, creating a conscious home environment, connect and enjoy your home and fix your home. So those are the five big destinations where we know that customers are really thinking about Claes Olsson when they have a problem or a need at home. I'm looking at this quarter. We do see growth across all five. If I compared to a year ago, we saw growth in two out of five. So that's obviously one big change. And we're really thinking about this as building out more of an all-weather portfolio where we always have something that we can offer based, needless of customer needs or season shifting. then on a everyday basis we are also focusing a lot on sustainability spare parts and obviously seasons is critical for us not least the season we're in right now the christmas season so the five missions are here to drive traffic and then we have also expanded our consumables assortment over the last couple of years to ensure that we can also complement the other categories with more consumable products Looking a bit more into, I mentioned product news. So we have launched thousands of new products this fiscal year. And a big part of the organic sales growth comes from new products. And we have been able to identify gaps in our assortment and also identify new needs from a customer point of view. And I also believe we've been able to price these at good levels, attractive levels, which also has helped our both gross margin and value perception with customers. So looking at where we stand from a customer point of view, we do know that the consumer sentiment in our markets is still low. It's been improving slightly, but it's still far below historical levels. And we really can tell that the households and our customers are extremely price sensitive. Then obviously it's critical for us to ensure that we deliver high value for money. And we track this every quarter and we see that the customers really look at Klass Olsson as high value for money as the discounter competitors. And we need to ensure we do everything to remain competitive from a pricing point of view. And last but not least, we also deliver outstanding customer service. So our MPS is at 57. In our store network, it's even higher. And we do see that that makes us stand out versus a lot of other retailers out there. And all the work that we've done in terms of taking out overhead costs, et cetera, is also to protect the customer meeting also physically in our stores, because we see that that makes a big difference for our customers. And then my last point before handing over to Pernilla. We're also very happy that as of 8th of November, we have also closed the acquisition that we announced back in October. We have acquired the group Spares, which consists of two consumer-facing parts, Teknikdelar.se and Batteriexperten, and two business-to-business parts, Spares and Zahn Group. We did this acquisition first to ensure that it adds value to Claes Olsson. We expect this to be very secretive upon closing. And we also do this to really continue our strive for delivering both on our Connect mission, but also to build out in terms of our spare part assortment. We do see this as a very big underlying trend. and we're going to integrate the sparse group as part of our q3 report so we will come back more on this in our next report so today we we do not have that much more information to share but we're excited about the deep closing and we believe this is a big opportunity for us both here now and longer term so with that i'll hand over to panilla to take us through the financial development thank you christopher good morning everyone

And now let's dive into the financial of Q2 and the first six months of this financial year. Looking at the sales development, I think we have shown strength and we have maintained the positive momentum from the first quarter into the second. Total sales in Q2 is up 9% to almost 2.5 billion SEK. Organic sales is up 10%. And like for like, sales in comparable units is up 10%, with thanks and a positive view on opening new stores. I also think it is important to underline that we strongly believe in the combination of physical stores and online sales. Online continue to drive a significant share of total growth, up by 15% in the quarter. When it comes to a different market, we see strong total sales growth in all markets in Q2. Organic sales growth also shows positive figures for all markets. Measured in local currency, Norway is the strongest growth market with a 13% organic sales growth in the quarter. A positive milestone that we now have reached about 1 billion SEC in Q2 sales both in Sweden and Norway. Before moving on and commenting on profitability, I would like to briefly remind you of the macro factors impacting our business. Firstly, it is very positive that the freight prices have stabilized on a historical, more normal level. The pandemic effects on logistics are now roughly one year behind us, which means that we have very small lag effects left in our inventory. This graph shows sport prices for transport as an illustration of the market conditions. And as you can see, prices have been quite stable on a reasonable level since October last year. Less encouraging is the continued weak SEC compared to the US dollar. In a three-year perspective, the SEC has lost approximately 25% versus the US dollar, which impacts us a lot. When it comes to mitigating primarily the effect of the weak Swedish krona, we constantly adjust our prices. optimize sales mix and balance campaigns and share of private labels to mention a few. With those factors I mentioned in mind, we see a great uplift in gross margin in the quarter. We have shown pricing power, but also the ability to adjust the product mix in a good way. Sourcing and transportation costs have declined, which we can conclude had a major impact on gross margin. These positive factors were largely offset by current effects with the weak Swedish krona compared to the US dollar. But in summary, we reached 3.6 percentage points higher gross margin compared to last year. Summarizing our income statement, we have improved operating profits substantially. The operating profit excluding non-recurring items in Q2 totaled to 277 million SEK. We are of course pleased with this development, but it should also be seen in the light of last year's relatively soft Q2. Share of selling expenses decreased by 2.3% to 28.1%, mainly thanks to increased sales and conducted cost savings. Administrative expenses were flat at 50 million SEK. Looking at the six-month summary, we see a similar pattern with increased profits and even larger non-recurring items with disposal of IT systems and costs for white-collar reductions. All in all, we have a profit for Q2 at 173 million SEK and 147 million SEK for the six-month period. As always this time of the year, we have an increase in inventory ahead of peak season. The inventory is also affected by external factors such as the Swedish krona, US dollar exchange rate. Compared to end of October last year, the inventory level is however down with almost 200 million SEK. So last year inventory was a bit high and we believe that this is a better level. Our ability to generate cash is a strength and we saw a solid development in the quarter. Cash flow from operating activity totaled 192 million SEK compared to minus 167 million SEK last year. The improvement between the quarters is mainly due to a higher profit and the difference in changing working capital due to normalized inventory build-up. At the end of the quarter, our credit facilities totaled 600 million SEK, of which 100 million SEK was utilized at the end of the period. After the end of the reporting period, in connection with the acquisition of Spares Europe AB, the credit facilities credit facility was increased by 510 million SEK to 1.1 billion SEK. And of this 1.1 billion SEK, 506 million SEK was utilized after the closing of the acquisition. Net debt, DBDR, excluding IFRS 16, was 0.0 times, which means that the financial position is well in line with our financial targets. I hand over to Kristoffer.

Thank you, Pernilla. So looking at the events after the reporting period and our November sales development, we again saw solid development with organic sales growth of 7%, net sales growth of 4%. Obviously, the difference is driven by the weak Norwegian krona and like for like up 6%. Again, as for Q2, we saw organic growth across the three markets. And we also saw organic sales growth across the five missions, so similar to the Q2 development. Our online business in November grew 12% and in the numbers we also have included the November sales of spares, both in terms of the total and also for online. And we believe that Asperis is progressing exactly as we expected, but obviously we'll come back as of Q3 closing to share a bit more details. So here we only have the absolutes included. Moving on into the summary and then Q&A. So obviously the key for us is to continue to execute on the plan that we laid out a couple of years ago. We do know and we do see that the market environment and the uncertainty around the consumer spending remains. We are still very humble when we look into the spring. We do know that Claes Olsson is incredibly strong in the Christmas period and we are working a lot of plans to continue to deliver in the spring. But it's again, we're also very humble in terms of the development. Also, as Pernilla mentioned, we need to remember that the first half, we were also meeting fairly soft comparables, whereas, of course, in the second half, the picture is a bit different. We keep working on the key things that we believe will drive us forward. It's the relevance in our assortment, it's value for money for our customers, and also remaining our high flexibility so we can adapt based on how the customer needs are adapting. Also, we have some exciting store openings to look forward to in the spring. And we want to continue to drive our online sales growth also in the spring. Again, we, of course, stay very cost focused. We have executed on the programs that we laid out. So we're going to continue to be cost focused and ensure that we do not add any costs, but actually do everything to become even more efficient also moving forward. So with that, let's move into Q&A.