Clas Ohlson AB (publ)

Good morning everyone and welcome to the Klaus Olsson Q1 report. My name is Gustav Trondström, I'm CEO and here together with Pernilla Walfridsson, CFO. So we'll cover a short presentation before we move into Q&A. So I'll start with a business update. Pernilla will take us through the financial development and then I'll close out with events after the reporting period and the summary. So some highlights from the first quarter. We see that organic growth continues with 10% growth across the first quarter and our operating profit came in at 203 million and our margin at 7.7%. Also cash flow stable with operating cash flow 413 million and the company is still in a very solid financial position with a net EBITDA of minus 0.4 And our EPS in the quarter amounts to 2.3 versus minus 0.42 last year. We also see a good start to the second quarter with 7% organic growth in August. I will come back a bit more to that. So moving in to the business update and starting from the strategic position that we talked about last time when we closed out Q4. So there are three big things that we're focusing on as a competitive advantage for Claes Olsson. It's all about the assortment, the brand and the customer meeting. Those three things make us unique. And that's what we're investing in to drive value forward. Looking at how to leverage this, we are differentiating and we're focusing across five niche areas. So we're moving more and more from a generalist retailer to more a multi-niche player. And you can see the niches here at the bottom. We tidy up your home, light up your home, conscious home environment, connect and enjoy and fix your home. We're doing a lot of work to ensure that our business model is scalable and efficient and ensuring also a very cost competitive position. And we want to generate strong cash flow that we can reinvest into assortment, brand and customer meetings to deliver a very solid return over time. Looking at our targets, the mission is to grow 5% a year organically with 7 to 9 operating margin and also to be industry leading on sustainability. So looking a little bit at the first quarter, how we've been executing towards this plan, we identified three growth drivers for this year, which are very similar to the ones we have been focusing on over the last couple of years. And the first one being making our assortment relevant 12 months per year. And I think the first quarter has shown that we're doing this in a good way. We see all the niches driving growth. And it's really the non-seasonal assortment that's driving growth. Looking at the summer season assortment, it's an average summer. And the growth of 10% organic comes very much from the breadth of assortment across the five niches. We have continued with a high pace, launching new products, and we also have a lot of new news now entering the forum. Second, the growth driver, profitable and growing online business. We saw that the first quarter sales came in at 12%, so slightly above the total organic sales growth of the company. And we do see that our solid Omni structure is a competitive advantage. So also with more stores added to the network, it also supports the e-com growth. The Spares Group delivered sales of 210 million, and this is obviously another driver of future e-com growth. The third growth driver is building a robust store network. So in the quarter, we have added three new stores, two in Sweden, one in Norway, and there's a plan to open another five stores now in the second quarter. And for the year, the target is that we're going to add net 10 new stores. Net means that we might open more than 10 and also close some. So net-net, we expect 10 more stores to come into the network. We're also working to make the store portfolio more efficient. And we are doing some rebuilds and investments in the current store network to make it even more efficient and optimize the chances to deliver a good sales development and return. When it comes to customer communication, we do see that we have strong relevance with our customers and the customer satisfaction continues to be on a very high level and we also see club class continuously growing so we now have five and a half million members and a year ago we had approximately 5.1 million members so club class continues to be a driver forward We have done a lot of work to make our organization more efficient, and we are growing now without adding anything to the organization and are continuously working to make the business model more effective and scalable. On sustainability, we just released the numbers for 2023 when it comes to scope one and two CO2 emissions, and we can report a decline or a reduction of 38% across the full calendar year 23. Moving down into the niches, I've already mentioned that we do see all five driving growth. and also we see that our spare parts business is continuously evolving and also the consumables assortment so we are very much a destination for need-based products and once the customer enters the store or online they also find lots of other products that they actually need and we do believe that the balance between these five puts us in a very good position forward uh the last point on customer relevance and satisfaction so i've talked about abc assortment brand customer meeting here are some data points to show the progress starting with product reviews which is obviously a reflection of the assortment we do receive a lot of reviews from our customers and we also get very high ratings from our customers so the products they buy they like keep and use for a long time Second, on affordability, one of the most important things for the Claas Olsson brand is to always deliver value for money versus customers. And we can see from the benchmarking data here that we're doing a good job also versus the discount competitors. Our NPS, the Net Promoter Score, is very stable at 58. The store network is very strong, and we have seen over the last few years a strong development also of the online NPS. So that's all in all short business update, and I'll hand over to Pernilla to take us through the financial development.

Thank you, Christoffer, and good morning, everyone. As Christoffer has mentioned, we have closed a strong Q1, and I will now go through the figures more in detail. Our total sales is up 20%, of which 10% comes from the acquired spares group, and 10% is organic growth, sales growth in local currencies excluding acquisitions. Like-for-like sales was up 7%, and online sales growth in the quarter was 12%, excluding spares. Including spares, online sales was 494 million SEK for the quarter, which adds to an online share of total sales of 17%, rolling 12 months. Looking at the different markets, we have really strong organic growth figures in Sweden and Norway, but Finland's performance is also improving. When it comes to macro factors, we have talked about the volatility in transportation costs quite a few times before, and this quarter is no exception. There has been a sharp increase in sport prices during the past month, due to many different factors, with the situation in the Red Sea as an important trigger. We do see, however, a more stable development in recent weeks, but will of course monitor the situation closely. We have, as you are aware, different types of transport agreements, and a lag effect due to the turnover rate of our stock in trade. The Swedish krona remains weak in relation to the US dollar, which is of course affecting purchasing costs. Looking at what has impacted the margin, the currencies, as I just mentioned, had a quite significant impact. Here I would also like to highlight the positive hedging effect in NOC that we had last year, which this year took off in an opposite direction, meaning that the hedging effect was negative compared to last year. The structurally lower gross margin for spares group also impacted gross margin negatively with about 1%. This we have mentioned before, and it is an effect that will fall out of the comparison once we have had spares on our books for the full financial year. If we disregard the spare effect, things we had actively worked with ourselves, such as sourcing and pricing, have contributed to strengthen the underlying profitability. All in all, gross margin declined by 0.7% to 37.5%. The income statement shows a really strong Q1. Operating profit amounted to 203 million SEK compared to minus 16 last year. As you know, the comparables include last year's write-down of IT systems and costs relating to reorganization. So also when comparing with last year's excluding one of, profit is significantly up. The EPS for the quarter was 2.3 sec, an increase from minus 0.4 last year's Q1. If we look at the inventory, the total inventory level is up. Important factor for the increase is somewhat earlier response. due to the situation in the Red Sea. The spare group stock in trade is included in the figures. More new products and more new stores. Most importantly is that we see that it is a sound inventory that will support future sales with a good balance between different products and categories. Cash flow for the quarter was strong. Cash flow from operating activities totaled 413 million SEK, an improvement from 328 million SEK last year. Free cash flow amounted to 287 million SEK compared to 184 million SEK last year. Since we are highlighting the free cash flow, I would also like to mention that we define free cash flow as cash flow after investing activities, including amortization of lease liabilities. Net debt, EBITDA, excluding IFX 16, was minus 0.4%. So we maintain the net cash position and well in line with our financial targets. So with that, I hand back the presentation to you, Kristoffer.

Thank you, Pernilla. So looking at August sales development, so the first month of Q2, we saw total sales being up 13% to 968 million, of which 7% organic. We see negative currency effects of 3% and the acquired spares group at 9, so we didn't have spares in the comparison. So broad-based, Sweden up seven, Norway eight, Finland seven. And it's obviously the Norwegian krona that is impacting us the most. So we do see 8% organic growth in Norway while we report 1% growth in Swedish krona. So that has a pretty significant impact. The store network was increased by 11 stores if I compare to the end of August last year and similar to Q1. to the previous quarters we also did see all five product niches driving growth also in august so a very strong start to the second quarter then wrapping up before we move into q a so we are continuously working in line with the strategy we laid out more than two years ago now we're working with our growth plan and we believe that the general market and the general consumer The situation is still fairly weak and it's even more important or as important as ever to execute everything flawlessly day to day and also to continuously working with a very valuable money assortment. As I mentioned, we do still do a lot of work in terms of renewing the current assortment, launching a lot of new products and also taking out products that do not perform as well. And we are continuously developing our sales channels. So again, five store openings in Q2 and also working to strengthen the store network that we currently have and continuously growing online sales. We believe that those three factors will help contribute to continued 5% organic growth also moving forward. And as always, we will be tight in terms of cost control, not adding any cost, even though we're growing. And also every opportunity to find efficiencies will go after. So with that, we'll move into Q&A.