Clas Ohlson AB (publ)

So good morning, everyone, and welcome to the Claes Olsson Q2 report presentation with me, Gustaf Tornström, CEO and CFO, Pernilla Walfridsson. So we'll, as always, go through a short business update that I'll take us through and then we'll go into the financial development, the events after the reporting period and the summary and Q&A. So starting by headlining a bit the second quarter and also the start of Q3, we can conclude that Q2 sales came in at 2.8 billion, which is an organic growth of 8%. Also operating profit was up approximately 11% versus last year to 307, which also then translate to a margin of 11%. We can also conclude that online sales now represents almost a fifth of the Claes Olsson sales now in the second quarter. So it's obviously clear that driving profitable growth online as well is driving the results. Cash flow wise also came in slightly above last year and we ended the quarter with a net cash position of 211 million. Also, the start to Q3 was solid with a 13% organic growth in November. And we'll get back to a bit more details there. So business update and starting a bit from our strategy and then moving on towards the activities we worked on during the quarter. So overall, there are three big things that really sets us apart that we view as our competitive advantages. And that's our assortment, our brand and the customer reading and the combination of the three. uh so we do focus our attention and resources on really differentiating uh to ensure we have the resources behind those three areas to really set us apart the ambition is to develop a scalable and efficient operating model that is cost effective and we see that the changes we've done over the last few years is helping with leverage in terms of when top line grows We also want to generate a strong free cash flow that we can then reinvest into further strengthening our position across assortment, brand and customer meeting. Since we updated our strategy a few years ago, we also have concluded that we are very much a multi-niche player versus being a generalist. So we are focusing our attention across five niches that we call our consumer missions and you can see them at the bottom here at the slide. Also, you see the brands Teknik, Delar and Batterie Experten, which is part of the spares group that we acquired now one year ago, which is part of the whole Connect and Enjoy Your Home. So looking at our targets, our ambition is to grow organically 5% a year and deliver a operating margin of 7-9%. And we also want to be industry leading when it comes to sustainability with ambitious goals over the next few years. looking then a bit what we have done across the second quarter linking back to executing on this plan and strategy first off when it comes to our assortment the ambition from us is to build a strong all-weather portfolio that is very much relevant all year round and i do think we have a few good examples looking at the second quarter first overall all the five niches are growing We have had a continued high pace in terms of reinventing our assortment. We've launched a lot of new products, which drives a lot of traffic and that also then drives big sales on the base business. We also see that the second quarter from a pure seasonal perspective has been fairly weak when it comes to seasonal products. It's been a warm quarter. We have sold less heaters, etc. But thanks to the assortment strategy, we're compensating by being strong across other areas that are extremely relevant to our customers. The second part is growing online in a profitable way. And I think we can conclude that we're doing that, as said initially. Almost a fifth of the sales now goes online. And to us, our Omni structure is very much a competitive advantage. We do see that the combination of our store network with our relevance online goes hand in hand and delivers and enables a very high customer satisfaction, no matter where you choose to interact with Claes Olsson. We also see that a big part of the online volume uh in one way or the other flows via the store network which again shows how important it is to us to have a solid omni structure um looking at the sparse group that now as of november is um uh it's gone one full year uh since uh the acquisition became of the as far as became part of the class also group um and here we reported sales of 211 million so that's included in our online sales now The third big focus area to drive growth is to work with our store network and here we have added four new stores across the second quarter and we're on track towards delivering 10 net new stores for the fiscal year. we also work a lot with the store network that we have we have seen strong like for like growth over the last six months across the store network so it's also important to continue to improve the store network that we have so there are several moves and rebuilds underway and also executed when it comes to enablers Communication and being close and relevant to customers is obviously extremely important. And we do see now that more and more customers associate Claes Olsson with our prioritized niches or missions than before. So it shows that we are even more clear in our offering. Second cost base, we do have a more efficient organization and we are doing everything to ensure we keep a solid overhead cost structure so that we get leverage from the sales growth and the growth drivers above. On our sustainability agenda, a lot of things obviously happening on a going basis. To name one across the quarter was that we were named one of the most equal companies by the Albright Foundation in Sweden. Then looking at the most important part, our customer relevance and satisfaction, then this links very much back into our assortment brand and customer meeting. So starting with products, we are a product company having the right assortment and high satisfaction behind the products we're selling is crucial. We continuously get high number of reviews of the assortment and the products we're selling and we are also consistently delivering very high scores when it comes to the product reviews. The second area is from a brand point of view to be always very affordable. And here we benchmark ourselves to the low price and discount competitors. And we do see that we are affordable and we are delivering value to our customers. And then the last point on the customer experience and satisfaction, we constantly measure MPS every day across our interactions. And as reported before, we are constantly slightly above 60, which is a high level versus the retail average benchmark. Moving on then, not going through too many details, but as I said, looking at our five missions, the five niches, this is really what drives traffic to Claes Olsson. We have seen strong traffic growth across the quarter and the month. and these five areas drive relevance and it really enables customers to come to us when they have a specific need in one of those areas and they can then find the product they need and they usually leave the store with a few more products that they found when visiting us and usually products they really also need A couple of examples. We are constantly launching new products and always trying to look for new, simple, smart solutions for our customers to solve needs. Here on the slide, we see some examples of organizing your shoes. I guess everybody can relate to how much space shoes take. So having these type of simple, practical solutions to help customers in their day to day makes a difference. but also to repair products and then also to clean the home. So just a couple of examples of of things that we've been launching. also cleaning and tied up your home is a key part but it relates to cleaning also your shoes as an example here with a fantastic product cleaning white shoes but also very practical solution for solutions for home fixers that maybe do not have the skills to work with power tools etc so magnetic hooks hooks that you can push through the wall without using drilling etc So these are just a few examples of the typical Claes Olsson products, quirky smart solutions to everyday problems that you want fixed. So with that, I'll hand over to Pernilla to take us through the financial developments.

Thank you, Christoffer. And good morning, everyone. I'm very pleased to once again have the privilege to guide you through the financials of a really strong quarter. As previously communicated, total sales was up 14%. of which 8% is organic growth, minus 3% relates to currency effects, and the acquired spares group stands for 9%. Looking at the organic growth in detail, 4% comes from like-for-like, and 4% comes from new stores. Online sales growth in the quarter was 6% excluding spares, excluding currency effects online growth was 9%. Including spares, online sales was 527 million SEK for the quarter, which adds to an online share of total sales of 18% during 12 months. Looking at the sales per market, consumer confidence remains relatively weak. But despite this, we see positive development in all markets. I think it is impressive that we have such good momentum in sales despite the macro climate. There are, however, as always, some external factors that impact us. Firstly, it is positive that freight prices have declined during the autumn. The previously higher prices for transport will keep affecting us the coming quarters, as we have different types of transport agreements and a lag effect due to the turnover rate of stock in trade. But we will see positive impact on this recent decline later on. When it comes to currencies, the week knock impact us immediately due to a larger share of sales in Norway. And the US dollar has been challenging for quite some time, with a further increase in relation to the SEC during November, up to as high as 11 SEC for one US dollar in mid-November. All in all, gross margin declined by 1.5 percentage point to 39.8%. Looking at what has impacted the margin, there are of course a lot of components affecting the gross margin. The main positive effects come from reduced cost of sourcing and transportation compared to Q2 last year. Currency effects, including hedging, impact us negatively, also this quarter. And the structurally lower gross margin for spares group also impacts gross margin negatively, with slightly more than 1%. If we disregard the spare effect, things we have actively worked with ourselves are strengthening the underlying profitability. Operating profit amounts to 307 million SEK compared to 245 million SEK last year. We have no one-off effect during the quarter. and the comparables include last year's write-down of IT systems and costs relating to reorganization. Looking at the first half of the fiscal year, operating profit has increased to 510 million SEK. The APS for the quarter was 3.6 SEK, an increase from 2.7 in last year's Q2. Looking at the inventory, we see the effect of the usual build-up for the third quarter sales period, which of course includes Christmas sales, as well as longer lead times with the current longer C-frame groups. The inventory is sound and supports future sales with good balance between different products and categories. Please also remember that the inventory now supports more stores and includes spares groups inventory as well. Cash flow for the first half of the year was strong. Cash flow from operating activities totaled 30 million SEK, an improvement from 520 million SEK last year. Free cash flow for the first six months amounted to 176 million SEK compared with 211 million SEK last year. The cash flow was strengthened by an increased result But the earlier build up of inventory and higher investment were key factors behind the slightly drop from last year. And as previously stated, we defined free cash flow as cash flow after investing activities, including amortization of lease liabilities. Net debt, EBITDA excluding IFRS 16 was minus 0.2. So we maintain the net cash position and well in line with our financial targets. And with that, I hand back the presentation to you, Christoffer.

Thank you, Pernilla. So looking at events after the reporting period, we also today reported our November sales numbers. So the first quarter of Q3, the first month of Q3. All in all, we saw strong sales development across November, growing total sales 165 million and with 13% organic growth. Here we do not see the same currency effects. We're now meeting a slightly lower base on the Norwegian krona, so no currency effects from a sales point of view. Also, broad-based growth in November. Sweden, Norway, strong double-digit organic growth. Finland, 4%, and Sparse Group, 4%. So, all in all, a good start to the Christmas season. And across the board, good execution from the Claes Olsson team, welcoming a lot of customers during this very busy season for us. Also, the store network has increased 14 stores compared to end of November last year. So wrapping up before we move into Q&A, we're going to continue to execute on the long-term plan and in line with our simple strategy. It's all about ensuring relevance for our customers, ensuring that every customer that visits Claes Olsson lives happy and well taken care of to ensure that they come back more and more. We are continuously working with the store network. We haven't announced any number of new stores for next fiscal year, but for this year we are on track versus the net 10. And we are satisfied with the stores that we've opened and we do see strong like for like developments on the ones that we have. So we're going to continue with that. also going to continue building a profitable online business now online sales rolling 12 months is surpassing 2 billion swedish krona so it is a significant part of class also and continuously working with this making it more and more efficient and more and more customer friendly is a key priority And we will always continue to be very cost focused and cost conscious. There are still macro challenges that we need to mitigate and balance. But at the end of the day, it's about being cost conscious to ensure that we get scalability in the business, but also that we can deliver the absolute best value to our customers. So with that, we can move into Q&A.