Clas Ohlson AB (publ)

Good morning everyone and welcome to the Claes Olsson Q3 report presentation. My name is Christoffer Tornström. I'm the president and CEO and I'm here with Pernilla Walfridsson, CFO. So here's the agenda for today. We will go through a business update and then Pernilla will lead us through the financial development and I will cover the events after the reporting period and the summary and then we will move into Q&A. Highlighting the third quarter and the first nine months of our fiscal year. The third quarter was another strong quarter from a sales point of view, closing at 13% organic growth. at a bit more than 3.8 billion SEK. We're also reporting our online sales growth today, and it came in at plus 22%, so a significant increase versus the last quarter. Looking at operating profit, we closed at 533, which is an increase of 30% versus last year, resulting in an operating margin of 14.3%. When it comes to the financial position we're in a strong position. We had an operating cash flow of close to 1.9 billion and we are ending the quarter with a net cash position of approximately 1.2 billion resulting in a net EBITDA of minus 1. Earnings per share for the first three quarters amounts to 12.65 versus 7.39 last year. We also reported our February sales today and we'll come back to those a bit in detail, but the growth has continued with 5% organic growth. And here we also have a calendar effect driven by the leap year last year that had an impact of approximately 4%. So we'll come back to February. So those are the headlines. and we'll now move into the business update and we'll start with our strategic position So all in all, there are three big areas that we view as our competitive advantages and we're consistently focusing and investing in those to make us more and more unique. It's all about the Claes Olsson ABC. It's the assortment, it's the brand and it's the customer meeting and the combination of the three. And the way we're leveraging this is to ensure that we differentiate ourselves and that we focus on multiple niches. Over the last few years we have gone from being a generalist retailer to more a multi-niche player. And you can see the five niches at the bottom and I'll come back to those in a second. The second thing is that we're doing a lot of work to consistently ensure that our operating model becomes more effective. We want to be cost competitive in the market and ensure that we are delivering a strong free cash flow that we can then reinvest into making the business even stronger. When it comes to targets, we have an ambition to deliver organic growth of 5% every year and deliver a 7 to 9 operating margin. And we are also executing on our sustainability agenda and want to also be a leader in that sense. Now looking a little bit at some of the key activities across the third quarter. So as we started this year, nine months ago, we laid out three big growth drivers for the year. And I think we can conclude that those three growth drivers in combination has delivered results. First of all, when it comes to assortments, we want to become relevant 12 months per year. And right now, looking at the business, all prioritized niches are driving growth. So it's broad based. We have also done a lot of work over the last few years to ensure that we do have what we call an all-weather portfolio to ensure that we are flexible. We have many legs to stand on, no matter what happens outside of the company. We've also had a continued very high pace when it comes to launching new products. I'll share a couple of examples later, but we are becoming more and more of an executional machine when it comes to constantly renewing our assortment, driving relevance and traffic, while of course also always focusing on the profitable core assortment that has a relevance all year round. The second big growth driver is our online business. And here we do see that we're reporting 22% growth in the quarter. This part of the business is and should be a profitable growth driver. and we also see that now approximately a fifth of the total class also sales actually goes online including the acquired spares business last but not least we continuously work on making our store network more robust today we reported also we have reported our like-for-like development and during the quarter we saw nine percent like-for-like development in our existing store network We're also on track when it comes to store openings. We had ambition to net add 10 stores this year and we're definitely on track for that. And the ambition as we kick off our new year, 1st of May, is to continue this pace also in the coming year. Then looking at the enablers, we do have a lot of focus also on our customer communication. It's a key way for us to build our brand. The brand stands strong and we do see that we are growing in terms of mental availability with our key customers when it comes to our focus areas. So the niches or consumer missions that we call them internally, they are becoming more and more top of mind for customers. and it's been growing across countries but we especially see positive development now in Finland. The second area is to ensure we have a very competitive cost base. We have done lots of changes over the last few years and the key is to not add any cost and rather focus on making the organization and the business more and more efficient for every day that goes by. And last but not least, when it comes to sustainability, one of the key areas for us is to ensure that the core business model is becoming more and more sustainable. It's all about selling need-based products that you really will use for a long time. And in the case, if the product breaks, we should offer a spare part to ensure that you don't have to buy new. And in the quarter, we saw our spare parts business excluding spares grow 29%. Then moving into the key areas that we look at to judge how we're developing versus our ABC, starting with the product reviews, which is a measurement to ensure that our product quality lives up to expectations. Here we are continuously delivering very strong results. We're constantly between four and five in terms of score. uh between one and five and we also get a lot of customer reviews on the assortment so all in all we are delivering on the product quality aspect the second aspect when it comes to the brand we want to be very affordable we want to ensure that we have a price position in the market that is competitive and we can also see this quarter that we are standing strong in terms of affordability last but not least delivering exceptional customer service is crucial for us and we have an mps that is constantly between 55 and 60 and looking at the quarter the results were strong we're usually slightly lower in the q3 given the amount of customers that we're welcoming but very very solid results Then moving on to just laying out the ground a bit on the niches. We do have our five focus areas, tidy up your home, light up your home, conscious home environment, connect and fix. And as I mentioned before, we do see growth across those areas. There's a lot of work happening to progress and evolve the assortment. And we've also done a few initiatives on the spares group recently. For example, we launched Batteriexperten into Denmark a few weeks ago. So a lot of things happening on the assortment and just to lay out a couple of examples from the quarter. Here are some products and news that have been launched and some examples across missions. So we can see a well-balanced range of new Claes Olsson products like the new LXC series that we're launching. Also combined with great brands that we're attracting into Claes Olsson and we just announced our partnership with Husqvarna. being the first retailer to offer the Husqvarna battery range across our business. We've also launched a lot of new products within Tidy Up Your Home with storage boxes for jewelry, etc. We also just launched a new brand within mobile accessories. And as you can tell on the right, there are also lots of product within conscious with electricity, storage, etc. That also complements the business really well. Last but not least, we have a lot of news in terms of light up your home. And that has really driven the business across January. So closing out Christmas and then customers replacing Christmas lights with other lightning. So all in all, high pace, good balance between Klaus Olsson products and well known A brands. It gives us an opportunity to build a solid good, better, best price ladder. And it also gives us a lot of flexibility to have lots of legs to stand on as we are moving forward. Last but not least, we have been talking about making the assortment relevant 12 months a year, and I think January is a good example on the progress that we're making. Historically, January was always a bit of a slower month for Cross Awesome post-Christmas, and we used to be around 600 million in revenue. This year we reported just above 900 million. So January is also now progressing towards becoming a billion SEC month. And I do think this is a good example of our flexibility and relevance within the assortment that we can shift and be relevant 12 months a year. And that work continues. So with that, I'll hand over to Pernilla to take us through the financial development.

Thanks Christoffer and good morning everyone. Let's dive into the figures of a very strong Q3. Total sales was up 13%, all of which relates to organic growth, meaning that we did not have any currency effects on sales in Q3. Looking at organic growth in detail, 9% comes from Life4Life and 4% comes from new stores. Online sales growth in the quarter was exceptionally strong, up 22% including Spares Group, which as of November is part of the base for organic growth. Total online sales was 717 million SEK. of which 204 million relates to sales in spares group. Online share of total sales is now 19% rolling 12 months. Looking at sales per market, we had fantastic figures in Sweden and Norway, but also worth highlighting that Finland was on par with our long-term growth target in the third quarter. Looking at some macro trends impacting our business, I think it is fair to say that the volatility remains and our job is to execute on proactive measures such as pricing, sourcing and sales mix. For instance, we did have negative impact from the previous spike in sea freights. during the quarter, but managed to offset this by lowering costs in other parts of the resourcing and transportation chain. That said, the previously higher prices for transports will keep affecting us also going forward as there are lag effects. But the current more positive development in sea freight will benefit us later on. When it comes to currencies, the weak NOC impact of immediately due to a large share of sales in Norway and the US dollar has been challenging for quite some time. After the end of the quarter, both NOC and US dollar have decreased compared to the SEC. As we can see on the dotted line in the graph underlying the previously mentioned volatility. The impact of the factors previously mentioned are very much in focus when looking at the gross margin. Product and price mix was key as we managed to increase the gross margin by 0.9 percentage point to 39.3%. Cost for sea freight was up during the quarter, but by being successful in other part of sourcing and transportation, we more than compensated for the higher sea freight. Currency effects were neutral during the quarter. The income statement shows a great leap in profit. Operating profit amounted to 553 million SEK in the quarter and slightly more than 1 billion SEK for the nine month period. And just as a reminder, comparables for the nine months also include last year's write-down of IT system and cost relating to reorganization. The EPS for the quarter was 6.72 sec, an increase from 5.07 in last year's Q3. Also, the development of the inventory is positive. New stores and more products have, of course, contributed to increases in inventory. But we have mitigated this with higher sales and efficiency in inventory management, resulting in an inventory on the same level as last year. We had a strong cash flow during the nine-month period. Cash flow from operating activities totaled 1.9 billion SEK. compared to 1.6 billion last year. Free cash flow for the nine-month period almost doubled to 1.35 billion SEK, but last year's figures is affected by the acquisition of Spares Group. 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 1.0. So we maintained the net cash position and well in line with our financial targets. By that, hand over to Kristoffer.

Thank you, Pernilla. So moving into the events after the reporting period, focusing on the February sales that we also reported today. So all in all, the total sales was up 4% to 715 million, of which 5% was organic growth. And then we had the currency effect of 1% relating back to what Pernilla just talked about when it comes to the Norwegian krona. As I briefly mentioned in the beginning, there was also a calendar effect due to the leap year last year. So one day less this year. So underlying was closer to 9%. Looking at the markets within Norway, 5% organic, Finland flat and spares grew 16%, continuing the good progress there. Looking at the store network, we had 14 stores more as we closed February this year versus last year. so wrapping up moving before moving into q a it's all about being consistent and ensure that we continue to execute we laid out our strategy approximately three years ago and we are executing on that and obviously there are a lot of things to consistently and continuously improve first of all it's all about ensuring that the assortment progress continues We know that new products, it drives sales and it drives visits and it drives relevance. It builds the brand and makes us very top of mind with our customers. It's critical for us to ensure that we continue to be competitive when it comes to pricing. And also, as I laid out during the looking at the different news we're launching, also ensuring that we do have a solid price ladder with lots of different options, depending on your needs as a customer. It's also critical to ensure that we with quality continue to build out our store network. It's both adding new stores. And as I said earlier, we're the ambition is to continue with the same pace as we've done over the last couple of years. But it's also about improving the store network that we currently have and then continuously fueling the profitable and growing online business so that we continue to be exactly where the customer wants to be. Last but not least, the macro environment is obviously volatile, and it's key for us to focus on the things we can influence, which is very much our own costs and ensuring that we do stay in a very strong financial position so that we can reinvest into building a stronger company also moving forward. So with that, we'll move into Q&A.