Clas Ohlson AB (publ)

Welcome to the Class Olson Q1 2025-2026 report presentation. For the first part of the presentation, participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing hash 5 on their telephone keypad. Now I will hand the conference over to CEO Christopher Tonstrom and CFO Pernilla Walfriedsen. Please go ahead.

Good morning and welcome to the Claes Olsson Q1 report presentation. My name is Christoph Trondström. I'm the CEO and I'm here with Pernilla Walfridsson, CFO. So we'll go through a business update. Pernilla will take us through the financial development and then I'll cover the events after the reporting period and then the strategy update and summary before we move into Q&A. So overall, looking at the first quarter, we've had a strong start to the new year. And we have shown again that we can deliver both growth and profitability. Looking at some of the highlights, the first quarter sales came in at 10% organic growth. And the operating profit came in at 278 million, which is up 37% versus last year. And this results in an operating margin of 9.9%. Also cash flow was strong coming in at 468 versus 413 last year. So the financial position is still strong with the net EBITDA of 0.3. And we're under the quarter with the net cash position. EPS came in at 3.27, also that up versus 2.3 last year. And today we also reported the August numbers, and we saw a solid start also to the second quarter with 7% organic growth in August. Moving into the business update and starting with our strategic position, we continue to execute on the strategy that we laid out back in 2022. And we're doing everything to solidify our competitive advantages related to our assortment, the Claes Olsson brand, and the customer meeting. And we are doing a lot of work to differentiate ourselves by focusing on our multiple niches. And we are doing a lot of work to develop a scalable and also efficient operating model that's cost competitive. We measure ourselves versus the discounters and low price players in the market. And we want to generate a strong free cash flow that we can then reinvest into our ABC. So looking at the financial targets, we are over delivering on the targets, both when it comes to sales and margin in the quarter. And the financial position remains very solid. Now looking at some of the highlights from the first quarter, we laid out three growth drivers for the year ahead. The first one is related back to our assortment, making it relevant 12 months a year. And here we've had a continued high pace in terms of renewal. And we saw over the summer that we have seen strong performance both across the base business, seasonal products, but also news. And we have also done a lot of work to become more flexible when it comes to purchasing. And we saw that we were able to meet the peak demand of seasonal products back in July when the weather turned very warm. Second, on the profitable and growing online business, we see that the B2C channels show very positive development. Reported sales on Ecom was plus 10%, but if we look in isolation on the Klaus Olsson part of the business, Ecom was actually up 28% in the quarter. And the online-only assortment, which we have also worked on over the last few years, is driving significant growth. And we now have more than 4,500 products that are web only. Last but not least, on the growth drivers, we continue the work to building a more robust store network. In the quarter, we saw strong like-for-like development and also customer satisfaction remained very high during the summer months. And we are now preparing for even further rebuilds of more stores and also more store openings happening now in the second quarter. So the ambition to launch 10 new or add 10 net new stores this year remains as we move forward. When it comes to the enablers in terms of efficient customer communication, we keep working with a big focus on digital marketing, which is flexible and scalable. And it is supporting both online but also in-store growth. When it comes to the competitive cost base, here we continue to work across the organization to be competitive across all parts of Klas Olsson. And also not adding any structural costs, even though we're growing significantly. looking at the sustainability agenda and highlight here is that we see strong growth on spare parts both on the spares business but also within the class also on class also business and here the ambition is very much to deliver a more and more sustainable business model where consumers buy products they really need use for a long time but also are able to repair and looking at the customer relevance and satisfaction this is very much a few numbers that highlights the abc so we are very much in the sweet spot that we want to be in product reviews remain very strong we get lots of reviews from our customers and the quality that the customers play back is that we have a very high quality assortment when it comes to affordability we continue to be competitive also versus the low price players in the market And on the net promoter score, we are still within very high levels across all the channels where we meet the customers with an MPS at 57 for the quarter. So looking ahead, we are continuing the effort to strengthen Klass Olsson across the five prioritized niches. and we do look at ourselves as a multi-niche players and we can see across the quarter that we have been growing all prioritized niches and the work continues to further solidify ourselves across each of those five areas so without i will hand over to panilla to take us through the financial development thanks christopher and good morning everyone

Let's run through the numbers more in detail. But first, I would like to remind you of the changes in our reporting that comes into effect from this quarter. We have moved from the function of expense method to the nature of expense method. The main reason for the change is that this way of reporting profit and loss is how we already work internally, and that's how management reviews the operations. This means simpler way of working. and more efficient processes and we also believe it gives more transparent information on significant expense categories. This change has no impact on net sales and operating result and no impact on our financial targets. What you will see later on in the presentation is that it impacts on gross margin. Looking at the performance during the quarter, we can conclude that sales were strong, with total sales up 7%, of which 10% relate to organic growth and minus 3% relates to currency effects. Like-for-like sales was up 7%, and online sales were, as Christoffer mentioned, strong during the quarter, totaling 542 million SEK. Looking at the whole markets, we had strong organic growth figures across the board, but obviously with extreme strong figures in Norway. As previously communicated, sales in market outside Sweden, Norway and Finland, which is dominated by sparse business-to-business sales, were down by 35% due to changing market dynamics following the weakening of the US dollar. When it comes to macro trends, we are less concerned about transportation costs at the moment as they have remained at a reasonable level, even if there has been an increase in spot prices during the summer. The US dollar remains at a lower level than in the last couple of years, which of course is positive for us as it is a big purchasing currency. Impact from NOC continues to be negative and immediate due to a large share of sales in Norway. As I mentioned, our gross margin looks a bit different than we are used to due to a change in reporting method. All historical figures are of course available in previous reports. No matter reporting method, gross margin improved significantly from last year. The main factor behind the increase was lower purchasing costs. Currency effects were slightly positive. That's positive effect from lower purchasing currencies and hedging compensated for the negative impact from selling currency NOC. But all in all, gross margin increased by 1.4 percentage points to 45.7%. The income statement shows a record-strong Q1. Operating profit amounted to 278 million SEK compared to 203 million SEK last year. Also note that we did not have any items affecting comparability in the quarter. DPS for the quarter was 3.27 SEK, an increase from 2.3 in last year's Q1. If we look at the inventory, the total inventory level is down compared to Q1 last year and at a very good level, despite more stores compared to previous year. We are still very pleased with the availability of products and we think the stock in trade is fresh and well balanced. Cash flow for the quarter was strong. Cash flow from operating activities totalled 378 million SEK, an improvement from 346 million SEK last year. Free cash flow amounted to 306 million SEK compared to 247 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 depth EBITDA excluding IFRS 16 was minus one times. So in other words, I maintained net cash position. And with that, I will hand back the presentation to you, Kristoffer.

Thank you, Pernilla. So moving into the events after the reporting period and the August sales numbers that we reported today. So all in all, another month now of about 1 billion second sales with a 7% organic growth and we saw currency effects of 2%. So solid development both in Sweden and Norway with 8% organically and a flat development in Finland. When it comes to the store network, we were up nine stores versus the same period last year. So overall, a solid start also to the second quarter sales-wise. So then moving into the summary. So first of all, we are targeting a big and growing market. So we still see big potential forward. The overall market opportunity for Claes Olsson is 340 billion Swedish kronas across the markets, Sweden, Norway and Finland, which means that we today have just about 3% market share. The brand is strong. We have approximately a fourth of the population across these markets as members in club class. And we're now approaching 6 million members in club class. So all in all, the market potential is big. And we have shown over the last few years that we are able to progress across those five missions. So when we look ahead, we do see a clear path to continued growth and value creation. We are well positioned across those niches, and as I just outlined, they represent a big market opportunity. We do see profitable growth across all the niches and also the sales channels, which is a competitive advantage that we're able to let the customers choose whether they want to convert in a store or online. We also have a very needs-driven product assortment and high customer satisfaction. We continue to renew the assortment and also the fact that we're focusing on needs-driven products. We also believe that no matter what happens with the household spending and market economy, we should be relevant also moving forward. We also have very central store locations, which enables a full scale e-commerce. We have high volumes flowing from the stores when it comes to online business. And we've also proven that the marketing is effective to drive online growth development. And we continue to work to solidify the store network. And last but not least, we do have a high cost focus and we are doing everything to be in a position that we can do more work in terms of investing in growth initiatives. So with that, we will now move into Q&A.

If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Nicholas from Ekman. Please go ahead.

Thank you. Yes, can I start asking a little bit about the gross margin? Very strong here, up 140 basis points year over year. First thing, just you mentioned the hedges here that had a positive impact. I'm just trying to understand whether this was an unusual positive effect that you saw, or if the hedges merely mitigated what would otherwise have been a negative effect? That's, I guess, my first question.

No, so there was a positive effect from the hedges. But if you zoom out, I would say that the biggest driver of the gross margin improvement was the purchasing prices. And then if you look at the net effect of currencies, the combination of the US dollar improvement, the hedges were able to offset the Norwegian krona. But I'm not sure if it was an unusual effect in terms of the hedges. We can have a look at that separately, but that helped.

Okay, fair enough. And also looking at how currencies have continued to evolve as well as transportation costs, etc., I'm assuming that these tailwinds that you saw in Q1 should be even more pronounced in the coming quarters, all else equal based on kind of current spot prices. Am I correct in that or do you see this quarter as being unusual?

No, you're correct in that we will get more tailwind, everything else equal, obviously, especially related back to the dollar and the transportation. That said, it's important to remember also that the Norwegian krona has established itself on a fairly low level. So also looking at the next few months, we have to look all the way until April 26 to start meeting the same levels as we are today. So there's going to be A continued pressure on the Norwegian krona for the remainder of the month is fiscal if it remains at 93, 94 euro versus the Swedish krona. And as we saw in the first quarter, we were able to offset that effect. And we hope that we're going to be able to offset that effect forward as well. But there will still be some pressure there. But gradually, of course, the impact of US dollar and transportation will help more as we move further into the year.

Very clear. Can I also ask about store openings? I note that last year, middle of the year, kind of from March to September, you opened 12 new stores. And since then, it's been more limited with store openings. You talk about 10 stores net for this financial year. I think you have five contracts so far. How confident are you that you can sign another five stores and open another five stores before the end of April? what is your view in general on store openings? Are you pleased with the stores, the recently opened stores? Do you think that this is the way to go going forward to continue with the kind of 10 stores per year in store openings?

So, yeah, so first of all, obviously you're right that we have five contracts. We're still comfortable on the 10. And then as we have said before, you know, if it's plus one or minus one versus that ambition, we're still comfortable. Obviously, we are very picky when it comes to store openings. We are very happy with the store network that we have added to the business over the last few years. We can see that the portfolio of new stores are adding value and delivering well. And then that combined with a strong like for like development really encourages us to continue store expansion. But again, we are very picky. We have lots of ongoing discussions right now across the countries. So we're confident in finding the right locations, but we always go for quality rather than quantity here. And we want to see a strong return on the investment that we put into a new store. So overall confident, but as always, we're very picky and go for quality versus quantity.

Very clear. Finally, I just have to ask, as you said here, you're very much over delivering on your targets. You have a margin target of 7% to 9%. You're now on a rolling 12-month basis at 10.5%. Is there anything that you see here over the next year or so that suggests that this margin should return to the margin range of 7% to 9%? Why are you sticking to that target?

There's nothing in the near term that shows that we should go down and we're not doing any initiatives from our end to dilute the margin, neither with pricing or promotion, etc. And then, of course, the biggest volatility for Klaus Olsson is, as always, currencies. We have had a pretty big headwind for a few years now when it comes to the macro factors. Now we're, as we talked about, starting to see some tailwind, which, of course, will help that. But all in all, we do not see any signs that we will go down from this level.

Very clear. Thanks for taking my questions.

Thank you.

As a reminder, if you wish to ask a question, please dial pound key 5 on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any written questions and closing comments. The next question comes from Eric Sandstedt from Kepler Shoebrew. Please go ahead.

Hi there, I'm Erik Sunset with Kepler Chevrolet here. I've got a couple of questions as well. Firstly, in terms of marketing, you mentioned that marketing costs were higher in the quarter. Should we view that as more of a one-off effect or a sort of sustained higher level going forward?

Good morning, Erik. The marketing increase that we saw this quarter was similar to what we reported last quarter. It is something that we expect to remain, but it will vary a little bit. We have allocated more and more of the marketing spend into digital channels, which means that we are buying more based on available traffic out there and then on preset profit levels. So we will continue to spend as long as we see a strong ROI. So of course, there could be market dynamics that impacts this, but it's very much the flexible and scalable digital marketing that is higher in the quarter now versus last year. But we will continue working with that methodology because it works extremely well for us. And we saw that in both online numbers and also the overall growth. So it's hard to tell exactly where it will land quarter by quarter and we work with it flexibly in a flexible way each month. And as long as there's profit to get, we will continue.

Perfect, great. Then just a question on the online business. I know you elaborated a little bit on it, but could you say anything more about the profitability of the online business, both how it compares to the store margin, but also to what extent it contributed to the strong profit development in this quarter.

So overall, we have had as an ambition for many years now that we want to have a profitable and growing online business. So as you know, we do not report profit per channel. But what we can confirm is that the online business is very profitable. And we do not see any issues in letting the customer choose sales channel. It is another... big difference between channels. And then of course it can vary in months and quarters, but all in all, we're very happy with the profitability in our online business and that we do see as a continued, continued, uh, competitive advantage moving forward.

Great. Thanks. Um, then finally, just a question on August sales. Um, it was sort of the growth rate was slightly lower than we saw in July and August. Um, still above your target though, but could you share any more light on this? Was the summer months sort of exceptionally strong thanks to weather or what sort of weather difference between June, July versus August?

Yeah, so first of all, August, we view it as another solid month with 7% organic growth. Then as you highlight, of course, growth was higher in July. And I guess the comment on July could be that if you look at the underlying business, we saw a similar organic growth rate. And then we had a big effect of the seasonal products that came in on top. So the underlying growth was strong in July and June. um and then in august obviously the there is less seasonal effect august is also very much of a transition month for us as we move away from the summer season focus we move into back to school autumn etc so it's always a quarter where we shift focus or sorry a month where we shift focus um and then as always months um the growth rate per month varies a little bit but we still view august as a solid performance

Perfect. Thanks. That's all I had. Thank you very much, and well done on a strong quarter.

Thank you.

There are no more questions at this time, so I hand the conference back to the speakers for any written questions and closing comments.

Yes, and we do have a couple of written questions from the webcast. I'll start off with a question from OneInvest that we have Touched upon already regarding the profitability target and if there would be make sense to at least remove the floor of the margin target. Comment on that, Christopher?

As I outlined before, the margin, our ability to deliver a solid margin is, of course, a huge focus, and we do not see anything that will take this down in the near term. But the margin target is still the same as it's been also for this year.

And we have a couple of questions from representing Watch Media in Norway. Firstly, any comments on the strong growth trend that we've seen in the last couple of years?

So overall, obviously we have picked up significantly when it comes to our sales. If you go back five, six years, we had like-for-like of zero to 1%. And then over the last few years, we've seen that we've raised the minimum level significantly. And we've gone from approximately 9 billion to 12 billion now in the last three years. Obviously, it's a combination of the factors that we talk about with assortment, the growing online business and the store network. And all in all, if you look at the club class numbers, we do have a bigger and more active member and customer base. So we have kind of raised ourselves to the next level. And then, as always, it's a combination of the of the factors that that interact

And a second one from Watch Media. Any particular comments on the development in Norway as it is significantly higher revenue per capita in Norway compared to Sweden, for instance?

The Norwegian business obviously is very strong and it continues to perform really well. We are, from a brand point of view, extremely strong in Norway. We're seen as one of the strongest brands in Norwegian retail. So when it comes to the growth drivers in Norway, it's very much similar to what we've seen in Sweden. So the same factors impact. But then, of course, per capita, we do have almost the same number of stores in Norway as we have in Sweden, despite the half more or less of the population in Norway. So the brand is incredibly strong. The Norwegian team has done an excellent job. in meeting customers, being relevant every day in each of the stores and also the e-commerce business has supported. So the strength of the Norwegian business is built on the same foundation as the other markets, but obviously it's performed tremendously now and we do everything we can to keep that momentum.

And lastly, from Watch Media, a question about Claes Olsson's potential for further local presence in rural areas and if you see any limits to market potential in terms of smaller cities, etc.

And I think here, Norway is an interesting example. In Norway, we are, as said, we do have almost the same number of stores as in Sweden, which means that we are performing extremely well also in smaller cities. And in Sweden, we have been more focused on the bigger cities, but we've also started to... to open stores in slightly more rural areas. And of course, that's an opportunity for us in Sweden, but especially in Norway, where we've been able to succeed with that in a good way.

And the final question from the webcast is a question from Theodore asking whether we want to comment anything on the slightly lower number of product reviews in the quarter.

Yeah, well spotted. So yeah, slightly lower number of reviews. At the same time, though, if I look at the absolutes here, I think we are, compared to the market, we have extremely high levels and we get reviews on a huge part of the assortment. I don't know any specific reasons for why there was a slight drop in terms of number of reviews. That was especially in the fourth quarter. We saw it pick up a bit in the first quarter. So we are obviously encouraging our customers to give reviews. So there's no specific reason, but in general, the base level is very high and we do get a lot of feedback from our customers on a going basis, which helps us continue strengthening the assortment.

And that was the final question from the webcast. So I'll hand back to you, Kristoffer, for some final words.

Okay, thank you very much for taking the time this morning. And now we obviously will start to gradually move from the important autumn season into the very important Christmas season. So everybody is doing everything now to ensure that we can meet customers and the big inflows now across also the important months ahead. So we'll see each other in December when we report our second quarter. So thank you very much.