H & M Hennes & Mauritz AB (publ)

Welcome to the H&M conference call, nine months report for 2023. Please be advised that today's conference is being recorded. For the first part of the call, all participants will be in listen-only mode during the speaker presentation and afterwards there will be a Q&A session. If you would like to ask a question during the Q&A session, please register via the link in the confirmation email. Today I am pleased to present Joseph Alberg, Head of Investor Relations. I will now hand you over to our speakers, so please begin when you are ready.

Hi, everyone. Thank you all for joining us today. Welcome to this telephone conference in connection with the H&M Group's third quarter results 2023. With me today, I have our CEO, Helena Helmersson, and our CFO, Adam Karlsson. We will start with a short summary of the third quarter. After that, we will be happy to answer your questions. You will find the report at hmgroup.com, investor relations. Now, I'll hand over to you, Helena.

Thank you so much, Josef. Sales in the third quarter started strongly with a pent-up demand for summer garments following a cold May in most of our major markets. The effect then gradually decreased during the summer and at the end of the quarter we were up against sales that included the temporary reopening in Warsaw in August last year. Having now moved into September we can see that the start of the autumn season has been delayed as to date September has been marked by unusually hot weather in many of our European markets. During the third quarter, we've had focus on profitability and inventory efficiency. This means we've made some proactive decisions that resulted in both strong cash flow and good profit development in the quarter. Inventory was down by around 21% currency adjusted compared with the previous year, and we are taking further steps towards our goals and creating good conditions for profitable growth over time. In times of high inflation, where household living costs are rising significantly, it is more important than ever to offer customers the best price and unbeatable value for money. Our highest priority continues to be the customer offering, where work is ongoing to improve the product assortment and the customer experience so that customers can access an even broader and more relevant assortment. Thanks to our initiatives and investments in areas such as AI, tech, and the supply chain, we are improving flexibility and precision and have faster response times. Our efforts continue to enhance the customer experience with increased inspiration and seamless shopping in our further integrated sales channels. The store portfolio has reached a level where we see that fewer stores will be closed going forward while we at the same time are opening new stores. Our stores are an important part of building our brand and we accelerate the pace with upgrading our stores to further elevate the customer experience. We are also creating new conditions for growth. The expansion in Latin America is developing well and is continuing in the region. As recently announced, we are planning to open the first H&M stores and online in Brazil during 2025. With a population of over 210 million and a strong appreciation for fashion, there is considerable potential in the market. We look forward to bringing H&M's concept of fashion, quality and sustainability at the best price to many customers in the country. During September, we have successfully launched an H&M flagship store on JD.com, one of China's biggest marketplaces for e-commerce with more than 300 million active users. This autumn, we have many exciting fashion news. One of them is the very appreciated H&M Studio Collection that celebrates 10 years. The Studio Autumn Winter Collection is full of worthy wardrobe investments with a lot of glamorous and feminine details and was very well received at Paris Fashion Week recently. The limited edition will be launched tomorrow in selected stores and online. Since we temporarily closed our stores in Ukraine in February 2022, we've maintained a close dialogue with different stakeholders. We are now planning to gradually reopen the majority of our stores in the country from November onwards. The safety of colleagues and customers will always be our first and foremost priority. We take a long-term approach and are working to develop the business all the time. A number of further important steps have been taken towards our goals and we are seeing better and better conditions for both increased growth and profitability. The external factors that affect our purchasing costs continue to improve. Work on the cost and efficiency program is proceeding at full speed And at the same time, many of the changes that we have made in recent years are paying off. We have a well-positioned customer offering and are fully focused on meeting customers' ever-increasing expectations of good value and sustainable fashion. With a strong customer focus, improved cash flow and increased inventory efficiency, we Our profitability goal to have an operating margin of 10% in 2024 remains in place. Thank you very much for listening and now we're happy to take your questions.

Thank you. If you would like to ask a question during the Q&A session, please register via the link in the confirmation email. To ask a question, please press star 1 on your telephone keypad Or if you wish to withdraw your question, please press star 2. The first question comes from Fredrik Ivasen from ABG Sandal Collier. Please go ahead.

Thanks so much. Morning all. A few questions from my side. First on the sales momentum maybe. I mean, we've seen a quite steep deceleration during the last months and just curious to hear whether you've done any significant changes strategically or if it's more due to the weather and general demand?

Good morning. Looking at sales, if we start with the third quarter, we started off in June where We then saw a high demand after a pretty cold May and then in the end of the quarter we are meeting high grounds from last year also looking at the temporary reopening in Russia. During the quarter the focus as we said has been more on inventory efficiency and profitability which is clearly paying off. With that comes that we have taken certain proactive decisions. We have, for example, which you know from the past couple of years, decided to also close unprofitable stores. We have also been more conservative with buying and we have been a bit selective with marketing. And moving forward, we see that we have even better conditions to, of course, drive both profitability and growth moving forward.

Okay, and a short follow-up then. How much would you be willing to sort of compromise sales to reach the 10% margin target next year?

We are planning to drive both growth and profitability. As you all know, we have a profitability target until 2024, which of course is very important and we have focused on that, but also we have a long-term growth target. So we have taken conscious decisions to make sure that we have a better foundation to stand on for profitable growth, which means, for example, that we have chosen to close unprofitable stores. But now we have a much more balanced store portfolio. And as we said, we can close less and open more, which is one part that will help us drive both profitability and growth.

Okay, great. That's helpful. Thanks. And last one from my side, how should we think about the SG&A line and all the sort of demand generating investments that you've been doing over the last years? And then I guess I'm thinking about the tech investments and inventory management and all that.

Helena was into it briefly. It's about making the effectiveness and the efficiency of the costs that we put in place increase. And we think that we have Found new ways of reviewing marketing spend, so that this one potential we see going forward, that it will become more effective. We also see that the tech investments are clearly starting to pay off in both how we buy, how we distribute, and how we sort of optimize the allocation of our garments. So we look positively on the effectiveness of the previous investments we've taken.

That's very clear. Thanks so much, Adam, for that. And congrats on a good quarter. Thanks. Thank you.

Our next question is from Daniel Schmidt at Danske Bank. Please go ahead.

Yes, good morning, Helena and Adam. A couple of questions from me. And firstly, sort of coming back to SG&A costs, which... continue to come down also reported currency not only local currency and on that topic how much sort of the cost saving program that you launched last year did you realize in Q3 I think you said that it was around 100-150 in the first half of this year and what was the progress in Q3?

Well, I mean, the pattern of the effect is sort of towards the end heavy, so to say. It's back heavy. So it's less in Q3 than it will be in Q4, but as we also said, with good progress. Then overall on the SG&A, we have seen opportunities in other than only sort of the admin and overhead cost. It's about operational efficiency. Helena mentioned the the story state and the selling per square meter turning in the right direction. We have logistics efficiencies and other things also coming into play here. So there are multiple parts and particularly on the admin program, it's somewhat sort of back-heavy towards the end of this year, the majority of the effects.

And you think that you will reach the 500 run rate in Q4? Is that still standing?

But it's still standing and also, I think, reminding everyone that it's somewhat difficult to only look at the admin row. It's maybe sometimes it would be easy and simple to follow it in that way. But we also have, of course, administrative costs in other parts of the organization. But the 500 still stands.

Yeah. And then just maybe coming back to what we talked about in terms of taking conscious decisions to have a better ground to stand on. It does sound like you took some conscious decisions, as you mentioned, in terms of closing stores and being more cautious on purchasing. But it sounded like that is a bit behind us, and correct me if I'm wrong, and you're saying that you're closing fewer stores now, and at the same time your opening stores will be... Are we supposed to interpret that as that we are in a situation where net closures are behind us as we go into the last quarter of this year or maybe into next year and it's going to be net positive in terms of store openings and that the cautiousness on purchasing is also gradually behind us?

Looking at the store closures, we do see that we will now be able to close less and open more, which, of course, can contribute in a different way to our growth. So a much more balanced store portfolio than before. When it comes to... to buying we have been more conservative here we always need to secure that we can have the best customer offer best value for money to our customers when looking at the inventory and of course adjust the buying accordingly looking into the first part of this quarter we have increased but again it's always about adjusting that so probably pretty neutral in the coming quarter.

And then just the last one in terms of external factors as we've sort of expected for some time that will turn positive now in Q4 which you also state. Could you give any sort of feeling for the magnitude of the impact in the coming quarter?

Hi Daniel, this is Joseph. The external factors, the picture remains the same, that we will go from a neutral impact in the third quarter and turning into tailwind and giving support in the fourth quarter. In regards to the magnitude of this, we prefer not to give any strong indications, but we do see a clearly positive tailwind ahead.

OK, thank you. That's all for me. Thank you. Thank you.

Our next question comes from Warwick Okind from BNP Paribas. Please go ahead.

Two questions, please. The first is on your markdown guidance in Q4 for it to be similar year on year. Given that your inventory is quite a bit lower than last year, why aren't you expecting an improvement in markdown? Maybe I'll leave it there and then I'll ask my second question after.

You're right, we have a very healthy both stock level and composition but we sort of decided to guide on a neutral level here based on the somewhat slower start of the autumn here. We still have a lot of autumn left but I think that the combination of a strong stock level and strong combination with a slightly delayed start of the selling made us end up at the guidance of flat, so to say.

Yeah, understood. And actually, my second question is on current trading. Obviously, you've called out the weather being the main factor in September, but one of your peers yesterday called out weaker consumer sentiment, especially in Germany and and the US, two of your major markets. Are you also seeing that weaker sentiment or do you think September is entirely weather-driven?

Again, we've seen unusually hot weather in several of our big markets, especially in Europe. So it's clear to us that looking into September, that is the biggest effect. Then overall, we see that purchasing power from household systems. So it's a clear impact, of course, from inflation and higher interest rates, I would say, overall.

Understood. Thanks very much.

Our next question is from Sridhar Mahankali from UBS. Please go ahead.

Hi, Eric. Good morning. A couple of questions for me as well, then, please. Firstly, just looking at SG&A, in the quarter with adjustment, I think with adjusted for Russia, it seems to have grown about focusing on local, not actually on reported currencies. Is that correct? And if you can tell us what happened in the quarter on local currencies, that would be super helpful. And second question, And really, going back to the sales trends, not just the September, but the quarter we've just reported, I'm recalling some of the strategic initiatives we've talked about on the collections, the stores, and the merchandising and the analyst event earlier this year in Stockholm. Can you give us an update, perhaps, in terms of what impact you're seeing from those initiatives on sales trends, X, the weather impacts and things like that, any data points you can share with us that can help us appreciate the underlying sales trends. I've got one last one which is again connected to sales on the 10% margin. I'm trying to understand what sort of sales trajectory is needed for next year to reach the 10% margin target or in your view you'll get there regardless of sales trends. Okay, thank you very much Fred.

I'll try to repeat your three questions to make sure I understand correctly. First one is you want a comment on local currency development on SDNA excluding Russia. Second part is connected to our sales trend excluding weather effects. And then thirdly, the sales trajectory next year to achieve a 10% margin. I'll go ahead and comment first on the SDNA on the first question. So you're right that we had a one off cost connected to the wind down of Russia in Q3 last year. Excluding that part, we see a minus 3% local currency SCNA development for the quarter. And that is to be compared with a plus one sales development for the quarter, excluding Russia. So we do see quite strong operational leverage here, even though we we have this quite, you know, flattish development on the top line. So I think that shows good strength on our profitability development.

Then I'll maybe try to jump to the third question and on the profitability development. We see that we have good traction in, I mean, the three major components here towards the 10% target. We do have a gross margin that's normalizing we see overall efficiencies and potential in the SG&A. And then as we previously spoke about, we have also good traction on the cost and efficiency program. So these three are the levers that need to be in place. But obviously, particularly the SG&A has a leverage effect that if selling grows more, that will contribute even more. And if it If it doesn't, that will be more difficult. So it's difficult to say on exactly what level, and we don't guide on selling. But we have good traction on all three components to reach the target for the EBIT margin.

And then looking at sales, and you asked what we can see if we kind of exclude the weather, which is really difficult. When looking into September, it clear when looking into the different product types and that it's linked somewhat meaning that the more the heavier autumn garments have a slower start than the rest of the assortment so it's clear that that is kind of the main reason as we talked about before we also see purchasing power from consumers overall we see that that is having a slight effect difficult to see how much but overall we see that we have a very strong customer offer we see that it clearly reflects the trends of a lot of feminine products a lot of tailoring a really strong product for amazing value for money. Understanding that was not the data points maybe you were asking for, but that's kind of what we see. So again, we're back to the warm weather being the main reason.

Thank you. Our next question comes from Anne Critchlow from Society General. Please go ahead.

Good morning. Thanks for taking my questions. I've got two, please. First of all, I wondered whether you'd consider sourcing in Latin America as you go into new markets there, certainly for those markets and maybe for North America as well. And then secondly, thinking about price inflation and the outlook, I wondered how you saw that in terms of the market for autumn-winter, but also going into spring-summer next year. Thank you.

When looking at sourcing we have spoken about nearshoring a few times the past quarters and this is still ongoing so we see somewhat of a shift when we look into sourcing and we're developing more nearshoring. The biggest part is in Europe and in Asia but we're also looking into possibilities in Latin America.

Thank you. And your second question was connected to price inflation and how we see this autumn, winter and spring, summer next year. So we see that the sourcing cost levels and our COGS level develop in the right direction. And this gives us room to maneuver on price and really secure the best offer. We're well positioned in a climate where the consumer will be more careful when spending money because we offer the best price and we offer really exciting fashion. So we have a strong position here. And with the improved sourcing situation and COGS levels, we also see a possibility for price decreases moving forward.

Thank you very much.

Our next question comes from Adam Cochrane from Deutsche Bank. Please go ahead.

Hi, good morning, guys. A couple of questions. You've got lots of initiatives going on. Would you just be able to highlight three or so which are maybe the most important ones from the data that you've seen that have driven some improvement in sales, just so we know a little bit where to focus on from your long list? In terms of the inventory, you've clearly been buying less product, maybe with the ability to top that up with nearshoring, etc. Would you just be able to tell us when your decision to buy less inventory was made? So we know when it comes to annualize, please, as we look into next year. And then finally, I think you touched on this on the last one. But in terms of how much of your gross margin and lower input costs, etc., are you prepared to invest in order to generate sales growth? How are you thinking about that balance between keeping the margin and getting the top line moving?

Thanks. I can start with the first one, three initiatives where we see satisfactory results and then we're coming back to three big focus areas and I'll try to be a little bit more concrete but the three areas as you know is customer offer, it's customer experience and then it's also our supply chain. The customer offer as you know is the best combination of fashion, price quality and sustainability that kind of product engine will always be core and key for us and here we see several improvements that we've made continuously and that will always kind of be our core to make sure that we're on trend and can deliver amazing value for money to our customers. The second one, customer experience, as you know, we integrate the channels, digital and physical. I would still highlight improvements that we're making in the physical experience. Of course, it has been about closing unprofitable stores, but also it's of course of rebuilding and making sure that we, to a certain extent, also remodel the stores to make sure that we have great customer experience. And this is truly a big asset that we have. And then we have the supply chain and, of course, integrating tech and AI in our supply chain. And that work together with the assortment is really, really key to make sure that we further improve precision, availability, that we become even quicker to respond to customer demand. And this is, of course, driving both growth and profitability and is key for managing inventory levels.

I'll try to answer the two second questions then on the inventory. There's not a specific time of the year when we decide on the purchasing. It's a continuous work, working with the part what Helena alluded to with the better uh more predictive demand and a more more uh flexible flexible supply chain and and just looking back a year now we can see see uh um great improvements in in uh in sort of the flexibility and the timing of of making that decision as supply chain constraints have eased and and we've also a it's like a higher share of north near nearshoring so that contributes also to to us being able to make that decision more gradually and more closer to sort of the point in time when the products meet the customer. So that is a continuous ongoing work. On the gross margins, as we stated before, we are striving for a somewhat blurry but a normalized gross margin level. And when we reach that, we believe that the relative upside in reaching our EBIT target then comes from SG&A and admin costs So I don't know if that guides in any way, but we see based on a more historical pattern that a normalized gross margin is what we need, and then we have more relative potential to improve on the SG&A and the admin side to reach the targets.

So I've seen your gross margin go from 50% to 63% over the years. Where do you call a normalized gross margin?

We don't set that as a specific target, but we spoke about it before then that potentially a five-year average looking back pre-pandemic level with some kind of interval here is potentially a good level to refer to. Thank you.

Our next question comes from Noor Nanji from BBC. Please go ahead.

Hi, morning. Thank you. So I have two questions. My first one is you've recently started charging for returns. Could you tell me what the reason was for that? And also, could whoever's answering just let me know who's speaking? Thank you.

Yeah.

Sorry, the first question was charging for returns and the second question... The second question is there has been a bit of a backlash to the move online with particular comments around the lack of consistency in sizing of clothes and that's a reason why people say they have to return so much in the first place. So I was wondering what you're doing, if anything, to address that issue? And yeah, I just said if anyone, whoever's speaking could just let me know who's speaking each time. Thank you.

Okay. I'll try to answer your first question here. This is Joseph Olberg, head of investor relations speaking. The charge for return was introduced for the online returns to remind the consumer to be mindful of making returns due to the climate impacts this has. So this is to help the consumer make good choices for the environment. The part where we by mistake stated that We are charging for returns into physical stores. That was a mistake and that has never been the case, not in the UK or any other markets. That's one of the advantages that we have, that we can offer our customers to return garments in stores and get the best offer from two channels, the stores and the online.

And this is Helena Helmersson, CEO. I'm tagging on to the second question that you had. The most important area to focus on when it comes to returns, that's to try to make sure that customers don't want to return what they buy. So here we have several different initiatives, but really important to focus on size and fit and we have improved continuously the way that we for example recommend sizes to our customers and again this is the most important proactive work that we do to make sure that whatever the customers buy they will want to keep it.

Thank you. I mean But clearly a lot of people feel that the clothes just aren't the right sizes and that's why they are having to order lots and then return sort of several of those items. So that is the feedback from customers. So is that a concern? Is that something you're looking to fix?

We actually see that we have lower returns than many others. However, you are pinpointing a very important area where there's always improvements to make. And we really try to work on different tools that will help the customers to understand what size that they should order. And we're We're planning to continue to improve that continuously, for example, with better and better size recommendations.

Thank you. And can I just ask, Joseph mentioned that the climate was a big reason for introducing a return fee. Was there not also an economic reason for this?

I can build on this. I think it's many wins on this. I think it's a win for the consumer helping them to make good choices. It's a win for the environment with less transport and emissions. And it also will, I think, benefit our model over time as well. We have an Omni model and this is part of the advantages of of offering our fashion both in stores and online.

Great, thank you.

Our next question comes from Georgina Johanan from JPMorgan. Please go ahead.

Hi, good morning. Thanks for taking my questions. I've got two, please. The first one was just around the 10% margin goal for next year. I just noticed your wording was slightly different in this release relative to Q2. It reads like you have slightly less confidence than previously, perhaps around the timing. Are you still confident on the 10% margin for the year as a whole? Or are you now talking about reaching that at some point within 2024, please? And I suppose, what, if any, factors have have impacted your confidence. And then my second question, if you could just comment on any increase in shrink that you're seeing, please, and theft from stores in any markets, just given what we've heard from a few other players on that. Thank you very much.

Thank you. Adam here. No, we are not indicating any changes to the confidence in the target. Then, of course, there's a lot of work to be done, but we see the quarters leading up to the third quarter and the third quarter as clear steps towards that direction. So there's no intended sort of uncertainty that we wanted to communicate. But of course, a lot of work, but we also see good progress on all of these parts. On the shrink side, we also see that it is an increasing problem in many markets. We see reports generally from the US market that it's a growing concern for many retailers and that is also for us. Working closely with the team in the markets to ensure that we, to the best of our ability, find solutions to bending the curve and not having shrinkage continue to increase as it has been over the last couple of quarters.

Great. Thank you very much.

As a reminder, if you would like to ask a question, please press star 1 on your telephone keypad. Our next question comes from Agata Grzyciak. Please go ahead.

Yes, hello. I would like to ask, can you please share some interesting data about H&M Beauty, particularly how are sales currently and what are the forecasts for the holiday season? And that would pertain to both beauty products sold in traditional stores and your H&M Beauty stores.

We have an amazing team working with the beauty assortment and we're kind of not disclosing sales per concept that we launch, but overall we truly see that our customers appreciate the great products and the value for money that we can bring. And also looking into the coming sales, we're not doing any type of forecasts, but more trying our utmost to secure that we give the very, very best offer to our customers.

Okay, if I may inquire about why wouldn't you disclose any data regarding the beauties?

Well, we don't disclose this information about any of our concepts or government groups, et cetera, like Helena pointed out. We prefer to keep this information internal.

Understood. Thank you.

Our next question is from Hiba Ali from HSBC. Please go ahead.

Hi. Good morning. It's actually Paul Rossington at HSBC. Can you hear me?

Yes.

Thank you. Three quick questions. Can you actually quantify what the markdown impact was in Q3 on gross margins, please?

It ended up very close to what we guided for ahead of the quarter, about 50 basis points up around that level. Okay. Thank you.

And just a follow-up on that. If If markdown was slightly higher, I think, than you anticipated, according to the commentary in the statement, but the margins are still up and input costs were neutral, does that mean that the uplift that we've seen in gross margin has been primarily down to leverage and cost savings in the supply chain? I'm just checking there's nothing else in there to think about on the gross margin. Thank you.

No, you have, of course, the impact from the closure of the Russian operations last year, but adjusting for that, there are no other parts to the improvements rather than the supply chain improvements and the purchasing environment that has steadily been improving over the year.

Okay, thank you. And then, Arnold, can you just say what kind of rent reductions you're getting on the lease renegotiations on spores? And are you actually kind of aggressively pushing that agenda on the one-third of the estate, which comes up for grabs each year?

Adam here. I don't know. Aggressive sounds a bit bad, but ambitious. And we do actually continue to see savings here. We do have a... history for the past two or three years where there has been a very favorable environment and we still can manage to come out with strong deals with our partnerships and particularly then our rent set up with the many renegotiations each year gives us that opportunity to continue to work ambitiously on this.

And would that be a double digit rent reduction average or single digit if you could maybe just give a bit of color and that's it from me. Thank you.

No, it's more in the single digits than the double digits. But it's also, of course, very dependent on how we sell and what markets we open. And Helena said that as well, that we have adjusted the store portfolio. So it's difficult to make it apple to apple. But it's clear and continuous improvements.

Excellent. Thank you very much.

As a reminder, please register by the link in your confirmation email if you would like to ask a question. Once connected to the call, please press star one to raise your question. We have a follow-up from Georgina Johannon from JP Morgan. Please go ahead.

Hi, it was actually just a follow-up to Paul's question, if that's all right, please. Just on the gross margin, can I confirm then that there's no annualisation of price increases, no benefit from that in there at the moment, please?

The gross margin is, of course, a function of how much it costs by the government and how much we sell them for. So, of course, that combination gives us an improved gross margin. And as Josef said, we see with the gross margin development on the purchasing side that we can, looking forward, even though we're striving for a normalized gross margin, be working on the outprice part of the equation as well. we have had a price increase starting of the year, and that is sort of diminishing now over time.

So there is still some contribution from price increases in the Q3 gross margin that you just reported on a year-on-year basis?

Yes, yes, there is.

Great. Thank you very much.

Our next question is from Vebjorn Storvik from Handelswatch. Please go ahead.

Hi, I'm working as a journalist here in Norway and I'm curious about the Norwegian market. How would you say that you've been doing on the Norwegian market during this quarter and also how you're doing in Norway in general?

Do you hear me? We can hear you well. So you wondered specifically about Norway in the third quarter and generally.

Yeah, and also like what plans do you have for Norway, if you can say something about this as well.

We usually don't give detailed comments on individual markets. We have started to give comments on our sales regions. So Northern Europe would be, and the Nordics is the segment that Norway belongs to. where we in the third quarter had a selling growth in local currency of 5%.

Overall looking into this region and also Norway we are of course working very focused on the customer offer. Norway has also been the first country where we have been trying out the beauty concept, which has received great feedback from the Norwegian customers, also making us get a lot of good feedback in how we can develop that further. And of course, it's also been a big focus and will continue to be with the whole customer experience and the whole work with the store portfolio.

Is that what you were saying just now? Is that about the returns that you have been receiving good feedback, charging for the returns in Norway?

Yes, that we have also done. What I was referring to was the feedback link to us trying out the new beauty concept, which has been standing out. Then we have also started with charging for online returns, which has also received good feedback from our customers.

And the last question from me, how come that you choose Norway as the test country for these products? returns charges?

There are a lot of parts when we select the market Adam here. It has to have sort of the full technical foundation in place and other things and also Of course, looking into the customer response and the general market, we focus on how the customer acts on the specific market. And then we select the relevant sort of test market based on the outside in view and also our internal capabilities that needs to be in place. So there are a couple of different factors affecting our selections.

So you're going to continue to charge for returns here in Norway.

Yes. And we also see that this is well received in other markets by now where we have rolled out this. Perfect. Thank you. Thank you.

We have a follow-up from Sridhar Mahamkali at UBS. Please go ahead.

Sorry, that's been answered, but Maybe just a very, very brief one. The depreciation line, the impact there is clearly significant reduction in the quarter. I was just wondering if it is entirely related to the write-downs in the quarter prior to year. That's all.

It is also about the investment levels that has been fairly low over the last sort of pandemic affected years and so forth. So that is starting out to show that the story state investments have been more cautious the last three years than the previous years. And that's starting to affect the depreciation line.

As one last reminder, if you would like to register a question, please do so via the link in your registration email. Then press star 1 once connected to the conference call. Our next question comes from Cecilia Nickpay. Please go ahead.

Yes, thank you. I wonder if you could share any of your reasoning behind the share buyback program and how it might progress in terms of size. Cecilia from Affashpadden here. Thank you.

Well, the board got a mandate in the June AGM to repurchase shares and based on their evaluation of our sort of financial both position and trajectory, they then decided to take that mandate and start to repurchase starting today. So it's an overall assessment of the financial situation we're in and the strength of of the cash flow generation as we've seen over the last quarter here.

Okay, any future indications where that might go?

No, that is not for us to decide. There's an AGM coming up in May again, and that will be a new decision made by the AGM.

Okay, thank you.

At this time, there are no further questions on the call, so I will hand back to the speaker's team to conclude.

Thank you all very much for today and for participating in the conference call, and we wish you all a great day. Thank you.

This concludes today's conference. Thank you all very much for dialing in. You may now disconnect your lines.