Rusta AB (publ)

Good morning and welcome to the quarter one results for Rusta. This is the first quarter in our fiscal year that runs from May until April, and this constitutes the May to July numbers. It will be myself, Göran Westerberg, CEO of Rusta, who present the results together with Sofie Malmunger, our CFO. The agenda, as usual, will be a business update from my side. And then after that, Sofie will go through more of the financial performance in detail. And then after that, we'll summarize. We'll also talk a little bit about the outlook going forward, and then we will open up for Q&As. Right, let's start with the business update. First of all, have a snapshot of what the store chain looked like at the end of the first quarter. This is by the end of July. We were up to 213 stores in total. We had opened one store during the quarter in Norway, up to 49 stores. This is quite common that we don't open so many stores during the peak sales periods during summer and Christmas. The major amount of store openings tend to be during autumn and early spring. Having said that, there's been quite a lot of positive movement around our store pipeline and store openings, but I'll return to that towards the end of the presentation. So moving over to the results of the first quarter, this is a challenging market, as everybody knows, but I think Rusta has done a good job. We have strengthened our profitability and we have also increased the sales. So looking at the sales, we had a 3.7% growth in sales during the quarter and all markets and all segments grew. We also had a like for like sale of 0.5% during the quarter. So what happened when it comes to the top line? Well, as already announced during last quarter, we had a strong May, but that was followed by a significantly weaker June and July. So what happened? Well, when we look at this, our interpretation is that the unusually cold April, where we had lower summer sales than planned, carried over into the unusually warm May. So the combination effect of that drove sales and reached higher numbers than expected during May. But what took over during June and July was the careful customer. We feel that we have a customer that's under pressure. They have used up a lot of their savings. They have a lot of costs to cover, and they're also careful. How does that affect them? Well, we see both positives and negatives. One is that customers are continuing to flow to Rusta. So we have higher visitation numbers, a higher amount of tickets passing through our checkouts during the quarter. But we are more careful on spending. So the customers have avoided high ticket items. This is important for us because during the summer season, we have a different offer profile. More of our range is constituted by higher ticket items. Typical seasonal summer items is barbecues, garden sets, awnings, trampolines, things like that. And that's not where the customer where they are. They basically avoided those things. At the same time, looking at our two biggest business areas, consumables and home decorations, where we have an offer that is much more in line with where the customers are on low ticket items, much more need-based, that's where we had a much more positive development. So this partly, I would say, mitigated the effect of the weak summer, and that's what we see in the numbers. So looking forward, this is something where we see that because most of the autumn sales and Christmas sales are more dependent on those business areas. And we are more in line with the offer with lower ticket options where the customers are moving over to profitability. We have since long guided that we are prioritizing margin growth going back to our historical numbers over growth because that's one of the things that we wanted to rectify in our operations. That continues and it continues on the back of strength and productivity throughout the value chain. And that means in particular much better purchase prices, but also higher efficiency through the value chain. So we had a 6.2% growth of our gross margin. And one of the things that I want to underline here is this is not on the back of higher sales prices. On the contrary, we have actually invested in stronger price points and also deeper campaigns during the quarter to support sales and also to protect our low price position. So in spite of that, we fully mitigated the increase of increased transport prices. We also allowed for some room for strength and price positions, but still we continue to increase the gross margin. On rolling 12, we are at about 43.8% gross margin. And we have said that our historical average have been between 44 to 45%. And that means that we are now quickly moving into that territory. So we are confident that we will reach the guidance and also that this will now soon allow us to spend more and more of our productivity to actually invest in our price position. Now, all of these things together with good cost control and efficiency in the rest of the company led to, I think, a significant growth of EBITDA. We increased our EBITDA in the quarter by 17.6%. So I think all in all, in the climate that we're right now in, I think a lot of positive things have happened, and I would deem this a strong quarter. A couple of key events that I would like to underline during the quarter. One, there is definitely a challenging market, but there are also positives in this. The consumer is price conscious. They really are looking for ways to save money. And I think that drives more people in our direction. So higher visitation numbers in our stores. And that's also why it's very important for us to underline our price leadership in the market. At the same time, the improved profitability on all markets for all the reasons that I just mentioned, that's something that has been continuing for over a year and also something that we believe will continue going forward. Another thing that I'm happy about during the quarter is that we have now fully resolved the dispute that we've had with Tieto. As you remember, we had a big IT incident in the beginning of the calendar year and we've also had a lot of discussions with Tieto after that. But I'm happy to say that we have reached an agreement in good faith here together with Tieto without going into arbitration. And as is normal with agreements like this, it's covered by a confidentiality clause about the data, so we won't mention exactly what's in it. But what I would like to say is that it's something that we believe is fair, looking at the contractual agreement that we have that has been governing the partnership between Tieto and Rusta, that it has a positive effect on our bottom line, but that it's not material. Also, I would like to say that it feels really good to be able to put this whole process behind us so that we can use all of our energy on things that are more positive going forward now. Another positive flip side of the weak economy is as i mentioned that customer continue to flow to low price and in particular to rusta we have we by the end of last quarter we reached 5.8 million fully registered club rest rusta members that's an increase of 200 000 people again and it's a 14 increase on top of something that would deem to be very very high numbers this is one of the absolute largest loyalty programs in the in the nordics in retail So I think this is positive that continues to be there. And I think the effect of this, the real positive effect of recruiting so many customers is something that the benefits of which we will reap when the economy turns, when their room for for for spending money actually increases. Right. With that, I hand over to Sofie for a little bit more on the financial performance.

Yes, sure. Let's see. Okay, so in Rusta's first quarter that stretches from May to July, we have a total net sales growth of 3.7% and a like-for-like growth of 0.5%. Despite price reduction and hard comparables, we managed to continue to strengthen our sales. We have a gross margin that has increased with 1.1 percentage points, which is an increase in gross profit with 6.2%. We have an adjusted EBITDA margin of 11.4%, which is an increase in adjusted EBITDA of 10.2% compared to last year. There are no adjustments made in this quarter. In Q1 last year, we adjusted for IPO costs. Looking at our markets, we see positive total net sales growth in all our segments. The numbers you see here for sales are excluding currency effects. Our largest market, Sweden, continues to grow, however, at a slightly lower pace compared to previous quarters. The sales growth, just as Göran has described, is negatively affected by lower sales of high ticket items, and this goes for all our markets. We have managed to increase the gross margin and reduce our costs, which then gives us an EBITDA margin for Sweden of 20.8%, which is an increase of almost two percentage points. Our segment for Norway has a sales growth of 5%. We're meeting a high sales increase, over 21% in last year Q1 for Norway, which partly explains the lower sales growth this year. The profitability for Norway has increased with 0.4 percentage points. Our third segment, other markets, consists of Finland, Germany and online. We see similar sales impacts in other markets as described for the other two segments. However, online has been more negatively affected by lower sales of high ticket items since summer items is their main share of sales during the summer. The EBITDA margin for other markets is up with 1.5 percentage points and the EBITDA has increased with 41% compared to last year. Our profitability has continued to increase during the quarter and there are some clear profit drivers which are all in line with what we have guided on in previous quarters. We have higher sales where volume is the single largest driver to the overall growth. During the quarter we have reduced our sales prices so the sales increase is not at all price driven, it all comes from increased volume. We see the largest positive impact coming from our gross margin, which we continue to strengthen due to positive effects of improved purchase prices from Asia. We also see a continued positive development of our inventory with lower obsolescence reserves and similar compared to last year. And we also have positive currency effects in our gross margin in Q1. OPEX, as a share of our sales, has decreased with 0.6 percentage points. Last year, we had extra IPO-related costs, which explains most of the positive development, but we managed to retain our cost base despite new demands as a listed company. And this is a great example of good cost control and the scalability in our business model, where we managed to balance the inflation during the year. The negative effect in other, as you can see in the EBITDA bridge, are due to negative currency effects compared to last year, which is found in the net operating income and expenses in the P&L. The Tieto compensation, as Göran mentioned, is fully booked in Q1 and it's a part of other operating income in our P&L, where we in Q1 last year had an extra contribution of 12 million SEK regarding electricity contribution. Our agreement is limited by confidentiality. We believe we reach a fair agreement, just as Göran said. However, the impact is not material in our Q1 results. So our statements regarding our profit development in the quarter stay true even without the settlement. And then some comments on our balance sheet and cash flow. We have a sound and healthy inventory. The value per item is lower compared to last year, thanks to reduced purchase prices. And this will continue to have a positive effect in our gross margin in the coming quarters. As a share of last 12 months sales, inventory has increased with 1%, which is due to periodization and when the goods are received. And this can differ a bit between July and August, between the years. We are positive in net cash of 458 million SEK at the end of the quarter, which is an increase of 33% compared to last year. Cash flow from operating activities is slightly lower compared to last year, which is explained by the same periodization effect that I just mentioned regarding the timing of the goods received, and this also goes for our payables. Cash flow from investment activities for the quarter amounted to minus 103 million SEK compared to minus 31 million SEK last year. And the increase is explained by the growth investment regarding optimization in Rusta's central warehouse, which is expected to be ready in spring 2026. All in all, we continue to have a solid balance sheet, a positive cash development and a very stable financial position. Regarding our financial targets, we are a bit behind on top line sales targets, but we are ahead of our profitability targets, which we are still committed and comfortable to meet. With an increased customer base, we are in a good position to also increase sales once the economy turns. The sales pattern for a lower share of high-ticket items is very much a summer-related problem and has less to do with the rest of the year. Regarding dividend, we presented in our last quarter, in Q4, that the board proposes to distribute 43% of the net profit, which is in the higher end of our dividend policy of distributing 30-50%. And with that, I hand over to Göran.

Thank you. all right so a bit of the outlook yes right what happened here back again oh there okay right so right so i promised to get back on what is happening on the store pipeline and we've had i would say a significant positive development after the quarter closed First of all, I want to mention that we have opened another two stores in Norway since the end of the quarter, last one yesterday. And we're now up to 51 stores in Norway. And I think it's really great for Norway celebrating their 10-year anniversary in the Rusta Group this year that they've actually also crossed the 50-store mark. But if you look closer to the pipeline, you'll find that even though we have opened three stores now, the pipeline has increased. We're now up to 35 new stores that are agreed upon where we are going to open. We've never had that many stores in the pipeline at the same time. And this is a very positive sign, and I believe also a positive flip side of the weak economy that we've had. So we're not only recruiting new customers that are looking for low price alternatives, we're also in a much better market for finding new locations. So I think both in line with a weaker economy where more players are struggling on the market, that has increased the availability for us for new locations. And with the inflation coming down and also on the back of the weaker economy, it's easier for us to reach agreement that are on acceptable financial terms when it comes to rent and so on. So these two effects combined, it has led to a very healthy pipeline of stores. So if we're looking a bit into the future, whenever the economy turns for the better, I think we will be in a very good position with both more stores, but also with a stronger customer base. So looking at the outlook, having said that, we will continue to focus on price leadership to drive a like for like growth, but also to make sure that we're really delivering on our main customer promise. Where are the customers right now? Where they're under financial strain, they don't have deep pockets. So what are they interested in? To save money. And that's exactly our job. So the most important driver for us that has always been the low price. So we will make sure that we have enough room to really underline the price leadership on the market. That's the key to driving growth and also to maintain success in this type of business. We should also, in the meantime, until the economy turns, really make use of the continued potential to recruit new customers. As we said during the quarter, we see this in two ways. One, that the traffic, the visitation numbers are increasing at Rusta, but also that we can recruit new members to our loyalty program. That will basically create a much wider customer base and when their spending room increases, so I think will the sales for Rusta. So we will continue to recruit them and we will also lay the base for more efficient marketing going forward where we can actually communicate directly with our best customers. The increased pipeline of new stores I think is really, really positive. In the short term, it won't make much of a difference because those stores we have already planned are opening up. But for next year and the year after, I think this is very promising. And I think this also supports a guidance towards the higher end of the 40 to 60 stores that we have communicated in our guidance for store openings in the coming years. So I think these two things are really promising for the future. The last thing that is going on, that has been going on for quite some time and that we see will continue to go, is the productivity momentum. We still see improved purchase prices. We see that it fully mitigates the increased transport prices. Also, when we look towards the horizon, we see softening transport prices. So I think all in all, we continue to hold the guidance that we will reach the gross margin of 44 to 45%. And since we are now quickly approaching that territory, we also have room to strengthen our price position as and when it's needed. So I think that these are really the things that we're building our future on. More stores, more customers, even stronger price position, and at the same time, a very healthy profitability development. So with that, I think it's time to open up for 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 Simon Ayas from DNB Markets. Please go ahead.

Good morning, Göran and Sofie. I have a few questions. The first is on current trading. Could you just shed some light on development in August and so far in September? Is it any reason to believe that you should still trend below your current, your like for like guidance? I think the comps are getting sort of increasingly harder here. So how should they think about that? That's my question.

Right. You can say that August is very much a summer month, and I think the seasonality is really the thing that is impacting consumer behavior the most. So I think what we should say about August is that it's not a dramatic difference what you've seen so far during the Q1. So the start of Q2 is more in line with what you have seen during the Q1 report. Autumn has a bit to do with weather, and we've had an unusually warm start of September. But as and when we approach darkness and the colder weather and so on, we think that preferences for customers will change. But the underlying development is, I would say, still there. Consumers are interested in low price in general. They're looking for lower ticket items. They're very responsive to campaigns, but they also avoid higher ticket items. But recruitment from a loyalty base, but also from visitation, I would say is more or less in line with what you've seen in Q1.

Okay. And, you know, given the recent performance in Norway, looking at the lack of minus 1.8%, just wondering... Are you losing market share here or what's happening? Could you just shed some light on how you think about the competitive landscape? If you look at some of your pairs, they have been sort of performing at least in the positive territory. So how should we think about that going forward? Is it anything that's happened here or is it just the tough comes from last year?

Well, I think as usual, one of the things you always have to remember when you're talking about concepts such as Eurostar and some of our peers is that we have a very wide range. So there's a lot of things going on at the same time. I think, for example, where we see that we have lost sales, for example, in typical summer items, the barbecues, the garden equipment and the furniture and so on. Yes, that has been headwind there, but I think so has the total market. So I think the jury is still out on whether we gained or lost market share over here. At the same time, we have a completely different story when it comes to consumables and other areas where we might be overlapping more or less with some of our peers. So I think it depends very much on which segment that you're looking at, which type of business area. So it's really hard to say something in general. But of course, also, I think you have to consider, especially in Norway, that we're meeting very, very strong comps there. So I think if you look at it over a longer period of time, I think it's quite clear that we have been taking market share. What it's like exactly in Q1, I think remains to be seen.

The comps for Norway in Q1 from last year was 21 in total sales and 14% like for like. So it has very much to do with the comps.

I figured that. And then over to another Norway question. And on your 10-year anniversary, when did you start to campaign for this? And how does that compare to last year? This is obviously a new campaign. So should we expect sort of a softening of the gross margin, but on the other hand, hopefully some improvement on the sales side? Or how should we think about that campaign?

Yes, thank you. I mean, I think we're taking all the opportunities we can to to to celebrate, but also to strengthen our campaigns. We did so, for example, in connection with our store openings, for example, our store number 50 that just opened a few days ago. think this is something that we have taken into consideration so overall on the on a group level uh we see that we have uh or to say a general headwind or a tailwind when it comes to to purchase prices and so on that allows for strength and prices as i've said as and where it is needed and that will partly of course go to norway as well so in general we continue to see a margin growth and we have room for the for the campaigns that we have planned

Okay, that's clear. And then my final question here before I leave the queue open. On compensation from Tieto, I know you can't say the absolute figure, but can you shed some light on is there sort of a new deal here with better terms as well, or is it just the compensation that you got from Tieto?

I think the main agreement here that we have focused now is basically to close the dispute that we had ongoing on responsibility. And I'm really happy that Tieto has decided to take some of that responsibility And I think from a broader sense, how we're moving forward with I.T. security, as I've said, I think in a couple of quarterly reports before this one is that we need to spread our risks. And so so I think that's basically the main message that I have there that we will be probably going forward, not be as we will not be relying as much on few players as we have done so far.

And the compensation is fully booked in Q1, so there will be no financial impact going forward regarding that compensation.

I was alluding to the terms in the contract that you get. That gives you something going forward as well, but I guess then everything is in the Q1.

No, I would say that going forward, there are bigger discussions in place. Thank you so much for taking my questions. Thank you very much, Simon.

The next question comes from Niklas Ekman from Carnegie. Please go ahead.

I'm sorry, Niklas, we can't hear you. We have a very weak signal. I'm not sure if you can hear us. You're breaking up.

The next question comes from Gustav Hagius from SEB. Please go ahead.

Morning, guys. Can you hear me? Yeah, we can hear you. Perfect. Thanks for taking my questions. I have a few. Firstly, coming back to the Tieto part here. Is it fair to assume that given that you did highlight the 12 million in subsidies for electricity prices last year, as you deem these to be material and not the Tieto ones, it is a compensation that is below that number?

We can't comment that.

No, we can't comment. The reason I said it was because we have numbers last year that affects the profit for that quarter as well.

And what is the threshold for something being deemed as material or not?

Anything above 10% of the results, that's what we have said.

Okay, thank you.

And I think the most important part is that what we have stated regarding the development of the profitability in the quarter that goes without the Tieto compensation.

Okay, thank you. And then we had the inflation numbers from Sweden come out this morning. CPIF was down month over month by 50 basis points. And coming back to your comment there that your gross margin is basically in the territory you'd like to be, I assume that Q1 isolated is well within that range and that you are now in a position to lower prices. Have you lowered prices net? at the end of the quarter and into the next quarter or do you still have an inflation in your like for like sales prices?

The net effect is still that the prices have come down. I understand what you mean. There's been some old price increases that is giving a tailwind into the gross margin, but then there's also a headwind from price reductions or strengthening of price points that we've done. But the net effect of that is that it has a negative effect on the gross margin, but fully compensated for purchase prices.

And on the sales, do you have a net positive or negative impact to sales from your pricing in the quarter and into next quarter?

Well, I think, of course, that creates somewhat of a headwind. That you're reducing prices, of course, is something that is negative for top line. But it's also driving traffic. It's also driving visitation. And that's really what you're after. So you could say that that's really something that you're doing to invest for the future as well.

No, no, yeah. Let me try to explain. have you on a net year-over-year basis are your prices higher or lower versus last year uh-huh uh i would i i would say that it's lower now than one year ago yeah yeah yeah yeah okay thank you and um let's go on the store locations uh 35 store locations um your target is 40 to 60 stores in a three-year period, right? So it seems like you're well on track to hit the high range of that, or at the current momentum, or you'd like to even go beyond the 60. stores you think at current or can you update us on where you're at with that with that target given the current momentum?

Yeah exactly so I mean if this momentum continues I think there's every possibility for us to also cross that guidance and be above 60 stores but that remains to be seen but if we have that same momentum going forward here I think that it's definitely positive And if we see those possibilities, knowing the financial situation that we're in, we will definitely say yes to those. So, you know, if the inflow continues, we will take them all.

Okay, perfect. Those were all my questions.

Thank you very much.

Thank you.

The next question comes from Fredrik from Handels Watch. Please go ahead.

I also start with some questions about the Tieto. I don't know if I got it or not, but will you continue to have Tieto as your EP provider?

So I think, again, I want to repeat that one of the things, one of the changes or learnings from the incident is that we can't afford to be as dependent on one player. This is something that we have discussed with Tieto and of course they understand our position. But it's not that we have ruled out that Tieto will play any part with Rusta going forward, but maybe not be as dominant as they have been in the past. So I think that still remains to be seen. We're having dialogues. We're discussing how to set this up with the goal, of course, to be as secure as we can be with our IT infrastructure. That is the goal, not getting 100% out of Tieto. The goal is to be safe.

It sounds like you will continue with them at the moment, but aren't you afraid if this could happen again if you continue with the same IT provider?

Of course, this is something that we do not wish to happen in this situation again, for any reason. And of course, we have taken a number of measures to secure that we don't end up there, and I don't want to go into what we have done. But that process is still very much ongoing, and I believe that we will have many different, some new, some old partners moving into that. But again, the main goal for us is to make sure that we have an as safe environment as possible.

And last question about that. Can you say something about how much money you have lost in total due to this IT attack? I think you wrote something about you lost 70 million in January, but can you say overall in total?

So yeah, I think the guidance remains.

Yeah, the guidance remains. We stated in our Q4 report that we made a loss of around 74 million SEK on EBITDA due to the IT incident. But that's all in last year financials. We have no loss going forward from that. So the only thing that is impacting this quarter is the contribution after our...

agreement agreement yeah yeah perfect thank you and some finally some questions about the new 35 planned openings uh i didn't know if i saw the entire picture on the slideshow but how many of these planned openings are in norway when will they open and where

So we're not disclosing exact location as of yet. That will remain to be seen. But we've opened up a couple of stores. I think the number in Norway is eight, I think, net that we still have in the pipeline. But the store increases basically across the Nordic. So it's Sweden, Norway and Finland.

And when will these eight openings be in Norway? Can you say something about that?

So we've just opened three, and they will basically be spread out over the coming years. So it's basically all years.

Okay, perfect. That was all. Thank you. Thank you.

As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad.

So I guess there are no more.

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

All right. I think we were unable to reconnect with Niklas, who I think is traveling. Anyway, thank you very much for listening for the quarterly results. The next report will be on December 10th. And I hope I see you back then. Thank you very much for listening and bye for now.

Thank you.