Rusta AB (publ)

Good morning and welcome to Rusta's second quarter report. Today we will present the results here as usual. It will be myself, Göran Westerberg, CEO of Rusta, and I'm here together with Sofie Malmunger, our CFO. And we will take you through the second quarter results, stretching from August until October. The agenda today will be quite simple. I will go through a business update, what has happened during the quarter, and then we will go more into depth in the financial performance with Sofie, and then I will summarize towards the end, and after that we will open up for Q&A. Right, skipping into the business update. First of all, I think it's a good idea to have a look at where we stand in terms of stores. We opened five new stores during Q2 and this is what we usually do in the season, between the seasons so to say. This is one of our smaller quarters and that's when we try to focus our store opening. So we usually do it during the spring and now during the autumn. After the quarter ended, we also opened up one more store, taking the total new store count up to 219 stores, an increase of six stores. Three stores in Sweden and three stores in Norway. And for those who remember, we had a total pipeline last quarter of 35 stores, so we've now opened up six of those. Moving over to the results. We had a positive growth of 3.1%, where we experienced quite a heavy exchange rate headwind. Excluding the exchange rate headwind, we would have been up to 5.1%. Like for like in local currencies was 0.8%. And we also on the back of this sales growth actually had a volume growth. So we continue to sell more articles, which is really, really important for our business model where we want to be strong in the purchase market. I also want to underline that similar to last quarter we have also price invested to make sure that we have the best possible prices on all of our strategic items. So this is not a price driven increase, it's actually a price decrease out to our customers. I think it's also worth mentioning that we met during quarter two our toughest comparables of last year of 14.4% and with a very strong like for like of plus 11% during last quarter. Our gross profit continued to increase as it has done since we went on the stock market. We have said that we wanted to go back to normalize the gross margin level of 44 to 45 percent and we're now really really close to that. The gross margin increased slightly to 43.9 percent compared to 43.6 percent last year and again This is even though we reduced our prices to our customers. The EBITDA margin dropped a bit, 44.9% compared to last quarter. Again, this is fully explained by currency effects, but you will get the whole waterfall from Sofie in a couple of slides. Looking at the first half, we had an increase of 3.4% and a like-for-like growth in local currencies of 0.9%. We increased our gross profit 5% versus last year, reaching for the first six months a gross margin of 43.8%. We're also strengthening our EBITDA by 10.6%. reaching 8.4% EBITDA margin in the first six months of the fiscal year. So some of the key events or highlights of the quarter. We can say that in many ways what we saw during Q2 was a continuation of the consumer sentiment in Q1. They continue to be financially challenged, let's say, quite careful, much more planned. And the behavior that we saw that they were more inclined towards campaigns and also lower price points continued and actually accelerated during Q2. So we definitely continued to see quite a pressured consumer out there. However, we had a continued growth and especially I would say in Sweden we had a solid growth and in Norway we had an especially strong growth where they met really really tough comparables but still achieved high sales. Likewise, we continue to see the same pattern, the positive flip sides of the weak economy, meaning that many more consumers are searching for low price options and they seem to really like Rusta in terms of the way that they are coming to us. We reached 6 million fully registered members in Club Rusta. It's an increase of 13.2% in Q2. So that positive momentum of people looking for Rusta, being engaged and applying and registering for the loyalty program, that continues. We also saw an increased footfall to our stores. We saw more receipts, but we also saw on the back of the careful consumer a slightly lower average receipt, average value of each receipt. So more wallets through the doors, but all the wallets are a little bit thinner in a simplified way. We're also revising the forecast for our store expansion, another of those I would say positive flip sides that we're trying to utilize now during the weak economy. We see that the availability of new locations and also the terms are much more attractive. We have a record pipeline of new stores and therefore we also have a more positive view on the expansion potential and I'll take you through the details of that on this slide. So, last time we met, we had 35 stores in the pipeline. We have opened since then a total of six stores, taking it down to 29. But then we have had an inflow of nine new stores in the last three months, taking the total pipeline up to 38. So that's a new all-time high for us in terms of the pipelines. We see a really positive net increase of the number of locations. And this is both because of the availability of locations to a greater abundance than it was just a year ago, but also on terms that are commercially viable for us. And since we have a strong balance sheet, we don't hesitate to sign those attractive locations and we will continue to do so. So we see the same momentum from last quarter continuing into this one and also up to date, I would say that it continues. On the back of this, we have taken the opportunity since last time we presented the Q1 results, also to go through all of the white space that's available in the Nordics, because this is the area where we have seen that we probably underestimated the potential for us to open stores. And we work both with the total gross list but we also work with the priority list. And that priority list is locations that if we would get a good agreement on the table today we would sign them. We have decided to increase the number of locations in the Nordics by 30. So taking the total number in the Nordics to 150 prioritized locations plus the 30 ones that we have seen earlier in Germany. So we're now operating with 180 prioritized locations which are all so attractive that if we would get them on the table today we would sign them. So on the back of our strong balance sheet, the inflow into our pipeline, the longer runway that we see ahead of us with more white space to address, we think it's a prudent time to also change our guidance for store openings going forward. Since the IPO, we have operated with the guidance between 40 to 60 stores in total over the coming three years. Now when we're looking into next year and the coming two after that, we see that we're going to be more in the span of 50 to 80 store openings. So I think it's a good opportunity for us to take this step and we continue to see this positive inflow of new locations. Right, with that I hand over to Sofie to take us through the financial performance.

Yes. So, in Rusta's second quarter that stretches from August to October, we have a total net sales growth of 3.1%, negatively affected of 2% of currency effects, so the total sales growth excluding currency effects were 5.1%. Our like-for-like growth, excluding currency effects, was 0.8%. During the quarter, we have continued to reduce our sales prices due to more campaigning, so the sales increase is not at all price-driven, it's all volume growth. We have a gross profit that has increased with 3.6% in Q2, very positively affected by improved purchase prices. We have managed to increase our gross margin throughout the year and for the first half of the financial year we have an increase of 0.6 percentage points. We have an EBITDA for the quarter of 135. That is on a historically high level. It's actually our second highest profitability for this quarter ever, only beaten by last year. This slight decrease compared to last year is all explained by negative currency effects. So excluding the currency effects, we have an even stronger EBITDA than last year's record high. Rustas second quarter is seasonally smaller as it falls between the summer and the Christmas season. In the past four years, it has accounted for an average of 13% of the year's total EBITDA. We see a positive total net sales growth in our two largest segments. Sweden, our largest market, continues to grow. We see a shift in the sales mix towards more home decoration, which has had a positive impact in both sales and gross margin. We have a slightly higher OPEX due to more store openings and a higher electricity cost compared to last year. Opening more stores is of course positive and we build for future growth, but in the short term it means slightly higher cost in the quarter of opening. The EBITDA margin for Sweden is 15.7 in Q2 and the accumulated EBITDA for the first half year is 18.3, which is an increase of 0.7 percentage points. Our segment for Norway has a sales growth of 13.7% despite meeting high sales increase of 13.8% last year. The EBITDA margin for Norway is 8.8% in Q2 and 11.3% for the first half year. We have a slight decrease in profitability due to more store openings and negative currency effects due to a weaker NOC. Our third segment, other markets, meets really high sales comparables of 18% last year, which is actually 28% including currency effects. Due to the tough comparables and challenging markets, other market has a negative sales growth of 0.5%. The EBITDA margin for other markets is minus 0.1% in Q2, but the accumulated EBITDA for the first half year is 3.1%, which is an increase of 0.8 percentage points. We see some clear profit drivers during the quarter. We have higher sales where volume is the single largest driver to the overall growth. As I mentioned earlier, we have continued to reduce our sales prices during the quarter due to more campaigning. So the sales increase is not at all price or inflation driven. It's all volume growth. We see a continued shift in our customers purchases towards lower price points, but we have more customers and more receipts. We also have a positive product mix development in the quarter. We see the largest positive impact coming from our gross margin, which we continue to strengthen due to positive effects of improved purchase prices. We have an increased share of private label and we also have continued positive development of our inventory with lower obsolescent reserves. OPEX as a share of our sales has decreased with 0.1 percentage points. Last year we had extra IPO related costs which explains some of the development, but this year we have extra costs for more store openings in the quarter compared to last year. So we have a good cost control and the decrease in OPEX is an example of the scalability in our business model. The negative effects in other in the EBITDA bridge is all due to negative currency effects compared to last year, which is found in the operating income and expenses in the P&L. The currency effects you find here is negative with 28 million SEK. So for all parts that are in our hands, we are improving last year's record high profitability. And as you can see, we would have had an even higher profitability compared to last year, excluding the negative currency effects. 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 positive effects in our gross margin in the coming quarters. The inventory share of last 12 months is in line with last year, and the increased inventory value is a planned inventory buildup to continue to drive sales. We have a net debt excluding IFRS 16 of 18 million SEK, which is a positive decrease from 41 million SEK last year. Cash flow from operating activities in the quarter is in line with last year, accumulated it's lower than last year due to the higher inventory. Cash flow from investment activities for the quarter amounted to minus 180 million SEK compared to minus 49 million SEK last year. The increase is explained by the automation project in our warehouse and of new stores. And as for the automation in Rusta's central warehouse, it's all going well according to plan and budget and is expected to be ready in spring 2026. So all in all, we continue to have a solid balance sheet and a very stable financial position, which will support our store expansion that Göran has just described. We have no need of bank loans and we will fully finance our growth ourselves, completely in line with our set financial targets. And with that, I hand over to Göran.

Thank you. Right, a few words on what we see after the quarter. And I'm sure all of you are interested in Christmas sales that's going on. And I can say that we have had a good start of the Christmas sales. November being one of the most important sales months during the year has performed well. And according to plan, this year we had both First of Advent, that is actually our most important day during the year, plus Black Friday that has also had a growing importance for us. So we like what we have seen during November, but I also want to say then that December is equally important. The two biggest and most important months during the whole year is November and December. But so far we haven't seen anything else than the momentum that we have had during November. One of the interesting things that I would like to point out is Sweden. And when we look at the macro development across our markets, it's debatable where all the different countries are, except in one sense, and that is Sweden seems to be clearly in the lead in terms of the return to a stronger economy. And one of the things that we noted for the first time in quite some time, since before the inflation hit us, is that we had the combination of both higher visitation in Sweden combined with an average ticket that increased that is not price driven. So more people flowed to our stores in Sweden and they also shopped more. They basically put more items in their basket to a higher value. in spite of us having reduced the prices. And we like that, obviously. So we hope that that might be a start of something new, maybe an early sign of recovery. So that's something to be noted. The other thing, of course, we have to utilize whatever advantages are there with a weak economy, and here I would like to point out two things. One is the attractive rental market. The very reason that we have improved our guidance going forward, we continue to see that even after the close of the quarter. Both the inflow of new locations and also the interest and the commercial terms continue to be the same as we have seen during Q1 and Q2. The other thing that we want to utilize as a positive flip side of the weak economy is of course to attract new customers, to continue to make sure that we have as many customers coming to our stores and starting their journey together with Rusta. So the new member inflow continues, and the interesting thing is that we see that same thing in Sweden as well, that the member inflow and also the ticket visitation also continues over there. So we will make use of that. And as Sophie has underlined here, we have a strong balance sheet. So we will continue to invest in our own growth and taking in new customers, opening new stores, we believe is really, really important at the same time as we're investing in price leadership, delivering on our most important customer promise. All of these things are things that we're doing to make sure that we support our future growth. All right. So with that, I think it is time to open up for Q&A.