Rusta AB (publ)

Good morning and welcome to the presentation of the first quarter of Rusta. In our financial year that stretches from May until April, this represents then the first three months of May, June and July. Presenting will be myself, Göran Westerberg, CEO of Rusta, and I'm joined by Sofie Malmunger, our CFO. The agenda for today, we will start with a short business update to explain what's been happening during the quarter. We'll then move into more of a deep dive into the financial performance by Sofie. And then we will also add this time an update on some of the projects that are going on to give you a little bit of a flavor of what is happening in the chain. And then finally, we will summarize, tell you a little bit about current trading, and then open up for Q&A. Let's start with the business update, and as usual, give you a picture of what the retail chain looks like right now. During the quarter, we did not open any stores. This is normal. We never do during peak seasons, meaning summer and Christmas. However, after the quarter, we have opened up two new stores. And in fact, those opened up yesterday, one in Sweden and one in Finland. That takes our total number of stores in the network to 227 stores. We have continued to have an inflow of new locations that we have signed and that's also why the pipeline remains at the record high 47 stores. So looking at the guidance for opening, we've had the span between 50 to 80 stores in the coming three years. We reiterate our guidance towards the upper end of that spectrum, supported, of course, by the continued inflow of new stores. And we continue to see a softer rental market in the Nordics. Then having a look at the numbers for quarter one, we had, if we start with the numbers, we had a growth of 6% in total and 1.2% like for like, both of those numbers excluding currency effects. Our gross margin ended up at 42.6% and we have an EBITDA margin of 8.8%. Now, breaking this down, if we look at the top line, we can say that we started off this season with quite a weak and soft May, very much because we were meeting very tough comps from last year. Our hope and aim was to pick up some of this slack during June and July. This happened in our biggest segments, so in Sweden and Norway we continued to see a healthy growth, supported both by the market and where also the strategy that we had in place for this season worked out quite well. However, it was another picture in the segment other markets, and this is very much to do with Finland, where we saw that we had weaker than expected sales driven very much about the customer that returned more to lower ticket items and did not respond as well as we had hoped on our summer season sale. And I would like to remind you here that This is the quarter where we have the highest share of high-ticket items, meaning the typical summer items, barbecues, garden furniture, and so on. We increased our gross profit by 0.6%. And when it comes to the EBITDA, we had a drop. And you can say that this is pretty much entirely explained by two things. One is that we're meeting the compensation from the IT attack that we experienced more than a year ago. That came in and that affected the EBITDA margin here, together with the currency effects, the currency headwind that we had. And here I would like to underline that our judgment here on this is that the Forex headwind peaked during Q1, and that we have now experienced the brunt of the negative effects of the Forex exchange. And I would like to underline also that we believe that in total the stronger Swedish crown is net positive for us, but it's a difference in timing of the negative effects and the positive effects. And the positive effects are now ahead of us and we're starting to see signs of that. If we look at the EBITDA, just to give you some clarity, and Sophie will give you more, if we look at the constant currency EBITDA, that would have been at 10.4%. So together with the compensation for Tieto, that pretty much explains the whole drop in EBITDA. Right, looking at the key events during the quarter, there's a couple of things that we would like to underline. One, again, regarding our biggest segments, Sweden and Norway, we saw a very healthy underlying trend, and that is one that we had increased footfall to our stores. There were more people coming there. That also resulted in a higher number of tickets, but also that the average value of those tickets went up. At the same time, we also saw a healthier development in terms of mix within those customer baskets, meaning that customers actually moved up the ladder, the pricing ladder, buying less of the low ticket items and more in the mid and higher end of the spectrum. And that is exactly what we would like to see. It was a bit of the opposite in Finland, where we had a weaker than expected development. We saw a careful consumer that hesitated to buy the higher ticket items. We had an increase in low ticket items. And this is very much something that is reminding of what we saw during the peak of inflation. And I think the market data regarding macro factors in Finland suggests that this has to do with a weaker consumer outlook on the market. And this is something that we're working hard now with addressing. And we believe the answer here is really to address the needs for lower prices that seems to be especially strong in Finland. Looking at the other trends, I think we also see similar things that we've seen in the past quarters, meaning that we are continuing to recruit new customers. Looking at our Club Rusta, we had 6.5 million Club Rusta members. That's an increase of 12%. And in fact, in terms of percentages, we actually saw the strongest growth in Finland and Germany. So there is definitely an interest for us and for low prices. We continue to have a positive view on the expansion potential. As I addressed on the previous slide, we see that there is a soft market and it will continue to flow in new stores. And as we also released yesterday, when we opened two new stores here, we will have about six stores in the autumn, or we will have exactly six stores during the autumn. And that also marks a step up in our accelerating store opening pace. We also judge that the rental market remains positive, so we believe that this will continue. With that, I hand over for the time being to Sofie for financial performance.

Yes. Let's see if I can click here. Okay, so in Rusta's first quarter, we achieved total net sales growth of 3.4%, which was negatively impacted by currency effects of 2.6%. Excluding the currency effects, the total net sales growth was 6%, and like-for-like growth excluding currency effects was 1.2%. The summer season, that starts already in March at Rusta, was all in all strong, but the sales pattern shifted compared to last year. This year, a warm April led to an earlier start to the season, and this is in contrast to last year when the peak was in May, which then boosted Rusta's first quarter. This shift means that approximately 3.6% of this year's seasonal sales were reflected in our fourth quarter instead of in our first quarter. Gross profit increased by 0.6% compared to the same quarter last year. The gross margin decreased by 1.2 percentage points, but 1.7 percentage points was due to negative currency effects, which then fully explained the decrease and shows that we have a positive underlying productivity in the gross margin. Our assessment is, just as Göran said, that with the current FX levels, the peak of the negative FX effects was reached in this quarter, and that from the second half of the financial year, the net currency effects for the group will be positive. Our EBITDA for the quarter decreased compared to the same quarter last year, which is explained by the negative currency effects and the compensation we received last year from Tieto Every regarding the IT attack. The EBITDA margin amounts to 8.8% and the EBITDA with constant currency is at 10.4%. If we look at our segments and start with Sweden, we continue to see a positive trend like the previous quarter, with stronger customer willingness to buy and an increasing preference for products in higher price ranges. Both the number of customers and the average receipt continue to grow compared to last year. Seasonal sales have been strong overall, combined with increased sales of DIY products. Total net sales increased with 7.1% and like for like 2.6%. The EBITDA margin is 90%, a decrease of 1.8 percentage points, which is explained by a higher share of OPEX due to many new stores openings at the end of last quarter. The positive development for DUSTA in the Norwegian market has continued with strong growth both in sales and customers. Purchasing willingness is increasing and customers, just like in Sweden, are increasingly buying products in higher price ranges. The total net sales growth excluding currency effects is 10.4% and like for like excluding currency effects is 3.3%. The EBITDA margin decreased with 1.8 percentage points to 11.9% for the quarter, mainly due to negative currency effects from a weaker NOC compared to the previous year. Other markets were weighted down by a weak Finnish market where macroeconomic factors and unfavorable weather damped the summer sales. Net sales growth for other markets excluding currency effects was minus 1.3% and like for like excluding currency effects minus 5.4%. The EBITDA decreased during the quarter by 2 percentage points to 3.7%, mainly due to weaker sales and negative currency effects from the euro compared to last year. Our profitability in the first quarter has decreased compared to last year, which is mainly explained by the negative currency effects mentioned earlier and that we last year received a contribution from Tietoebri for the IT attack. It's our belief that the currency effect peaked during this quarter and that the headwind will gradually ease over time and instead strengthen our profitability during the second half of our financial year. We have a well-balanced campaign strategy in the quarter, positive sales mix effects and use in our assortment that has strengthened our profitability. Sea freight costs are lower than last year and we are starting to see lower costs for duty to Norway thanks to our bonded warehouse. The increase in OPEX is planned and explained by more store openings at the end of last quarter. Rusta has a short payback time for new stores, about a year on average, but the short-term impact can differ between the quarters and between the years depending on timing. And then some comments on our balance sheet and cash flow. The increase in working capital is a planned inventory build-up due to more stores and increased demand. We have a positive cash balance at 123 million SEK. Cash flow from operating activities in the quarter is lower than last year. and is explained by earlier deliveries and payments of goods this year in Q1 compared to last year. Due to the uncertainty regarding possible supply chain disturbances because of the tariffs during the spring, we wanted to make sure that our autumn and Christmas assortment was delivered on time and without disturbances. With our strong balance sheet and financial position, this is all positive and the result of Rusta mitigating risks. Cash flow from investing activities for the quarter amounted to minus 102 million SEK, which is in line with last year. All in all, we continue to have a solid balance sheet and a stable financial position, which will support our future growth. All said and done, we are on track and remain committed to deliver on our financial targets. As announced in the last quarterly presentation, the board has proposed a dividend of 1.45 SEK per share, which is an increase of 26% compared to last year. This corresponds to 47% of the net profit for the year and is thereby in the upper end of our dividend policy. This is made possible by our strong financial position, where we can both invest in future growth and efficiency, and at the same time increase the dividend to our shareholders. The dividend will be decided on our annual meeting on the 19th of September. And with that, I hand over to Göran.

Thank you. All right. I think you'll find it interesting also to see some updates on the projects that we're running. There's quite a few being run at the company right now. And one of the ones that I found really, really fun, engaging and valuable is the concept renewal. And just a quick reminder, we're doing all of the stores in the Rusta chain in record time. So between week 32 and 37, we're rebuilding large parts of all of our 227 stores. Obviously, all of our new stores are open up with this concept from the very beginning. But we're also rebuilding even our existing and even our oldest stores into this concept. And approximately 40% of our sales space is directly affected by this rollout of the new concept. We have never done it this fast. We have also never done it within this very limited cost stream, never done it as cheaply as we have done it this time. And I'm happy to say that this seems to be completed exactly on time. According to the plan, we are going to finish at week 37, which is this week. And that's exactly what is happening out there. And I can also tell you that this seems to be very well received by our customers. It's very much about an upgraded way of presenting our product groups. They're more combined, supporting each other in a more logical way in the customer, in the flow, in the stores. But we have also introduced new ranges. We're also utilizing new techniques where we can display more products on the same area. So it's simply more efficient as well. And the early performance is well in line with the guidance on the like for like impact, which we set at one and a half to two percent above what we would otherwise have had. And this is something that we have tested, we've seen it, and now we start to see it also in the full rollout. And you can say that most of the full impact of this will start to show during Q2, since Q1 was basically more affected by the rollout of this new concept. One of the ranges that we rolled out is Elsa Form Kids and for those of you who know us Elsa Form is one of our private labels within home furnishing where we package basically slightly higher quality items within home furnishing very much in nature materials and so on. And what we are doing here is that we're taking a step towards families with children, people that want to furnish the room for young children. And this is Elsa Form Kids. It's about 30 items that we're adding. It's presented together. It's rolled out in all of our stores and it has been very well received by our customers. I think this is... both something that drives our average ticket, it also expands our offering towards the customers, but it's also supporting margins. Another area that we have rolled out is in our very large product category within home textiles. It's a big and important part for Rösta. We're now taking another step with more of premium products at a very affordable price. This is called the hotel collection. This is higher tread counts, bed linen, it's higher grammage towels, terry towels, and it's other things like incense candles and so on that you would basically see in a hotel context. And this is packaged and it's sold really, really well. We're actually struggling to keep up with the demand in this area. And again, this is something that supports both the strength in our brand going upwards in the ladder, which supports both value of tickets, but also top line and also, of course, our gross margin. So very well received. Other than that, we have a couple of efficiency projects that's running. One of the biggest ones that we have at present is the automation system that we're implementing in our distribution center. And actually, if you look at the picture, all of those buildings is actually, in fact, the Rusta DC. We have everything there in one place. That project is on track and it's expected to finish as per plan in spring 2026. And so far into the project, we can say that all lamps on the headboard are showing green here. So it's continuing as per plan. We also have the bonded warehouse implemented, which we also talked about in previous quarterly reports. This is basically a way of saving on custom duties when we are exporting to Norway. We don't have to shell out that money until we're ready to sell it in Norway. So instead of paying the custom duties already when we bring it into the European Union, or to Sweden, we can do it when we're ready to sell it in Norway. And we expect that to give an annual cost saving of approximately 30 million, of which we will see approximately 7 million during this financial year. And this is also what we're seeing. So we also stand by that guidance. Right, so summary, you can say in short, is that all current projects, and there are quite a few of them, are progressing according to the plan. The DC automation, the bonded warehouse, the concept rollout in our stores, and perhaps I should also add that now Having tested this faster rollout with more efficient techniques, when we see that as being successful, of course, that increases our appetite for doing more of that more often. It's a possibility for us that we see in front of us. Store pipeline, we see a sustained inflow of new stores and we remain on an all-time high with 47 stores in the pipeline. So we remain optimistic about the expansion opportunities and we again continue to guide towards the upper end of the 50 to 80 store range that we have presented in earlier presentations. When it comes to current trading, I can say that August, when it comes to sales, to top line, it was in line with what we have seen in Q1. Being a summer month, I would say August didn't differ very much from May, June, July. Finland remained challenging on top line, while Sweden and Norway continued to show the same strength as we have seen before. However, I can say in a comment without going into details, the gross margin looks different as compared with Q1. Here we see an improvement, and that's very much on the back of the things that we have reiterated during this call. that the FX effect, the brunt of the negative effects, have now peaked during Q1. And we have most of the negative effects behind us. And now the larger and positive effects are in front of us. And we have started to see signs of that, and we believe that the net effect of that will show us a strength in GM during the second half of this fiscal year. So we repeat that same guidance as we had from last time. All right. And with that, I would like to open up for Q&A.