At this time, I would like to welcome everyone to this Matas earnings report for H1 2024-2025. Today's call is being recorded. If you have any objections, please disconnect at this time. All participants will be in a listen-only mode throughout the presentation, and afterwards, there will be a question-and-answer session. I would now like to introduce CEO Gregers Wedell-Wedellsborg and CFO Per Johannesen. You may now begin.
Thank you, Operator, and welcome everyone to the call covering our first half and our second quarter of the financial year. We consider this quarter to be another proof point that our strategy is working, is being executed, and is delivering results in line with our expectations. We have a short agenda. I will comment on what's happened in the quarter, a bit on the numbers, but mostly on what's happened in the quarters, what's going on in the company, and what drives results, and then I will hand it over to Per to do a more detailed review of the financials, and we will end out, as always, with the Q&A. As I mentioned, we consider this quarter to be perfectly in line with what we had planned for. We see our strategy working.
Actually, I think what characterizes this quarter is that we have been together, KICKS and Matas, for more than a year now. The first year has had a lot of internal focus, getting to know each other, collaborating, taking out cost synergies. And what you're seeing in this quarter is the beginning of our revenue journey, of the revenue synergies that we also believe we can generate together. So a lot of focus on doing new stuff and taking initiatives towards the market, towards the customers. The bare numbers: our growth accelerates in Q2, and the bottom line follows suit: 6.8% pro forma, currency-neutral growth against the same quarter of last year, a stable EBITDA margin against last year of 12.6%. And that was perfectly in line with our own expectations, actually slightly ahead on the growth against what we expected. We are seeing three big things in the quarter.
As I mentioned, revenue synergies starting to gain traction. Those initiatives that we are taking towards the market are paying off in terms of growth, so we see growth in all our retail channels and in all of our markets. One number to highlight: KICKS Online growing 24%. If we take out Skincity, KICKS Online growing 24%. Margins stable despite dilution from a number of things that we are doing to fuel growth and to execute on our strategy playbook, and I will get back to that, but we are investing OpEx to drive our strategy perfectly in line with our plans: marketing, pricing, integrating Skincity, rationalizing our in-house brand portfolio and resetting our in-house brand portfolio, and building capability for long-term growth. It's also a quarter, as always, that's about the financial results in the quarter, but also about getting ready for Christmas.
We are ready for Christmas, expecting growth with an inventory build-up, an early inventory build-up this year to make sure that we don't have any bottlenecks in our new logistics center in KICKS. And that is also actually reflected in our OpEx. We have slightly higher than expected OpEx in our KICKS logistics center because of this early inventory build-up. I'll get back to that. All in all, on the basis of the performance and our expectations for the rest of the year, we raised the low end of our revenue guidance to between 5% and 7% against 4%-7% earlier. We maintain our EBITDA margin guidance and our CapEx guidance as is.
Digging a little bit more into what's happening in Matas and happening in Kicks, we see very strong performance in Matas with 7.6% growth in stores and online, both channels growing, but standout growth from online, with actually an improvement in our gross margin. And we'll get back to why we can achieve this. Looking at Kicks, we have a slightly different mode, slightly different mindset. We are investing slightly more gross margin into growing Kicks and doing a few resets in Kicks. And I think the number to look out for here is what is happening in Kicks. If you take out the Skincity business, which is in decline, you are seeing a 10.4% growth under the KICKS banner. We consider that quite an achievement in the Nordic markets that are not easy markets to compete in.
So in total, 6.8% growth with a stable EBITDA margin for this particular quarter. We're happy with those results. Strategy: our strategy is all about doing more for our existing customers and existing members and driving growth by adding more assortment, more brands, including our own brands and making them stronger. It is about getting closer to the consumer with both an emphasis on an even better customer experience online and in our club, but also investing in our store network, finding those white spots, enlarging stores, upgrading stores at a moderate pace. And then finally, it is about using the strength of being one Nordic company to create value for the consumer and, of course, operate the company more efficiently and share return on investment. So this is our strategy. And a lot is happening on each of those tracks for this particular quarter.
Let me take you through a few. Four brands on this page. You might not know them, but the consumer definitely knows them. These are very high-demand brands. Some are brands that have been in the market for a long time, well established, but that we hadn't previously had access to, and some are rather new brands that are really trending on social media. So what you can take from this particular quarter is that we are now a company that can execute a brand launch across four Nordic markets at the same day, and this is something that is in very high demand from our suppliers and partners.
This is the offer to them to say, "We can give you access to the most attractive Nordic customers for markets without the complexity that you had before." That is what we can do with the launch of e.l.f., which is a Gen Z brand, with the launch of Milk, also a very hype brand on social media. Dyson, many of you will know from vacuum cleaners. They have also gone into beauty and gone with us. That's quite an achievement to catch that brand. Kevin Murphy is a very well-known brand in professional hair care as a long brand that we're very happy to carry now and to offer to our consumers. Second big thing happening is that we have looked at our in-house brand portfolio for some of the KICKS brands in the portfolio.
And some of them, we have assessed that they don't have a long-term future. They are not at scale. They can't go Nordic. So let's take them out. Let's create space for something else, whether it's interesting third-party brands, as you just saw, or some of the brands that we really believe can be Nordic power brands. And launching Striberne in KICKS is not the big sales driver, I can say, of the quarter, but it is a big symbolic thing because obviously this is a sign of where we want to go. We want to build strong Nordic power brands that we retail in all channels. And actually, Striberne, it's almost like launching a new brand. But KICKS in Sweden and Norway, there's about 20% awareness of the brand already from people who have traveled to Denmark. But it's like starting from scratch.
We get very good reactions both from customers who immediately understand the brand, a good quality brand, nice packaging at a very fair price. For our colleagues in the stores, they find this very easy to sell as an add-on sale. This is not cannibalization. This saves the customer a trip to the supermarket or to the pharmacy to buy these kinds of brands with KICKS as well. Off to a good start, just one month in the numbers and it's early days. Another good indication that the strategy is working and being executed is membership is growing. Even in Denmark, where we are a very mature business but very alive business, we passed the two million member mark in Club Matas. In KICKS in Norway, we passed the one million member mark.
What's interesting is customer satisfaction by being part of the club is on the up. We are recruiting mainly younger demographics into the club. We are seeing that the members, they are taking advantage of the assortment expansion and shopping across many more categories and channels. Finally, and this was actually just outside of the quarter, but all the preparation was in the quarter. We opened a new flagship store in a prime prime location in Helsinki, the main shopping street in Helsinki in October and saw 1,000 customers lining up, first one 4:30 A.M. in the morning to visit our stores. It was a massive splash on social media. It got national media coverage in Finland. It's a very beautiful store, a store that we also believe will be a good business.
And perhaps most interestingly, we saw that this event and what it created actually created a sales lift in the rest of our Finnish businesses. So really, I think a testament to our belief in the Finnish market as well. And logistics, this is our big investment area where we spend a lot of CapEx. And that is on track as well with perhaps some issues on the OpEx that I will get back to in the KICKS business. The good thing is that our new warehouse in Rosersberg is fully operational. It's working. It's delivering. And all the KPIs related to availability, they are on the up. So everything related to the customer experience is running much more smoothly than you can expect from a new warehouse. We have made two decisions.
One decision was to build up inventory for Christmas earlier than usual to avoid these inbound bottlenecks that you can experience in a new setup. So therefore, you will see early inventory build-up in our numbers. That drives some OpEx. If you take in hundreds of millions of DKK more inventory than usually in September, that just drives some OpEx. That, of course, is just timing effects and non-recurring effects. We're also seeing that our efficiency gains from the Rosersberg facility are coming slightly slower, moving in the right direction. We're confident that they will reach the targets that we have, but slightly slower in the summer quarter than we had expected. So about a DKK 10 million OpEx overrun. Most of it is non-recurring in the quarter. Our Matas logistics center facility, the building is completed. The automation is now installed.
Now we're doing all the hard work of testing and making it work and figuring out all the minor details and major details of how to actually prepare this for the ultimate launch, which will be on time in the first half of 2025. The project is on budget. It's on scope. And it is on time, which we are very happy to see given that this is a major undertaking for the business. And with that, I conclude my review and hand over to Per to comment on the results.
Thank you, Gregers. And let me dive straight into the numbers, starting with the revenue, both by banner and channel. And as Gregers already alluded to, a performance this quarter slightly above our expectations on revenues. But what we're basically seeing is we're seeing core e-commerce growth across the group with above 20% growth, excluding the Skincity impact.
And again, as we talked about previously, assortment in Matas continuously drives our performance. And you can say a lot of talk in the beginning in terms of how do we get the synergies out of this joining Matas and KICKS. And really some of the elements from Matas, the playbook of Matas, so to say, is now starting to work also on the KICKS side, which you'll see in the numbers looking at the performance on our e-com business. Strong growth also in our stores, 2.4% like-for-like growth, and net eight more stores, which is why we are growing 4.5%. And as Gregers just alluded to, the reason one we just opened in Helsinki in October. One thing, though, is, of course, this is a little bit offset by the integration of Skincity. This is what we've planned.
And what that basically means is, of course, that we're moving certain stuff into the KICKS business. But it also means that we do not do the same level of activations on the Skincity business as we used to. Again, overall, growing the business 6.8% for the quarter. Moving into the margins, and as Gregers already talked about, we are investing on the Swedish side in the KICKS business, also Norway, Finland, whereas we are getting traction, especially on the Danish business, on our margin. So what is actually driving that from a Matas perspective? It is really that we are getting the sourcing synergies, as we talked about when we did the merger with KICKS.
But we are also seeing that we are getting to a mature level on our assortment expansion in Matas, which basically means that we're getting higher and better margins than what we've seen in the early days of our assortment expansion. So actually, what we talked about earlier is now actually coming into life in the numbers also. In terms of KICKS, we are investing. We are investing in pricing. It is a more competitive market. And we are investing in that. And in addition to that, we're doing the reset on our in-house brands. So we take fewer bets, but we become stronger where we do our investments. And last but not least, the Skincity. So how does that impact the numbers of the KICKS group? It basically means that from a short-term perspective, we would have a margin dilutive impact.
The skincare product from Skincity was slightly higher margins. But on the other hand, it will improve our margin, EBITDA margin, which will then take us to the next element, which is basically our cost situation. And I know we already talked about a lot of the elements, but let me just take you through some of the details. So from our staff cost perspective, basically, we're mitigating a lot of the very high salary inflation that we've had a couple of years with high adjustments on salaries, which we're basically managing through our workforce planning and also the way that we streamline the overall workforce across the Nordics. In addition to that, we are also investing.
We are investing in capabilities, our pricing excellence, the assortment that we're looking at, and last but not least, our e-commerce competencies, as I just alluded to in terms of our playbook in terms of e-commerce. Last, and as Gregers already talked about, is really our KICKS logistics center. We are progressing towards our targets. The plans we made in terms of efficiency, the whole learning curve after we went live, we need to remember this is not just a new logistics center. It's a total change of the way that we have done logistics and the way we do our supply chain across the three countries in which KICKS operates. Then we have the timing effect. We're basically investing in the inventory build-up in September, making sure that we are really ready for the high season and the peak quarter.
And as Gregers alluded to, that has an impact of this quarter in this quarter of around DKK 10 million, which is a non-recurring item. So that's important to take into the view on our cost base for this quarter. On our cost side, two things I just want to highlight is really part of our other external cost is, of course, the cost from an e-commerce business. So the more we send, of course, our shipping costs will go up. And we're investing in that combined with, of course, the faster deliveries, which is part of our plan going forward also. And then on the other side, and the second point is we've really invested more than 25% above last year in this quarter. And this is comparing like-for-like numbers with last year.
That is really to make sure that we have a higher share of voice in the market. Of course, we were focusing on our assortment awareness. Last but not least, this is a discretionary decision we made to make sure that we, from a longer-term perspective, also will benefit from creating higher awareness on the brands, especially on the KICKS side. That then moves me into the final point. How does all this come together? As Gregers said, 6.8% growth on our EBITDA in line with our top line. Basically, this just reflects or is the sum of all the good things that actually happened for the quarter as we planned. Good growth on our e-commerce business, like-for-like growth in our stores, gross margin improving, although we are still investing in the business also from a long-term perspective.
From a cost side, we have a non-recurring from our operation in Rosersberg, but we are investing also in our marketing to make sure that we get a higher share of voice in the market. And then we're delivering basically an EBITDA margin in line with last year and growing in line with our top line. So we're very pleased with the overall financial performance. This then moves me into a little bit more on the cash flow and the balance sheet. And as you'll notice, and we talked about already, is really around our inventories. We made some conscious decisions this quarter or going into the high season quarter. And that's really linked into the inventory build. And you'll see the building blocks here, continuous high growth as we've seen for quarter by quarter, of course, drives the need for high inventories.
Then the new logistics setup in KICKS is a different setup than in the past or in Q2 last year, which, of course, also requires us to carry more inventory. And last but not least, then we have the inventory build. Excluding the inventory build, that's probably where you will start seeing the inventory levels going forward. And then that moves me into the cash flow for the quarter. So overall, and this is, of course, comparing from first half of last year to first half of this year. And really, we have a positive cash flow from operations. We have an impact on our working capital. That is linked into inventories. If you look at the inventories, we had around DKK 260 million incremental from the build-up. Part of that, of course, is funded by our suppliers.
That's part of the way we run our inventories and run the business. And then, of course, the CapEx. We've invested around DKK 200 million, and that's predominantly linked in to the investments in MLC, which we just talked about. This actually leads to a gearing end of this quarter around 3. So you can say this is at the top end of our guidance, but this is also with the incremental investments that we made or the decisions we made around putting in the extra inventories before the peak. So all part of the plan for the high season, so to say. Which brings me to the last point is really just to reiterate our guidance for the year on EBITDA margin, 14.5% - 15.5%. Our CapEx around 615.
Then basically, we narrowed our guidance on revenue upwards to between five to seven, as Gregers already alluded to in the beginning. And with that, we conclude the presentation of the first half of this year. And I'll leave it open for questions.
Over to you, Operator, to manage the questions.
Thank you, Gregers and Per. If you do wish to ask a question, you will need to press five star on your telephone. To withdraw your question, you need to press five star again. There will be a brief pause while questions are being registered. Our first question comes from the line of Mads Krigsgård from Carnegie. Please go ahead. Your line is open.
Yeah. Thank you for taking my questions. So the first comes to Kicks. So I remember one of the initiatives was to change the price perception in Kicks.
But we're looking at the prices in KICKS. It seems as the price points have remained largely unchanged. Is that a right observation?
No. We have introduced a Nice Price, which is our everyday low price program. And that is successively being rolled out. So we had a first wave before the summer. We had a second wave coming here in the fall. So you see that program being extended. And then, of course, there is the campaign part of it that we also work to optimize all the time. So we are making those margin investments to improve on the price perception, which is one of KICKS' issues that they in the past maybe have had an approach that they could afford to have a slightly worse price perception given that it was a premium experience.
We are of the opinion that we need to be slightly more price competitive and have that perception that we have a fair value for money in KICKS.
All right, that. Then I have a question in terms of downtrading. So do you see any signs of downtrading in the Nordic markets? I also see that the high-end beauty category is performing quite well in the quarter.
Yeah. We're actually seeing that exactly the high-end beauty is the main driver from a category perspective. And you could say it's not even Christmas yet. Having said that, remember that KICKS is more high-end as a business model and as a concept than Matas. So when we see the growth coming in KICKS to the extent that we are now, that flows into our high-end.
So, I would say what we see right now is what we call mix and match shopping, that customers, they buy high and they buy low, and they combine that, and that's why we think having Striberne in Matas has always been a good idea. But having stuff like Striberne in KICKS is also a good idea to cater for the customer that might want to buy her preferred luxury brand with us, but also get a real value for money experience at the same time.
All right. Thank you. Then my final question, I'll jump back to the queue, so this 58% negative growth you recorded in Skincity, is that the run rate going forward?
I don't think you can imply that. But what's definitely happening is we are migrating both brands and the experience of having this online advice interaction with the brand.
We are migrating that to the KICKS business and to the KICKS online offering, and at the same time, we have decided to hold back on campaign activities in Skincity, given that in the long term, we think that the Skincity experience and the Skincity brand should live under the KICKS umbrella and be part of the KICKS offering, but we will get back to Skincity at a later point later in the year. For now, all our efforts go towards building a very strong KICKS offering under the KICKS banner online and offline.
Maybe just to follow up here, so what you're doing in terms of Skincity, that already included in the full year guidance, i.e., what that's part of the strategic plan, so you're just doing what you plan to do by the beginning. Completely.
Exactly the same thing that we said in the beginning, migrate the experience, the brand, the business, the customers into the KICKS environment.
Thank you.
Thank you, Mads. The next question will be from the line of Christian Godsk from SEB. Your line is open.
Thank you. A couple of questions from my side. I'm sorry for my lack of voice here. So first of all, maybe could you put a bit more commentary on the investment in marketing of the incremental DKK 25 million for the quarter and how you would think of that in the coming quarters?
Yes. So it's 25%, not DKK 25 million. It's not that different, but just to be absolutely clear. So what we're doing all the time is we're monitoring opportunities to gain market share. And if we see opportunities to gain market share without sacrificing margin or over-investing, we will seize that.
I think that's just good business to look at what's happening in the market. If market shares are available at a fair price, go for it, and that's always a discretionary decision. This would be our commercial teams and ourselves combined saying, is there an opportunity to grab some market share and can we afford that with the ambitions that we have? That's one thing. That's the more, can you say, opportunistic part of it. The really important thing is that when we introduce new assortment, we want to build awareness into that assortment. If we see good growth and good traction, we might pull forward some investments in marketing. I would consider this marketing to be, as Per said, a discretionary decision. It's not sort of the level that's needed to sustain the growth that we have or anything.
It is a decision to spend whatever resources we see that we can pull together to actually make an impact in the market, so that's how I would think about it. And then perhaps for KICKS, KICKS has been, because KICKS is the well-established brand, they have not been super concerned about having the right share of voice in the market and telling the story about all the new stuff that we're doing. And we are dialing up that, and we're seeing an immediate response from customers to that.
Okay. Very clear. But maybe could you comment a bit on the split on those two? How much is this more opportunistic where you see pockets in the market to take growth? And then how much is more on the investment in the brand and the product assortment?
That will be too detailed.
I would rather say that this is not a decision that impacts our guidance for the financial year or for our long term. This is something we believe we can do within the guidance that we have.
Okay. Then my second question would be on if you could comment or give some kind of bridge on the magnitude of the impact from, yeah, both the synergies you've seen coming through and also on the other side that is offset by some of the price erosion and some of the other moving parts, the matured assortment expense and some of the other initiatives you are implementing this quarter just to have a better feel on the progression on the margin. That would be appreciated.
Yeah. Without breaking down into sort of actual numbers, we are seeing two big positives on the gross margin.
One is that the sourcing synergies that we aspire to gain from being a Nordic company, we're seeing those coming in. And the other one, as Per mentioned, in Matas, where we have pursued assortment expansion for, I think, since August of 2021. And we talked about many times on these calls that when you go into new assortment, it is always lower gross margin at the beginning. You don't have scale. You have to add marketing. You have to do campaigns. You don't really have the best terms with suppliers. And what you see in this quarter is that what we have said, namely that we will see gross margin improvement on that new assortment, you're seeing that actually to an extent that it impacts our total gross margin in the Matas business.
KICKS is at another point in this journey of assortment expansion, hardly gotten started on sort of the strategic assortment expansion, and in KICKS, we have done these couple of things that Per mentioned, investing in the price perception, resetting our in-house brands, taking some of the high-margin in-house brands that we don't believe in for the long term. That impacts the gross margin, but we gain some of it again in the EBITDA margin, so you're seeing this balance of some of the positives accruing to Matas, and that gives us room to invest more gross margin into the KICKS business.
Okay. And then just a third question as a follow-up for the question from Mads. When should we expect the Skincity impact to be out of the numbers?
Because it basically looks like you are discounting or discontinuing Skincity based on the size of the revenue coming from Skincity.
Yeah. So just to be clear, the Skincity brand will live on, but it will live on under the KICKS umbrella and part of the KICKS offering. The Skincity brand is actually a very well-liked brand and with a lot of positive qualities that we want to maintain. So this is more of a channel shift, if you will, that from the dedicated e-comm Skincity business moving into the KICKS environment. And our approach to this is let the customers decide when it's time to make decisions on how soon or how fast. That it's really about figuring out if there is a strong loyal following on the Skincity standalone business, then we might go on for a little longer.
But if customers have migrated onto KICKS, then it might be a bit shorter. But again, going back to Mads's question, this is not something that affects our short or long-time financial guidance. It was always in the plan.
Yes. Just very briefly, just to understand the numbers, the 10.4% growth in KICKS excluding Skincity, is that adjusting for the migration of clients from Skincity to KICKS?
So no, it's not. The 10.4% is including what revenues we capture from Skincity. But I would say that it's primarily other things driving the growth under the KICKS banner. So it's not just a shuffle from the Skincity channel into the KICKS channel. It's actually a lot of other things driving the growth for the, I think, standout growth of 24% in KICKS online.
A part of that, and a relatively limited part of that, is Skincity.
Okay. Perfect. Thank you. I'll jump back as well.
Thank you, Christian. Our next question will be from the line of Poul Jessen from Danske Bank. Please go ahead. Your line is open.
Yeah. Thank you for taking my question. And I apologize if it's written in the report for Q4, not being able to read it. Coming back to what Christian talked about is now that when we have both you and Luca, you are outgrowing by more than a factor of two. So if you should make a guess on why you are doing so much better, it's because you're up and running now? Is it the extra marketing, your assortment, Nice Price, or is it omnichannel?
From your point of view, what's the reason why you are suddenly making this huge difference in growth rates?
Yeah, so you almost gave the answer, Poul. It's a combination of many, many things, and I would say the headline is that the first year together with KICKS was all about internal stuff, getting ready for the strategy, taking out synergies, setting up the organization, making plans, all of that. What you're starting to see in this quarter is what the company can do when we start investing in our playbook, in doing all those things that we aspire to do in the market. I would say that the big difference for this quarter is actually that the customer starts to see the benefits from us being a Nordic group and acting together. It is a combination of all those factors that you mentioned yourself.
It is sharing knowledge on how to run best practice e-comm. It's faster delivery. It's wider assortment. It's how we run our campaigns. It's a number of different things driving that growth.
Okay, and then as I understand it, one of the shortfalls on the revenue were health and well-being, at least being below expectations. Is the single-digit growth rates we see now, is that more a new normal, or is there any specific in the quarter?
No, we don't want to guide specifically on the different categories, but we have seen, as you know, over the last five years, we've seen spectacular growth in our health and well-being business. So we saw good growth last year, and we continue to see that there are opportunities to expand assortment within that and strengthen our offerings and get more beauty-only customers to also shop health and well-being.
We absolutely believe that in the long term, health and well-being is also a growth business for us.
And the final one is just to get an update on the cost out on the combination of the businesses. I can't remember. Are you already up and running on the synergy cost savings that you were aiming for?
Could you please repeat?
The cost savings you set up from the combination of the two companies when you make the acquisition?
Yes.
As I recall, it was DKK 100 million as a minimum. Are they all secured now? Or is there more to come?
Yes. So we are, and what we said was that by 2025, we will have fully phased in both the DKK 40 million standalone improvements from the KICKS business and the DKK 100 million of total synergies across all types of synergies.
We are progressing as expected on that item. We are firm believers that we will be able to deliver the 140 by 2025, 2026.
You're not giving any indication if you're halfway or three-quarters?
We look at this as a totality. The best I can give is we're well on track, and we feel confident that we can deliver on those numbers. We are well on our way. We are where we want to be. We are where we want to be, frankly. There's no surprises, nothing hidden, not a big hockey stick effect that we're waiting for. It's well on track. It's been the main focus for the first year together. We feel well on track on that item.
Okay. Thank you.
Thank you, Poul. Our next question comes from the line of Sebastian Carl from Nordea. Please go ahead.
Your line is open. Hi, Gregers, Per. Thank you for taking my questions as well. I have a few here. So first, I mean, you're operating in a still very uncertain environment. Could you expand a bit on sort of what you're looking into here? Has anything changed in terms of consumers here over the past month? And also, I mean, growth in the quarter driven by basket size is not as much as transactions. Why is that? Could you maybe add some comments to that as well?
Yes. So first, let's take the first part. So what we're seeing is customers actually buying a bit more when they shop with us. So transaction is broadly stable, but they buy a little bit more. And this is driven both by just, I think, the nature that we're offering a slightly wider assortment.
So some customers will take an opportunity to buy maybe one more item at a low price when they shop for the thing that they really came for. So that's happening. As we look forward, and as is indicated by our revenue guidance, we believe that the growth is sustainable for the rest of the year, that it will be a Christmas of growth as well. And we've filled our inventories, our warehouses, and our stores. So we continue to see what we have talked about as the lipstick effect. We continue to see that customers actually want to spend money on the little luxury. They might save on the big luxury, but they actually continue buying into the beauty business. So our assessment is that the overall beauty market is growing, and we are slightly gaining market share in a growing market. Why?
Lipstick effect, but I think also social media plays a massive role in generating demand. In the old days, people would be exposed to beauty communication when they got their leaflet, and maybe if they saw a television ad. Today, customers are exposed to beauty on a daily basis, many times a day. And somehow that drives demands. And just anecdotally, we see that very clearly that the markets were quite different, what brands would be the big brands, quite different a few years ago. But now we're seeing the same trends actually being global trends. And that is part of the rationale for why it's a good idea to be a Nordic company, because all the Finns, the Norwegians, the Swedes, the Danes, they want the same brands at the same time, which can be quite challenging operationally.
But it's also a massive opportunity for us because we can deliver that same-day launch, and we can have a conversation with suppliers to be the preferred retailer if they want to introduce hot new brands.
Well, okay. Thank you for that answer, Gregers. Very nice. Then a question on the DKK 10 million cost overrun in the KICKS logistics. So you talk about this partly being from inventory buildup, which I guess is completely a question of phasing. And then there's also a comment on the a bit slower than expected efficiency gains. So can you help me? What is what here?
So without breaking down the numbers, but just logically, we have built out DKK 280 million early buildup of inventories. That takes hands, frankly. So you're seeing, and that is the bigger part of the DKK 10 million is related to the early inventory buildup.
There is also, I would say, a delay in the learning curve on Rosersberg. It's moving in the right direction. We feel perfectly confident that we will reach the levels in the business case because we are progressing every single month. But it was a slight overrun in Q2 compared to our own expectations. And that's why we highlight the DKK 10 million as a combination of those two factors. It's not going to impact our full year guidance, of course. Otherwise, we would have made changes. So it's something we can manage. And I think the really important thing about the Rosersberg is it's working. It's delivering on all the customer-facing metrics. And that's really where when you do a transformation that is a massive transformation for KICKS, that's your main concern. If customers suffer from this, customers don't suffer from this.
Actually, we have better availability, faster delivery to the store, so on those all-important KPIs, we're in a very good place with a cost overrun or a slightly slower learning curve.
Thank you for clarifying. Happy to hear that, and then last question from my side here. A little bit nitty-gritty question. So on the special items, you book a DKK 5 million net income, which is a reversal of an accrual for deferred acquisition cost, you say. So could you expand on what does this mean in layman's terms?
So this is just related to an earn-out on the Websundhed acquisition that we had some targets, some ambitious targets, some very ambitious targets. And with how the business is progressing, we see that the very ambitious targets are not within reach for the sellers. So that's why.
Okay. Thank you.
Thank you, Sebastian.
As a reminder, please press five stars to ask a question. The next question will be a follow-up from the line of Christian Godsk. Please go ahead. Your line is open.
Thank you. Just briefly, just maybe a hardcore question here. Can you comment a bit on the margin impact from FX movements? That would be the first one.
From FX?
Yeah.
Yeah. Well, I think overall, I think the margin impact is fairly little compared to last year. So when you look at the LFL growth compared to the LFL currency neutral, there's virtually no major difference. So from our perspective, it is actually close to the same, at least for this quarter and also for the first half year of 2024, 20 25.
And then for the fourth quarter, where you now get a bit more tailwind?
I think at the end of the day, we don't speculate in exchange rates. When we put out our guidance, especially on revenues, what we're doing is we're taking the forward rates basically from you guys, from the banks, and then we apply that so that we keep ourselves out of speculating in any kind of currencies, to be honest. And that's also why you'll see the differences in the numbers. And then we compare, of course, to the base from last year and the exchange rates we had last year. So you will see a small improvement comparing to the previous numbers we did on FX impact on the business. But I still think the key focus question is really around, so what is the underlying? And that's what we present in the like-for-like, so the 5%-7% growth for the year.
No, no.
It was more on the, if you could maybe help me, on the margin impact from the FX impact, how that translates.
Yeah. And I think that is insignificant if you look at the EBITDA margin, if that's what you are concerned on. So there's no impact as we speak on the overall margin. And the way you can think about it is really when we look at the revenues, that's the big number. That's the top line. The EBITDA margin is really a percentage of the totality. And there we do not expect any impact from the FX.
Okay. Then a second question would be on the inflation and promotional environment. Could you maybe comment a bit on the development of the forward margin for the physical stores? Yeah. You can't see me quoting the times here. Only growing 2% in like-for-like in the physical stores.
Yes.
So we have been fortunate in our neck of the woods that the big inflation wave that we saw a couple of years ago and sort of the tail end of that has not really impacted our business because suppliers have been actually quite disciplined about not making huge price increases towards us. And whatever price increases or whatever additional cost came from suppliers, we have been good, I think, at sharing the burden with suppliers. So inflation has been less of an issue for us than for many, many other businesses. And I think the 2.4% like-for-like growth in this kind of environment for the stores; we're quite happy or actually very happy with that kind of growth in the stores.
And also what you're seeing, if you look at the staff cost, if you take out the Rosersberg, we're quite disciplined at keeping our salary cost ratios in line. So we consider this to be a healthy development for the stores.
Perfect. And then just a final follow-up on that would be maybe just remind me of the margin impact from when you grow online so much faster than you grow physical stores.
Yeah. So it's a difficult one because on an absolute basis, we are kind of channel agnostic. We don't really care if we get the sales in stores or online. And that's how we build our business model, how we think about cost and cost allocation is we should really be channel agnostic and not care where the customer shops.
On the margin, you could say that growth in the online environment could be more margin dilutive because you have to do the picking and the shipping per order. On the other hand, you have bigger basket sizes online compensating for that. So if we grow very fast online, do we see a little bit of margin dilution? Yes, mainly driven if we decide to invest in more marketing and more long-term growth. But structurally, no.
Okay. Very clear. Thank you.
Thank you, Christian. The next question will be a follow-up too from the line of Mads Krigsgård . Please go ahead. Your line is open.
Yeah. Thank you. I just have one question, one bookkeeping question. So can you talk a bit about expectations for leverage and net financials going forward?
Because I guess both will trend out in the third quarter, but then it might come up again in the fourth quarter given the timing of leases. Is that a fair proxy?
I think, Mads, the way you should look at it is really also comparing to previous years. Having said that, we have less movements on the leases compared to the historical way of looking at leases. And we're updating that every year when we close the year. But you will see, as in previous years, you will probably see the same pattern as you've seen historically. So you're right on that.
All right. And when do you expect your leverage to be by the end of the third quarter?
We don't guide specifically on the leverage per quarter. We have the two to three as our bandwidth.
This is obviously the expensive year with the big investments in MLC. So this is the big year. And there's no change to the expectation that we will generate a very healthy cash flow from next year as the MLC is lapsed. So we have no concerns on the gearing. And what you're seeing is a few timing effects.
Sounds good. All right. Thank you.
Thank you, Mads. As no one else has lined up for questions in this call, I'll now hand it back to the speakers for any closing remarks.
Thank you all for joining. As I started out by saying, we consider this quarter to be a confirmation of our strategy, trading very much in line with what we want, slight positive on the sales.
And the margin, as we expected, with the one surprise coming from Rosersberg, which wasn't really a surprise because it was a decision. So we think of this quarter as a confirmation of our strategy. And therefore, we maintain our EBITDA expectations, and we raised the lower end of our revenue expectations for the year. So thank you for joining, and over to you, Operator.