Hello, and welcome to Matas Q1 Conference Call. For the first part of this call, all participants are in a listen-only mode. Afterwards, there will be a question and answer session. To ask a question during the Q&A, please press five stars on your telephone keypad. This call is being recorded. I would now like to introduce CEO Gregers Wedell-Wedellsborg and CFO Per Johannesen Madsen. Please begin.
Thank you, operator, and welcome everyone to the call, our earnings call for the first quarter of the financial year. It's been a good start to the quarter, but it's also a quarter of more symbolic importance because we are approaching the two-year mark of our acquisition and integration of KICKS in Sweden, Norway, and Finland. Our agenda for the day is that I will make some comments on where we are on the grander timeline of the Win the Nordics strategy, and then point out a few areas of our strategy where we are making progress. I'll hand over to Per to cover the financial results in more detail before we open for Q&A. This is to us the central message of the announcement that we've made today, that two years into the acquisition of KICKS Group, we now enter a new stage of the Win the Nordics strategy.
For the last two years, we have been focused on growth, and we have been focused on integration and really getting the two companies together and driving out synergies. The biggest investment program in our history, building and opening two automated warehouses. As we look ahead, we look into a different kind of phase, still focused on growth and our long-term growth ambitions, but also more focused on operational excellence and execution. Also from a financial point of view, we enter a highly cash-generative phase, offering us a lot of freedom to keep investing no matter if the markets are friendly or less friendly out there.
Digging into what we have covered for the last two years, I think of note for us as a first-time buyer of a company outside of Denmark after 75 years of operation in just one market, we have been able to deliver sustained market share gains with growth in all four markets and both the physical channel and the online channel while integrating. We have seen, and this was not something we counted on, we have seen a growth in our membership across the Nordics past the six million mark for the number of members, which is obviously a very, very key asset for us and a key part of the reason we are competitive. We also announced when we acquired KICKS that we would be able to deliver DKK 140 million in improvements and synergies. That's on track. It will be fully in in this financial year.
As we said with the financial year reporting, we have identified another DKK 50 million of synergies coming in to the next financial year. We have a Nordic organization. We have a Nordic management team, leadership team in place. The IT integration that is still running is on track. We have actually delivered in the last quarter our first win on a joint e-commerce platform where Finland migrated into the new Nordic platform. IT integration is on track as well. Two automated logistics centers, that is of course a critical project both financially and operationally, to completely remake our supply chain. It has been delivered on time, on budget, and they are both now fully operational and entering the learning curve phase, getting more and more efficient month by month.
Financially, a full refinancing was completed on competitive terms, offering us more headroom if we were to need that, and the launch of a share buyback program with the financial year. The next phase, and I'm not going to make any predictions about whether it's going to be an easy market or a difficult market, it is for sure a volatile market. We have a strategy to grow driven by factors that are within our control. Our growth and our long-term ambitions to grow are driven by assortment expansion, offering more to our members and customers in all markets. They are driven by online growth, delivering faster to the customer this wider assortment and becoming an even more attractive place to shop online, and moderate store expansion. Not a wild ride of store expansion, but we see opportunities for moderate store expansion.
I could add to this list the membership growth also as an important driver in uncertain times. As for the margin and the margin improvement that we're foreseeing, we have a lot of levers to drive the margin improvement. Operational excellence for sure will be a headline for us going forward. The realization of the 2026, 2027 synergies that we have announced, our Nordic house brands, which is an area we will start focusing more on, taking national champions out into all four markets. Our retail media offerings, which is an area where we are very advanced and where we can offer to suppliers Nordic offerings, something that they are really asking for and demanding of us so that we can deliver as one of the few companies operating in this market.
We see significant, tangible levers to drive margin improvements or create the margin headroom we need to stay competitive on value in a time where consumers are looking for value. Then again, a phase where we will deliver significant cash flow generation, which would give us a lot of freedom to either deleverage, invest in growth, and of course also distribute to shareholders. A lot of financial freedom to operate no matter if the markets are friendly or less friendly out there. All in all, a milestone, a new chapter, a new phase with more focus on operational excellence than the two years we've just gone through. Therefore, we feel confident in maintaining our long-term financial ambitions. As for the quarter and the financial results of the quarter, 4.7% growth year on year, currency-neutral. Reported growth 6%, so we got a bit of help from the SEK improving.
On the other hand, on the margin, down from last year, driven mainly by FX, by higher Swedish krona. Still, again, we buy in Swedish krona, we sell in Norwegian krone, and that has affected our margin. Underlying, we see a flat margin towards last year, despite the fact that we have extra costs opening and running the Danish warehouse and the redundancy that we have as we have opened the Danish warehouse. This is in line with our expectations, underlying what we had expected for the quarter. We feel like this is a start to the year with no surprises. I think in this market, no surprises is what you can be hoping for. The highlights, of course, online growth 17%, still growing double digit. As you look at the numbers, remember that Skincity is now completely out of the numbers.
We did have significant revenues in Skincity, same quarter of last year. That's gone. The business is closed down, and it's out of the numbers. 17% growth, I think, is very good and definitely above the market growth. Mass beauty growing, and this is not surprising. That's where we can offer a lot of value to consumers. One of the benefits of our strategy is that customers are able to trade down within the four walls of Matas and increasingly within the four walls and online proposition of KICKS. As for gross margin and underlying improvements, we did see, as I mentioned, headwinds from currency effects on COGS being bought in SEK and sold in NOK. Of course, the Skincity closure. Skincity was a high gross margin business, but a loss-making one. That affects, if you look at gross margin, that affects somewhat.
I'll return to Matas Logistics Center, but the headline financially is, of course, that we are now entering a phase of normalized CapEx and significant cash flow generation. Our synergies are on track. We paid the dividends and the share buyback program. As we look ahead, we see no reason to make any changes to our guidance. The revenue growth of 3%- 4%. If we exclude Skincity, that is between 4% and 8%, so well in line with our long-term financial ambitions. We maintain our EBITDA margin guidance as well of 15%, knowing that we will see the double count of cost in the first quarter disappear as we go into the quarters, the learning curve from our new facilities continuing, and synergies rolling into the business.
CapEx also maintained between 3% - 4% of revenues, DKK 330 million, including the last little bit of investments into the Matas Logistics Center. That's the guidance for the year maintained. As we look at the numbers again, Matas driving the majority of growth. If you look at headline numbers, 6%, and that includes our subsidiaries, Firtal and Grøn & Sundhed. 6% growth in Matas and a gross profit margin that's actually up due to both the category mix, but also the realization of KICKS synergies. A strong performer, Matas, the most mature market where we have the strongest market position. The fact that Matas is able, from that very strong market position, to continue to drive this level of growth and clearly win market share, I think is just a testament to the strength of the concept and the strategy. For KICKS, 2.3% growth. Remember to take out Skincity.
We've had discussion in previous quarters, is there like a migration effect and so on. Now it's pretty clear. Skincity is out of the numbers. These are the pure underlying growth numbers with growth in all markets and all channels. Profit margin down in part due to FX, but also because we are investing in value. KICKS does not have a reputation to have the best price perception, and we are doing something about that. We want KICKS to be positioned as a fair value player in the market. We have the headroom to do that. All in all, 4.7% reported, 6% growth, 14.5% EBITDA margins, taking out FX in line with last year and in line with our own expectations. As for the strategy, continued progress. We are making headway on all three pillars, main pillars of our strategy.
Our strategy is about serving our members better, offering more to our members, whether it's third-party brands, more new products, more categories offered to consumers, or investment into price and value, but also the expansion of our in-house brand, which I will talk about later. In a very important area that we haven't really started to harvest yet, we can take our national champions and roll them out into all Nordic markets. Closer to you, driving e-commerce growth, you see that very clearly, and the growth in membership as well is a testament to that strategy kicking in and working. For our stores, it is a modest program that we have. We love our stores. They are central to our business model.
We don't believe that you should rush into store expansion, but we are confident that stores and modern stores in the right locations are part of our long-term future. I would also mention that we have recruited a very senior new Country Manager to lead and drive growth in the Norwegian market, which we find to be an attractive market where we have opportunities. Finally, as I mentioned before, the whole idea that as a Nordic company, we would be stronger, have better bargaining position, and be able to take out costs is clearly showing in this quarter as well. Our strategy is to launch more brands, more categories, educate the consumers and members that they can use Matas, they can use KICKS for much more than they did in the old days with the store around the corner.
No matter if they shop in the store or if they go online, they have a lot bigger choice and they experience much more, many more news coming in, and many more categories and many more needs they can fulfill by shopping with Matas and KICKS. A couple of wins: KIKO Milano, a really cool brand, used to be only their own distribution, have now gone into retail in the Nordics, choosing us as our partner, which we're really proud about. Really good start for that brand. We see, which is of central importance, KICKS, which is the KICKS business, is very strong in makeup, very strong in fragrance.
We would like to build the strength in skincare that we know from the Matas side, and acquiring and getting partnerships with some of these really strong, well-known brands that consumers might know from the pharmacy sector is of key importance to the credibility of our skincare play. Also in Denmark, the fact that we can both get the very high-end brand into our environment and some of these really top-selling products in the health and wellbeing space is a testament to the fact that suppliers see us as a relevant channel for products that they may not have considered through retail with us in the past. Good progress on this count. Closer to you, as I mentioned, more members, customer satisfaction critically going up, younger demographics coming into our business. This is not an aging business.
We see the young really shopping with KICKS and Matas, and they are shopping across more categories and channels. The key one for us actually is the fact that we have been able to make two supply chain transformations, a really big one in KICKS that is running very safely, numbers improving month by month. That has enabled us now to offer a wider assortment and faster shipping to consumers, but also, of course, run the logistics part much more effectively. It is in operation. It is in full operation. We have seen no major disruptions. We are really proud that that's stable. The big thing is our Matas Logistics Center, our biggest investment in e-commerce, the logistics for Matas. We opened in the spring. It was a very smooth transition. I don't think customers noticed at all. If they did, it was maybe for a week or two.
Of course, we go into the learning curve phase of this. Just one little fact, more than 1 million, we passed the 1 million mark web orders shipped from this brand new facility with limited downtime. That is, I can tell you from previous experience, an exceptionally well-run transition by our logistics team. Now it's all about operations. It's about getting all the benefits out, the learning curve, keeping the steady operations, seeing customers appreciate faster delivery both in our KICKS markets and our Matas markets. For us, of course, seeing the costs to serve improving as we progress into the year. A lot of discussion amongst ourselves and in the market about macroeconomic uncertainty, volatility, and drop in consumer confidence. We're all following those numbers closely. That sentiment is reflected in our guidance for the year. We remarked with the full year that in Denmark, we see no impact.
That's still the case. In Norway, we saw limited impact. That is still the case. In Finland, we saw no impact. That is still the case. In Sweden, probably the more volatile of the markets, we did see signs of slowdown both in market data, but also in peer reporting. We wonder whether this is of a more cyclical, temporary nature. Nothing has changed on that perspective either. Pretty similar to the situation we saw before the summer when we reported the full year numbers. With that, I'll hand over to Per to cover the financial results.
Thank you, Gregers. As Gregers said, this is really a quarter delivering as we expected and in line with our guidance for the full year. Let me take you through the numbers.
Firstly, in terms of our revenues by banner, as Gregers has alluded to earlier, Matas growing 5.3% with our subsidiaries growing 12%. Really strong growth on our small business as well. KICKS, excluding Skincity, growing 7.8%. Coming out of the first quarter with a 6% reported and 4.7% currency-neutral. If we look at the channels again, stores 1.9%. Of course, this is also growth on a like-for-like basis. We need to remember that we have fewer sales days in this quarter due to the timing of Easter actually impacting a little bit the store performance, especially on the Matas side. From an online perspective, 17% excluding Skincity. Again, a very strong growth as we progress into the next quarter.
Moving into our gross margin, and that is really, as Gregers has alluded to, this is where we have a little bit of special effects this quarter compared to our previous reporting. Matas is straightforward, you know, a strong growth also on the gross margin level led by our product mix. As Gregers said, some of the synergies that we were expected, but also a stronger profitability or gross margin on our assortment expansion is really coming through. The maturity is actually showing in the numbers as we talked about since we launched all the assortment in 2021. On KICKS, on the other side, we are investing in the market. As we've said all along, we are investing in price. We're investing in being more competitive. Our nice price program is showing. Then, of course, we are citing some stronger gross margins from Skincity.
On the numbers, it's not as dramatic as it actually shows as 1.4% of the drop is coming from higher input costs on cost of goods in Norway and Finland from the slightly stronger Swedish krona. That has also reported it's about 1.4% or around DKK 8 million that we are impacted with on that account. In totality, when we look at it, we're growing our gross margin almost in line with our top line of 4.4% despite the impact from the FX. Moving into our cost, basically, staff cost and other costs. If we start with staff cost, we're looking at our staff costs basically following the percentage compared to revenues compared to last year, slightly below actually.
That is also to do with the focus and the operational excellence space that we're moving into where we really focus on streamlining our approaches in terms of how we manage our salaries and also on some of the adjustments and the synergies we're getting on the organization. At the same time, of course, as we move forward, building all the capabilities we need to win the Nordics. Other costs, of course, are impacted by the fact that we have very strong growth. When we grow our e-comm business, as we go this quarter, it has an impact in terms of our shipping costs, and that is also reflected on external costs. Marketing is basically in line with our top line growth.
Again, assortment expansion now is more and more in line with the growth that we are seeing as we are on a more mature level, especially on the Matas side. The Nordic efficiencies and synergies, as we talked about, are coming in as we progress during the year. Taking that down, just to summarize on our EBITDA, adjusting for the FX, which is important, we're basically in line with last year. A 0.4% impact on our EBITDA margin in this quarter. Actually 14.9% compared to 14.9% last year. On that amount, we need to remember that in this quarter, we are running the learning curve or we just launched the MLC . We have a little bit of extra costs. We're very pleased with the performance also on EBITDA margin level.
With the EBITDA coming in, turning into our inventories and then our cash flow, as you'll see, our inventories are up compared to last year. It is not increasing compared to end of last financial year, so compared to end of March, it's pretty much in line with that, adjusting a little bit for the FX. The change we're seeing is actually the changes we made last year. As you recall, last year we went live with KICKS, the logistics center, and we upped the inventories in the first quarter of last year to make sure that we had sufficient inventories both in stores and also in our logistics center to make sure that we got that as efficient of a running as possible with at least impact on our consumers.
In this quarter, we now have the impact of Matas MLC, and of course, that impacts our numbers compared to last year. We're running with slightly higher inventories. As we progress throughout the year, we expect that to level out somewhat. Turning to the cash flow, a really strong quarter, and some of that, or the majority of that, is actually coming from our improved working capital. That is linked to a reset of our accounts payables to a large extent. That's the majority of the impact. That's coming from a very low accounts payable or support on our inventory for our suppliers. You can say end of last financial year, we have reset that to a more normal level in this quarter, and we expect that to continue throughout the year.
The other point to our strong cash flow is that we are now back into a normal level of investments. Last year, we had the investments in MLC, and this year, we're back to the normal 3% - 4%, which is also improving our cash flow with roughly DKK 100 million. A positive of above DKK 300 million in this year's first quarter compared to last year's first quarter. This is not a timing. It is more a reset, and then investment level will continue at the same pace, which will be lower than last year. Which brings me to the gearing, and that means that we're going to close this quarter around 3x, three times our EBITDA. Of course, this is impacted by the stronger cash flow. A slight decline in this quarter.
Normally in Q1, we go up a little bit, but in this quarter, with our stronger cash flow, we are actually decreasing the ratio. That then ends up with our guidance. As Gregers has already alluded to, with the performance in the first quarter, we remain and keep our guidance for the full year, both in terms of revenues, our EBITDA and EBITDA margin, as well as our investments in the 3%- 4% range. With that, I think Q&A before we say thank you. I'll leave the table open for questions.
Thank you. We will now start the Q&A session. If you wish to ask a question, please press five stars on your telephone keypad. To withdraw your question, you may do so by pressing five stars again. There will be a brief pause while questions are being registered. The first question will be from the line of Poul Jessen from Danske Bank. Please go ahead, your line will now be unmuted.
Yes, thank you. Congratulations for the report. No surprises like the last time. Question number one, you reiterated the view that you had on the four Nordic markets, but we also see the split between high-end and mass beauty performing quite differently. Can you put some words on why? Is it the market that is taking down the high-end and on the mass that people are trading down, or is it coincidence with launch of new brands or that you are putting more pressure on Sweden and Norway on the mass market? What's the reason here? Yeah.
I think you almost gave the answer, Poul. It is a combination of when consumers are uncertain, they do a bit of trading down, but it is also in part driven by our focus because what we do typically when we feel that there is a softer consumer, we do shift our marketing around both the messaging but also the types of products that we are advertising. You can say it's a bit of a self-reinforcing thing. I would say the number that I would look at more than anything is the number of transactions. We're 300,000 more transactions in the first quarter compared to the same quarter of last year. To me, that is the best sign of underlying health of the consumer that you can ever find as a retailer, those kinds of numbers. We're not becoming irrelevant, but we are seeing shifts in the market.
Of course, with KICKS being more high-end positioned, they are a bit more exposed. Also remember that Skincity was almost entirely a high-end proposition. That should also be taken into account.
If you see people trading somewhat down, we should expect that split between the two categories continuing at least in the near term?
I think that's hard to predict. We go into the golden quarter and, I mean, we're already there mentally thinking about Christmas. Christmas is a gifting season. It is a season where people are more ready to spend and splash on their own. I don't think we can take a Q1 performance and then extrapolate into the rest of the year. We are in a position where we are in tune with the customer at all times. We see this little shift in our customer data and we adapt our marketing and our messaging and our campaign. We can do that because we're so digital now in the way we market. We can do that with very, very short notice.
As you remember, Poul, in the old days, it was like a 20-month or 20-week plus lead time to begin to change messaging when we were driven by leaflet communication and mass marketing communication. Now it's one-to-one. It's digital. It's day by day. It can even be influenced by is it raining or is the sun shining? I would not jump to conclusions as for the rest of the year mix.
In Norway, you're changing manager up there. What's recently going on? Is Norway underperforming, or is it because you are changing the focus on what's going on, that you want to expand fast, or what's behind?
We've actually had a good and strong team, and Norway has been performing. Looking at local currencies or taking away the currency effects, I think Norway has been performing very convincingly over the last few years. I think it's fair to say that in the old KICKS structure, there was a lot of focus on Sweden and less on Finland and Norway. We just want to add more attention to the opportunities that we see ahead of us in both Norway, which is a very attractive market from a financial point of view, but also Finland, with a smaller market today, but we are not as penetrated in Finland. What you should take from this is it's not a reaction to something gone wrong or not performing as planned. It is really an investment in being more clear and having bolder ambitions in the Norwegian market.
That, of course, was in our long-term guidance. That was always the plan that we would see some potential in those two markets. This is just execution of a strategy that we think should be driven by even more senior leadership added to an already great Norwegian team.
A more technical question. Skincity, you say they are out of the books now. When are they fully out of the base when we do the year-over-year comparison?
two first quarters of this year is the majority. As you remember, it's around DKK 80 million of sales in Skincity overall. The vast majority of that is in the two first quarters. There's a little bit left in the Christmas quarter and the fourth quarter, but it should be insignificant from the conversations we're having about headline numbers.
Okay. I don't know. What does that mean? When we look into the second quarter, then it's below DKK 20 million in headwind?
Second quarter, I won't comment specifically on second quarter, but as you look into Q3 and Q4, Skincity should not be a part of our conversation.
Okay. Thank you.
Thanks, Poul. The next question will be from [Eway] from SEB. Please go ahead, your line will now be unmuted.
Thank you for taking my question. I have two. Firstly, could you please elaborate a bit on the product initiatives in the KICKS? Is it a sort of a normal sales campaign, or is something special here? Also, if you can say if we should expect this sort of the same kind of margin dilution in the coming quarters.
Yeah. Remember, before we go into the commercial mechanics, just remember the two things that are structurally different. One is the FX, that the KICKS margin was pressured by the fact we buy in Swedish and sell in NOK. That's actually a material effect. Also, the fact that Skincity leaves the numbers, and Skincity is or was a higher gross margin business. Commercially, how we think about it is working with our suppliers to fund competitiveness as a Nordic group, go to suppliers and develop growth plans, win-win initiatives with suppliers that help us fund the price investments that we're making.
Having said that, we also, from time to time, make decisions to fund price cuts on our own margin if we see that we're out of line with competitors or if we see a good business case in shifting from more campaign-driven sales to more of an everyday low-price offering. These are things we play with all the time. Of course, on top of that, there is a normal campaign cycle that we might adjust up and down. Clearing out the more one-off elements of FX and Skincity, this would be reflecting where we are. You can't really say that this is the level going forward because we do see opportunities also to fuel our own brand offering, which is margin expansive. Of course, we're having a conversation with suppliers all the time, how to share the bill for being price competitive in the market.
Okay, great. Thanks for the clarification. My second question here on your EBITDA margin guidance, 15% for this year. Is it a currency-neutral target, or is it sort of already reflecting a currency movement?
You can say the EBITDA margin target for this year of 15%, we keep that and we maintain our guidance with that. In the first quarter, we got a, you can say it's not a currency-neutral adjustment, but we got an FX impact of 0.4%. As we move forward in the year, we'll see how that develops and some of the mitigating actions we can do to mitigate that. Still, looking at the full year, we maintain our guidance around the 15%.
If we assume the similar movements of Swedish krona against the other two currency where you do the procurement, I guess the 15%, we have to sort of put an effective FX impact on this. Is it a fair assumption?
Yeah, you can make your assumptions around that as you progress into the year and see how the currency is developed. I don't want to speculate on the currencies. We'll be trying to mitigate as much as we can in case the currencies continue in the way they do right now. From a full-year perspective, we still believe that we will be able to be in our guidance around the 15%.
I would also like to comment from a more commercial operational point of view. FX is not just something happening. It is also something that starts a conversation with suppliers because sometimes we win on FX and sometimes they win on FX. Oftentimes, we have a meeting and we discuss how do we make sure that it's not the roulette of FX that's determining our performance, but really jointly sharing whatever happens. We're having those conversations as well.
As we see a negative FX, of course, we are doing things on the business side to mitigate that. With all the other things that we have mentioned, we feel comfortable about the guidance for the year.
Okay, that was clear. Thanks. Last question on the special items. We got that in the last quarter, you guided DKK 40 million in total for the full year. Could you please guide a bit on the phasing for the special items over the quarters?
You can say the first quarter is DKK 5 million. We still believe it's going to be around DKK 40 million for the full year. You can say it's going to be a little bit backloaded. That's the assumption I would make.
Remember just.
For the sake of the order, it's related to the next round of synergies. The DKK 50 million we're seeing materialize in the next financial year. Of course, as part of our plan to deliver, we are looking at, is there some of those initiatives that we can pull forward into this financial year? That's another bucket that we have to look at as we drive performance this year.
Okay, great. Thank you so much. I'll jump back to the queue.
Thank you, [Eway]. The next question will be from Sebastian Grave from Nordea. Please go ahead. Your line will now be unmuted.
Good morning, guys, and thank you for taking my questions as well. Congrats on a strong result here today. I would like to revert to a bit more technical questions about the FX impact on the EBITDA margin, and I apologize for that. I just wanted to get an understanding. Assuming that FX remains at the current level as of today, how would this sort of the year-on-year dilution look for the remainder of the year compared to the 0.4% point dilution that you saw here in Q1?
Yeah, I think, you know, as I just said, Sebastian, I don't want to predict the FX. As Gregers has alluded to, you know, this is not a Matas-only discussion. We're having these discussions with our suppliers as well. Sometimes we're gaining, sometimes they're gaining. We are looking into how do we balance this for the remaining of the year. I don't want to predict for the rest of the year in terms of how this is going to turn out because there's a lot of moving parts in that element. I think the key thing for you to take away from this quarter is really that the impact in this quarter was the 0.4%, which was a little bit of an impact after all the announcement and all the geopolitical movements and changes, which really moved everything around.
The discussions right now are, of course, with our suppliers and how we manage these different elements. Again, first quarter, 0.4%. I think that's the key number you need to take into account.
No, that's completely fair. I take it as a compliment that we are digging into this nitty-gritty stuff. That means there are no bigger or worse surprises of the quarter. It's a good thing. Exactly, exactly. I just want to talk about the MLC as well. You look to the learning curve and time of double cost here. Is it fair to assume that now, given that you're also entering this important or nearing the important Q3, is it fair to assume that the double costs that you are incurring in MLC, that those will persist for the time being until we are past Q3? How should we think of this learning curve?
There are really two elements to that. One is that we, you know, as we opened MLC and the robotics facility out there, we also kept our manual operations on standby and thereby incurring double costs. That's going to fade fairly quickly with the performance we're seeing in MLC. No surprises as to our internal plans on those cost items. The other effect that we're seeing is the learning curve that as you start out with a new facility like this, the cost to serve, the cost per unit, you know, is high. It gets better over the year. Of course, we have planned for that kind of learning curve as we go into the year. That's the other element, and that's really the element that we're following more closely.
You may remember from last year when we did the KLC, we underestimated how that would play out in a brand new facility. Of course, we took that learning and we applied it into our budgets, our plans, and our financial guidance. That's it.
Sure. Sounds good. Just last question from my side. You provide these comments per market. Could you maybe elaborate a bit more on the Swedish market in particular? What are you seeing here? I mean, signs of a slowdown? How did the quarter play out over the quarter? Is there any sort of silver lining here in the quarter that things are improving? Is there any color to add to this?
No, really unchanged conditions to when we spoke before the summer. Of course, we have some more market data that you also have access to, both reporting from our peers, but also publicly available market data for Sweden, indicating that there is some kind of slowdown in retail overall, actually also a slowdown in online growth as we look at the totality of e-commerce in Sweden. I think that gives us a lot of confidence that even with a slowdown in e-com growth in Sweden overall, we are delivering really good growth, excluding the Skincity business. Our strategy of being able to grow out of stuff that's within our control, even in a more unfriendly market, if you will, I think there's proof of that in Q1.
Great. Thank you for taking my questions.
Thanks, Sebastian. As a reminder, if you wish to ask a question, please press five star on your telephone keypad. The next question is from Mads Quistgaard from DNB. Please go ahead. Your line will now be unmuted.
Thank you for taking my question. I only have one, which is also a neat one since all my remaining questions have already been answered. Coming back to the customer club, the membership club, you're pretty happy about the development. If I compare the numbers to Q4, I can see it's actually slightly down. Why are you so happy with the development in the membership club on a Nordic level? That would be my question.
We clean out once in a while. We do the spring cleaning of looking at members that haven't been active for a while. Instead of, you know, inflating the number year-over-year, that's really easy to do, by the way, if you just hold on to members that are not active. We do a bit of spring cleaning and look at what the underlying growth in the number of active members is. It's that number that makes me pleased with the development of the club. Frankly, some of this is also, do we run a drive to recruit new members, which we did in the last year, even though it wasn't the main theme. We did it last year, but we haven't done that in the first quarter. We kind of know now how to play that game if needed.
That makes sense. There may be also a question on the Nordic power plants. What is the timing here? Is it to launch something in this quarter? You're ready for the big Q3? What is the timing?
Yeah, usually we won't cover too much on forward looking, but you can expect us to be actively working to launch some of our hero brands. Nilens Jord, the company that we bought in 2019, has really, really grown and become an even stronger franchise in the period where we have owned the business. We have really strong management. We have expanded into new categories, going from being mainly a makeup brand also into skincare, hair care, men's offering. The brand in Denmark is at its very peak. Now what we're doing is preparing to introduce this fantastic brand that has very, very high quality at affordable prices. We're introducing that to the Swedish, Norwegian, and Finnish customer. The cost associated with that, getting ahead of your question, that's already in the guidance. This is a big thing for us.
It's not part of the explanation for why we believe in the margin or the growth this year, because building a brand from scratch in a new market just takes time. It took Nilens Jord 30 years to get to the number one spot before we bought it. Nowadays, building a brand is both faster and cheaper because of online marketing, social media, and of course the fact that we have all our source behind this, all our colleagues behind this launch. We are making a splash with Nilens Jord in the quarters ahead.
Sounds good. Thank you.
Thank you, Mads. As we have no further questions in the queue, I'll hand it back to the speakers for any closing remarks.
Thank you very much, operator. Thanks for the questions. I think the takeaways, a good start to the year in line with our expectations. The two big risks of buying a company and integrating and opening two automated facilities, they are now lapsed. They are behind us. We are looking into a new chapter, focusing much, much more on the customer, less on the engine room, but also really with an eye on operational excellence and getting all those benefits from the investments that we've made and the organization that we have set up. Again, a good start to the year, but also even more significantly, I think a milestone in the execution of our Win the Nordics strategy. Thanks for joining and see you next quarter.