Good morning, everyone. I'm Susanne Ehnbåge, CEO of Lindex Group, and I would like to warmly welcome you to the first Lindex Group Media and Analyst Webcast since the company's name change. Our company's fundamentals remains the same, and we have a clear target to create sustainable and profitable growth. Today, I will present Lindex Group's first quarter result together with our CFO, Annelie Forsberg. Let's continue with the agenda. We will start with a brief business update for both divisions, Lindex and Stockmann, followed by a financial update of the first quarter. And in the end, we will take a look at the divisions' strategies and how we are implementing them in 2024. After our presentation, we will also have a Q&A session, where we will answer your questions, and we can now move on to the next page, please.
So let's begin with a business update for Lindex Group, as well as the Stockmann divisions. And let's first look at the group's highlights for the first quarter. In the Q1, Lindex Group's underlying revenue grew, but the result was impacted by the timing of Crazy Days for Stockmann division, which was also expected. And added to that, we had increased freight cost for the Lindex division. In 2023, the Crazy Days campaign was partly ongoing in March, while in this year, the campaign was held at the beginning of the second quarter in April. The Crazy Days timing impacted the quarter negatively, both in terms of the revenue and results. And excluding the negative impact of the timing of the Crazy Days, the group's underlying revenue increased. Positively, the Crazy Days in April also performed better than previous year.
The Lindex division continued with higher revenue than previous year and also gained market shares. As I mentioned in the beginning, the parent company's name changed during the quarter, and in March, our annual general meeting decided to change the company's name from Stockmann plc to Lindex Group plc. The name change reflects the Lindex division's strength and role in the group's business. The name change does not have an effect on the Stockmann department store business, which continues with the Stockmann brand. During the spring, we have also seen good progress in the restructuring process. In February, we settled the dispute with TSOP, and after the review period, we reached a settlement agreement with Nordika, which means that there is only one disputed claim left. Let's move on to the group's revenue in the second quarter.
As earlier said, the group's underlying, underlying revenue developed positively, even though it declined by 2.8% in total. The Lindex division outperformed the market development and grew with 2.7% in local currencies, and continued its growth journey across all main markets, both in physical stores and in digital channels. The key reason behind the revenue decline is the timing of Crazy Days, as I already mentioned. Let's take a look also at the result, and as I said, the group's adjusted operating result was impacted by two things. It was the Crazy Days timing and higher freight costs. Next slide, please. For the Lindex division, we continued to outperform the market, the average market growth, and increased sales in both physical stores and digital channels, where womenswear was our best performing category.
We had a strong digital growth of 8.9% and strengthened the digital share of 22.9%. We continue to increase the number of customers, both in terms of new and active customers. During the quarter, we have continued to expand through partners and launched on Zalando in Denmark. We have now in April also added Austria and Belgium, and are so far live and selling in five markets with Zalando. In addition, we have also launched closely with Magasin du Nord in Denmark, that was in February, and we have increased to seven kids stores with Manor in Switzerland. Our crucial ongoing investments are progressing well.
We are working intensively with the implementation of our new highly automated omnichannel distribution center and the implementation of our digital store program, with rollout of a new point of sale system and also RFID technology into all of our stores, and this is also continuing with full speed. We have now RFID fully rolled out in Finland, and in the DC, the distribution center, and now during April, we have also started the rollout in Norway. We are progressing with our femtech brand, Female Engineering, and our innovative assortment, where we have introduced the new product category, period proof swimwear, for teens and women. During the quarter, we have also launched Lindex inspiring kidswear concept, Made for Play, and now in April, we released our new underwear concept, Underwear for Life, that captures a woman's real life and her needs....
On the next page, the Stockmann division proceeded well, improving operation efficiency. It continued with successful cost savings, which amounted to EUR 1.6 million in the first quarter. In addition, the gross margin improved due to good inventory management, which meant right levels of inventory intake and also reduced levels of slow-moving items. In March, the Stockmann division started to plan changes to improve efficiency, simplify management structures, as well as clarify roles and responsibilities. The planned changes will affect the part of the division's personnel in all three operating countries, that is Finland, Estonia, and Latvia. And in Finland, the plans were addressed partly in change negotiations, which were concluded after the reporting period now in April. In total, the planned changes are estimated to generate annual savings of EUR 2.7 million from 2025 and onwards.
We also continue to develop Stockmann's unique offering and launched KIKO Milano cosmetic brand exclusively in Finland, and so far it has been very successful and attracted especially young customers. stockmann.com was shortlisted for Online Store of the Year competition in Finland, and the winner will be announced during May, and we are happy to be one of the finalists. And finally, I would like to comment once more that the Crazy campaign in April performed better compared to previous year. Let's then move on to the next slide, please. I would also like to take the opportunity here today to highlight our recent climate achievements. In the first quarter, we published our sustainability review and finalized also the climate calculations for 2023.
What we can see here is, as a group, we are committed to both growing the business and reducing the greenhouse gas emissions, and our latest figures prove our good progress in reducing emissions. Lindex Group's total greenhouse gas emissions decreased by 11% during last year, and if we look at on a little longer perspective, the Lindex division has already achieved a reduction of 41% since 2017, and at the same time, been growing the business. In Stockmann, we improved the energy efficiency and reduced the use of electricity in own operations by 11%. Next, slide, please. Lindex Group guidance, it remains unchanged. We expect the revenue to increase by 1%-3% in local currencies, and that the adjusted operating results to be between EUR 70 million and EUR 90 million.
Now, I would like to give the floor to Annelie and the financial update.
Thank you, Susanne, and good morning, everyone. I will now walk you through the key financials of Lindex Group's first quarter, so we can go to the next page, please. Starting with the Lindex division's performance, we can see that Lindex continued its growth journey and outperformed the market, as Susanne already mentioned. The revenue increased by 3.3%, and in local currency, the increase was 2.7%. The sales increased across all main markets through both physical stores and digital channels. We were particularly happy to see growth in the digital channels, which is strategically important for us. The digital revenue accounted for 22.9% of the revenue. The best performing category during the quarter was womenswear. Customers' average purchase increased, and the number of active and new customers continued to grow.
Lindex gross profit remained at a comparison period level, but the gross margin percentage declined to 62.7% due to higher freight cost and negative currency impact. The freight cost increased as a result of unexpected logistic challenges in the Red Sea. This meant that Lindex adjusted operating result decreased by EUR 1.4 million, but when excluding the negative impact of the higher freight cost, it developed positively. Let's look at Stockmann division on next slide. For the Stockmann division, the timing of Crazy Days campaign was the key reason for the decline in both revenue and adjusted operating result. The Stockmann division performed well in adjusted operating result when excluding the impacts of the timing of Crazy Days. You may remember that Crazy Days is held both in spring and autumn.
For the coming autumn, we will not face the timing impact, as the campaign will be held fully in quarter three, which is the same timing as in 2023. In the comparison period, the Crazy Days was partly ongoing in March, while in 2024, the campaign was held at the beginning of the second quarter in April. In addition, the reduced store area of the Stockmann Itis department store decreased the revenue. What was really positive is that Stockmann improved its gross margin to 42.7% due to good inventory management. The inventories remained at the comparison period level, despite the fact that the Crazy Days campaign started at the beginning of April, while the year before, it started already in March. Now we can move on to the group figures on next slide.
Here you can see how the division level changes and their impact on the group revenue and adjusted operating result. The left-hand side graph shows the changes in revenue. The division's impact on the group revenue were twofold. Lindex grew by over EUR 4 million, and Stockmann decreased by almost EUR 10 million. As the key reason behind, as said, is the decline in due to the Crazy Days timing. And it's good to note that the underlying revenue for the group developed positively. Adjusted operating result declined in both divisions, but there were clear, identifiable reason, as we just went through. Then let's look at the group key figures on next slide. In this slide, we can see that the revenue was almost at the comparison period's level, while the adjusted operating result declined.
The currency rates didn't have any material impact on the group's adjusted operating result for this quarter. Operating results totaled to -EUR 7.6 million, and net result declined to -EUR 15.4 million, and that was mainly due to the positive impact of a tax decision for Stockmann Sverige AB in the comparison period. The group's gross margin was on par with the comparison period of 56.3%, and earnings per share declined to EUR 0.10 , mainly explained by the lower net result. In the next slide, here we show the profitability of the divisions as rolling 12 months result. Here it's evident that Lindex profitability has improved significantly. Comparing to pre-pandemic, it has more than doubled, and looking even further back to 2017, the profitability has improved with more than four times.
In this slide, it's also important to note that the currency has had a negative impact on Lindex's reporting figures during the latest years, due to the weak SEK and NOK. Stockmann has also improved greatly compared to 2020 and 2021, although it still reports negative numbers. It's worth mentioning here that the timing of the Crazy Days event has influenced these figures, especially for quarter three, 2023, and quarter one, 2024. Then we can turn to next page, please. Lindex Group's operating free cash flow was -EUR 39.2 million in the first quarter, and the group's business is affected by normal seasonal fluctuations during the year, and the cash flow in the first quarter is typically low due to higher net working capital compared to the beginning of the year.
The group's capital expenditure totaled EUR 6.8 million, and it was mainly used for digitalization projects and omnichannel development in both divisions. The comparison period included higher investments payment for the Lindex omnichannel distribution center. The Lindex division is driving digitalization in its store network with digital store program, which includes implementing new mobile point-of-sale system and integrating RFID technology to improve process efficiency and elevate the customer experience. The Stockmann division also continued RFID implementation to enhance efficiency and stock accuracy. Cash in the end of the first quarter totaled EUR 83.7 million and inventories EUR 179.7 million. Inventories remained at a balanced level and declined slightly from the comparison period. Then let's take a closer look at the cash position.
Here you can see changes in the cash position per item from the beginning of the quarter to the end of the quarter. Cash totaled EUR 137.5 million at the beginning of the quarter and EUR 83.7 million at the end of March. Adjusted EBITDA increased cash by EUR 19 million, while higher net working capital and lease payments had a negative effect. During the quarter, the Lindex division's new omnichannel distribution center proceeded as planned. The investments amounts to approximately EUR 110 million in total, and that will be between 2022 and 2025. By the first quarter of 2024, EUR 83 million of the total investment sum has been used for this project.
If we turn to next page, here, it's illustrated how Lindex Group's financial position has improved during the latest year, which has and will enable future growth. In the graph here, you can see that the net debt has remained on a good level. Excluding the IFRS 16 items, the interest-bearing net debt was positive at EUR 10.6 million . Equity ratio improved further and reached 60.5%, excluding IFRS items, and 28.2%, including IFRS items. The lease liabilities under the IFRS 16 reporting standard totaled EUR 603.2 million . In the Lindex division, the lease liability declined by some EUR 8 million , but increased in the Stockmann division by some EUR 37 million due to prolonged lease agreements for some department stores. Interest-bearing liabilities stood at EUR 73.1 million and consists of a bond....
As a summary in next slide, here I would like to highlight three topics in our financial performance. Firstly, the group's improved equity ratio means that we have even stronger financial foundation. This enables strategic investments to future growth. Secondly, Lindex continued revenue growth above the market development is a good sign that we have been able to listen to customers' needs. Our collections have been successful, and customers have found our products in the right channels. Thirdly, Stockmann improved the gross margin and continued successful cost-saving measures. This is proof of Stockmann's determined and systematic approach to regain profitability. Before handing over back to Susanne, I would like to use this opportunity to address the other stock exchange release that we have published this morning. I am leaving Lindex Group to continue with new career opportunities outside the company.
These nearly six years with Lindex, and later also as Group CFO, has been truly rewarding. I will continue to work at Lindex Group until early autumn, before new challenges, and thank you all for good cooperation so far, and will continue still for a few months. So now I'd like to hand over to you, Susanne.
Thank you, Annelie, and as Annelie said, we will continue working together until early autumn. Let's look at our way forward, starting with Lindex, on the next slide. In line with our strategy, we have big ambitions going forward on our journey as a global, brand-driven, and sustainable fashion company. We have built a strong foundation, and we are now focusing on accelerating growth further, while continuing our transformation into a more sustainable business and to improve the scalability and efficiency of our business. Looking into the next page and our way forward, 2024 is a year with many important launches to continue our successful growth journey. Taking our new omnichannel distribution center into operation is a big milestone and a crucial step towards achieving our growth and profitability goals, and establishment is progressing according to plan.
Our goal is that we, during Q3, will start testing our new facility with both physical products and our system, and our planned start then is to use this in operation during Q4. We will proceed to building a stronger foundation for efficiency, flexibility, and innovation, future-proof our stores, and continue implementing our digital store program. With the new POS, mobile first, and refilled by RFID in all stores and other important milestones. We're also focusing on digitalizing our supply chain and to continue enhancing our efficiency, flexibility, and reduce lead times, where 3D design and supplier collaborations are central.
To accelerating our growth, we will continue to expand through our e-commerce and external marketplaces by onboarding and launching and develop further with new partners to grow in both our current markets and in new ones, as well as continuing to grow in our existing channels and by exploring new ways of doing business. Those are important part of our strategy and our way forward, just like our sustainability transformation with exploring new circular business models and business opportunities. Looking then at the next page and Stockmann Division's strategy, our key target is to ensure profitability and future growth. While building the base with operational efficiency, we are elevating the offering, growing, and leveraging a loyal customer base and ensuring seamless omnichannel experience. All this will contribute to both profitability and growth. Next page, please.
In Stockmann, we implement our strategy and focus on customer-centric measures to improve profitability. We strive to continue a good growth track when it comes to increasing the number of active, loyal customers, and we could see good progress during Q1, that the number of active, loyal customers increased compared to previous year. We are actively also developing the loyalty program by enhancing personalization or in the marketing communication. Stockmann's omni-channel offering is unique since it's wide, with interesting brands and a clear focus on premium and luxury, and we will launch new premium and luxury brands during the year. In addition to our existing portfolio, we explore new revenue streams. A good example is Stockmann Pro, which we launched in December.
It's a modern online platform for personalized corporate gifts to business-to-business customers, and Stockmann Pro is a promising pilot and generates of new kind of sales, and we will see good growth potential for it going forward. As we saw earlier in the presentation, cost- Stockmann has been able to improve its operational efficiency, and this will, of course, be a focus area for us also in the future, where we will develop our organization, as well as invest in omnichannel capabilities and digitalization, while keeping an eye on a good cost control. We can now move on to the next slide, please, and we are happy to take your questions, and we will answer them now.
Okay, first question regarding our Q1 result regarding Lindex. So some of your competitors have reported improved gross margins due to decreasing costs stemming from external factors, such as supply chain and product costs. Why hasn't this been the case with Lindex? Shouldn't the situation in the Red Sea have an impact on the entire sector?
Yes, and I think I can answer that. Yes, in the first quarter, the freight cost tripled compared to the previous year due to unexpected logistic challenges in the Red Sea, and the Lindex division's gross margin was also affected by negative currency impact. Otherwise, the intake margin was on the same level as previous year. In addition, we see that costs in most of the areas are still increasing, but the level of the increase is lower than one year ago.
Thank you, Annelie. Then we have two questions regarding the restructuring program. Please elaborate on the Nordika case. What was outcome like for Lindex Group?
Mm.
That goes to Susanne.
Yes, thank you. We cannot give any further details about the settlement agreement. We are content that we have reached an agreement and that we can move on, in the restructuring process. As said, there is now only then one disputed, claim left.
Thank you, Susanne. Then there is another one regarding the LähiTapiola case. So you have made the provision matching the outstanding disputed claim with LähiTapiola to current provisions. Does this mean that you are expecting to solve this provision within this year and to exit the restructuring program by the end of the year?
Mm-hmm. Yes, we have made a provision of EUR 15.9 million for disputed claims, which we can see in the Q1, and we are striving to end the restructuring program as soon as possible, that we have also said before, but there's no definite timetable that I can give you at this point.
Thank you, Susanne. Then we have one question related to this distribution center and dividends. Are you planning to pay additional dividend of the expected sale and leaseback of the new distribution center of the Lindex division?
Mm-hmm. First, we have not made any such decisions related to Lindex's new omnichannel distribution center, and also we need to be aware of that according to the restructuring program, Lindex Group may not distribute the company's assets to shareholders, meaning dividend, are not paid during the restructuring program.
Thank you. Then we have a comment regarding the stock exchange release that was published before our Q1 report. Where can we find as excellent new CFO for the company as the current one? And there are also thanks to Annelie Forsberg. So the question is that do you, Susanne, think that we can find as excellent CFO in the house, or do we search such a role externally?
Mm. Well, first, I agree, and thank you, Annelie, for your valuable work in the Lindex division, as well as in the Lindex Group. We have started the recruitment process, and we are of course looking for the best possible candidate, and I'm confident with... that we will find a strong CFO with an international background that will support our journey and to become an even more global company in the future. But, I cannot give you more details on that, right now. I will come back.
Yes, and wait a minute, we have just got one additional question. Regarding LähiTapiola case, would it be possible to shift provisions EUR 15 million to current account and settle restructuring process? The question was a little bit unclear here.
Yes.
Would it be possible to shift provisions?
I'm not so sure that I'm understanding the question, but, Annelie, is that something you would like to answer?
Well, I think perhaps the question could be-
If we can-
or something like that, but we can't really speculate of,
Mm
... how we could do this, so,
Mm.
So no answer regarding that.
Okay. At the moment, we do not have any pending questions, so do we have in the audience anyone else who would like to pose a question now to Susanne or Annelie? Would it be possible to shift provision account outside of Stockmann reach, maintained by external party?
Yes, and that would mean some kind of deposition in that way, and then, like I said, we cannot really speculate regarding that.
Yes. Thank you. Now, we have got an additional question regarding the freight costs. The container freight rate increased due to the Red Sea conflict have abated against again in the recent months. Have you seen any easing effects yet?
Mm. Maybe I can take that one.
Situation.
I mean, we can see that, as Annelie said, I mean, it has tripled during the beginning of the first quarter. It went up with three times as it was previous year, but we could already see now in March that it has. It's better, still higher, but we're now talking more like 60%-70% higher than previous year, compared to tripled. So it's moving in the right direction.
Thank you, and no pending questions at the moment. Is there still someone who would like to post in the chat? There doesn't seem to be any-
Mm
... any additional questions coming?
Okay.
Thank you.
Mm.
Thank you.
Thank you. But then, thank you for the good questions that we got, and please be in touch with our Investor Relations by email if something comes up later. And the next time we will meet again is the 19th of July. So thank you for listening, and have a nice day!