Good morning everyone, and warmly welcome to this press and analyst webcast related to Stockmann Group's results for January, March 2023. I will first give you a short group overview about the performance during the first quarter. After that, I will open the results and activities of the Stockmann division, and I will then hand over to Susanne Ehnbåge, our CEO for Lindex, who will present the performance of the Lindex division. After Susanne , we will deeper dive into the group financials led by our group CFO, Annelie Forsberg. Stockmann division had a positive start for 2023. Both revenue and profitability improved in the first quarter, although the macroeconomic situation of our operating countries continued to be challenging. During the quarter, we improved the group's revenue by 1.2% reaching EUR 198.5 million.
The improved sales were driven by healthy increase in the number of visitors and successful commercial activities. The group's adjusted operating result for the quarter increased by EUR 1.3 million and stood at -EUR 2.4 million thanks to increased sales and efficiency cost control. Lindex improved its already good profitability level and the Stockmann division made progress as well. We do remember the seasonality of our business. Both divisions made good progress in strategy execution. On a concrete example is gaining new loyal customers and enhancing customer experience for both divisions. The group's gross margin decreased to 56.4% due to the higher share of clearance sales in the Stockmann division, but the gross margin of the Lindex division increased due to more efficient sourcing and lower freight costs. Operating costs for the quarter decreased by EUR 3.9 million.
Our cash and cash equivalents totaled to EUR 102.5 million at the end of March. The Stockmann Group's first quarter revenue improved by 1.2% reaching EUR 198.5 million. The improvement is mainly explained by strong sales increase for the Stockmann division by 15.8% thanks to more visitors in the department stores as well as successful commercial campaigns. The Lindex division increased sales in local currencies by 0.7%, but decreased when looking at in euros by 5.6%. Revenue in Finland was up by 13.4% reaching EUR 68 million due to increased sales in Stockmann division, but also good sales improvement for Lindex. Lindex Swedish sales increase was 1.5% in Swedish krona.
Revenue in other countries amounted EUR 63 million, an increase of 1.2% mainly in higher sales in the Baltics and Central Europe. Although the business environment continued to be volatile, we succeeded in serving our existing loyal customers and well and attracting new ones as well. The adjusted operating result for the quarter was minus EUR 2.4 million, which was related to improved results in both divisions due to increased sales and efficient cost control. I am pleased about the improvement despite inflation and decreased depreciations, which related to new. Sorry, increased depreciations which related to the new lease agreements. With this chart, we can clearly see how the our revenue is divided between the division categories and markets. During the quarter, Lindex sales represented 64% of the group's revenue and Stockmann division representing 36% of the group's revenue.
In the second chart, we can clearly see that the fashion category is driving the business of our group, but there are several other important involving categories. In the third chart, we can see the division between geographic market areas. Even though we are growing outside Nordic, Sweden, Norway, and Finland are still representing 80% of the revenue. Now let's look more closely the Stockmann division. The Stockmann division's revenue grew by 15.8% and amounted to EUR 72 million. Sales in the department stores increased by 17.3% due to the healthy improvement in visitor numbers. Successful commercial activities as well as the recovery of tourism after the pandemic contributes to the sales increase. The online sales increased by 4.5% and accounted for 11.1% of the total sales.
The gross margin decreased to 41.2%, which was due to higher share of clearance sales. Operating cost, excluding depreciations, increased by EUR 0.6 million, reaching EUR 29.8 million. The operating cost increased due to higher energy and personal cost. The increased personal cost mainly relate to higher sales increase in the department stores. The cost increase were partly mitigated by continued cost efficiency actions. The adjusted operating result increased to -EUR 7 million. This was an effect of higher sales, which mitigated the increase in operating costs. Depreciations related to the sale and leaseback of the Helsinki department store property and decline in other operating income. During the comparison period, the operating income was impacted by the COVID-19 related subsidies.
The operating result for the quarter decreased to - EUR 7 million, explained by the capital gain of EUR 14.1 million from the selling the real estate in Riga during the previous year. Capital expenditure for the quarter was EUR 2.1 million, which mainly relates to the ongoing renovations in our department stores in Helsinki, Turku, and Itis, also investments to digital growth and omnichannel capabilities. The highlights of the quarter: strong revenue growth, commercial campaigns, including Crazy Days campaign, boosted sales. Our work for repositioning the Helsinki flagship store proceeded. Department stores are becoming destinations offering inspiring and energizing environment. Renewed children's department opened in Helsinki, including the biggest toy store in the Nordics, Pieni Lelukauppa. Position in luxury and affordable luxury strengthening. The Louis Vuitton store opened at the Helsinki flagship after the reporting period 7th of April.
Great progress with customers, increased new loyal program members, also our emotional value index improved from 59%- 62% during the first quarter. We also participated in the Project Runway, that is a brand collaboration with the Project Runway TV program, strengthening Stockmann's position as a leading fashion retailer. Service portfolio supporting circular economy expanded. I will now show you some couple of the images of the highlights mentioned. In case you haven't seen yet the newly opened Louis Vuitton store in our Helsinki flagship, here you see the image of the store that was opened just after the reporting period. We are very pleased with the collaboration, as a partnership is also an important step towards our targeted position.
As for the Stockmann division, we are carrying out a change where the traditional department store is being transferred into destination hub that offers customers an inspiring environment, not only for shopping, but for entertainment and socializing as well. We are therefore refocusing and reinventing the Helsinki flagship experience. As a first step of this journey, a new inspirational children's world has been built in the Helsinki flagship store. As a part of the biggest toy store in the Nordics, Pieni Lelukauppa was opened in March as part of the new children's department. Opening weekend with families queuing to the store. Let's look at the short video clip that gives you some flavor of the event. Going forward, we continue improving and implementing our customer-centric strategy for growth and for profit.
We will focus on the following areas: targeting profitability, invest and focus on the digital growth and omnichannel capabilities, increase in non-merchandise income, including rental and commission income, as well as media sales. Obviously, we need to keep a close eye to our cost development. As I said, our execution of customer-centric strategy is the core for the growth, and we want to drive premium positioning by expanding luxury and affordable luxury offering, building even a better omni-experience, data-driven decision-making to optimize customer touch points, and personalized offering. Obviously, systematic sustainability work at the end, at the core of our strategy. Carbon footprint reduction, renewed CO₂ emissions calculated in line with the SBTi requirements, and circularity enhanced by attending a national circular design program. Now I would like to hand over to Susanne . Susanne , please explain the Lindex division highlights.
Thank you, Jari, I will do just that. Hi, everyone, and looking into the first quarter for 2023 for Lindex, we can take the next page, Jari. We are pleased with our fine development. Despite the continued challenging situation in the world, we managed to further improve our result compared to our very strong start last year. We have reached new result and sales levels. Our revenue for the quarter was EUR 126.5 million, which is a decrease by 5.6% compared to previous year, 2022. Although in local currencies, sales increased by 0.7%. Our brick-and-mortar business increased in sales during the quarter and was up by five...
was up by 2.3%, while digital sales decreased by 5.2%, mainly due that our customers choose to shop more frequently in the physical stores again, combined with lower intakes from the global digital fashion platforms. Looking at our own e-com, it was on par with previous year, and the digital sales accounted for 21.6% of the total sales. Our gross margin increased to 65.1%. Despite higher purchase prices due to the historically strong U.S. dollar, we managed to increase the gross margin thanks to more efficient sourcing together with lower freight costs and also that we have implemented price increases towards our customers. Our operating costs, excluding depreciations, decreased by EUR 3.7 million- EUR 58.2 million.
This is a combined effect of cost saving actions that has successfully mitigated the inflation together with a positive currency effect when converting cost from local currencies to euros. Our operating result for the first quarter increased by EUR 0.1 million- EUR 5.6 million. This is explained by the increased sales with improved gross margin together with efficient cost saving actions. Since the euro is approximately 10% more expensive compared to the Swedish krona, the result with previous year's currency exchange would have been EUR 5.9 million. That is then EUR 0.3 million more than the, for the first quarter.
Previous year, we had a really strong result for the first quarter, and that we, despite the prevailing macroeconomic factors surrounding us, succeeded to improve our result further this year, we see as a strength. The positive development shows that our efforts and prioritizations have had a successful effect and where everyone's flexibility, speed, and commitment has been central. The CapEx for the quarter was EUR 11.5 million, which mainly relates to the ongoing construction of our new omnichannel warehouse that is planned to be taken into operation in 2024.
If we continue to the next page and we look into our highlights for the quarter, I want to emphasize our increased sales growth in local currencies and also our strong sales increase in especially lingerie, that during the quarter increased with 14%. Within our focus on the femtech market and our new brand, Female Engineering, we have also during the quarter expanded our product portfolio and offering. We have launched new colors and silhouettes of our period panties and in addition to our initial product category, we have also launched reusable nursing pads, leak-proof maternity underwear, as well as intimate care products. Female Engineering is a femtech brand with a holistic offering, and the product range stretches all the way from menstruation, maternity, menopause, incontinence, and wellness.
We really look forward to present our upcoming innovation as well. As part of our continuous work with innovation and exploring new circular business models and business opportunities, we during the quarter have piloted new services, such as rental of ski clothes for children, as well as the digital program, Your Active Wardrobe. Both have been well-received by our customers, and the pilots have been rolled out in a small scale with the aim to gain insights and learnings for further development. In March, we also released our sustainability report for 2022. We report on a year that has been characterized by surrounding turbulence and disruption on a global scale, but we have at the same time done a major transformation and significant progress to keep Lindex sustainability promise to make a difference for future generations.
One highlight from this report is that we despite
Our strong sales growth during 2022 managed to maintain our reduction in total emission by 22% compared to the base year 2017. This also means that we have been able to decrease the emission per piece compared to previous, than 2021, compared to 2022. I would also like to highlight our important investments for our future growth, where we have made good progress and where automation and also digitalization are of utmost importance for us going forward. During the quarter, we also launched our new brand-building kids campaign with a core message designed for play. Our long experience in quality and fit has given us a solid knowledge of how to design clothes that are comfortable to wear regardless of play or activity.
If we continue on the next page, where we look into our way forward, we believe that there will be a continued challenging market situation, and where we will proceed with our high cost focus and also flexible approach ahead. We will continue our Femtech journey and explore new business and growth opportunities, as well as we will continue our progress within our circular transformation. We have big ambitions going forward on our continued journey as a global brand-led and sustainable fashion company, where our investments and digital development are key. If we continue on the next page, a critical enabler and step for fulfilling our long-term growth plan is our investment in our new omnichannel warehouse. Our business is growing, and we have congestions in our current logistic operation.
Our semi-automated warehouse in Partille has reached both storage and throughput capacity, which has also led to that we have been renting extra space. In our e-com warehouse in Borås, we only have manual handling. Our total central stock is due to this not available for all sales channels simultaneously, and our setup today constrains our future growth. In order to increase our delivery capacity in line with our global and digital expansion, our new omnichannel warehouse is vital. Before I hand over to our CFO, Annelie Forsberg, I would like to finish my presentation by showing a short film that describes our progress of our new facility and the key advantages with our new logistics platform. Please show the video.
During 2022, we announced that we will build a new, highly automated warehouse, a crucial step in fulfilling our long-term growth plans and an enabler for our future success. Some of the key advantages is 1 common stock enabling increased flexibility and availability of stock between our sales channels. Increased capacity and scalability will enable future growth, also in new channels. Automation will reduce our transaction costs. We can already now see that e-com unit costs will be reduced significantly. We have high environmental requirements. For example, the facility will be powered by solar panels. We are planning on taking the new warehouse into operations during 2024, and the construction is moving forward every day.
Thank you, Susanne. For the film showing the good progress of the important omnichannel distribution center. If we turn to the next slide, we can see that Lindex Group had a positive start for quarter one. Despite the difficult market situation where both consumer confidence, inflations, and currencies impacted the business environment, we can conclude that both divisions succeeded to increase both revenue and profitability. Stockmann division had a high sales growth with 15.8%, and Lindex had a sales growth with 0.7% in local currencies. This meant together a sales growth of 5.5% in local currencies. Although the sales growth for the group was reduced when converting Lindex sales into reporting currencies. For the Lindex division, it meant a decrease in sales to 5.6%.
For the group, it meant that the sales growth was lower to a sales growth of 1.2% in EUR. As earlier explained, the gross margin grew for Lindex. The higher purchasing prices due to the U.S. dollar could be compensated thanks to more efficient sourcing and lower freight prices. For the Stockmann division, the gross margin decreased due to a higher share of clearance sales. Combined for the group, this meant a decrease in gross margin from 57.8%- 56.4%. Operating costs, which excludes depreciations and other income, were down by EUR 3.9 million in the quarter.
Despite inflation, higher energy costs, and additional personal costs related to increased sales, the group's operating costs decreased. This was an effect of a positive currency impact coming from the Lindex division and efficient cost-saving actions in both divisions. The depreciations was on par with last year of the group, although slightly increased for the Stockmann division and decreased for the Lindex division. At the same time, other income decreased as an effect from receiving some pandemic support during last year. This meant in total that the adjusted operating result for the first quarter increased with EUR 1.3 million with improvements in both divisions. The operating result, where last year also included the capital gain of selling the Riga real estate in January 2022, that declined from EUR 9.8 million- to - EUR 2.9 million. We can turn to next page.
The rolling 12 performance of Stockmann Group shows continued growth and profitability. On a yearly basis, revenue increased with 4.7% compared to one year ago. Stockmann division has grown with 11.3% and Lindex has grown with 7.2%. However, when translating into reporting currencies, Lindex sales was lowered to 1.7%. Both divisions had higher number of visitors in the stores and increased the value of average purchases. Thanks to the increased sales together with good handling of gross margin and costs, the rolling 12 adjusted operating result stays on a high level compared to previous years. Compared to pre-pandemic level in 2019, the result has more than doubled for the group. As seen, there is a decrease from rolling 12 one year ago. This is explained by currency conversion.
If same currency would have been used as last year, the adjusted operating result would have been EUR 86.1 million, meaning an increase with EUR 0.6 million on a rolling 12 base. We can turn to next page, please. This graph illustrates the profitability development in the divisions, where both divisions have improved significantly from year 2020 and 2021. Lindex profitability has improved thanks to strong sales growth, successful work with gross margins together with good cost control. Like said before, the adjusted operating profit has been affected when converting local currencies to the reporting currencies, which affects the reporting numbers. If the same currencies would have been used as last Quarter 1, the result for rolling 12 would have been EUR 1.7 million higher compared to last year's rolling 12.
As seen in the graph, Stockmann division was seriously impacted during the pandemic. Stockmann division has step by step improved sales, and together with efficient cost savings, the result has almost recovered. We can go to next page, please. The cash position for the group continues to be strong. The opening cash for the period was EUR 168 million, where the adjusted EBITDA improved compared to last year, while lease payments were higher. Other cash flow items were tax payments and change in working capital, which is due to normal seasonality during Q1. The inventory has increased from the same period last year due to increased purchasing prices, but is on a healthy level in both divisions. During the quarter, there has been continued investments where Lindex distribution center stands for the bigger part with EUR 7.8 million.
In total, this means that the cash in end of the period after all these cash flow items is EUR 103 million. For the continued 2023, there will be further investments in line with the project plan for Lindex digi- distribution center, meaning approximately EUR 58 million during 2023. So far, the group has invested EUR 46.3 million for the center, and it has been fully financed from own cash flow. We can go to next page, please. The illustration of the interest-bearing debt position excluding lease debts, according to the IFRS 16, this shows how the balance sheet has improved heavily latest years, and Stockmann Group are in a positive net cash position. This is an effect of an improved business operation and also fulfilling the restructuring program. If we turn into next page.
After the sale and leaseback of the real estates, the lease liabilities increased for the group. Although it's important to say that all Stockmann department stores are profitable after deducting all direct costs for them. 99.5% of all Lindex 405 stores are profitable. We can turn to next page. The improved balance sheet can be seen in this slide. If we look at the equity, we can see that thanks to more profitable business operation as well as fulfilling the restructuring program, this has been improved. The equity ratio has drastically improved during the latest years, excluding IFRS 16 leases. It has increased from a very low level during 2021, but also from 2019 years level. Here it has increased from 40.9%- 58.7%.
We can turn to next page. During the quarter, the net result improved compared to previous years and ended at EUR 19.5 million compared to EUR 2.8 million last year. The high increase is mainly due to the positive tax decision for Stockmann Sverige AB that was recorded during Q1. This has impacted taxes and net result with EUR 9.6 million. This increased the EPS for the quarter to 0.13 from last year's 0.02, which although also was impacted of selling the real estate in Riga. More interesting would perhaps be to look at the adjusted earning per share on a rolling 12 base in the graph. That has increased compared to end of 2022 from 0.24- 0.25.
When comparing with 2021, it has decreased explained by higher average number of shares. We can turn to next page. The market outlook for 2023 is that the current challenging geopolitical situation and the high inflation will continue, although predicted to slow down. The inflation together with high interest rates will have a negative impact on consumer confidence and purchasing power. With higher purchasing prices, operating costs, and risk of potential disruptions in the supply chain, the retail market is expected to be challenging. The next page, please, and the guidance.
When it comes to the guidance for 2023, we expect the group's revenue to be in the range of EUR 960 million-EUR 1,020 million, and the group's adjusted operating result to be in the range of EUR 60 million-EUR 80 million, and this is subject to foreign exchange rates fluctuation. This guidance is based on the market outlook, whereas Stockmann Group at the same time continues taking firm measures to minimize the impact of cost increases. That was all for the financial presentation, and now we can open up for questions.
Thank you, Anneli. We have a couple of questions here and let's start with the ones going to our CEO, Jari. In the report, it's mentioned that Stockmann is preparing for the future by evaluating strategic options. Could you give any comments regarding what kind of options that you are being considered?
We are going through, this is a normal process, our strategy for both divisions, looking at the environmental changes, evaluating the possibilities, where do we see more focused areas possibly, and this work is ongoing as we speak. Nothing new to report at this stage, but ongoing process as normally every company is going through.
Yes. Thank you. One question related to the restructuring process here. Can we give an update about the restructuring process, and especially about any news about the legal cases where we are there?
In order to end the restructuring process, the remaining disputes need to be solved. We do our utmost to end the restructuring process as soon as possible. It's important to understand that the supervisor asked that of the restructuring program has the central role in the process as an objective decision maker. We have a constructive dialogue with the supervisor and working very hard to get rid of the undisputed claims.
Yes. Thank you. There is a wish that to get some more insight on our new strategy after the period, when we have settled the disputed claims. Could you, Jari, comment what is our progress with the new strategy?
Well, it's proceeding as planned. We're looking different kind of alternatives, also financing alternatives after the restructuring of the solved disputes. This work we are doing together with the board of directors.
Mm-hmm. Yes. We have two questions to Lindex. Maybe Susanne, if you could answer then that what is the estimated time of completion for the new logistics center?
Yes. As I said, it's planned to be ready in 2024. The expectations is during the autumn of 2024.
Yes. Maybe to Anneli then, or Susanne, Lindex posted again a strong gross margin. Do you see 65% as a sustainable level going forward?
Well, I can start then maybe, and then maybe Anneli will add some more information. Regarding the gross margin for Lindex, it is impacted by several factors. We have the start margin, and that is impacted by our transformation to become a more sustainable fashion company. That I think we have under good control regarding the gross margin. It is also impacted by the U.S. dollar versus the Swedish krona. That is quite hard for me to predict how that will develop. It's an impact of the assortment mix. We also have the consumer demand that we believe will be a little bit more difficult during 2023.
Also, when we are growing, and we are growing with new channels, and especially the digital channels, we can expect a bit lower gross margin. On the other hand, these are really profitable sales channels for us. On the total profitability, it would be very good for us to continue to grow in those channels.
Would like to add. Yeah, yeah
if I may. As you saw in the presentation, we also invest in the logistics center, and it was very clear in the film how it's going to improve our picking and cost, improving cost efficiency in the warehouse
We have another question going to Lindex. In Lindex, you were able to raise prices, but you have stated that the price increases weren't enough to offset the increased costs. Are these increased costs currency effects or something else? If they are something else, do you see any room for further price increases before you would expect more muted development in sales volumes?
The major impact is, of course, the U.S. dollar for us. We have been able to mitigate and have a strong start margin despite of the U.S. dollar. Regarding the price increases towards the customers, we are holding back on that one because we think it's crucial that we have a strong price value towards our customers. We will look into the price increases, but we will do it really, really carefully for the coming months.
Thank you, Susanne. We stay in the Lindex division. Would it make sense to make a leaseback agreement with the coming omnichannel distribution center?
We are looking to different alternatives here. That could be one alternative, but this is an important business decision, so, many alternatives will be evaluated. That could absolutely be one of them.
Then we have two comments regarding Stockmann and Stockmann division. Stockmann division had a great revenue growth compared to last year, but still on the EBIT level, the result was on par with last year. How big were the COVID supports received last year, and what were the main drivers behind the lower EBIT margin this year?
If I start with the clearance, as we recall, Stockmann division stopped all deliveries to Russia when the Ukrainian war started, and we, as we know, we've been exporting our private labels to Russia, but that ended in February as we all know. Because of the long order cycle, we still receive products aimed to be sold to Russia in autumn, and this is one of the reasons for higher clearance sales during the winter and explaining the deviations. There is the sale and leaseback, the depreciations to be remembered here. Otherwise, I think I would say the cost efficiency measures have been taken fully and been implemented. Just slightly lower gross margin as I explained.
Also what Susanne was explaining before, the inventory levels, or Anneli was explaining, the inventory levels are on a good level. Obviously, the higher prices, looks higher inventory levels, but when looking at, volume, we are at a good level.
Yes. Still about the Stockmann department stores. What sort of central costs do Stockmann department stores have? This call to Jari yours, Anneli.
Well, if you look the Stockmann division as a whole, obviously supply chain, we have a logistics center in Tuusula. ICT cost related to all channels are central cost. Sourcing is one of those. We do source all categories from the central buying organization, and these are central costs. I would say we've been really driving hard the past three years the central cost level from a very high level to where we are today. Good progress in this area.
Yes. Are these quarters lease payments fully representative of steady-state quarterly lease payments for the group going forward?
Anneli, would you like to comment that?
Yes. Of course. Yes, these quarters are online with the coming future, payments.
Okay. To Jari, any update about new date for Capital Markets Day?
Well, we are, as I said, we are middle of the process working with, both divisions, the strategy moving forward. Obviously, we need to have a visibility when the restructuring ending because this is part of also seeing how do we want to move forward with in terms of financing. Our aim is that we will keep the Capital Markets Day, hopefully this autumn, but no definite date has been confirmed yet.
Yes. We have a question to Anneli. Are you able to quantify the sale and leaseback impact on depreciation and interest in the income statement this quarter compared to last year?
For the coming future, we have not published these numbers. Of course, we have internal calculations for that, but that is nothing we have published yet.
We have a personal question to Jari, about owning company stocks. Is there a particular reason that you are not having Stockmann stocks?
Well, I've been-
Mm-hmm
advised by the legal officer of the company that I have too much inside information, so he's saying all the time, "Do not buy.
Okay. Do we have any further questions from the audience? These were the ones that we received during the presentations. Okay. If not, we thank for the good questions, and you are of course welcome to be in touch with us, in case there is something else.
We would like to thank you all, and as we in Finland know, this is the 1st of May celebration, so we wish you all a happy 1st of May celebrations. Both Lindex and Stockmann is welcoming you to shopping. We are here to serve you. Have a nice weekend. Thank you.