Good morning, everyone. I am Susanne Ehnbåge, I am the CEO of the Stockmann Group. I would like to welcome you to this press and analyst webcast related to Stockmann Group's half-year financial report. With me, I have Annelie Forsberg. She's the CFO of the Stockmann Group. If we then continue on the next page, we have today's agenda. Please switch page. Today, we will together give you a short introduction to the performance of the group. We will take a look into a business update for both divisions, followed by the financial development and our way forward. We will end with a Q&A session, where we will answer your questions. We can go to the next page, please. May 12th, I was appointed CEO of the Stockmann Group.
Prior to that, I've been the CEO of Lindex for almost five years, and I am honored by the trust to now also lead Stockmann Group's continued development. The journey continues now to secure improved profitability and to seek growth. Since my appointment, I have focused to deep dive further into the Stockmann division with great support from my competent colleagues. The group management team consists of me, Annelie, our CFO, Tove Westermarck, COO for the Stockmann division, and Jukka Naulapää, CLO for the Stockmann Group. I would also like to thank all the fantastic team members at Lindex and Stockmann for their excellent collaboration and valuable support during my first weeks as the group CEO. On the next page, let's have a glance on the group's setup.
This gives you a brief overview of the group and how the division's presence look like. Lindex stands for 67% of the group's revenue, and Stockmann division for 33%. Looking into our market, we can see that Sweden, Lindex's biggest market, stands for the biggest share of the group, closely followed by Finland, where we both have Lindex and Stockmann stores. In total, the group has 438 stores in 18 countries, eight department stores, own e-commerce in 34 markets, and added to that, several partnerships. For the first six months, we increased our store network with two stores. We also have five production offices, and by these offices, we source almost all Lindex products and approximately 10% of the Stockmann products. Our biggest product group is fashion. That stands for as much as 80% of the total sales.
If we then continue to the next page, where we'll now focus on the business update with highlights for the group and Lindex and Stockmann division. For the group, on the next page. The second quarter was characterized by a business environment of rising interest rates and continued high inflation that unfortunately weakened the consumers' purchasing power. The quarter started slow due to cold weather and also challenges deriving from the operating environment, which had a negative impact on fashion demand in several markets. As the warmer temperatures arrived, sales picked up significantly, and in local currencies, the quarterly revenue was at the previous year's level for the group, but decreased in Euro by 6.3% due to the weak SEK and NOK.
The sales on these two markets stands for approximately 50% of the group's total revenue and 70% of the Lindex revenue. When converting to euro, it impacts total sales significantly. Lindex division revenue, the revenue for the Lindex division, increased in local currencies by 2%, where Lindex succeeded in increasing sales in all main markets and also in all sales channels, especially driven by the digital sales. We have been successful in customer recruitment, which is good, as it is clear to us that the customers overall have less money to spend. The pace of the recruitment compensates the clearly subdued market.
The revenue of the Stockmann division decreased by 6.4% during the second quarter, which is mainly explained by the timing of the Stockmann's Crazy Days campaign that contributed more to the first than the second quarter sales compared to the previous year. Additionally, the reduction in size of the Itis store in Helsinki had a negative impact on revenue. There was a continued strong increase in the new loyalty program members in both divisions. I am very pleased that Lindex again succeeded in improving the adjusted operating result in local currencies for the second quarter. This was driven by increased revenue together with increased gross margin. At the same time, the Stockmann division increased the share of clearance and promotion sales, which affected the result negatively. Both divisions were successful with cost savings to mitigate the overall inflation.
The group's adjusted operating result in local currencies was on par with previous year for the second quarter, and even increased for the first half year. Although the result decreased in euro, mainly explained again by the adverse currency impact on the Lindex result, together with decreased sales for the Stockmann division. In the second quarter, the group's financial situation has further improved, and the group showed positive cash flow despite the significant ongoing investments and the payments of undisputed debts. Inventories are on a balanced level and have decreased compared to both the previous year and the end of the first quarter. During the latest days, we have also signed a revolving credit facility agreement of EUR 40 million that will improve our financial situation even further. As we have earlier communicated, Stockmann Group have decided to commit to Science Based Targets initiative.
During the reporting period, Stockmann's board of directors approved our science-based climate targets, which means that we aim to reduce our CO2 emissions by 42% until 2030, with the base year of 2022. Continue to Lindex division on the next page. Looking in at the highlights for the Lindex division for the second quarter, sales increased in all sales channels, and we improved profitability in local currencies. The result improvement was both thanks to higher sales, improved gross margin, and good cost control. The gross margin has increased despite the historical high U.S. dollar and increased raw material prices. There's been a strong focus and a lot of actions to protect the gross margin by both improving sourcing and to seek where we can increase our prices, where it is possible without risking the good price value towards our customers.
At the same time, there's been an overall cost focus to mitigate the inflation impact. In total, we gained over 300,000 new customers only during the second quarter. We now have 5.6 million identified customers. During the quarter, we also increased our brand awareness, especially in our new markets and within our new growth area, FemTech. We have also increased our brand awareness for Female Engineering. We can see how our customers really appreciate our assortment. Lingerie was the best performing category and increased by 6.6% versus previous year. We have also proceeded our FemTech journey and circular transformation, exploring new services and circular business models. Regarding our progress within the FemTech industry, Lindex's first patent for an innovative, washable, protective garment for women will be published August 1st.
This is a milestone for Lindex, as it offers a competitive advantage by establishing exclusivity and also strengthens our brand's reputation. Concerning our circular transformation and exploring new services, we are in a testing phase, where we are having several ongoing pilots. One example is that we have expanded our second-hand also to Finland. We now have eight stores with second-hand in the Nordics and plan to expand further during the year. In addition to broaden our offer, it provides also valuable insights into our continued work to prolong the life of our garments. We have continued to increase also our circular materials, where with this year, produced over 1 million garments based on post-consumer recycled textile waste through our partnership with Södra.
Next year, we will scale it up further to 1.5 million pieces, which means that 35% of our viscose will be OnceMore. Through our partnership, we are also looking into how we can increase the recyclability of our own Lindex garments, and we have now formed a partnership and pilot with the company, Rester Oy. We have high activity within our digital transformation and also our ongoing investments. To mention a few of those, and the construction of our new OCDC is in full progress, and as part of our digital store program, we have, for example, initiated the implementation of a new mobile point of sale system and also RFID technology to further improve the customer experience.
We are also testing and further developing a unique AI tool, Lindex Copilot, designed to support our store employees in their daily work. We are also up and running with our new product lifecycle management system, and we are now also scaling it. All these actions will drive increased profitability, either through increased customer satisfaction and improved sales or by efficiency. For the Stockmann division, on the next page, please. Stockmann division had a good revenue development, especially during the first quarter and also for the first half year. For the first six months, the revenue increased by 3.2%.
As I explained in the beginning, the Q2 revenue decreased mainly due to the timing of the Crazy Days campaign, which contributed more to the first quarter sales and the reduction in size of the store area of the Itis department store in Helsinki. Despite the lower sales in the second quarter, the Stockmann division reported a continued strong increase in the number of new loyalty program members by 20,000, and the customer satisfaction improved during the second quarter. The customer service shows us that the transformation of our department stores towards inspiring destination has proceeded during the quarter. To mention a few of those projects, in Helsinki flagship store, we in Eagle opened the biggest toy store in the Nordics as part of the children's world.
In June, the exclusive cooperation between Stockmann and Fotografiska Tallinn Museum resulted in an art installation at the Helsinki flagship. During Q2, we strengthened our position in luxury and affordable luxury, which is an important step in Stockmann's offering development. In April, Louis Vuitton opened a store in the Helsinki flagship, and we launched several new affordable luxury brands to the Stockmann offering, such as the Max Mara Studio and Lardini in fashion. During the quarter, Stockmann continued to add new sustainable choices to its selection and services. As an example, Stockmann is partnering with several secondhand stores in all its locations, as well as with partners within recycling and end-of-life textiles.
Stockmann continues supporting and celebrating the diversity, equality, and inclusion topics, and did so by being one of the main official support partners of the Helsinki Pride, gaining great visibility and publicity for this important theme. By that, I would like to hand over to Annelie, who will walk us through the financial development.
Yes. Thank you, Susanne, and good morning, everyone. We can turn to next slide. In this slide, we want to illustrate the macro trends that have big impact on the financials and also business operation for the group. The euro has increased versus SEK with 16% during the past two years, and with 12% during the latest years, where also the Norwegian NOK has had approximately the same development. 70% of Lindex sales are made in SEK and NOK, and when converting these sales into euro, the group's financials are significantly impacted. Also, the U.S. dollar versus SEK has increased substantially, 27% during the latest two years.
Since Lindex buys 80% of all products in U.S. dollar, that has a heavy business impact, and the expected full year effect on buying costs compared to 2021 is approximately EUR 40 million, and compared to 2022, it's approximately EUR 25 million. These are effects that need to be mitigated. Also, the prices for raw material have a substantial impact on buying cost, where the cotton, as well as other raw material prices, have been extremely volatile latest years. The container and freight prices have been high after the pandemic and impacted the business, but are now more stable again. Both divisions are also impacted by inflation, since it affects both customers' purchasing power as well as the group's own costs.
We can turn to next slide, where I will start to show the Lindex financial performance and the Lindex division's revenue increased by 2% in local currencies, like Susanne said, but decreased in euro by 6.3%. The late spring impacted the sales at the beginning of the quarter, but from mid-May onwards, Lindex increased sales again. Both physical stores and digital sales grew, and sales increased on seven out of nine own markets. It's seen that customers have less money in their wallet and buys less frequent, but that was compensating by recruiting more than 300,000 new customers during the quarter. The adjusted operating result improved in local currencies but decreased in euro. The improvement in local currency is explained by increased sales, together with stronger gross margin and good cost control.
Lindex succeeded to strengthen the gross margin despite the more expensive U.S. dollar, and this was thanks to improved sourcing, combined with lower freight prices. Lindex also made price increases, but with very high carefulness to not risk the good price value. On the cost side, there were focused actions for cost savings, which partly mitigated the inflation and converted to euro, the cost side decreased by the currency effect. Summarizing the first six months, the Lindex division's revenue increased by 1.4% in local currencies but decreased by 6% in euro. In local currencies, both the physical and digital sales improved, and Lindex grow in almost all markets. The adjusted operating result stayed strong and increased in local currencies, explained by higher sales, improved gross margin, and cost control here as well, although when converted to euro, it decreased.
In summary, a good quarterly and half year result for Lindex, with both increased sales and result, but the division was impacted by currency conversion to euro. We can continue with Stockmann division on next page. Stockmann division decreased revenue during the second quarter by 6.4%, where timing of the Crazy Days had a main impact to that decrease. This year, Crazy Days generated more sales during quarter one compared to last year. Also, the reduction of Itis store in impacted this, and together with slow spring start and lower purchasing power of consumers, the revenue decreased. Both physical stores and digital sales had lower revenue, where Crazy Days impacted the digital sales significantly. The adjusted operating result fell with EUR 2 million to -EUR 3.5 million during the quarter.
This was an effect of lower sales and the drop in gross margin due to a higher share of price-driven campaigns and clearance sales this quarter. The cost decreased thanks to a very tight cost discipline that partly could mitigate the drop in gross profit. Summarizing the first six months, Stockmann division increased the revenue by 3.2%, where physical stores increased their revenue, where the digital sales decreased, explained mainly by the sales drop in the home category. The adjusted operating result decreased with EUR 1.7 million to -EUR 10.5 million . The revenue increased, like earlier said, the gross profit fell due to the drop in gross margin. The effect could be partly mitigated by cost savings, not fully, due to also higher depreciations this year and governmental pandemic support in last year.
We can go to next slide. When the divisions are combined and also group costs are included, we have the following financials for the Stockmann Group for the second quarter and first six months. For the second quarter, the revenue decreased by 6.3% in euro, although in local currencies, the revenue was almost on par with a slight decrease by 0.5%, That decrease was mainly explained by timing of Crazy Days for the Stockmann division. The adjusted operating result decreased to EUR 31.6 million, In local currencies, the result was on par with previous year's second quarter. In local currencies, the Lindex improvement, together with lower group costs, mitigated the decreased result from Stockmann division, When converted to euro, there was a drop.
The operating result for the group was EUR 30.2 million in the second quarter, where last year included a capital gain of selling the real estate of Helsinki flagship. Summarizing the first six months, the revenue decreased by 3.2% in euro, although in local currencies, the revenue increased with 2%, where the revenue increased for both divisions, but mostly for the Stockmann division. The adjusted operating result decreased to EUR 29.2 million, but in local currencies, the result improved. As well as for the second quarter, Lindex improvement in local currencies, together with lower group cost, could mitigate the decreased result for Stockmann division. When converted to euro, there was a drop in the adjusted operating profit.
The operating result for the group was EUR 27.3 million in the second quarter, where the last year included the capital gains from both Helsinki and Riga when selling the real estates. Turning to next page. As showed here in the graph, the profitability for Lindex continues on a high level. The adjusted operating result has more than doubled compared to pre-pandemic, although in these figures, the weaker SEK currency versus euro impacts Lindex figures negatively. As showed before in the presentation, during the 2 latest years, the SEK has weakened versus the euro with 16%, which has a heavy impact. The profitability for the Stockmann division has dramatically improved compared to 2020 and 2021, but the Stockmann division still has negative numbers, which, of course, will be in focus to improve.
We can go to the next page, please. The cash position for the group continues to be strong, second quarter had a positive cash flow as well. The opening cash for the period was EUR 103 million and ended at EUR 133 million. Compared to last year's cash flow, which can be seen on the green lines, the cash flow decreased, with the explanation that we had cash left over from the sales of the Helsinki real estate after repaying the restructuring debts. We also had lower investments at that time. For the year-to-date cash flow, we decreased cash, mainly explained by tax payment in beginning of the year, together with OCDC investments. Inventories are on a balanced level and have decreased from last year.
Lindex has reduced inventory thanks to lower freight days and improved supply chain, while Stockmann increased it, explained by higher purchase prices and a higher intake. Investments to strengthen the digital development have been done in both divisions. In addition to these, there is also the ongoing construction of the new warehouse for Lindex, which is the biggest in Lindex history, with a total investment of EUR 110 million. The construction is proceeding well, and the warehouse is planned to be taken into operation in autumn 2024. Until end of June 2023, EUR 57 million of the total investment sum had been used for the project, which has been fully financed from own cash flow. Going forward, another EUR 40 million in OCDC investment is planned during the autumn. Next page, please.
The group's financial position has significantly improved during the latest years. There is now a positive net debt and net cash position of EUR 61 million. That is coming from cash deducted with interest-bearing liability, which consists of the EUR 72 million bond. The group also has lease liabilities, according to IFRS 16, but these are excluded from net cash position to only show the really interest-bearing part. Like Susanne mentioned, we have signed a revolving credit facility of EUR 40 million in July. That will improve the financial strength even further. As a retail company, there is a high seasonality in the cash flow, so RCF will be very favorable for us in the future. The next page, please.
The improved financial situation can also be seen in this slide, where it's illustrated how equity ratio has improved latest years and now reaches 58.4%, excluding IFRS 16 leases. This is thanks to more profitable business operation, as well as the progress in fulfilling the restructuring program. If we turn to next slide, then, we can also look into the earnings per share, and during the latest years, the number of shares has increased, which is explained by new share issues according to the restructuring program. Now, the group has 156,000 shares.
The earnings per share is EUR 0.21 for the first six months, which is a decrease from last year, when it was EUR 0.54 per share, but that amount also included sales of the real estate in Helsinki and in Riga, which had a heavy impact on the net result. When excluding these adjustments, together with actual tax and also used deferred taxes from those, the adjusted earnings per share was EUR 0.03. This year, the positive tax decision from SSAB was adjusted as well, and adjusted EPS then ends up at EUR 0.04. The change from before is that we have included the use of deferred taxes in all calculations, where we restated also last year's figures to make it more comparable. That was the financial information. I hand over to you again, Susanne.
Thank you, Annelie, and we will continue with our way forward, so let's take a look at the next page. Looking ahead, for the Lindex division, we are focusing on to continue growth on both new and existing markets, to offer a customer-oriented, sustainable assortment, where designed longevity and circularity is a key focus ahead and an important enabler for our continued circular business transformation. We also continue to explore and pilot new sales channels, and during the autumn, we will launch on marketplaces. We will also launch with kidswear on JohnLewis.com, in partnership with Refine Networks, and together with Manor in Switzerland. Already after the summer, we will launch new innovative FemTech products from our brand, Female Engineering, so we have an exciting autumn ahead of us. Another important focus ahead is to continue to stay resilient and to transform the business.
We continue to develop our e-commerce sites, and through our new OCDC, combined with RFID, we will be able to increase our delivery capacity and stock accuracy to offer a smooth, omni-channel experience to our customers. We continue to have high focus on automation and digital solutions throughout the business. Exploring new circular business models is an important part of our transformation and our growth, and we have high set goals to grow, both in a sustainable and profitable way. We are building a strong foundation for innovation, efficiency, and flexibility, where our investments ahead are central. Going forward and focusing on the Stockmann division on the next page. The target is to further strengthen the customer centricity to deliver growth and improve profitability. The focus is to be relevant and add value to our customers to improve sales and profitability.
Customer-centric growth will be delivered by furthering, strengthening the luxury and affordable luxury offering, by continuing bringing in relevant partners and brands. It also means developing the Helsinki flagship store into a more inspiring destination based on customer insights. The loyalty relationship will be further improved and strengthened by building strong capabilities for personalized customer experience. To improve the omni-channel customer experience, we will continue to invest into digitalization, which include eComm development, MyStockmann app development, et cetera. Besides growth, improving profitability is the other important focus area for us. We will continue investing in digital solutions and automation. In June, it was decided to invest into an automation in the distribution center to nearly fully automate the eComm fulfillment process. This will lead to a faster order processing and improved customer satisfaction.
We have also started RFID pilot in our Helsinki department store. This has a potential to have significant positive impact on merchandising efficiency and will improve overall customer satisfaction as well. In all markets, we will invest in marketing automation. We also see potential in increasing the non-merchandise income, where we will develop and increase the role of different business models. Tenant and concession models will complement Stockmann's own offering. We're also looking into increasing Stockmann's media sales by utilizing own channels and premises. We will continue the cost efficiency measures by investing in the digitalization. That, by that, I would like to continue to the market outlook and give the floor to Annelie again.
Yes, our view on the market environment remains unchanged, as geopolitical tensions and high inflation have continued. The inflation, together with high interest rates, is forecasted to have a negative impact on consumer spending, and this, combined with increased purchasing prices and operating costs, will challenge the retail market. If you go to the next page, we can look into the guidance. On the 17th of July, we revised our guidance. We lowered the revenue range and increased the adjusted operating result range. The lowered revenue is related to the fluctuations of exchange rates that have a significant impact on Stockmann's performance, especially the weak Swedish krona and Norwegian krona. The change in adjusted operating result is due to stronger-than-expected gross margins and the successful execution of cost savings measures. Thereby, we can change slide and open up for a question from you.
Question regarding group, capital expenditure. What is the annual group CapEx level for 2023 and 2024?
Well, if you look at the OCDC, we know that we have approximately EUR 58 million for the full year of 2023. We have roughly, usually the CapEx level is approximately EUR 30 million-EUR 35 million yearly. That is the frame.
an exciting question: When will the Lindex spin-off, separate, company take place?
Well, we are looking into strategic options, and that is what we have stated, but we have not said anything about selling any of the divisions. I don't have any further comments at this time.
For the moment, we actually don't have more questions. Let's see. I think we had about 70 visitors online. Let's see if you still have something you would like to ask. For the moment, these were the only questions that we have got. Yes. Regarding taxes, your tax rate was fairly high in Q2. Was there something special in there, and what kind of tax rate you see as normal with the current earnings breakdown?
Well, the current tax level is due to deferred taxes that we have not booked deferred taxes. We have quite heavy currency impacts on the result with the are no deferred taxes booked for, and that also impacts the quarter two tax costs. For the coming month, of course, we hope that everything is profitable, and then we will have the more normal tax rate of approximately 20%. That is also due to how we can use these deferred taxes.
Yes. Thank you. Then we have a question regarding Capital Markets Day. Susanne, would you like to comment in case we have any news regarding CMD?
Well, the strategy work is ongoing and proceeding well. As the new CEO, I've naturally needed to dive deep into many areas. We continue to work, we will come back with more information in due course.
Thank you. Let's see if there is something more. This comes to Annelie. How large was the working capital impact of undisputed restructuring debts for the quarter and year to date?
During the quarter, we have paid, approximately EUR 6 million in restructuring debt. That is not included in the working capital in the graph here for the cash flow. For the year to date, it's the same amount. It's, during quarter two, we have paid this, approximately EUR 6 million.
Yes. Thank you. Let's wait another minute in case there are some more questions coming. For the time being, there are no. Okay, wait a minute. One more coming. One question coming regarding our legal disputes. When do you expect the legal disputes to be solved, and how large is the maximum amount potentially to be paid?
Yes. Well, we have four remaining disputes left, and our aim is to end the restructuring process, as restructuring program, as soon as possible. We have EUR 18 million in provision today, but the largest amount, let me just double-check this. The total amount that could be at risk is EUR 52, but that seems quite unlikely. EUR 18 million is the one that has been booked.
Thank you, Annelie.
All right, then.
Yes.
I think that by that, we want to thank you for your time and for listening. Your interest and engagement in Stockmann Group is very appreciated and valuable for us, so we wish you all a lovely and relaxing summer and look forward to further interactions in the future. Thank you.
Thank you.