Good morning, everyone. I am Susanne Ehnbåge, CEO for the Stockmann Group, and I would like to welcome you to this media and analyst webcast, where we present Stockmann Group's result for January to September. With me today, I have Annelie Forsberg, CFO of the Stockmann Group. If we continue to today's agenda on the next page. At first, we will look into a business update for both divisions, Lindex and Stockmann, followed by the financial development and our way forward. We will end the event with a Q&A, during which we will answer your questions, and we can now turn to the next slide. We will begin with a business update with focus on the third quarter performance. Before we focus on the financial result, let's take a look at the next page.
At the end of September, Stockmann Group announced it was commencing a strategic assessment to crystallize shareholder value by refocusing the group's business on Lindex. In 2022, with revenues of EUR 661 million, Lindex represented over 2/3 of the group's revenue and with an operating profit of EUR 90 million. Lindex was then also the main profit contributor within the Stockmann Group. As part of the strategic assessment, Stockmann plc is also considering a name change to Lindex Group, as it would better reflect Lindex division's role in the group's business. This possible name change would not impact the Stockmann department stores, which would continue to operate under the Stockmann brand. As communicated in September, Stockmann plc investigates the different strategic alternatives for the Stockmann department stores business to evaluate the best environment for developing the business in the future.
These options will include increasing the business independence within the group, considering a possible ownership changes or strategic partnerships, or continuing under the current structure. I would like to emphasize that the strategic assessment does not have any immediate impact on the Stockmann department stores brand or its daily business operations. Then we can move on to the third quarter's result. So the Stockmann Group's underlying business is developing in the right direction, with continued strong performance for Lindex. In local currencies, the adjusted operating profit improved versus previous year. The Stockmann Group's revenue for the third quarter decreased to EUR 226.9 million due to the negative currency impact and the timing of the Stockmann division's Crazy Days campaign. The Crazy Days campaign was held this year in October but contributed strongly to the comparison period's revenue.
In local currencies, the revenue decreased by 1.7%. In local currencies, Lindex revenue continued on a growth path with 4.9% increase. Accelerating Lindex division's growth remains our key priority. The adjusted operating result improved by EUR 3.7 million to EUR 26.2 million. This means that the result improved by 16% in euro and even more in local currencies. The Stockmann division's revenue decreased. The key reason for the Stockmann division's revenue decrease was the timing of the Crazy Days campaign, and in addition to that, the reduced size of the Itis department store. The group's financial situation has also improved, with higher equity ratio, gross margin, and net result, and we will continue to work to accelerate the long-lasting shareholder value and better profitability for both divisions.
For the Stockmann Group, one of the key sustainability priorities is respecting the planet and environment. During the third quarter, we prepared our climate targets in line with our commitment to the Science Based Targets initiative. We expect to have validated science-based climate targets during 2024. Also, after the reporting period, Stockmann and the mutual insurance fund, Fennia, reached a settlement agreement, which ends the disputed claims between the parties concerning the restructuring program. Execution of the settlement agreements is still subject to the court's confirming. So let's move on to the next slide and take a closer look at the Lindex business. Looking then at the Lindex division, we had a good collection transition to the autumn, with an inspiring and well-balanced assortment, which was appreciated by our customers and gave us a successful season start.
We continued our sales growth, and together with the strength and margin and a good cost control, we delivered a strongly improved result, both for the third quarter as well as for the first nine months. In local currencies, we increased sales in all of our main markets and for all of our business areas, where women's wear increased the most, with a growth of 8.9%. Well, we continued our sales growth in both of our physical stores and in our digital channels, and the digital share continued to increase and accounted to 19.4% of Lindex's total sales. I'm also pleased that we continue to grow with both new and active customers, and that we increased our average purchase. This is a great result of how we are further strengthening the Lindex brand.
Within the Femtech area and our brand, Female Engineering, we, in the end of August, launched a new innovative product category tailored to women going through menopause. With Female Engineering, we are committed to reshaping the landscape of women's wellbeing and look forward to being a pioneer in this exciting market. Our work and our investments continues according to plan and is a critical enabler for our continued growth, especially for our digital channels. The construction of our new omnichannel warehouse is progressing, as well as the digital development, which is central in all parts of the business to increase the customer satisfaction, the efficiency, and sales further. Looking at the Stockmann Division on the next page. As said before, the key reason for the Stockmann Division's revenue decline was the timing of the Crazy Days.
The campaign was held in October at the beginning of the fourth quarter and was successful with improved result versus previous year. The extensive redesign of the Stockmann Itis department store in Helsinki was finalized early September, where we renewed the store's concept and premises. We piloted RFID technology to improve process efficiency in the Helsinki City Center department store, and we are now currently moving on to selected fashion categories in the Finnish department stores. This will support a better customer experience and also improve the stock accuracy levels. At last, I would like to highlight the good progress that we have had in the Stockmann Division's cost efficiency. During the third quarter, the division achieved EUR 3.3 million cost savings, and going forward, this will continue to be an important focus area.
Also, our ongoing investments in digitalizations of logistics, warehouse automation, and sales processes will further improve the cost efficiency. Now, I would like to hand over to Annelie, who will continue with the financial update.
Thank you, Susanne, and good morning, everyone. Then we can turn to next slide, where I will start to show the Lindex financial performance. Lindex had a strong underlying sales growth during the quarter and increased the sales with 4.9% in local currencies. Since the currency rate from euro to SEK and NOK has increased significantly since last year, this heavily affects the reporting numbers, and therefore, the revenue reported in euro was down with 2.8%. The underlying sales growth was driven by a successful collection transition to the autumn, which gave a good sales for all categories and in all main markets, especially the digital sales growth, where the shares of the digital sales increased. Looking at the adjusted operating result, it improved significantly in local currencies and also in euro.
This strong improvement is explained by an increased sales, improved gross margin, and a good cost control. The improved gross margin was thanks to an efficient sourcing, combined with careful price increases, which mitigated the expensive U.S. dollar, which is Lindex's main purchasing currency. The cost for Lindex increased due to inflation and cost for growth, but was partly mitigated by cost-saving actions. When converted to euro, the cost decreased by the currency effect. So summarizing the first nine months, the Lindex division's revenue increased by 2.6% in local currencies, but although decreased by 4.9% in euro. During the first nine months, Lindex underlying business has grown in all main markets for both physical and digital sales. The adjusted operating result for this month has stayed strong and increased also in euro.
In local currencies, it increased significantly, explained by higher sales, improved gross margin, and cost control here as well. So in summary, a good quarterly and nine-month result for Lindex, with both increased sales and operating result, but where the division was impacted by currency conversion to euro. So then we can continue with Stockmann Division on next page. Stockmann Division decreased revenue during the third quarter, where timing of the Crazy Days had a main impact to the decrease. The decision to have the important Crazy Days campaign in quarter four this year was good for sales in general, but, of course, impacted the reported sales in quarter three compared to previous year. We can also conclude that the rebuilding and reduction of size in Itis store impacted sales negatively, and together with seasonal decline in the Finnish fashion market, the revenue decreased.
The adjusted operating result fell with EUR 5 million to -EUR 4.8 million during the quarter. This was mainly an effect from the Crazy Days timing, but also due to a drop in gross margin, where there was a higher share of price-driven campaigns and clearance sales this quarter. Stockmann Division could partly mitigate the drop in gross profit by actions that decreased the cost with EUR 3.3 million. When comparing to last year, the cost also included a EUR 15.9 million provision related to the LähiTapiola arbitration decision, which was treated as an adjustment. So summarizing the first nine, Stockmann division decreased the revenue by 3.2%, where the timing effect of Crazy Days in quarter three pushed the revenue below the comparison period.
The adjusted operating result for the first nine months decreased with EUR 6.6 million, but where the Crazy Days timing explains a big part of that drop. In addition to that, the higher share of clearance sales and price driving campaigns also explained the drop, but where the cost-saving actions mitigated part of it. So then we can continue to the next slide. So when the divisions are combined and also group costs are included, we have the following financial for the Stockmann Group for the third quarter and first nine months. For the third quarter, the revenue decreased by 7% in euro. In local currencies, the revenue decreased with 1.7%, which then is fully explained by the timing of Crazy Days.
The adjusted operating result decreased to EUR 20.6 million, although in local currencies, the adjusted operating result increased, driven by Lindex performance. The third quarter's operating result for the group increased from last year and was EUR 20.3 million, where last year included the LähiTapiola arbitration provision with EUR 15.9 million. Summarizing the first nine months, the revenue decreased with 4.5% in euro, but increased in local currencies with 0.7%. The adjusted operating result decreased to EUR 49.8 million, but likewise, revenue, it improved in local currencies. Here, Lindex strengthened profitability together with lower group costs, mitigated the decreased result for Stockmann division. The operating result during the first nine months decreased to EUR 47.6 million, where last year also included the capital gains from both Helsinki and Riga when selling the real estates there.
So then turning to next page. As shown 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, and if we would go further back, it would even be more. Although in these figures, the weaker SEK currency versus euro during the latest years partly impacts Lindex figures negatively on a rolling twelve base. The Stockmann division has dramatically improved profitability as well compared to 2020 and 2021, but still has negative numbers. Although in rolling twelve for September, the latest Crazy Days timing partly has impacted. The future target is, of course, to make positive numbers here. So then we can turn to next page, please. The cash position for the group continues to be strong.
The third quarter cash flow was impacted negatively by the seasonality for the autumn sales, as well as the ongoing investment for Lindex Omnichannel Distribution Center, OCDC. Compared to last year's cash flow, which can be seen on the green lines here, the cash flow improved, explained mainly by lower payments for OCDC in this year's quarter three compared to last year. The year-to-date cash flow is slightly below previous year, which to a big part is explained by the currency effect from the P&L, together with higher OCDC investments for year-to-date figures. Historical cash flow has partly been affected by the restructuring program and is not fully comparable. Inventories are on a balanced level, but due to seasonality, they are at a high level in end of September and before Crazy Days.
When compared to last year, the inventory decreased, where Lindex reduced inventory thanks to lower freight days and improved supply chain, while Stockmann increased inventory, explained by Crazy Days timing, beginning of October and higher purchase prices. Investments to strengthen the digital development have been done in both divisions. In addition to these, the ongoing constructions of Lindex OCDC continues. The construction is proceeding well, and the warehouse is planned to be taken into operation in autumn 2024. Until end of September 2023, we now have EUR 70 million of the total investment sum that has been paid for the project, and going forward, we have another EUR 40 million that is planned. Then we can go to the next page. Here we will show the financial position, and here it's shown how the financial position significantly has improved during the latest years.
Now there is a positive net debt and a net cash position of EUR 26 million. That is coming from cash deducted with interest-bearing liability, which consists of the EUR 72 million bond. The lease liabilities, according to IFRS 16, are excluded from net cash position. During quarter three, we signed a revolving credit facility of EUR 40 million 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 improved financial situation could also be seen in next slide. Here it's illustrated how equity ratio has improved latest years and now reaches 58.8%, excluding IFRS 16 leases. This is thanks to more profitable business operation, as well as the progress in fulfilling the restructuring program.
When also including the leases, the equity still improves. It is now at a level of 29%. So that was the financial information. So then I'll hand over to you again, Susanne.
Great. Thank you, Annelie, and then we will take a look at our way forward on the next page. Let's start with Lindex. So looking at the way forward for the Lindex division, our focus is to continue our transformation and proceed the multi-channel development for global growth, to offer a customer-oriented, sustainable assortment and a strong brand offering. And to also offer and to grow in both new channels and existing markets. And here we are exploring new ways of doing business and piloting new sales channels as well. We have launched via partners in new markets and marketplaces during the last quarter, and this is also something that we continue to plan doing. We also continue our Femtech journey and exploring circular business models and new collaborations for circular materials.
We have just recently signed a long-term agreement with the Finnish fiber supplier, Infinited Fiber Company, to use their unique patented fiber Infinna, made from 100% post-consumer textile waste. This is an important step in our transformation to a more sustainable and circular assortment. We are on an interesting journey and in a major transformation. We know that our business will not look the same in the future, we will grow in new ways. We also have great ambitions going forward as a global brand-led and sustainable fashion company, where our investments are critical enablers. It's now also the end of October, and it is the Pink month, which is an extra important month for Lindex.
During October, we are donating 10% of all the bra sales to cancer research, and together with our customers, we hope that we also this year will reach a new record donation to this important cause. And since the start, that was 20 years ago, we together with the customers, have raised a total of EUR 19.3 million for this important research. Thanks to the fantastic engagement from our employees as well as our customers. Going forward, on the next page for the Stockmann divisions, the key topics are to further strengthen customer centricity and improve the profitability. So, let's take a look into the focus areas here, in the customer-centric growth. Stockmann continues its repositioning towards luxury and affordable luxury. During the reporting period, Stockmann introduced new premium brands in all categories.
Stockmann division's revenue from loyal customers is growing, and the division continues to develop the loyalty program to increase value and annual spend. We are developing our department stores into inspiring destinations, and currently, we have ongoing renovations in the Helsinki flagship store, Turku, and Riga. After the reporting period, Stockmann's secondhand selection was expanded by the luxury Helsinki Outlet pop-up store, was opened at the Helsinki department store in mid-October. The offering comprises of pre-owned designer bags and accessories from brands such as Burberry, Cartier, Chanel, and Dior. In November, Ninyes opened a pop-up store for high-quality, secondhand children's clothing in the Helsinki department store. When looking into improving the Stockmann division's profitability, firstly, the division has ongoing investments in digital solutions and warehouse automation. Secondly, we increase non-merchandise income and media sales.
As an example of this, Finnair sort of took over the Stockmann Helsinki, this, Stockmann Helsinki department store premises as part of the company's 100-year anniversary celebration. These activities took place after the reporting period. And thirdly, we continue the strong focus to improve cost efficiency. We can now turn to the next slide, where Annelie will continue.
Yes, our view on the market environment remains unchanged as the geopolitical tensions and high inflation have continued. The inflation, together with high interest rates, is forecasted to have a negative impact on consumer spending. This, combined with increased purchasing prices and operating costs, will challenge the retail markets. When it comes to the guidance for 2023, we can turn to next page. The Stockmann Group guidance remains unchanged. We expect the revenue to be in the range of EUR 940 million-EUR 1 billion, and the group's adjusted operating result to be EUR 65 million-EUR 85 million, subject to foreign exchange rate fluctuation. We can go to the last slide, Susanne.
So yes, we would also like to warmly welcome you to Stockmann Capital Markets Day on the sixteenth of November this year. We hope to meet as many of you as possible live here in Helsinki at Allas Sea Pool, and you can, of course, also attend via live webcast. At the CMD, we will present the strategy as well as the future ambition levels for both divisions. And now we can open up for for questions from you if we turn that also to the next page.
Up here, a couple of questions. We first go then to Stockmann, Stockmann topic and regarding Crazy Days. So, what was the underlying reason on shifting the timing of the Crazy Days campaign?
Maybe I can take that one. When we are planning campaigns like this, and this is annual campaigns, we are, of course, always looking into the best commercial timing for the Crazy Days. Previous year, the campaign started in September, but this year we could see that it would be better for the business to have it in October, and I would say that we will continue to have it in October also, for next year.
Then we go to Lindex. You mentioned a successful collection transition despite warm autumn weather at the end of Q3. Did weather become better in October, in your view?
It depends when you're talking about better weather, but it became colder.
Mm.
Colder weather for the fashion business is good when it comes during the autumn and winter. Not so good when it hits us during the summer, of course. To that extent, of course, the fashion industry, it was an improvement having colder weather in October. I would say that that was an improvement for the market as such.
Yes. And then we have there, on continuing question, you have achieved a strong gross margin improvement in Lindex. Do you see that you have more to do in terms of initiatives to improve gross margin, or have most of the job been done?
Would you like to take that, Annelie, or should I?
Yes, I can. Yes, yes, we have done very successful actions to strengthen the gross margin. We never know what the future gives us, and we know that there are high pressures on the gross margin here as well in the future, but we will try to mitigate that as much as possible. So, yeah, that is the short answer.
Yes, then we continue with Lindex. In light of Lindex's omni-channel facility, what projections do you have on the company's future growth, and how significant do you anticipate online sales to become in the coming years?
Yes. Of course, as we have said, and also during this presentation, that we are prioritizing the digital growth, and that is also why we're doing these investments. But with regarding targets and numbers, I cannot give any details regarding that at this time. But
Mm
please attend the Capital Markets Day.
Mm-hmm. Yes, and then, actually, from the same person, we have then a question regarding the Stockmann division and, and specifically to the Helsinki department store. So, are we able to open is there something we, we can say about the Louis Vuitton store, is the, the person asking, and, and do we have there what are the plans, and is there something expected to replace it?
Mm-hmm. I cannot give any details regarding the contract with Louis Vuitton, but what we see, and what we have also said clearly, is that we see that we want to bring a more of a touch of luxury, to, to the first floor. Here we see that Louis Vuitton is a great brand, but we also can see another, lot of other brands that we would like to bring into the Stockmann department store as well.
Yes. Then, thank you. Then we continue with Stockmann. What is driving Stockmann's higher share of clearance sales and price-driven campaigns?
Yes, maybe I can take that. As the sales was lower due to colder weather during the beginning of the second quarter, and we had a weakened consumer confidence, we implemented more price-driven activities during the summer months. That's the explanation.
Yes. And then we have a question regarding Lindex and our latest news there. Ahead of your choice to invest with Infinited Fiber, do you also evaluate Renewcell offering? And if so, what differences did you find?
A good question, which I don't know exactly the answer to, unfortunately. What I do know is that we have, for some time, been working together with Södra. That is also sort of an alternative to this. We made this choice now w ith Infinna, we think that this product and fiber is suitable for us, and especially in the long term, because this is an investment for the future, where we believe that the majority of this outcome would actually reach us during 2027. So it's a long-term commitment for us, but I cannot give any details comparing these two fibers.
Yes. Then regarding the exchange rate fluctuations, so, maybe a question then to Annelie. What is your view on euro-SEK and euro-NOK going forward?
Yes, and that's extremely difficult, and I don't want to speculate here. And, we have many different views upon these currency impacts from many financial, specialists in the markets as well, so I don't really want to speculate on that.
Yes. Then we go, there is a question regarding the restructuring program and the Fennia case. Can you comment on the terms of the settlement with Fennia as well as progress on the remaining disputed claims?
Mm-hmm. Well, we do not comment on the details in the settlement until the court has confirmed it. But now we can see that the remaining amount for the three disputes that are left has gone from EUR 52 to approximately EUR 43. So, we have ongoing discussions with the other disputants as well.
Then we have a question: Have there been talks with the biggest owner, Nordic Retail Partners, regarding the strategic evaluation of the Stockmann division?
I will not comment anything regarding the strategic assessment or dialogues, but we will, of course, come back when we have something to inform about this topic.
Yes. And then we have a personal question to Susanne, former CEO, informed that he was told not to buy any Stockmann stocks or shares. Is this the same guidance now for the current CEO, or is there any plans for purchasing more stocks or shares?
Well, I have not received that kind of information. I think I'm free to buy shares when we are not in silent period or in projects that then would stop me from buying shares. Otherwise, that would be fine, and I also own shares already today.
Yes. And then some expectations, or and, and this is more, maybe more a comment for us in the company than a question: So are you going to be able to present something at the upcoming CMD that will make customers happy and shareholders smile? And, and then the person continues here that Stockmann division has to improve, and a new strategy is very much needed. So two comments and questions whether we are going to make then the customers happy and shareholders smile.
Well, what we have been working on during the late spring and summer is the strategy for both the divisions, to also be more informative to the market of both the divisions today and also the expectations that we have forward for the divisions. So that entails both the strategy and our ambitions going forward.
These were, at the moment, the questions we have received. Do we have any other, other questions that you maybe want to still share with us and Susanne and Annelie to answer? No, no further questions here to our chat.
All right.
Thank you.
Thank you.
Thank you.
Thank you for your good questions as well, and I hope that we can continue our dialogue in the Capital Markets Day in November. We are looking forward to meet you there and discuss our strategy in more detail. So thank you, and see you in November. I wish you a nice day.