Good morning, warm welcome to Tokmanni's Third Quarter Result Presentation. My name is Mika Rautiainen, together with me today presenting the result and the report is Tokmanni CFO, Mr. Markku Pirskanen. First, I'll go through the highlights of the quarter, Markku will dig a little bit deeper with the financials. A couple of words about the fourth quarter, it's time for questions. Let's start. During the third quarter, Tokmanni sales were very strong. Here, I would like to thank all our customers for the confidence. First of all, the store visits grew, as we'll see soon a little bit later with the presentation. The store visits grew very nicely. We also conducted a consumer survey during the third quarter. According to the consumer survey, the customer satisfaction is on a much higher level than in the previous survey.
The plans to visit Tokmanni more frequently, the level is much higher than in the previous survey. Thank you very much, and we will work according to the confidence in the coming months. All of this was, of course, done by Tokmanni employees, so many thanks to all Tokmanni people. Our third quarter was full of actions. The shelf availability, which basically suffered a little bit during the second quarter, the shelf availability in the stores was improved to a record high level. The second thing, a big issue for us was the apparel business. Basically, the apparel business suffered most from COVID-19, and the business basically pulled back on track during the third quarter. Also the Christmas season preparations were done earlier than ever before during the third quarter. Couple of words about the apparel business.
Basically, apparel business was causing the drop in Tokmanni gross margin during the third quarter. In Finland, Tokmanni is one of the three biggest apparel retailers. Basically, the Finnish apparel market was pretty much similar to European market as well. In March, basically, the business was stopped completely. Now after nine months, the first nine months of 2020, according to the market reports, the drop in apparel has been -18.5%. Tokmanni's apparel business for the first nine months is basically on the same level as last year. This was achieved mainly with very strong sales during the third quarter. This is something we decided to do because of the high inventory level, and basically, we succeeded increase the volume, the units, with almost 10%. For us, for Tokmanni, very important, especially with apparel, is the inventory level.
In the end of September, the inventory level was basically the same level as last year. We basically succeeded with, as mentioned, pulling this apparel business back on track. With the inventory from the spring, summertime, basically, we were not able to reduce the quantities. For example, for the coming winter season, we were able to already amend a little bit the volumes. This was basically the situation with the apparel. Anyway, we were able to improve our comparable EBIT. As mentioned already, all preparations for the Christmas season are well in place. All imports from our Far East office are basically already in Finland and in the Mäntsälä central warehouse or in our stores. A couple of words about the figures. Revenue grew by 13.1%. Last year it was 9.9%, the increase was very good. Like-for-like revenue grew by 11.6%.
Of course, basically the biggest problem was this gross margin, which was already mentioned. It was 34% when it was last year, third quarter, 35.4%. The comparable EBIT was EUR 24 million, with last year's figures EUR 21.9, representing 9.2% of the revenue. Cash flow from operating activities was EUR 6.1 million. Here's a difference with last year figures, which was EUR 18 million, and that's due to the Christmas preparations. We basically called all the Christmas seasonal products a lot earlier to Finland than ever before due to the uncertainties of the supply chain. That's why also the cash flow was, during the third quarter, in a lower level than last year. Of course, the same thing goes with the inventory level, and Markku will soon tell a little bit more about that. Earnings per share was EUR 0.29.
The first nine months of 2020 were actually, for Tokmanni, very good. Both revenue and EBIT level increased strongly. Revenue growth has been, for the first nine months, 13.2%, like-for-like revenue grew by 11.8%. We're still behind with the last year's level when it comes to gross margin. It's the first nine months, 33.7%, when it was last year at 34.1%. Anyway, the comparable EBIT is clearly better with EUR 54.9 million compared to last year's EUR 38.4 million. With EBIT, it's 7.4% of revenue. Cash flow from the operating activities was EUR 61.5 million, earnings per share EUR 0.63. As mentioned in the beginning, of course, we're all the time monitoring how does the customer behavior change with this current situation of COVID-19. Tokmanni, we've been basically lucky with the customer visits.
The like-for-like customer visits in our stores during the first nine months is plus 2.8%, meaning that it's more than 30,000 more customer visits every week in our stores. We're very happy with this level when basically there is a clear drop with the customer visits in retail in general. When we're talking about the customer behavior, the next figure, of course, is a remarkable change. This is the like-for-like average basket, which basically it has increased during the first nine months with 8.7%. The customers are buying much more at the moment when they come to our stores. Tokmanni, basically, we have got a lot new customers as well based on the figures that we can today present for the first nine months. Our online business grew strongly.
The growth was 155%. Of course, we have to keep in mind that the online sales is only 1.1% of the total revenue during the third quarter. I think we're very happy with the combination of our online sales and our stores. Basically, the visitors on our website, it's more than five times bigger than, for example, last year. The combination works very well. Customers visit our website to see the assortment, the price levels, and then they also come to our stores to do the shopping because we do have a nationwide store network, which of course means that there is a Tokmanni store for everything in five minutes reach. Anyway, all the online developments that were action points, what we've done, they've been successful. The main focus at the moment is in expanding the product range.
Also new products outside the store's assortment and, of course, improving the customer service. Of course, we're basically ready for the most important season for online business with Black Friday by the end of November. We're basically set for that. When it comes to our store network, at the end of September, we had 190 stores, where during the beginning of this year, we've opened a new store in a shopping center in Vantaa, Aura, and in Padasjoki. A couple of stores were enlarged basically right here in the very center of Helsinki, and in Kauhajoki. We closed four stores in Tampere, Äänekoski, Raisio, and Vantaa. Also, we opened a new store in one of the very new shopping centers in Helsinki called Redi, and there will be also a store opening in Pietarsaari in the end of November.
By the end of this year, we'll have 192 stores open, and the plan is to open five new stores next year according to our strategy, basically. Here's the figures from the non-grocery market based on the Finnish Grocery Trade Association. Based on this, Tokmanni is gaining a non-food market share from the other players. Tokmanni is with the red line over here and all the other players with the black line. However, let's keep in mind these figures, they don't include the online sales of non-food products. Anyway, we're basically happy with the market situation. Well, after this, the next one, Markku. You could actually dig deeper with the financials. Please go ahead.
Thank you. Mika already mentioned, sorry. Good day, or it is still good morning for some of you, from my side also. Mika already started with the figures and explained a bit backgrounds to figures, let's go a bit deeper there. Starting traditionally, I could say from a little bit longer view, looking at the quarter three from 2018 and 2019, of course, 2020. If you look first the revenue development, we can see that last year, we got a nice step, 10% increase in our revenue, this year achieved this 13.1% increase. Q3 to 2018, the EBIT was at the level of EUR 15 million. We got a jump to EUR 21.9 million, we were able also during this year improve the EBIT and end it up to EUR 24 million.
Of course, it could have been a little bit bigger, but the main reason behind perhaps only EUR 2 million development was that the gross profit percentage was during the Q3 2020 on a lower level compared the previous year. Let's look a bit this gross profit development. It's natural when your revenue is increasing, the gross profit in EUR are also on a higher level. Looking the gross profit percentage, Q3, we ended up 34%, and last year it was 35.4%. It was decreased by 1.4 percentage units. Why so? Basically there were two main reasons.
Mika already mentioned this apparel. We really decided during the summertime that we are going to sell our apparel away because we didn't want to keep it on our warehouse, because if you have a higher level of value in apparel in your inventory, it will be a challenge in the future. We started to make the discount sales. Of course, that meant that the actual gross margin % what we got from the apparel was on a lower level if we compared last year's figure. The other thing is the sales structure, what we had during Q3. Naturally, apparel was also one part of a reason there, because as Mika mentioned, the sales of apparel was about the same level in euros what it was during 2019.
Of course, if the total sales increased by 13%, it means that the share of apparel is lower from the total sales and we all know that the gross margin percentages on apparel are on a good level. Other things which affected to our sales structure or sales mix was that we had a good sales on yard and garden furniture and sports and leisure products. These products are we can say that they are good products from a margin point of view. On the other hand, we also managed to sell well our grocery stuff. As we also all know that the margins in groceries are on a lower level. This sales structure affected also to our gross margin percentage. All in all, after nine months, we are at the level of 33.7% compared last year, 34.1%.
There are only 0.4% decrease on cumulative figure. The good thing is that our apparel inventory are now on healthy level. We have said on our long-term targets that we are aiming to increase our gross margin percentage. The two actions or two means to do it is to increase our private label share and also increase the direct import share. Now, first looking the private label share. As we see that during this year, we have not managed to increase the private label share. After nine months, it's 30.7% compared last year, 30.9%. If you look the Q3 number here, it's 31.2% compared to last year's 31.8%. They are on a lower level, and the main reason behind that is our sales structure.
On apparel sales, which are a bit lower level, on percentage-wise, if you look at sales structure, it includes the good private labels. Of course, if you have a lower share in your apparel, it affects to our private labels also. As said, the target is to increase the share of private labels, and we are working on that. During Q3, we have brought two new categories, or not categories, two new products into the market, or we can say one new product and one enlargement. This Pisara, we have made an enlargement to these products and brought new lines for hair and face care and then cleaning. The new one is for pet food, NATUR, premium food. I can say that we have in this both two products, good price and quality ratio there. Hopefully, consumers are taking them well.
Even we had a small decrease in private labels on direct import share, we managed to increase a bit. During Q3, it was 26.3% compared to last year's 25.9%, and cumulatively also, the increase 25.2% against 24.3%. That's good development. Operating expenses, revenue increased well. Of course, if you look at Q3, the actual Euro increased by roughly EUR 3.8 million. At the same time, when we look in the ratio, what is the share of operating expenses against the revenue, we ended up to 18.9% compared to last year's 19.7%. Good development on that side also. Also on cumulative figure, 20.2% against 21.8%, good development there also. EBIT, already mentioned this Q3, improving by EUR 2 million, but looking at the cumulative figure, very good development now ending up EUR 54.9 million, which is 7.4% against last year, EUR 38.4 million, which was 5.8%.
Good development in EUR, but also on relative wise, very good development. Balance sheet issues, inventory level, we ended up to EUR 157 million, which is EUR 20 million more compared to last year. At the same time, our revenue increased much, which of course, affected to the inventory level. But the main reason behind the increase was that we took the Christmas products earlier into our inventory compared to last year. We really wanted to be sure that we have products to sell for Christmas season. Of course, as we all know that COVID-19 gives some kind of uncertainty at this time. We made a decision that it's better to have products earlier in our inventory. Cash flow, even it was a bit lower level during Q3, but on cumulative wise, nice development, EUR 61.5 million cash flow compared to last year's EUR 27.5 million.
Good thing ratio, net debt to EBITDA, now at the level of 2.6 compared last year's 3.4. If you remember, our long-term target is 3.2, we are well below that target. About the investments or net capital expenditure. Now, after nine months, a level of EUR 8.3 million compared last year's EUR 12 million, which is clearly lower level now. The main reason is that we have postponed or transferred some investments to next year due to the COVID-19. Earlier we said that the investments during 2020 will be at the level of EUR 15 million, due to these transforms or postponements, we are now expecting to be level of EUR 12 million-EUR 13 million during this year. Which of course might affect the next year's investments, that the next year most probably level be a bit higher level due to this reason.
This about the numbers. I still give speech to Mika. Mika will have a couple words still more.
Sure. Thank you, Markku. Yes, a few words about the fourth quarter. We are very confident about the fourth quarter for Tokmanni. The biggest problems caused by COVID-19 this far are basically solved. According to all the reports, the Finns won't be traveling during the Christmas season. We are in a very lucky position to have basically more customers in Finland. The stores and our online business, basically they're all ready for the season, for the most important Christmas season. Everything looks, at the moment, very good. We are ready. The last couple of weeks, they've been basically acceleration of COVID-19 all over in Europe as well as in Finland. Luckily enough, we haven't seen any drops with the customer visits in our stores. That's basically, we're very happy about it.
Of course, online is all prepared for Black Friday and so on. Obviously, many thanks to, one more time, to all Tokmanni employees. We have more than 3,000 people working in Tokmanni stores, and it's basically in this kind of environment, it's a heavy task to every day go to basically serve our customers, but thank you very much for doing a great job. The outlook for 2020, Tokmanni forecasts strong growth in revenue and like-for-like revenue for 2020. We also expect the profitability to improve compared to previous year. This was basically the report for the third quarter, and next report will be for the year of 2020, and it will be published on the 12th of February. Thank you very much. Now it's, operator, it's time for questions. Please, go ahead.
Thank you. Ladies and gentlemen, if you have a question for the speakers, please press zero one on your telephone keypad now. Our first question comes from the line of Nicklas Skogman from Handelsbanken. Please go ahead.
Sorry, we couldn't hear you.
Hi, it's Nicklas Skogman at Handelsbanken here. Can you hear me?
Yeah, now we can hear well.
Hey, Nicklas.
Hello. Good. I buy your comments on the gross margin there on the discounting of the apparel. You said that the apparel inventory was at the same level as last year, but is the composition as such that you don't require more discounting there?
Yeah. Well, basically, we don't need to do any more of this kind of discount at the moment. Basically, the winter season or fall-winter season has started. Everything looks good. For spring and summer season inventory, we were not able to reduce the amounts or reduce the quantities of the apparel orders. Of course, for fall and winter assortment, we were able to reduce that. The level of inventory
Actually, we do have all inventory already, almost all for the fall season. At the moment, we're very happy with the inventory level. It's very healthy when it comes to apparel.
Okay. Very good. I'm looking at your costs. Employee costs are up 6% year-over-year, cost per employee up 4.5%. Do you see that continuing in Q4?
Sorry, what was the percentage did you say?
Total employee costs were up 6%, I think, and then cost per employee was up 4.5% in Q3. Do you see the cost per employee being higher also in Q4?
Yeah. It's somewhat, of course, affecting if you look what we have to do, and then most probably still have to do is to make some special arrangements for taking care of this COVID-19, which, of course, increase the employee costs. Most probably this kind of a development will be also on Q4.
Okay. I couldn't really see any of that in your Q2 reports, which obviously COVID was an issue already then.
Yeah. The other thing which also affects to the salary employees is that, basically, we have more expenses on our supply chain because we have, as Mika mentioned, improved shelf availability. Also we have started to make our stores ready for Christmas earlier compared to previous year. That has caused certain supply chain salary costs also.
More compared to last year.
Compared to, for example, Q2, if you look at the issue.
Yeah. Okay, good. The biggest surprise to me was the other operating expenses. They're up almost 12%, I didn't hear any comments regarding those.
Yeah. Certain is also related to supply chain issues. Some is related to COVID-19. We have arranged different kind of issues in our stores for safety, and then that of course costs. One thing is also that part of operating expenses are in relation to revenue development related to volumes. That, of course, affects if you have a higher volume, for example, some transactions we have more if we have a higher revenue, and that also affect to our operating expenses.
Yeah. Okay. In Q2.
Sorry, Nicklas, nothing basically special, clearly, except those.
Okay. I'm just looking at in Q2, they were up 2%, and you grew even more in Q2, and this quarter you're up 12% almost, and you're growing less.
Yeah.
Is there anything like a marketing that you held back on in Q2?
No. Basically, no.
Okay. Thank you very much. Those were all my questions for now.
Okay, thank you.
The next question comes from the line of Armel Coville from ODDO. Please go ahead.
Yes. Good morning.
Good morning.
Could you give us some color about the gross margin decline? Could you spread the 1.4% decline between the three issues you had mentioned during the call, please?
If I comment that, if I understood right, it's about gross profit percentages, which is, as you mentioned, 1.4% percentage unit lower level. As mentioned earlier, be that we have this apparel issue, what we decided to clean. Basically, we sold our apparel with higher discounts so that we got the healthy inventory level at the end of September. That was clear decision because when we made the orders much earlier time, we of course assumed that we will sell higher amounts of apparel. Due to the COVID-19 issue, we all know that apparel sales has suffered as a whole, as a business. On Euro-wise, we manage with these discount sales achieve about the same level in Euro compared to last year's apparel sales.
Other thing, of course, is that our sales structure was different due to the reason that if apparel sales was about the same level compared last year, and then the whole revenue development was 13% increase. That of course means that the share of apparel is on a lower level, and as everyone knows, the margins in apparel are on good level. Other thing which affect, of course, is that, as mentioned, that the grocery sales was good and everyone knows also that the margin levels on groceries is on the lower. If that increases in sales mix, that affects to the gross margin as a decrease component. Mika?
Yes. What I was trying to understand is, amongst the 1.4% decline, how much of this 1.4% is related to apparel discount? Is it 1% in the 1.4? Is it less? Is it more?
The bigger part is from apparel sales.
Yeah, absolutely. The biggest reason for the drop with the gross margin has been the apparel business in total, basically the lower level of the sales and plus then the discount. The second biggest reason, basically, as Markku mentioned, was that the customers were buying a lot more groceries. We're basically mainly a non-food retailer, but at this point of time, this environment, the customers were very happy to buy groceries as well in Tokmanni stores, and the groceries gross margin level is lower. These are the two main reasons. The bigger one goes for the apparel and the smaller one for groceries. Basically, that's it.
Okay. Thank you.
You're welcome.
Just as a reminder. As there are no further questions, I will hand it back to the speakers for closing remarks.
Okay. Thank you very much. We wish everyone a very successful fourth quarter and Christmas season. Talk to you next time, latest on the 12th of February next year. Thank you very much.
Thank you.