Good morning and warm welcome to TOKMANI's 3rd quarter result presentation. My name is Micara Autiainen. And together with me today presenting the result and the report is TOKMANI's CFO, Mr. Marco Pirascanen. First, I'll go through the highlights of the quarter, then Mark will dig a little bit deeper with the financials, then a couple of words about the Q4 and then it's time for questions.
So let's start. During the Q3, Tochmani 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. So the store visits grew very nicely.
And we also conducted a consumer survey during the Q3. According to the consumer survey, the customer satisfaction is on a much higher level than the in the previous survey. And the plans to visit Tochmani more frequently, the level is much higher than in the previous survey. So thank you very much, and we will work according to the confidence in the coming months. And all of this was, of course, done by TOKMANI employees.
So many thanks to all TOKMANI people. Our Q3 was full of actions. The shelf availability, which basically suffered a little bit during the Q2, 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, which was basically the Aperol business suffered most from COVID-nineteen and the business basically pulled back on track during the Q3. And also the Christmas season preparations were done earlier than ever before during the Q3.
Couple of words about the Aperol business. Basically, Aperol business was causing the drop in TOKMANI gross margin during the Q3. So TOKMANI in Finland, TOKMANI is 1 of the 3 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 9 months, so the 1st 9 months of 2020, according to the market reports, the drop in apparel has been minus 18.5%. Tochmann's apparel business for the 1st 9 months is basically on the same level as last year. And this was achieved mainly with very strong sales during the Q3. 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%.
So for us, for TOK MONEY, very important, especially with Aperol, is the inventory level. At the end of September, the inventory level was basically the same level as last year. So we basically succeeded with, as mentioned, pulling this Aperarel business back on track. And with the inventory from the springsummertime, basically we were not able to reduce the quantities. But for example, for the coming winter season, we were able to already amend a little bit the volumes.
So this was basically the situation with Aperol. Anyway, we were able to improve our comparable EBIT. And 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 Metzeler Central Warehouse or in our stores. A couple of words about the figures.
Revenue grew by 13.1%. Last year, it was 9.9%, so the increase was very, very good. Like for like revenue grew by 11.6%. And of course, basically the biggest problem was this gross margin, which was already mentioned. It was 34% when it was last year's Q3, 35.4%.
Anyway, the comparable EBIT was €24,000,000 with last year's figures €21,900,000,000 so representing 9.2% of the revenue. Cash flow from operating activities was €6,100,000 and here's the difference with last year figures, which was €18,000,000 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. And that's why the also the cash flow was during the Q3 in a lower level than last year. And that's, of course, the same thing goes with inventory level.
And Marco will soon tell a little bit more about that. Earnings per share was €0.29 The 1st 9 months of 2020 were actually for TOKMANI very good. Both the revenue and EBIT level increased strongly. Revenue growth has been for the 1st 9 months 13.2% and 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 1st 9 months 33.7 percent when it was last year 34.1 percent. But anyway, the comparable EBIT is clearly better with 54,900,000 compared to last year's €38,400,000 So we're with EBIT, it's 7.4% of revenue. Cash flow from the operating activities was €61,500,000 and earnings per share €0.63 And as mentioned in the beginning, of course, we're all the time monitoring like how does the customer behavior change with this current situation of COVID-nineteen. Talk Money, we've been basically lucky with the customer visits. It's the like for like customer visits in our stores during the 1st 9 months is plus 2.8%, meaning that it's more than 30,000 more customer visits every week in our stores.
So we're very happy with this level when basically there is a clear drop with the customer visits in retail in general. But when we're talking about the customer behavior, basically has increased basically has increased during the 1st 9 months with 8.7%. So the customers are buying much more at the moment when they come to our stores. But Tocmani, basically, we have got a lot new customers as well based on the figures that we can today present for the 1st 9 months. Our online business grew strongly.
The growth was 155%. But of course, we have to keep in mind that the online sales is only 1.1% of the total revenue during the Q3. 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 5 times bigger than, for example, last year. So 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 Docmoney store for everything in 5 minutes reach. Anyway, all the online developments that 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 stores assortment and of course improving the customer service. And of course, we're basically ready for the most important season for online business with Black Friday by the end of November. So we're basically set for that.
And 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 shopping center in Vantaa, Aura and in Puracierbe. A couple of stores were enlarged, basically right here in the very center of Helsinki and in Kahayake. We closed 4 stores in Tampere, Anakoski, Raisio and Vanta. 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 Pietarsare in the end of November.
By the end of this year, we'll have 192 stores open. And the plan is to open 5 new stores next year according to our strategy basically. Now here's the figures from the non grocery market based on the Finnish Grocery Trading Association. Based on this, TOKMA is gaining a non food market share from the other players. So Tochman 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. But anyway, we're basically happy with the market situation. And well, after this, the next one, Marco, you could actually dig deeper with the financials. So please go ahead.
Okay. Thank you. So Mikael already mentioned sorry, good day or still good morning for some of you, so from my side also. So Mikael already started with the figures and explained a bit background to figures, but let's go a bit deeper there. And then starting traditionally, I could say, from a little bit longer view, looking at the quarter 3 from year 2018 2019 and then of course 2020.
If we look first at the revenue development, we can see that last year, we got a nice 10% increase in our revenue and this year achieved this 13.1% increase. Q3 2018, the EBIT was at the level of €15,000,000 We got a jump to €21,900,000 and we were able also during this year improve EBIT and ended up to 20 €4,000,000 Of course, it could have been a little bit bigger, but the main reason behind perhaps only SEK 2,000,000 development was that the gross profit percentage was during the Q3 2020 on a lower level compared to previous year. Let's look a bit with gross profit development. It's natural when your revenue is increasing, the gross profit in euros are also on a higher level. But looking for gross profit percentage, Q3, we ended up 34%, and last year, it was 35.4%.
So it was decreased by 1.4 percentage units. And why so? So basically, there were two main reasons. Mika already mentioned this apparel, and 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. So we started to make the discount sales.
And of course, that meant that the actual gross margin percent, what we got from the Aperol, was on a lower level if we compared last year's figure. The other thing is the sales structure, what we hadn't during Q3. And naturally, apparel was also one part of a reason there because as Mikael mentioned, the sales of Aperol was about the same level in euros what it was during 2019. And of course, if the total sales increased by 13%, it means that the share of Aperis is lower from the total sales. And we all know that the gross margin percent structure or sales mix was that we had a good sales on yard and garden furniture and sports and lyser products.
These products are we can say that they are good products from a margin point of view. But on the other hand, we also managed to sell well our grocery stuff. And as we also all know that the margins in groceries are on a lower level. So this sales structure affected also to our gross margin percentage. But all in all, after 9 months, we are at the level of 33.7% compared last year, 34.1%.
So there are only 0.5 0.4% decrease on cumulative figure. And 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. And the 2 actions or two means to do it is to increase our private label share and also increase the direct import share. Now first looking at the private label share.
As we see that during this year, we have not managed to increase the private label share. After 9 months, it's 30.7% compared to last year, 30.9%. And if you look at the Q3 number here, it's 31.2% compared to last year's 31.8%. So 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. And of course, if you have a lower share in your apparel, it affects to our private labels also. But as said, the target is to increase the share of private labels, and we are working on that. And during Q3, we have brought 2 new categories or not categories, 2 new products into the market or we can say 1 new product and one enlargement is BISARRA. We have made an enlargement to these products and brought new lines for hair and face care and then cleaning.
And the new one is for pet food, natur premium food. And then 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 we look at Q3, the actual euros increased by roughly €3,800,000 But 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 last year's 19.7%. So good development on that side also. And also on cumulative figure, 20.2% against 21.8%, so good development there EBIT, already mentioned this, Q3, improving by €2,000,000 but looking at a cumulative figure, very good development now ending up €54,900,000 which is 7.4 percent against last year €38,400,000 which was 5.8%. So good development in euros, but also on relatively wise very good development.
Balance sheet issues. Inventory level, we ended up to €157,000,000 which is €20,000,000 more compared last year. But 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 last year. And we really wanted to be sure that we have a product to sell for Christmas season.
And of course, as we all know that COVID-nineteen gives some kind of uncertainty at this time, and 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, €61,500,000 cash flow compared last year's €27,500,000 And good thing ratio net debt to EBITDA are now at the level 2.6 compared last year's 3.4. And if you remember, our long term target is 3.2. So we are well there below that target. And about investments or net capital expenditure.
Now after 9 months level of NOK 8,300,000 compared last year's NOK 12,000,000, which is clearly lower level now. And the main reason is that we have postponed or transferred some investments to next year due to the COVID-nineteen. And earlier, we said that the investments during 2020 will be at the level of €15,000,000 And due to these transforms or postponements, we are now expecting to be level of €12,000,000 to €13,000,000 during this year, which, of course, might affect the next year's investments, but the next year most probably will be a bit, bit higher level due to this region. But this about the numbers, and I still give a speech to Mika, and Mika will have a couple of words still more.
Sure. Thank you, Marco. Yes, a few words about the Q4. Basically, we are very confident about the Q4 for TOKMANI. Basically, the biggest problems caused by COVID-nineteen this far are basically solved.
According to all the reports, the Finns won't be traveling during the Christmas season. So we are in a very lucky position to have basically more customers in Finland. The stores and our online business basically, it's they're all ready for the season, for the most important Christmas season. So everything looks at the moment very good. We are basically we are ready.
The last couple of weeks, there have been basically acceleration of COVID-nineteen all over in Europe as well as in Finland. Luckily enough, we haven't seen any drops with the customer visits in our stores. So that's basically we're very happy about it. And of course, online is all prepared for Black Friday and so on. Obviously, many thanks to, one more time, to all TOKMANI employees.
It's we have more than 3,000 people working in TOKMANI 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. Doc Money forecasts strong growth in revenue and like for like revenue for 2020. And we also expect the profitability to improve compared to previous year.
So this was basically the report for the 3rd quarter And next report will be for the year of 2020, and it will be published on the 12th February. So thank you very much. And now it's operator, it's time for questions. Please go ahead.
Thank you. Our first question comes from the line of Nicholas Gautman from Handelsbanken. Please go ahead. Sorry,
we couldn't hear you.
Hi, it's Niklas Kobonen at Handelsbanken here. Can you hear me?
Yes, now we can hear well.
Hey, San Nicolas. Hello.
Hey, San. Hey, San. Good. So 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?
Yes. 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 summer season inventory, we were not able to reduce the amounts or reduce the quantities of the Aperol orders.
But of course, for fall and winter assortment, we were able to reduce that the level of inventory. Actually, we do have all inventory already for the almost all for the fall season. And we're at the moment, we're very happy with the inventory level. It's very healthy when it comes to Aperol.
Okay. Very good. Then I'm looking at the your costs. So employee costs are up 6% year on year, cost per employee up 4.5%. Do you see that continuing in Q4?
Sorry, what was the percentage? What 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 sort of the cost per employee being higher also in Q4?
Yes. 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-nineteen, which, of course, increase employee costs And most probably, this kind of development will be also on Q4.
Okay. Because I couldn't really see any of that in your Q2 report, which obviously COVID was an issue already then.
Yes, yes. But the other thing which also effects to the salary employees is that basically we have more expenses on our supply chain because we have, as Mikael mentioned, improved shelf availability. And also, we have started to make our stores for ready for Christmas earlier compared to previous year. And that has caused certain supply chain salary costs also.
More compared to,
for example, Q2 if you look at the issue.
Yes. Okay, great. And then your the biggest surprise to me at least was the other operating expense. They're up almost 12%, but I didn't hear any comments regarding those.
Yes. There are certain is also related to supply chain issues. Certain is some is issued or sorry, related to COVID-nineteen. We have arranged different kind of issues in our stores for safety. And then that, of course, costs.
And one thing is also that part of operating expenses are in relation to revenue development related to volumes. So that, of course, effects if you have a higher volume. It's for example, some transactions we have more if we have a higher revenue and that also effect due to our operating expenses.
Yes. Okay. But in Q2
Sorry, sorry, Niklas. But nothing basically special clearly except of Okay.
Because 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. So is there anything like on marketing that you held back on in Q2?
No, no, no. Basically, no. Basically, no. No.
Okay. Okay. Thank you very much. Those were all my questions for now.
Okay. Thank you.
Thanks, everyone.
And the next question comes from the line of Armel Quivill from ODDO. Please go ahead.
Yes. 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 point 4 percentage unit lower level. And as mentioned earlier, we have this apparel issue, what we decided to clean. So 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, assume that we will sell higher amounts of apparel. And of course, due to the COVID-nineteen issue, we all know that apparel sales has suffered as a whole, as a business.
And then on euro wise, we manage with these discount sales, achieve about the same level in euros compared to last year's apparel sales. Other thing, of course, is that our sales structure was different due to the reason that if Aperol sales was about the same level compared last year, yes, and then the whole revenue development was 13% increase. That, of course, means that the share of Aperol is on a lower level. And as everyone knows, margins in Aperol are on good level. Other sorry, other thing which effect, of course, is that, as mentioned, that the grocery sales was good and everyone knows also that the margin levels on gross is on the lower.
And if that increases has in sales mix, that effects to the gross margin as a decreased component. So Mikael, do you have
What I was trying to understand is, amongst the 1.4% decline, how much of this 1.4% is related to apparel discounts? Is it 1% in the €1,400,000,000? Is it less? Is it more?
It's the bigger part is from apparel sales.
Yes, 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 discounts. And as the second biggest reason basically, as Marco mentioned, was that the customers were buying a lot more groceries and that's on a 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 Tocmani stores and the groceries gross margin level is lower. These are the two main reasons.
The bigger one goes for the Aperol and the smaller one for groceries. But basically, that's it.
Okay. Thank you.
You're welcome.
And 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 Q4 and Christmas season. Talk to you next time, latest on the 12th February next year. Thank you very much.
Thank you.