Good morning, and welcome to Verkkokauppa.com's Q2 earnings presentation. If you have any questions, please feel free to send them to investors@Verkkokauppa.com and questions will be then read out loud at the end of the presentation in the Q&A part. In my presentation, I will, in the first part, go through the highlights out of the report of this morning. In the second part, we will look how the company's strategy is evolving and also how do we see the market and the outlook for the rest of the year. After that, we will have short key takeaways and then questions, if there are any. Let's jump into the report. Overall, obviously something that we can't be happy about, not according to our expectations when we look at the revenue development.
If you look at the consumer market and the consumer insight at the moment in the Finnish market, the consumer confidence is at the lowest point that it has ever been since this has been reported in the Finnish landscape. This has been continuing for four months now in a row. Probably something or somewhat still to do with the anxiety because of the geopolitical situation and the war in Ukraine. We believe that actually the inflation really kicking in not only fuel and electricity prices but grocery prices also going up. The consumer really feels that their own economy will be under pressure and shopping power will probably decrease going towards the latter half of the year.
This is probably the driving cause for this anxiety and confidence in consumers' own finance. If you then look more closely to our business environment, consumer electronics, the market has been having two good years. People, consumers were really stacking up their equipment and now we see those figures from previous years ahead of us, and this combined with the consumer confidence and also that the consumption is still more focused into service sector, in travel sector, in hospitality and restaurant sector, for example, rather than products, is driving the consumer market and demand down. Due to these reasons, our revenue development was negative, and we lost sales or revenue 3.7%.
Main segment from our business e-commerce platform obviously sharing these kind of market environments and also losing sales by 3.6%. On the other hand, there was also a bright light in the report, B2B segment, which has been growing nicely throughout the years. Again, delivered strong figures growing by 12.6%, which is a good performance taking into consideration the underlying market. It is fair to say that the B2B market is not as volatile as the consumer market. It is not that heavy impacted and affected by the anxieties.
I think there's still a lot to do with us taking proper business decisions, focusing on this area, processes, key capabilities, experience also for the businesses and getting sales in and growing that business. The difficulty in consumer electronics market is clear when we look at the categories. Core categories consisting of consumer electronics got a strong headwind and lost sales by 7%, while at the same time still in evolving categories, we were able to utilize the mega trend. Retail is going online and those categories still grew by 5%. It is not on a level that we want it to be and we expect it to be, but still, I think taking into consideration the surroundings, a solid performance from those categories.
Profitability goes hand in hand with revenue, and gross profit development. As the general picture about the costs is that the inflation is also impacting our business. We get price increases from the supplier side. We get price increases from service provider side. These underlying pressures also impact our general cost levels. If you look at the margin as such, typically during the second quarter, we are in a position where we can really sell these higher margin categories around outdoor garden, grilling and these kind of categories. This year, sadly, we saw that the spring was prolonging, and due to that reason, the summer sales was postponed, and we were not able to have the sales levels that we would have wanted to have in the higher margin categories.
At the same time, because of the summer season starting so late, a lot of price campaigning was tactically conducted in the early phase of the season. We really didn't have enough time to have the normal margin in that area. That was really pushing the general margin down, while at the same time consumer electronics is facing soft demand. We have an overstock because we were expecting higher sales. We were also somewhat stacking up our inventories due to availability issues and due to price increases that we foresaw to be happening. Now, we are sitting on that inventory as many operators in the Finnish, Nordic and European landscape.
That brings with it always price activities as all players are trying to push out the obsolete stock. If you look at the cost position, the main reason for the other operating expenses being EUR 1.3 million above that of previous year comes from the outsourced warehouse operations. Running an overstock of EUR 10 million than previous year brings storage cost with it and also handling cost with it. That is the main thing that's impacted our cost level. The overstock had twice the effect, first of all, on the margin as we had to push out some categories to lower margin. On top, we still pay for every pallet that we store in the outsourced warehouse operations.
Due to this reason, the comparable EBIT was slightly negative, EUR 0.2 million, a strong decline to previous year record figures of over EUR 5 million. As a company, obviously, we do day-to-day actions and optimize operations. We have conducted several activities to secure margin to be on an acceptable level, try to negotiate with suppliers to have some support, try to find out new price points to push out products, dynamic pricing, for example, different ways of campaigning, so not to lose all margin because of the price campaigns. Also looking at operations and investments, we are cautious and careful if taking next steps and investing in people or organization. Now we need to take a careful look at the overall cost level.
From the P&L, we already talked about the revenue development. You can see that the revenue development combined with the margin resulted in operating profit of EUR 3 million loss to previous year. Major part of the profit loss came from top line and margin development. From the expense side, EUR 600,000 personnel expenses are up . Behind that is that during the last year, fall and end of year time and during this year, we have been investing in certain key competencies quite heavily. We understand that we need more IT developers to fulfill our strategy. Besides that, we are also implementing new data architecture and data analyst capabilities, we are investing in that.
Third part comes from investing in sourcing capabilities and sourcing organization to take the category to next level. These are closely tied also to decided actions taken in accordance with our strategy. On the other hand, in the operating expenses, EUR 1.3 million up, major part of that coming from the surplus inventory that we have in outsourced warehouse operations. This is something we need to take a careful look. We are in the same situation as probably every consumer electronics operator at the moment, so we are sitting on products and categories where there's no demand. Probably the upcoming back to school, back to business season will be quite price fight heavy. Let's see how the last quarter then evolves on that topic.
All in all, getting a hit from the market on the top line because we were expecting something else out of this year, out of the summer season. We have an overstock of inventory, which we now need to deal with. This is pushing the margins down, and this is also pushing the cost levels up. Some things are decided by the company looking at the personnel expense side. Some things are regardless of the inventory or the market situation. Now we need to cope with that. I think we have a good plan. It was not a big surprise that few quarters not hitting our targets is not affecting our policy of paying out the quarterly growing dividend.
This morning, the board decided to pay out a quarterly growing dividend of EUR 0.062 per share. At this point, thank you all investors and all owners for your support. From the main KPIs, I think we already covered the total revenue development and the e-commerce revenue development. Down left, you see the B2B being the bright star, not only the past quarter, but the first half of the year in total. When looking at the cost ratio per revenue, while revenue is going down, it seems to be hard to get to the targets that we have set ourselves. Getting the revenue back on track will be also main topic for the coming quarters. From the balance sheet, we discussed the topic of inventory.
Here you can see clearly that it's almost EUR 10 million more than last year at the same time due to the reason of consumer electronics categories facing soft demand, and we were overstocking those partly because of mitigating supply chain issues and price increases, which we will be now seeing, and partly also to the reason that the seasonal sale wasn't on the level that we expected, somewhat to do with the consumer demand, probably even more to do with the soft or prolonged spring really not helping with garden, grill, and those outdoor activities categories. Cash flow until end of June significantly below that of last year. The delta is actually quite accurate, the same that we have on the EBIT as well, so that comes from that side.
Investments during the second quarter at probably the highest level in the company's history. The first acquisition, e-ville.com, completed during that period of time and also the warehouse automation AutoStore investment here in Jätkäsaari completed and up and running. We are investing in future capabilities and future growth opportunities. Cash position slightly below that of previous year. Equity ratio below that of previous year because of the bigger balance sheet. For the first time as a group, we have also external money in the balance sheet of EUR 25 million. Last part of the report, we calculated and disclosed our emissions regarding the first, second, and third scope.
If we combine these three and look at emissions out of own operations, you see that only 0.1% out of that is coming from our own. Really investment and emission-light operating model that we have, that's a good thing. We have target to have that on a neutral level by 2025. What we can do about the other ones, the two biggest emission drivers come from production of the product that we sell, so close cooperation with our suppliers on how to get those emissions down. The second biggest part comes from the use during the lifetime of the product.
Really educating consumers on which kind of products to purchase and how to utilize them in a proper manner to take the emissions down. The second part, let's go into the strategy, how that's evolving. As a reminder, we have a clear path on where we want to go, why we're gonna go there and with which kind of focus area and investments. We are providing value towards our customers throughout our value model out of or consisting out of most exciting assortment surrounded by the best possible customer experience, utilizing our wide flexible delivery network, providing the best possible delivery experience while being standing here in the Finnish retail landscape as the one of the most renowned trusted partner for consumer.
Customer experience is something that we have been developing quite eagerly in our day-to-day operations. Now we will start slightly bigger project on updating and optimizing our e-commerce platform and operations really to strengthen the superior experience and the brand perception as such. What we aim for is to have several cases of top of mind throughout our categories. Today, we have maybe top of mind in only a few of those, really focused on consumer electronics, so we need to take that into next levels, meaning that we need to understand different customer segments and different needs and different purchasing funnels better to provide more personalized and more needed experience, rather than offering one for everybody.
That will include better content on the site, that will include more inspiration, that will include better searchability, purchasability of the products, and also the service factor should be more shown throughout the shopping journey. What we will get out of it? Well, first of all, we will secure future growth because e-commerce channel will be the main driver for our growth in the future and we try to maximize the opportunities that lies within our platform, not only from the product sides, but only from the service side. This also supports our future category expansion.
Before we expand into new areas with categories, we need to understand the purchasing behavior and those drivers for the consumers and try to be as good as possible while offering experience on a personalized level for those ones. When looking at the brand perception and the recognition of the company, Google did some surveys in the Finnish landscape, where we were on the first spot. Hanken School of Economics for the second time listed the most innovative companies in the Finnish landscape. We were among the top ones. If looking at brand index measured in different kind of ways, on the left side you see the positive buzz about the brand, clearly above that of our peers.
What's even better, if you look at the right side, you see how willing the consumer is to recommend us for a friend or family member to interact with, and there we are clearly number one and when looking at our peers. The next one is about the speed and flexibility, the delivery experience. For e-commerce company, this is increasingly important because with that part of the shopping and value chain, we can really win or lose also customers and experience. This is the reason why we are really investing in that. We want to be by far the best in the Finnish landscape in this area. Internal logistic processes and automation is one part of it. The first solution for Jätkäsaari investment is ended.
The AutoStore small item picking warehouse is up and running and seamless part of our internal processes. The next step will be after that to build a packaging automation system where those orders that are sent home are packaged in an automated manner and that first of all brings us significant efficiency but also reduces the time for home deliveries. The next part about the strategy is taking the assortment to the next level, providing the most exciting assortment. Excitement there has been several of those. We have now almost 90,000 different SKUs. With the assortment we can also drive business and visits to the site.
Now we will collect the data that we can get out of the last months, and then make decisions on which kind of product families we want to go further into or which kind of categories we want to invest more. In those category expansions, private label is a key element on providing the best possible value, price-value ratio and also nice margins when looking at those categories like outdoor and garden or home and interior, for example. For that process we have the best possible tool now available with our e-ville purchasing organization sitting in Hong Kong and Shenzhen ready to take these orders in.
In the environment where the demand for products is soft, it is increasingly important to provide customers with the, well, first of all needed near product services, but also standalone services. We have been focusing on this area maybe slightly more the last couple of years. It is nice to see that services, whether it's deliveries or installments or protections or maintenance or recycling, all these services are getting more and more useful for the consumer. Even though revenue doesn't go up, the services sell more and more, which is a good thing, helps the customer and also increases the experience. Important part also in the service portfolio are the financing services that we are providing. We have been providing Apuraha for several years now. It is renowned and widely used on our site.
What we invented during the first quarter and released by end of first quarter was the Verkkis Account. Account facility that is super easy to adopt, super easy to use. It brings no cost with it and when utilized, if you pay the balance back within 45 days, it's also interest free. We expect quite a lot out of this service. Nowadays, we have already over 7,000 users for this one, and that will be one of the key drivers also utilizing in these economic circumstances and still providing nice profit streams when looking at the last quarter. The last part of the presentation is around the business outlook. We have been talking quite much about the consumer confidence in the Finnish landscape where we are mostly present.
You can see that it goes down and down and down. Our estimation is that it will not recover that soon, which obviously and automatically implies that the consumer is not that willing to consume and durable goods and products where you can decide or deliberate on when to purchase. The assortment that we mostly run is the first line where you start to postpone your purchases. In a big economic picture, unemployment, for example, the workforce is still unchanged, or the Finnish landscape is still unchanged. It can be that if this would be prolonging for several months, that we would have the first implication also that could be maybe slightly worsening. From the macro scenario, nothing that's really supporting the consumer confidence at the moment.
Inflation is rising and going up. I think it's quite clear that the purchasing power will decrease during the latter half of the year. What's quite clear is that consumer electronics market will be under tough price pressure throughout the year because of the soft demand and due to that, because of the high inventory levels across all operators. At the same time, we are quite positive when looking at the business market. B2B sector seems to be doing good. It doesn't seem to get the same kind of flavor that the consumer market gets at the moment. It can be that if this would be prolonged, that also businesses start to postpone their purchases and postpone their investments.
It hasn't happened yet, so we are quite optimistic that we will be gaining market and market share in that segment. The underlying mega trend retail going online is also something that we see and foresee to continue. Specialty retail, brick-and-mortar retail, when you lose revenue, the cost level is also quite high. These kind of market situations can also bring consolidation in the market. The strong ones and those ones who have the winning business model normally come out stronger than before. We expect and believe that we are one of those. Because of the market not changing, consumer confidence continuing on a low level, we expect that the recovery to be already seen at this point, this has not happened.
Secondly, what we see that the margin levels that we expected to be fulfilled during the second quarter and the coming quarters will probably not be happening because of the price sensitivity of the consumer and because of the overstock in consumer electronics market, we updated our guidance. If you look at the revenue, we took down the upper bracket by EUR 20 million. It is not realistic to expect that this year will be a growth year when comparing the previous year figures. That's the reason we took down the upper bracket. Now we expect revenue to be between EUR 530 million and EUR 570 million. On the EBIT side, the revenue expectations going up obviously reflects the whole EBIT levels. The bigger part comes from the margin expectations.
Not being able to sell higher margin categories in this season at normal price brings the estimation that probably that will also be at least partly the case during Q3 and especially during Q4. Consumer will be price sensitive, so price will be probably the key deciding factor throughout this year. Like a few times already mentioned, the consumer electronics market will not see healthy margins at least this year, because of the surroundings. That's the reason we took down the upper bracket and the lower bracket as well, and comparable EBIT is expected to be somewhere between EUR 8 million and EUR 14 million. Long-term targets at this point unchanged and also policy of paying out the quarterly dividend untouched and like today decided also fulfilled.
If we take this all together, we look and operate in a turbulent market, consumer confidence probably going to stay on a lower level. Still I think it's a positive that we have been able to build up a second revenue stream, a strong one with the B2B segment, a good development from that part of the business. Actually if you look at the margin as such, taking into consideration overstock in consumer electronics market high and aggressive price activities in that market. Taking into consideration the late summer sales start and that being price-driven as well, I think we can be still quite happy about the absolute margin levels of 15.4% when looking back historically, but not hitting the same level as we did previous year.
Investment and projects are going according to decisions and plans and getting done. Logistic hub ready in Jätkäsaari, packaging automation coming up. What we obviously need to do at this point is to take cautious look on where and what to invest next, how to mitigate the pressure on the margins and how also mitigate the inflation which affects our cost levels. Taking and bearing still in mind, we are determined and focused to fulfill our strategic goals and keep on investing also for future capabilities to be stronger at some point when the market again brightens up. Thank you. We seem to have questions. Please, Marja.
Thank you, Panu, for the presentation. We just got a couple of questions. First one regarding our export business. Do you think the moderate decline in export business will sustain despite Russia being half of the sales?
Well, that's a good question. Would I like it to be like that? Yes. The export business is, it's not a recurring revenue business model. The deals are spot deals. Every day, basically, you fight for your position. We have been gaining new customers, and we have been selling to different countries than before, which gives us at least slight confidence that maybe that could be of duration. I can't promise you that that will be the case. What we know is that half of the export that we have before is done and lost with the Russia situation, at least for the second quarter. We're taking into consideration that it just happened. In a quite short period of time, we were able to mitigate that.
It is possible that we could be on these levels. Like I said, the deals are always spot deals and one-offs, so there are typically no recurring models or businesses. We need to keep on working.
Thank you. The next one regarding other operating costs. Why was there a 17% increase in other operating costs from Q1 to Q2 while inventories already were on a higher level during Q1?
Yes. About the operating expenses, we saw the increase already in the first quarter. We saw that increase to intensify during the second quarter. There has also been price increases. The inflation is also impacting our logistics when looking at this position. We move products between our warehouses, we ship products to our stores. That's one part where inflation kicks in, and also in those deals, we have certain kind of steps which brings that with it. Inflation also part of that business.
Thank you. The last one, regarding our updated, financial guidance. What is the scenario to reach the lower end of the profitability guidance?
Yes. We have different scenarios. Typically, we have three of those. We have the worst, base, and best, and that probably goes pretty much hand in hand, revenue and comparable EBIT. When looking at the lower bracket on the EBIT level, would assume that revenue would be really declining or continuing to decline. There would be no bounce back at all. That would imply that the margin pressure continues or even slightly increases from this position. There would be no positive influences from the market. If you look at the last year from the quarters perspective, last year Q4 was already a softer one.
Taking that softer Q4 and having still kind the same kind of impact would actually imply that the situation would worsen in one way. That would be probably the worst case scenario, which is implied then in the lower bracket.
Thank you. Thank you to the audience for the questions. There are no further questions at this time.
All right. Thank you. On my and company's behalf, have a great summer.