Good morning, and welcome to the second quarter presentation for Europris. Joining me today is CFO Stina Byre, who will present the financial details, and we have IR officer Trine Engløkken who will manage the Q&A session at the end of the presentation. You can send in your questions over the web, so please do that as I speak, and we will summarize and take all questions at the end of the presentation. A big thank you before we start to SpareBank 1 Markets for hosting today's event. I'm really proud to present another strong quarter for Europris. In fact, it's the best ever second quarter for the company. Sales grew by 5.7%. The gross margin continued to be strong and increased with one percentage point.
Costs are under control with an OPEX to sales ratio on level with last year. All that resulted in a net profit increase of 15% and in the quarter, we have also completed another successful acquisition of a pure-play online retailer. That was Strikkemekka. Looking at the first half of 2022, we are still very satisfied with the start we've had to the year. The post-pandemic market has proven to be more challenging than expected. We have delivered a very good performance, and the Europris concept is very strong and proves to be resilient in more uncertain times. For the first half year, we have delivered a sales growth of 3.1%. The gross margin has increased by 1.1 percentage points.
OpEx to sales ratio is up by 0.8 percentage points, and EBITDA increased by 4.6%, and net profit is up by 6.7%. We have a strong financial position with cash and liquidity reserves of NOK 1 billion at the end of the first half. As I said, the market is a little bit different, and I think if it's one page from this presentation that you should try to remember, I think it's this one. It's quite important to understand both the market segment we are working in, how the Europris concept works, but also how the consumers are reacting in today's markets. Recently, several retailers has reported that they see difficulty selling higher ticket items, and we can confirm that.
In the second quarter, sales for Europris chain grew by 1.6 percentage points, and the growth was driven by low price items, which is the core of our concept. 60% of Europris sales comes from low price consumables, costing less than NOK 100 . On these goods, we saw a very good increase in sales of 8.5 percentage points in the quarter. These are typical core consumables and other low price, seasonal and non-food goods. This shows that the Europris concept is well-positioned in today's market. On higher ticket items, we saw lower demand, especially for goods with sales price above 1,000 NOK. For these items, we saw a sales decline of 25.1%.
This is mainly seasonal items like garden furniture, trampolines, spa baths, and these items accounted for 7% of the chain sales in the second quarter. The second quarter is the peak season we have for higher ticket items, while it is around 3% of total for the year. We were not surprised by the fact that we saw a lower demand for high ticket items this season. We planned for that. We reduced our purchase volumes for this season, but slow demand has been higher than expected. We didn't foresee that it should go down as much as it has. We are very confident that we will manage to balance this with our inventory. We have enough storage capacity to store some goods for the coming season.
We have worked quite hard to on the items that will be discontinued for the next season. We have made sales and actually sold out of most items that will not continue next season. For the remaining of the seasonal products, we will try to balance, and this is the art of retail, where you have to balance your inventory, the sales, the margins, and the capacity costs. I think we have managed very well so far by keeping costs on track for the second quarter, high gross margin. I think we will need to see that the margin will be somewhat lower in the second half of the year. Still, I think we are in a very good position to balance this, and this is the retail craftsmanship that the Europris organization is extremely good at.
In the quarter, as I said, we have completed a strategic acquisition of another e-commerce pure player. This is Strikkemekka. We acquired 67% of the shares for NOK 88 million, and the transaction was closed on the first of July. The founder, Eirik Fuglestad, will remain as 33% owner and CEO of the company. Eirik has extensive experience within online retailing. He's a founder of the company, and a resource that we are really looking forward to work together with. Strikkemekka is Norway's second-largest online store in its category, offering private label and branded yarn and yarn accessories and also in-house developed patterns. I think this is a key reason why we did this acquisition.
Europris is a big retailer of yarn, but the modern and new customers, they want to actually buy the experience of knitting. They want to get inspiration. They want to see new patterns. They want to buy the full package, just click on, "I want this sweater, I want this size, I want these colors," and they get everything they need to make that. That is impossible to offer in 274 physical stores, but online we can do that. I think this will strengthen our product offering. We can see benefits from joint sourcing, and our customers will get a better experience with working with Strikkemekka. In addition to Strikkemekka, Eirik has developed the online store Designhandel, which operates in Sweden and Norway and sells small interior products.
I said this over the last couple of quarters, and once again, I have to say, just comparing quarter over quarter is quite difficult also in the second quarter because there are different COVID effects in 2022 and 2021. We have to look at this in the longer perspective, and during the last three years, Europris has significantly outperformed the overall retail market and taken a stronger position as the market leader in variety retail in Norway. When we look at stacked three-year growth since 2019, Europris has grown by 27.4%, which is 10 percentage points more than the general market. Europris come out of the pandemic as a stronger company. We have upgraded several important product categories.
We have recruited more than 1 million members to our customer club, and we have strengthened our e-commerce position by strategic acquisitions of Lunehjem, Lekekassen, Strikkemekka, and Designhandel. I think we are coming out of this as a much stronger company than we were before. Stina, I leave some of the financial details to you.
Thank you, Espen. If we look at sales for the second quarter, they were NOK 2.2 billion. This is an increase of 5.7%. If we exclude sales from acquired companies, the growth was 1.3%. The Europris chain had like-for-like sales growth of 0.5%, and the development was positively affected by the timing of Easter and also that an average of 8% of the stores were closed last year. Most of our categories had sales growth in the quarter, but as Espen explained, higher value seasonal items had declined. We also see that border trade is picking up, and the four stores that we have closest to the Swedish border had a weaker development than the overall chain average. Total e-commerce sales were NOK 147 million. This constitutes 6.6% of group sales.
Lekekassen had a sales decline for the second quarter in Norway, but in June, it was sales growth, and in Sweden, the quarter showed sales growth. E-commerce sales from Europris were NOK 53 million, and the decline from last year was partly explained by higher click-and-collect sales from the closed stores last year. The mentioned decline for higher value seasonal items, of course, also affected the online sales negatively. The gross margin was 48.2%, which is an improvement of one percentage point, and the organization has worked actively with price management, campaigns, and product mix, and on balancing sales versus margins. Europris follows market pricing, and the new agreement for inbound freight has increased cost, but it is a competitive agreement, and Europris has had a relative cost advantage.
OPEX was NOK 400 million. This is an increase of 6.1%, and that is explained by the inclusion of subsidiaries as Lekekassen was included from August last year, and also from a higher number of directly operated stores. The OPEX to sales ratio was 21.7%, roughly on par with last year. EBITDA was NOK 589 million, up 9.7%, and the EBITDA margin was 26.6%, up one percentage point. These strong results were from the combination of higher sales, improved margins, and good cost control. Net change in cash year to date was negative NOK 603 million. This was more negative than last year, and several factors contributed to this.
Accounts payables and other liabilities and a higher inventory from higher purchase prices and also from a higher volume of seasonal items. Tax paid was also higher this year, and a higher dividend was also paid this year. Net debt was NOK 3.4 billion, and the increase is due to less cash and also higher short-term borrowings. Excluding lease liabilities, net debt was NOK 1.5 billion. The financial position continues to be strong, with liquidity reserves of NOK 1 billion. I give it back to you, Espen.
Thank you. It's strong numbers as you see. I'll continue a little bit on the strategy and what we've done over the past quarter to continue to develop the company. The key strategic initiatives for Europris is all about strengthening the price and cost position, improving customer experience, and drive customer growth. Over the years, we have talked quite a lot about the new warehouse in Moss and the expansion of that, and I'm really happy to say that the expansion of the new central warehouse in Moss is progressing as planned on budget both for time and for costs. In addition, we see very good progress on the automation for the shuttle system and we are starting to see a higher efficiency for picking of goods.
The software issues we've had has been resolved, and in order to improve the stability of the system, some hardware parts will be replaced in the third quarter. Category development, that is the most important initiative we do to improve the customer experience. We have done quite a lot to that over the last years, and that is also what is part of driving the gross margin upwards. As informed earlier, we will roll out a new concept for toys during the second half of the year. The concept and product range is carefully selected in close cooperation with the Lekekassen. Earlier, we tested the new product range in selected stores with very positive results. The stores with the new product range grew more than the chain average.
This quarter, we have tested the new concept, the layout, in the new stores we have opened and in the refurbished stores. We call the new concept Lekeplassen. It's not that creative, but it's a good name, and we have created a much more playful part in the store. The results from this is very promising, and we are really looking forward to launch both the new concept and the new product range in all our 274 stores during the second half. I think this category upgrade is a direct consequence of the acquisition we did of Lekekassen, and it demonstrates how we are able to acquire a pure e-commerce player and use this to improve the product offering, the customer experience, and sales in the physical stores.
This quarter, we have also launched successfully a new app for our customer club members. With the new app, the customers get easy access to campaigns and the digital marketing. They get overview of their fixed MER deals and their personal coupons, and they get all the receipts from previous shopping trips. We have also tested how we can cooperate with Lekekassen and other pure players to drive traffic to their platforms by giving the MER customer club members unique exclusive offers for shopping with them. We will continue to explore this possibility and how we can use the customer club to promote our pure players and give the special member benefits to the customer club members and just drive traffic across these platforms.
The physical stores are still the very backbone of Europris, and we will continue to develop both the stores and the network. The second quarter has actually been a quite busy quarter for Europris. We opened three new stores, and we have relocated two stores. Going forward, we have a pipeline for 2022 and beyond of seven new stores, which one is subject to planning permissions. Summarizing and looking a little bit on the outlook, as I started the presentation with, I said that Europris has a very strong concept and is resilient for more uncertain times, which we are in these days. In the reopened society after COVID, the consumers are facing higher prices and hiked interest rates. The Europris concept is well-suited for the current market environment.
With low prices, strong campaigns, and a large selection of everyday consumables, we also saw that the high growth we had in the second quarter was coming from low-price items, and that gives us confidence going forward that our concept, are a concept that the consumers will turn to in more difficult times, and we saw that already in the second quarter. The gross margin for the Europris chain has been strong over the past years, and we expect the margin to stabilize at a higher than pre-pandemic level. Europris is celebrating 30 years in business this year, and we are the market leader in discount variety retail, and we are ready to develop further while balancing the customers' needs with delivering profitable growth. With that remark, we will open up for questions.
I start with the questions from the web then. The first question comes from Kevin Åkeson. How does everything we heard about ÖoB go? I see no updates in any quarter reports or through googling on how all this has gone, and where is it now?
Basically we give no update because there has been no progress since the last quarter. We gave a quite detailed update in the first quarter presentation of this year, where we clearly stated that we will come with news whenever there is some progress, and there has been no progress in this quarter. That's why we do not have any update in the second quarter report.
Next question, Konrad Ragnstad: Do you expect to be able to maintain the EBITDA margin going forward?
I think it will be difficult to maintain the full EBITDA margin going forward. As said, we expect that the gross margin will be somewhat more under pressure in the second half. It has been still very positively affected by the freight agreement from last year in the beginning of the year. The gross margin you should expect to come down a little bit in the second half, but we do not expect that it will go back to the levels it was before the pre-pandemic. We have stabilized the margin at the higher level, but not on the same level as it has been in the last two years.
The next question is from Ole Martin Westgaard. What was the mix between volume and price in Q2 on like for like, and how has the traffic developed?
Traffic was positive. One should also keep in mind the timing of Easter, and also that there were closed stores last year. We also see that more convenience customer are coming in, so that was up. Both price and volume was up in the quarter, but again, timing of Easter affects these numbers.
He also has a question on the margins. I think you touched on it, but he also asked if you can please elaborate on what's driving this and what level we should expect.
I think we will not comment on the exact level. We are saying that we will establish above the pre-pandemic levels, and that was historically for the chain in the range 43%-44%. We will be above that. What we have done is basically a lot of small things. It's not that easy to point at one single thing. We have upgraded several categories, and by doing that, we have reduced complexity in the goods we offer to the customers. We have reduced the number of SKUs that is, you know, pure campaign products that is, you know, just coming in and out. We do not have that large need to clear in sales anymore. We are using more private labels.
It's a lot of different things that we have done. We have also lifted some of the important non-food categories where we have an above average margin. A lot of the sales growth we have seen over the last couple years is in higher margin items. You know, it's a positive change in the product mix. It's more private labels. It's reducing complexities in the SKUs. We're also working, I would say, you know, more smart when it comes to balancing campaigns and how we work on pricing and promotions. It's a lot of different things in that we are working on constantly to try to achieve a good margin as possible while we are still maintaining the price advantage towards the customers.
Markus Heiberg has also several questions and many others on the margin. I think I'll just jump over these questions just not to repeat. You also have a question on the traffic development that I think is covered by Stina. The third question from Markus is, in light of the 20% decline in high-ticket items, should we expect impact on the margin for Q3?
I think you should expect that the margin in Q3 should be somewhat lower than what you saw in the second quarter. That is quite natural as we have the seasonal sales that started last week. I think it's difficult to say exactly how this will play out because the high ticket items also have an average. On average, they have a lower margin. We cannot take the percentage high margin on the high ticket items. Selling more low ticket items is actually also supporting a higher gross margin overall. We expect that we will have some more inventory of seasonal goods after this season than what we planned for and what we had last year, but we also have sufficient storage capacity to handle that.
We are not in a position where we have to discount extremely hard to sell everything out.
Next question is from Joachim Huse, a question to Stina. Congratulations to a strong quarter. However, we continue to remain concerned about the negative cash balance of minus NOK 33 million. You are technically out of cash, apparently. Can you please elaborate about the certainty of the liquidity position you frequently mentioned, and why do you not turn this into a minimum cash balance on the balance sheet? Thank you.
We have a strong financial position, and we have the liquidity reserves, which are cash equivalents, so we are not concerned with our cash situation.
Petter Nyström, thank you and congratulations on strong Q2 numbers. OPEX was up 6.1% year-on-year. How do you see cost inflation in the second half versus the first half year of 2022?
Well, we're affected as the overall market. Our rent for all the stores, they're CPI adjusted and also when it comes to salaries for most of our employees are covered by tariff agreements. This will in line follow the general market. Historically, the market has absorbed these types of cost increase and we also work continuously with our cost base and to be efficient.
A second question from Petter. Given your Q1 report, you were able to calculate April sales, and based on today's Q2 sales, it seems like May, June saw a sales decline of over 15% year-on-year. Is this correct understanding? If you continue to see a 15% sales decline, will you be more aggressive on campaigns activity?
I think that calculation is not correct. I do not recognize those numbers. We did not have a sales decline in that range in those months. We had lower sales than last year, that is correct, but not in that range. We see no reason why we should campaign harder just to get rid of goods. As I said, you know, and try to explain, balancing the inventory, the sales, and the margin is the essence of retail, and that is where we are really focusing and working hard. We do not see any reason why we should try to maximize sales because that will just be on the expense of the profits.
I don't think that is beneficial as long as we are comfortable with the inventory levels we have and we have sufficient storage capacity.
Next question is from Jeppe Baardseth. Congrats with a solid result and the best second quarter ever. Can you elaborate on inventory mix? How much of the inventory is higher volume seasonal items?
Well, we have higher inventory from acquisitions that we made if you compare to last year when Lekekassen was not in the numbers. For the remaining increase from Europris, a little more than half is from seasonal items. We also chose not to sell out all Christmas goods as we commented on in the first quarter. As the Christmas will also be red next year, we have a higher volume of, as Espen said, the seasonal items this year. For those items that we will not sell again next year, those we have made sure that we sell out, and the others we have capacity to store.
A question from Even Naume. How much of the gross profit in 2021 were from high ticket items?
That's.
You know, we have to be honest, that is something we haven't calculated. But I can say that on average the high ticket items have a lower gross margin percentage than the lower ticket items.
There is no more questions from the web.
Questions from the audience? No. I wish you a great summer. Thank you.
Thank you.