Yes. So please make sure that you bring the coffee the Goody Bags with you afterwards. We will also have drawing today. We will actually be able to get a Wilfa classic coffee machine. You could, of course, go out and buy it at Jarnia for $14.95 or something, but or you could buy it at a special price.
I think it's $5.99 or $4.99 this week at Europress, regular price, dollars 6.99 dollars So it's your choice. But 2 of you will be lucky. You don't have to buy it. You can actually win it. And I think that the gentleman on the 1st row here has to draw the lucky winner.
Yes. No, I don't see it. Okay, what is it? H47. H47.
Fantastic. Coffee for There's one more go and I think this time Atle will not win, so you can draw. H39. H39. Who is this?
All right, no? Age 39? Oh, wow. Okay. Another one.
Okay, sleeping. Okay, Otter, another drawer. It's a coffee, guys. Okay. Okay.
3rd time lucky. 858. 858. There we go. Yes, gentlemen.
Here you are. Okay. Very good. So yes, to the presentation. First of all, as I said, welcome.
The results overall, the message is that obviously on the back of it, we're not happy with the figures both in terms of sales growth and result growth in results. But it's tough times in retail. I think that I am, at the same time, very, very proud of the staff and the people at Europrize. I think that in tough times, it's an opportunity to really show what we're made of. And I think that the spirit of the company shows some promising signs in terms of the dedication of the staff, the energy in the company.
And I think that, that will eventually also come through to the results. So we will see. But in the quarter, Q3, we had a roughly 6% increase in sales. That is in group revenues, including the franchise takeovers. Total retail sales, which is all stores in the chain, 2.8%, which is obviously well above the market, but still sort of slightly below on par with the market on like for like.
We are a seasonal concept. So obviously, when the seasons are not there, we are more effective than other concepts. Gross margin improved quite significantly, mainly due to a very positive stock taking that Esma will come back to. But even if you adjust for that, it was roughly stable margins versus last year. OpEx increased by $14,000,000 following a one off timing of the accounting of distribution costs.
Esteban will also come back to that. But if you look beyond that, the costs are under control and we have a sort of good development on costs. Net profit was slightly down due to unrealized foreign exchange currency losses. If you look at the retail sales, as I said, it was marginally like for like was marginally below the market growth. But also in this keep also in mind that when you see the figures in this quarter that we have 1 less sales days, so they are slightly lower.
We have 1 more sales day in the 4th quarter. I'm not going to stand here and complain about the weather. So weather comes up and down and eventually it will level out. But obviously in parts of the quarter we were affected by it, but it will come back. We saw in certain categories that we had a very good sales growth in this quarter, mainly due to the summer sales period where we had a lot of focus on consumables.
So we did good in personal care and laundry and cleaning. And as we talked about last year, some of the focus in the Q3 this year has been the centralized control and spacing of volumes. I would say that, that's had a very positive sort of effect, even though we cannot see all of it in the figures here. And so we are continuing with that work and even stepping it up. So it's positive feedback from that kind of work.
These are the growth figures. We are beating the market on total growth. Still sort of a winner in the market there, but not more sort of stable on like for like versus the market. And as I said, what we have to have focus on is basically to make sure that we own the best selling spaces in the store that we have the best products. And in between seasons, it's very important to have daily consumable products there.
And I can say that in this quarter, from sort of mid August and onwards, when we sort of led back to work again, back from holiday, we had a very sort of good implementation of those the way we presented ourselves in those central spaces. So very, very sort of positive early signs. Coffee, you have all tasted. As you can see on the display over here, we have a huge range of coffee, both our own private label, but also brands. I think, as I said, that there's very few places where you can find that kind of selection in Norway actually.
And I think obviously at very great prices and very often also we have great campaigns on these products. So it's a category that we've been doing well. We are also in this area trying to increase the everyday sales not just on campaigns And this is these category efforts are part of that efforts to make sure that your coffee is more visible in the stores also when they are not on campaigns. We talked about last time that we launched our e commerce sales. We'll talk more about that in the Capital Markets Day.
Obviously, the majority of the volumes at the moment is click and collect, which is if you pick up in the store, that's, I guess, for all the retailers, but also especially for us now that we are in the early days of home delivery. And we have opened 7 stores so far this year, and we have 2 more stores to go. Nannesla, we opened last week, and then we're opening in Ryukan in December, on the 6th December. That makes it 9 new stores this year. And then we closed 1 store close to Nantesdal, which means that we have net 8 new stores this year.
We have 12 stores signed next year. A couple of them are due to have some municipal zoning regulations, so they might not come in 'nineteen, they might come in 'twenty. But overall, as we said before, we are only, only opening new stores if we see that they are profitable and that they meet the strict criteria that we have for new stores. And every year, we go back and we audit whether those old stores actually met the targets we set in the business case. And so far, the results are good on new stores.
Therefore, we open new stores when we get good deals from the landlords. Of course, obviously, we also see it as many other retailers see that when everyone else is starting to go out of a retail location or some, the discount variety of retail sector is still growing, and we get a lot of interesting opportunities. OBE. It's far too early to come back with some results and savings. But I just wanted to reiterate that if you ask me today whether this is a good move from a strategic point of view, I would say that I'm even more sure today than I was 3 months 4 months ago when we announced it.
I think it's a very, very good move. The cooperation has started well. It's a very good cultural match between OBE and the Europrize. So we have been starting to have this 1st joint meetings, the first meeting with the suppliers, both here in Europe and in China. So it's very good progress on the cooperation, both with OBE, but actually also with TUKMANI that we're putting a lot of effort also into the cooperation with TUKMANI and to include more volumes to buy together with TUKMANI.
So good progress on the activity side. And with that, I'm going to hand over to Espen, who will take us through the financials.
Should we do it in English actually? Let's do that. Starting off with the gross margin. The margin in the quarter was 43.6% compared to 42.1% last year. In the stores, we do the annual stock taking in the Q3.
And during the year, in the stores, we report a calculated gross margin. So any calculation differences, they are recorded at the time of the stock taking. And this year, we had some calculation differences. In total, they amounted to SEK30 1,000,000, of which now SEK24 1,000,000 relates to previous quarters. So basically, for the Q4 last year, Q1 and Q2 this year, and the remaining relates to the Q3 this year.
The stock taking calculation differences basically origins from a shrinkage reduction program. We have introduced in 54 stores, we have done a quite intense follow-up on shrinkage due to high shrinkage numbers historically, and we see very good results from that. They have reduced the shrinkage by SEK 13,000,000 compared to last year. In addition to this, we have a one off effect following the sugar tax increase from last year. We estimate that to be $5,000,000 will be conservative in the Q1, but we ended up with a total $12,000,000 from that.
And that, of course, belongs to the Q1 this year. So the effect in the Q3 was $12,000,000 minus the $5,000,000 we accrued in the Q1. So net effect, dollars 7,000,000 dollars that we need to move back to the Q1. In addition to this, we had the one off effect from franchise takeovers of $2,000,000 And adjusting for the one off from the stock taking and the franchise takeover, the gross margin for the quarter was 42% compared to 42.2% last year, so slightly down. Looking at year to date numbers, the margin is 43% this year, up from 42% last year.
Looking at operating expenses. In percent of revenue, that was 34.8% in the 3rd quarter, up from 32.9% last year. The operating expenses this quarter has been increased by DKK14 1,000,000 following a timing effect of transportation cost. This is basically us being a little bit too late for booking our invoices and also the supplier being too late with issuing invoices. So we ended up with a backlog that was detected during the quarter.
This $14,000,000 of that $8,000,000 relates to 2017 and the remaining $6,000,000 to the previous months this year. So it's a mistake, not good that it happens, but we have corrected it, and now we are on track when it comes to booking or transportation costs. In the Q3, we always do a check on the revenue the performance based pay for management, which is linked to the development in the share price, and that has been adjusted by SEK10 1,000,000 this quarter, same as last year. So reducing the the operating expenses by SEK10 1,000,000 in the quarter, which is the same as we did in the Q3 last year. If we look at operating expenses and adjusted for the extra freight costs in this quarter, it was up by 8.6%, while the number of directly operated stores increased by 9.5%.
Year to date, operating expenses in percent of revenue is 33.8%, up from 32.6% last year. EBITDA, of course, also affected by the stock taking and the freight costs. In total, EBITDA was NOK119 1,000,000, up from BRL 117 1,000,000 last year. Year to date, we have EBITDA of BRL 363 1,000,000, up from DKK356 1,000,000 last year. On the cash flow, as you remember, we had significant inventory build down during the Q3 last year.
That has not repeated. We are very happy with that because we now have a very good stock in the stores. In addition to that, we have also started building up the Christmas early. As you can see on Paul, he has his Christmas sweater. So we made sure that we have the Christmas goods on time this year earlier than before, so we can really supply and build up the important season in the store.
So we built up the inventory a little bit earlier, but that's also impacted the cash flow in the quarter. After the Q2, we initiated a share buyback program of 2,000,000 shares that was completed during the 3rd quarter. And in total, we spent $43,000,000 buying those 2,000,000 shares. That's also included in the cash flow of the 3rd quarter. I think it's time to summarize.
You have a mic, Paul? Yes, I have a mic.
Okay. So basically, we believe in continued growth both in revenue and in results. So no change in that. We think we are in a strong position, as I said, with this cooperation with EOB and TUKMANI. And we believe even more that this is an important strategic move long term.
We have also initiated, as we announced earlier this morning, a further share buyback program of up to 2,500,000 shares that can be done used in the transaction with OBE or for other purposes. And as we have told you before, we are starting a transformation from a pure physical retailer to a true omnichannel retailer. We are we have launched our sort of both click and collect and home delivery e commerce service, and we are stepping up our ECRM program. We'll talk more about that when we have the Capital Markets Day, but a very good opportunity, I think, for all retailers to get that customer traffic. We think it's important.
And still, we have a healthy pipeline of new stores. Are not going to open any store that we don't believe will be profitable and that we believe will meet our strict criteria. We will audit all new stores every year, and we'll make sure that they actually stay disciplined. But as long as they are profitable and the audits show that they are meeting their expectations, we would be advised not to open stores. And of course, this is not just us, it's the entire discount variety retail sector that is still growing in Norway, in Europe, in U.
K, in the U. S. We have one store closure in the Q4. It's already closed. We basically just opened a new store in the vicinity at Nannestar.
And we have completed 1 franchise takeover on October 1, and we have 2 to 3 more expected this year. This is a natural transition as more and more franchise stores are up for modernization and some people stay on and some people don't. So we expect this trend to continue. So with that, I think we'll some of you asked me before about this shirt. Last year, we actually had a little bit at a shirt with less quality, but only for the staff.
This year, we have improved the quality, and we are also offering it to customers because a lot of customers started complaining that they couldn't buy their shirt. So now you all know that you can buy this for your wife or your husband as a perfect Christmas gift only at $2.49 and only at Europrize. It's a special design by our own graphic designers. Okay, with that, we'll open up for questions. I will.
Okay. Yes, questions. Just ask them loud and I will repeat them. The question was whether we can expect 9 stores for 2019 since we have 12 stores and three subject to zoning regulations?
I have mine. It's going to be difficult. Now you should expect next year. We have the stores are for 'nineteen and beyond, so some of them might come later. So we don't give a specific number for next year.
We I would expect it to be somewhere between 610, but that is let's wait and see when they get approved and there might be also some that can open on the shorter notice.
Keep mind that it's still 1 year 15 months until the end of 'nineteen.
I think honestly that the pipeline we have now is actually very strong for the time of the year we're on. So it's
Just a follow-up question
on that. On the store portfolio,
you can now see, do you expect that
The question is if we expect the stores next year to be front or back loaded or even the distributed throughout the year. And I would say that we expect it to be evenly distributed throughout the year.
The question was, first of all, that we see that e commerce is an alternative to or complement to all retail and we are following us on Instagram that I hope everyone else is doing too. It's a good channel for inspiration. And the question is whether we can actually do direct sales on Instagram. We have sort of said that at the moment start with the big important things, start with the sales through your own e commerce site. We think that is more money and more volumes.
We see that the biggest volumes are mostly, as I said, on click and collect, More than 90% is still on click and collect. So we believe that, that's more important in the first phase. We will obviously at any point in time evaluate more. We use Instagram as an inspiration for the customers. So we see that customers look at Instagram more to get inspired and then they come to the stores or go to the website.
But actually the majority of people looking at our Instagram site is going to the physical stores. They get inspired on Instagram like you and then they come to the stores. But Instagram is one of those channels that we see is growing quite a lot, especially in the home and interior sector obviously. We as you said, every year, we do know that the most important days in the Q4 is still to come. Basically, it's today.
Halloween is a small season, but this day to day is going to be big. And then the most important period is from mid end of November and to the rest of the year. So I think it's an okay start, but it's far too early to be positive or exuberant in any way.
And then in some quarters, you have commented on the performance of the different
We most of you do that after when we do the annual because the majority of sales and the majority of the results are in the 4th quarter. So we think it's better to comment on that in the next time.
Okay. And then what about IFRS 16? Do you plan to
The question was about IFRS 16. And that, I'll leave to Eskom.
Yes. We will provide numbers on that, and we will do that on the Capital Market Day on the 5th December. Then we will give you some numbers on how that implementation will affect the balance sheet and the profits for Eurofrees.
I think that's 1st of all, I think in the first half, we did some deliberate things that we talked about last time, where we actually in the mix of the campaigns, where we saw that when we evaluated 2017 that we were giving away too much margin and not getting enough sales for it basically. We're not so that was a deliberate choice in the first half. The Q3 is more sort of normalized and the campaign share is more normalized, slightly up. Campaign margin in the quarter is stable. So I think it's 0.2 or something.
It's roughly the same level.
There's a couple of questions here from Nikolaj Ebsen. First of all, we want to congratulate you the new sweater poll. And can you talk a bit about the profit per store? How many stores are running at levels that you perceive as non satisfactory? 9 stores year to date.
And how are those performing and contributing to profitability? Would you say that your marginal return on capital on new store is below at or above the company's average store? You talked about timing on freight. And then it's the freight question. Do you want to answer the store question first?
Yes. We'll try to answer. That was a long question.
Yes, there's more to come.
I think it's too early to comment on the 18 vintage when it comes to performance because we need to see a full year of operation in order to really see how the stores have different seasonality. Some stores are peaking during summer, some are peaking during winter. So we need to see a full year in order to evaluate the stores. So we cannot comment on new stores more specific until we have a full year of operation. When it comes to unprofitable stores, we have a tale of some unprofitable store.
I believe it was 17 stores last year, Trina, that was unprofitable on EBITDA on group level. And we are following up those stores. For some of them, it's relocation issues. And for others, it's, of course, management issues. So we need to work and follow-up on the profitability of those stores.
So we continue to do that as we've always done. What we're happy to see is that all the stores that were negative in 2016, they actually improved in 2017. 3 of them went into green numbers. So we see positive results of what we're doing, but it takes time.
And the majority of the stores are very profitable.
And then the next one. You talked about timing on freight. How is freight developing on comparable numbers as a part of revenue COGS?
As a part of revenue or COGS?
The revenue COGS COGS.
Revenue.
Relative.
It's stable compared to last year, but of course, we need to adjust the last year numbers with the SEK8 1,000,000 and freight costs should be in line with last year. There are no changes to the pricing nor
Nikolay. Lastly, could you buy back shares? You buy back shares. Do you think your shares have better return prospects than new stores?
I don't think we should comment on that.
Then we have one question from Jens Erik Jenssen. Have you assessed the effect of new store openings on sales in nearby and already existing stores, thinking of negative like for like?
Yes. For every new store, I mean, as I said, when we do the business case for a new store, we actually look at what is the effect of the surrounding stores. So that's part of the business case we make. We don't open a store if it makes another store unprofitable. We do get the total effect in that market.
And as I said, we go back every year and we audit whether this cannibalization effect is actually taking place and how much it is compared to what we estimated. So it's a very diligent process for opening new stores and looking at the cannibalization, too.
And some questions from Ole Martin Viskor, DNB. What is the main reason for the early shipment of seasonal goods this year? When do you expect inventory to stabilize? And what is a normalized level?
The reason for the early shipment is basically that we last year, we said that we were not happy with how we utilized the space in the stores during the mid season. So now we have planned it a little bit better how we build up the season for Christmas. That means we need to have the goods in a little bit earlier in order to ship it in the best way. So we get best operation and best presentation of the stores throughout also the mid season and the peak season. So that's why we did it that way.
And one last question from Ole Martin. On your like for like in the quarter, what was the mix between volume and price?
In the quarter, it was a more it was a negative like for like in the quarter. It was volume driven, not that much on price.
The question was that we were happy with our current inventory level.
And the answer is yes. In the stores, I believe the inventory is more balanced and correct than it was last year now. And when it comes to timing of goods coming into the central warehouse, that will vary from season to season, how we manage to get the flow. I think we could have a potential of not having all the seasonal goods delivered pre season that we could have some deliveries during the season as well. So there could be a potential to make that a little bit better.
But when it comes to the store levels, we are satisfied with the level.
How do you consider changes in the competitive landscape? I mean, there's been a
The question was, do you feel any change in the competitive pressure? I think that as we said earlier, think we are opening new stores. I think actually probably we are the ones opening most new stores. But the entire discount variety retail sector is still growing. I think you should expect that it's going to continue growing.
In some markets, it will be slightly higher competition. But as we said before, our customers primarily doesn't choose between Europritz and some other player in the discount variety retail sector. They go both places. So yes, there is, of course, more discount variety retail stores coming up in the market. Overall, that is a slightly increasing competitive pressure, but with not one to one head to head competition in the same way as you see in other markets like sports or grocery sector or other areas.
We should not expect it in Q4. I think, as I said before, also the most important now we're at the level where we're doing a lot of activities. And I think it's a very important phase because if you want to make a foundation of a house, you need to make sure that the foundation is strong and tight. And as I said, I'm extremely happy about the way we work together a cultural fit, but also from the way we work together in re cooperation. And I'm also very happy with the kind of rejuvenation of our cooperation with Hukmanay.
We see new areas where we can cooperate with them. I think that's the most important, and then we'll at some point, we'll give more visibility on the effect. But I think you also think it is competition, but we need to make sure that we invest in the market and in the prices. So that's also so net net, it's always a market who decides market prices who decides where we get.