Okay. I think we'll start. First of all, welcome everybody. It's, yeah, you're more than your usual, so it's positive. As usual, we will start with a little bit of a lottery. First of all, we have some gifts for you today too, of course. This is the way to make sure that the Saturday evenings are positive in your homes. NOK 25. Special made package only at Europris. Only at Europris. Then, this flower, which I'm not going to try to say the English word for it. It's stemorsblomst in Norwegian, NOK 29.90. If you bring it home, your wives or your better halves will be very, very happy. Please make sure that you take a plastic bag on the way out. Also, we will have a lottery, of course, in order to make sure that so many people continue coming to our presentations.
This time, you know it's spring now. We have trampolines. Of course, you have many different types of trampolines, but we thought that we would give out one of them. I will ask Atle if you can If you draw yourself, then- You get seven out of it leaves. Someone says that this is by It's H07. That was a bit embarrassing, I must admit. Very good. Okay. Better than being surprised. This is like the American election. Okay, very good. Yes, here you are. Okay. That sounded suspicious. Yes, I know. Okay, welcome to the quarterly presentation Q1. As all of you know, it's the smallest quarter of this year. As every year, it's Easter versus first half kind of thing.
That being said, it was, in isolation, a very good quarter, driven by good Easter sales, but you have to look at Q1 and Q2 in total, of course. That's one of the key messages. Once again, I think we are proving ourselves to be the champion of the seasons in Norway, and I'm very happy with that. Now we're going to try to make a season all of the year. That's the key challenge going forward. Also, keep in mind not to get too distracted into this quarterly jungle, but keep in mind the long-term vision. I think that there are few places as exciting as Europris in the long term. I think we are in a sector that is growing. With digitalization and digital opportunities, I think that a concept like Europris has many exciting opportunities in the long perspective. Don't get too focused only on the quarters. I think long term, it's exciting times.
If you look at the quarter, highlights for the first quarter, the timing of the Easter, as I said, this stores comparability both on sales but also on gross margin percentage. We had a strong increase, 8.1% total growth, 5.3% like-for-like, mainly driven by solid performance during Easter, and once again proving we are the seasonal champion of Norway. Good gross margin performance. As you know, Easter sales is good for sales, and it's a sort of putting a little bit of pressure on the margin. Despite that, margin was slightly up. We had a very positive OpEx development. We take over more franchises, and we build a lot of new stores. That being sort of leveled out, we have a very good and positive OpEx development.
Opened two new stores in this quarter and took over four franchise stores. I'll come back to that. Champion of the seasons, and beating the market, which is maybe the most important solidly in this quarter, both on total growth but also on like-for-like. This is an interesting slide. We didn't give it to you last time, I think, because we were early in the Q4 presentation. Every year, we look at our different vintages, and we try to analyze the historic vintages to make sure that when we open new stores, there are three things. First of all, they have to meet or exceed our business case. Every new store has to meet some very strict criteria, and afterwards we go back, and we audit it to make sure that they're actually doing it.
We saw that the most recent vintage, the 2016 vintage, they outperform our business case. They are actually doing better than what we thought when we said yes to establish new stores. In isolation, you can also see that the average sales and the profit is slightly up. Although that can vary a little bit from year to year, depending on exact location. I think the key message is that our new stores are performing very well. Of course, this is the reason why we are opening new stores. This is the reason why Jula is opening new stores. This is the reason why Biltema is opening new stores. This is the reason why Rusta is opening new stores. This is the reason why Action is opening hundreds of new stores in Europe.
This is the reason why the Dollar stores are opening thousands of new stores in the U.S. They are profitable, and they are meeting their or exceeding their business case. Of course, we will continue to open new stores as long as they do. This is another exciting thing that's even more fun than talking to you guys, which is the work we are doing at the moment on enhancing the central control of planograms, spacing, seasonal space. You will not see anything of this in the quarterly figures, but this is the kind of actions we have done over the last 3-6 months that we will hopefully see the fruits of in the quarters to come and later in 2018. It's basically all about making sure that we increase the breadth of assortment that we have a central control on.
We make sure that we plan it in detail all the way through to the implementation. I think that with this kind of planning, we are getting very close to the forefront of our segment in sort of worldwide, in Europe, in terms of planning and concept development. I think this is very exciting things. As I said, we have a robust pipeline of new stores, we are not, I'll say it again, I said it last time, we will not open any new stores just to open it. We will only open new stores if they meet our strict investment criteria, and we will every year go back and audit the previous vintages to make sure that we are disciplined. There's no point in opening new stores if they're not profitable and meeting our very strict investment criteria.
Obviously, there's no point also in not opening new stores just because other segments in retail are having trouble with their physical stores. If you go to the U.S., as I said, dollar stores are in the homeland of Amazon. They are opening thousands of new stores. I think both those segments are doing well. There's not one black-and-white model for retail in the future. With that, I will give the word to Espen, who's going to take us through the financials.
Thank you. Starting with the gross margin, which was 41.2% in the quarter, up from 40.9% last year. As normal, we've done some franchise takeovers at year-end. This year, we took over four franchise stores with a negative impact on gross profit of NOK 3.4 million on the 1st of January. Last year, we took over eight stores with a negative impact of NOK 10.1 million, a little bit less negative impact from franchise takeovers this quarter compared to last year. Longer term, these takeovers will have a positive impact on the margin. When we look at the quarter, we also had very high sales of low-margin seasonal products during Easter, that had a negative impact on the margin this quarter. That will be reversed next quarter. Underlying, we are actually quite positive with the development in the gross margin.
When we look at operating expenses in percent of sales, that was 37.3% in the quarter, down from 37.8% last year. As Pål said, the franchise takeovers continue to impact our numbers a little bit. That's the key driver of the increase in operating expenses in absolute numbers. We took over, since last year, we opened 10 new stores, took over five franchise stores, the increase in the directly operated store base by 15. Keep in mind that five of the stores we took over last year was taken over on 1st March. This year, we have full effect in the operating expenses of these stores that we took over last year. Last year, we also had the 25-year anniversary. That had the price tag, but it was worth it at NOK 4.8 million. That one was, of course, not recurring this year.
Underlying, as Pål said, we have a very good cost control and focus in the organization, we continue to keep a very strict eye on costs in the organization at the moment. That also impacts the adjusted EBITDA, which was NOK 46 million in the quarter. That was up by NOK 12 million from last year's NOK 34 million, of course, driven by the like-for-like sales growth, especially during Easter and the improvement in the gross margin. On cash flow, that was negative in the quarter, less negative than last year because we see now a seasonality in the cash flow, especially the timing of Easter is important. While we this year have Easter behind us when we end the quarter, it was right in front of us when we ended the first quarter last year.
The Easter inventory is, of course, down in the stores this year compared to last year. In addition to that, we had an inventory buildup early last year of spring/summer seasonal items, as we had an early Chinese New Year, and we shipped the goods in early. That impact is not coming this year. This is as expected, a more normalized situation when it comes to deliveries from Far East. Cash used in investing activities is down from last year. That is mainly due to the fact that we have paid less for the franchise stores we've taken over, so less payments in connection with that, and also it's one less new store openings and a slight reduction in modernization of the old store base. At the end of the quarter, we have the solid cash position and the liquidity reserves of the group was unused.
I think it's the outlook, Pål?
As we said before, I think that we are in Norway, and we are in discount variety retail. This is positive for the sort of long-term outlook. We encourage you to look at the first half as a total, but also just not to get too focused on each quarter, but really have the long-term vision in mind. I think we are in a sector that is very exciting, and I think we are in times that are very exciting, where we can have a lot of opportunities to develop the concept even further with digitalization and further growth. I think it is a good start to the year, but the fun is coming in the next quarters, of course. I think we'll open up for questions.
Questions. Proper silence.
Yes.
Thank you.
Martin Stenshall from Danske. Could you please comment on the revenue growth, if you could, on the split between price and volume growth?
It's a little bit difficult because of the timing of the Easter, which is a key traffic driver, so it's a little bit difficult to give exact split on that. Of course, it's somewhat driven by price, especially on the Easter seasonal products, which is linked to the candy and sugar tax.
Now, in Q1, we had Easter. Would you be able to say anything about the basket size in a quarter with Easter? Is it, let's say, flat, up, or down since the last Q1 with Easter?
It's up from the first quarter where we had Easter, but that's basically over time that continue to grow due to price. The size of the basket varies a little bit if you have a late or early Easter, because when you have a late Easter, you also start selling seasonal items for the spring and summer. It's a little bit difficult to compare.
Yeah. The sugar tax also distorts the picture.
Yeah.
It was interesting to see the 2016 vintage. Would you be able to say anything about any, let's say, common factor of the stores in that vintage that, let's say, outperformed the average, in terms of size or location, inside, outside, shopping center? Is there any pattern?
I think the key message is that we are succeeding in places you wouldn't believe we could succeed. I think that's the key message. It's the diversity of the portfolio of Europris. Most of them are standalone stores. We have a few in the shopping centers, like Strømmen, but not a lot. I think that it's just the diversity of the concept. We are in small places where we get a very loyal customer base, and then we are in some of the biggest shopping centers or marketplaces in Norway, where some people don't even know we are there yet. There's a million people in the catchment area, so we can take the time to grow.
You also showed a slide on the initiative you started 3 to 6 months ago in order to enhance sales in between, let's say, seasons.
Yeah.
You showed also some products there. Could you be a bit more specific in exactly what you have done in centralizing the decisions on what kind of products to sell?
It's basically, as I said, the results you will not see yet. You will see them in Q3 and Q4. What we're doing is, if you go through a Europris store, basically, we are taking even more control of the best-selling spaces in the store. The end of the aisles, but also within each shop in shop, there's the products that are closest to you in the pathway as a customer. That's one big area. All the best-selling products, and there's not very exciting new things happening there. It's the kind of best sellers from previous vintages. We just make sure that we analyze it in a more coherent way, and we make sure that the best products with the gross margin increasing sort of features are in those places.
That's one thing, and we take the control all the way through to implementation with the volumes. That's one big area, and I think that puts it at the forefront of the industry in Europe, at least in terms of planning. We also take more control of the seasonal space when it's not a season. Because of course, we have 200, 250 sq m of seasonal space in the stores. When you don't have a distinct season, of course you have a season in September, October too, but not as big as spring, summer, or Christmas. You need to have a smaller seasonal assortment, and then you need to have best seller kind of consumables. That we are taking more central control of to optimize the assortment and make sure that we get it through all the stores.
That's something also, which is, I think there's only a few players in this segment in Europe that is doing, and it's exciting things.
There's a number of new stores planned for 2018 and 2019. Would there be any new stores in the greater Oslo area?
Yeah. There's actually one, third of May in the basement parking lot of Rykkinn, which is maybe not the most fashionable place to be. Rykkinn is fashionable. I'm not offending anyone here, but putting a store in the garage, actually in the parking space, might not be what you would dream of, but I think it's fantastic. It's going to be a success, I know. Third of May, just come to the opening party.
Okay.
It will be good. Otherwise, it's sort of all over.
Yeah. Then lastly, it's important to look at H1 in total versus H1 of last year.
Yeah.
Would you have any comment on what you think about H1 compared to H1 last year?
No.
No? Fine. Thank you.
Yes? Yes, please.
Hey. Petter Nystrøm, ABG. Is it possible to quantify the negative effect on the gross margin due to Easter in Q1?
Not to do it exactly, but it should be affecting the margin in the range 0.4%-0.5%, approximately.
Finally, one question. Previously, wholesale to franchise has moved down due to the inventory reduction. Is that now back to a more normalized level?
Yes, we are normalizing that, but still, I think it's a little bit too low.
Perfect.
Okay. Any question here.
Thanks. Marcus from SEB. Could you reflect a little bit on your SKU base now versus 2014 when you IPO'd? What's the SKU base looking like today versus four years ago? The size, type of products, say, average price, et cetera?
Very good question. We IPO'd in 2015. I think that we are sort of totally have had a focus on keeping the number of SKUs quite stable and slightly reducing. Slightly going down, but not dramatic. I think it's not a big change. I think we have a little bit more in some categories like pet food, pet accessories. We have more assortment, wider assortment.
Somewhat more brands?
Somewhat more brands. I think it's like a two percentage points of sales or something increase in share of brands. I think that's the biggest thing. The average price has gone a little bit up, mainly due to if you compare with 2014, that was pre the USD versus NOK. I think that's slightly, yeah. Okay. Ole Martin. Keeping you busy running here.
Ole Martin Westgaard, DNB Markets. You commented in the Q4 report that you are to open for home delivery. What's the timing on that?
The team that is doing it was dreading that I was going to say it. It's going to be June.
Yeah.
Yeah, we'll start it, but we'll have a soft start.
Yeah. Just on the price and volume mix, can you give any sort of flavor of how you see the market in the retail in general between volume and price for 2018? Not on Q1 specifically, but how is the market? Do you expect prices to be a driver of growth, or is it only volume, or how do you see that for 2018?
In 2018, or if so far? On the market so far, I think, you look at the figures and you analyze as well. I think the market so far has been soft. It's early in the year, and the biggest seasons are ahead of us. I think it's a little bit early to say.
On the season that is ahead of us, have you done anything specific differently this year compared to last year that we should take notice of?
Maybe we have this team internally that is going to be a little bit better every time. We are going to be a little bit better this year. If you picked up that brochure that we showed you, these two fantastic brochures. If you look at these two and you compare it to the ones last year, you will see that we are a little bit more authority, a little bit more sort of assortment, wider assortment, more exciting assortment, some new product features. It's not going to dramatically change, but I think that if I ask the team, are we a little bit better this year than we were last year? We always ask ourselves that question at the start of a season. I think the answer this year is yes, we are. Better planning, better products, better material, better execution.
We'll see in the next few months whether it pays off or not. I think we are always getting a little bit better, and this is retail, it's operations, and always getting a little bit better for each season.
Do you see the sort of start of spring as normal compared to last year?
It's a little bit slower because of the snow and the early cold temperature in the beginning of April. If you look outside now, spring is starting. I think that you have to actually look at Q2 to get comparable figures. We've been listed for a few years now, and there's some Aprils that have been fantastic and some Aprils that have been slower, and then the quarter can be totally different. I think that it's really important to look at first half.
Ulf Lenby, Nordnet. Reducing the number of franchise stores, does that create any noise in your organization? When will this conversion be finalized?
You shouldn't probably ask me. No, I don't think it creates any noise. Of course, it's a little bit tougher to get margin in two parts of the operations. I think that most of those franchisees we take over is the franchisees coming to us and wanting to sell their stores. We don't have a specific target because we're not driving this ourselves. It's more driven by franchisees coming to us. I think that there will be a natural reduction in number of franchisees. Most franchisees are positive figures and are doing well. I hope that they will continue and do well and work with us.
You're not opening any stores under the franchise model?
No. No, we're not. I think it's a little bit the fact that this business is getting more and more integrated. That's the key message. Okay. Should we take any questions from the web?
Several questions from the web. Starting with Mikko Ervasti from Nordea. How much of the 5.3% like-for-like growth must be tied to Easter, and how much to overall Q1 growth that would be sustainable this year? It's very difficult to answer because it's not really comparable to last year because of the timing of the Easter, and it's a big difference if you have an early or late Easter, due to that you also get the start of the spring season. I would say that a significant part of the growth in the Q1 was driven by Easter.
Second question from 1Invest. Please, can you indicate whether the sales year to date, i.e., until today, are positive like-for-like? Easter obviously had an impact on advertising and marketing costs in Q1. Could you give an indication of this phasing impact?
We are reporting on the Q1 numbers. As we've said quite clear, it's important to look Q1 and Q2 together because you need to see it combined.
Question from Global Assets. The gross margin was higher than same quarter last year, you referred to negative one-offs such as Easter and franchise takeover. Is it an underlying trend this year with the gross margin higher than last year or just a really good Q1 considering the one-offs?
Adjusted for those two, actually this year we had a positive compared to last year from the franchise takeovers and the gross margin effect from Easter sales was negative. Adjusting for that, we see a slight positive underlying performance in the gross margin.
Question from Tushar Jain at Goldman Sachs. How shall we think of impact of Easter on like-for-like and profitability?
Same answer as before.
Second question from him. On competition, is the pressure still increasing? If so, specific categories that you are facing pressure?
I think that the pressure is not necessarily increasing. It's not keeping, I think that in certain segments you have some pressure, like in personal care there, say, the entire market is down. That's only one small segment. We have a lot of other categories. In general, I think that we're not really feeling that someone is targeting us in any way. It's a general kind of the same as previously. Little bit more pressure in the grocery sector, not because of us, just because between the grocery players.
Question from Idar Bakke. Do you use much bargain prices that EPR loses money on to get people in the stores?
No.
Question from Aksel Ramstad, ODIN Forvaltning. Can you isolate the growth in the week before and during Easter relative to last year?
I think technically you could. It doesn't really make sense. You need to look at this business on the longer base than week on week.
That's it.
Okay. Thank you for coming, and make sure also that you get your trampoline. Sit in the front next time, and you'll get an opportunity to win. Okay. Thank you.