That's probably the best way to do it or we can have or we also have some participants here that can ask questions directly. So by that, I'll leave the floor over to Anders.
Thank you very much. Good morning to everybody and welcome to this Q3 presentation for Kirt Asaf. Just want to see if this thing works. Here we go. Thank you.
Well, we will go through the highlights from the Q3 reports and also introduce you to one of our strategic initiative, a program that we internally have named Kid Xtender. In a challenging market, our group revenue sorry, in challenging market, we maintained a Stable revenue compared to last year. We saw a drop in footfall to our physical stores, but our group revenue increased by 0.5% and our like for like revenue decreased by 0.4%. However, We regret to report that the high freight costs and freight rates in 2022 not sufficiently have been incorporated in our pricing calculation models which resulted in a gross margin decrease. Our gross margin decreased by 5.9 percentage points.
The EBITDA decreased by SEK 76,900,000 to SEK 142,700,000 and the EPS ended at SEK 0 point The revenues from new categories has been important has been an important growth driver for us lately. In this quarter, it increased by 21% or €12,000,000 and we saw significant growth in the outer range and the homeware and lightning and lamps categories. And at the end of the category, we introduced We expanded our premium collection from Bedlin to also introducing higher quality curtains and decorative pillows. We also introduced as shown on the picture on the slide a new concept called Nice and Tidy, A concept for cleaning products and products helping to organize your customers' homes. So far, all these products and categories has the start has been very promising.
We thank you. We experienced a challenging operation logistics situation due to the inventory buildup caused by earlier deliveries than planned. And with that, we feel we are very prepared, sorry, for the most important quarter of the year. So then I'll leave it for you, Jose.
Thank you. Q3 was a challenging quarter in retail. Footfall to our physical stores were down compared with the same quarter last year. But we have managed to maintain our revenues with higher growth, especially from our e commerce platform that was actually launched this time last year, as well as growth from new products and new categories. In the kid interior segment, new store openings also added to the total growth ending at plus 1.4%.
While the like for like growth with the like for like growth of minus 1%. Footfall to physical stores It was negative also recorded, but especially in order. In Hemtex, we have 4 less Stores don't last year and total revenue growth was negative by 1%, measured in local currency. The like for like revenues were up by 0.8% compared with a very strong Q3 last year. And the growth in the HempTex as well is due to especially from the e commerce platform and also from new initiatives.
Gross margin. The gross margin was down by 5.9 percentage points to 55.5%. The by far most important reason is increased freight costs, we have also had larger volumes of products sold during campaigns. During Q3 last year, we had a lower than usual volume sold during campaigns because of late arriving products. But back to freight costs.
We have a resilient pricing model and we have a history of a stable gross margin throughout many years. However, in 2022, We have failed to calculate and to report the full effect of increased freight costs. We have corrected that mistake. With freight costs, with freight Spot rates currently decreasing combined with actions to secure normalized margins for future purchases. We expect a gradual improvement in the gross margin during 2023.
The higher freight costs It's also expected to negatively impact the gross margin for Q4 as all products to be sold in Q4 are no inventory. For these products, we do know the purchase prices, we do know the foreign exchange rates and we have now recalculated the freight costs included in cost of goods to be sold during Q4. We maintain the principle of more active guiding, But it's fair to expect a Q4 gross margin in line with Q3. For 2023, We expect to return to gross margins in line with the past 10 years as expressed in our financial objectives. Also, let me shed some light on how the freight costs are rolled through in our financial reporting.
The rate to be applied on a particular shipment is agreed just before the ship Leaves the Far East. A main part of our shipments is from China. The duration of a shipment to Europe will take between 1.5 2 months. We are being invoiced for that freight once the ship reaches its destination. It will then take on average 6 to 8 months before the products are being sold and the freight costs are to be charged to the profit and loss account as costs of goods sold.
In summary, it may be up to 10 months from the shipment date until the freight cost is being rolled out as a cost in our P and L. Hence, as the current inventory now includes these higher freight costs, We will be negatively impacted also going into 2023. EBITDA, the main reason for the drop in EBITDA of 76.9 percent was the reduced gross margin as just explained. That accounts for approximately 70% of the EBITDA reduction. OpEx increased by 23.8%.
Main reasons being almost SEK 5,000,000 from net new stores and SEK 4,000,000 from increased rental space, which is we consider to be a growth cost, but also increased operating and market costs from landlords. Parts of that will be due to increased electricity costs. And we also have SEK 4,500,000 in increased electricity costs as such, not from the landlords but from our own stores but our own leaders. Also almost SEK 3,000,000 in increased logistics Because our inventory is at a higher level, it is not as efficiently run as it would have been with less inventory in stock. On employee expenses, there is not a big increase.
It's negatively impacted by store manager kick off, how during Q3. I think Anders will get back to that later, but partially or mainly offset by reduced bonus provisions during the quarter.
To say that we think of always tougher times it's all about people in combination with good products. That's why we decided also to invest in our store managers. So we had a kickoff meeting in the Ramen Lir in September which Now we didn't have that in the last year not even the year before due to COVID but we thought that was we mean that's a good idea to also invest in People, although times are preferring retail right now. That was very positive. From feedback from the store managers.
Important factor for motivation.
Yes.
Inventory. First of all, Let me just be very clear. We have a healthy inventory, limited obsolescence and 80% approximately all year products. And on average, the inventory turnover is between 6 to 8 months. And secondly, We will reduce the level of inventory going into 2023.
Now the main reasons for the increase from 586 877 is earlier placement of goods. Last year, goods were arriving late We had basically no Christmas products until Christmas was almost there. This year, we're much better positioned in terms of inventory. And approximately SEK 55,000,000 of the increase is due to earlier placement of goods. I didn't deliberately skip the increased freight costs, but that's It's been already commented.
There is a higher portion of freight costs in inventory accounting for SEK 64,000,000. Also SEK76 million can be allocated to expansions, various types of expansions. We have a much higher number of stores. We have expanded the store sizes as well as expanded product and category assortment. And then finally, a technical element of SEK 55,000,000, which is regarding At what time shipments should be recognized as inventory?
This is a 1 year effect. It won't appear as of Q4 because we started this change in recognition in Q4 last year. There's also a rather Small, I would say, a portion of seasonal products still on inventory. That's basically half of that is from last Christmas. And do you believe that should be possible to sell these Christmas as well?
We hope so.
And there is also a smaller amount over summer or early season products. But again, I repeat, we have a healthy inventory and we will come down, the level will Cash flow. Cash flow decreased by almost SEK140 1,000,000 SEK139.3 million compared to the same quarter last year, Main reason being decreased profit, but also as just explained increased inventory. We have a net interest bearing debt of SEK 1.6 Dividend, we maintain our dividend policy And according to the proxy given to the Board at the Annual General Meeting, the Board has decided to pay a dividend of NOK SEK 2.50 per share as a prepayment for 2022. That represents 33% of the last 12 months net income, which is less than last year's 50%.
We find it reasonable to be a little bit more careful once we see how the Q4 and the Christmas sets comes up and how the start to 2,003 ends up before we conclude or the final amount of dividend to be paid in May 2023.
Okay. So we would like to use this opportunity to to review on how we work with the new initiative within our growth strategy. Like for like growth is our most important growth driver and category expansion probably the single most important initiative. On the back of our success of category expansion, we have for the last 2 years worked on a new strategic initiative that we internally have named Kid Xtended. There's not you will not see the brand Kid Xtended externally.
It's only a program internally called Kid Xtended. The Kid extended program also touches into our store network and omni channel initiatives. And through KidXtender, we will pilot an extended retail concept based on existing and new categories in our Norwegian online store and 5 physical pilot store in Norway. So After expanding the assortment in recent years, Kit is currently relocating and targeting store sites at an average of 600 square meters. If you go back, this the average store size in Q1 in Norway was around 460 square meters.
And for the last 2 years, we have had this program to develop an extended regal concept and the category of the team has been increased with 3 FTEs to support the project which now is ready to be launched. A large proportion of the extended Assortment will be available during Q4 2022 and additional products and categories will be introduced throughout 2023. Parts of the concept is already available in our Norwegian online store at kirt. Nno And the first pilot store will open in Bergen, Sartre Stuschanger, Thursday next week. We expect that a large portion of the sale from the extended assortment will come from our omni channel solution available in all The Norwegian kid stores not only the 5 pilot stores.
In the physical pilot store, we target an average of 1200 square meters meaning doubling the size of the 600 square meters to make room for 3 key drivers for growth. The first one as you see on the slide is increased space for inspiration. Inspiration is extremely important for kids an extremely important growth driver. And then secondly, expanding of already existing categories. We have since 2017 launched many new categories.
We aim to enlarge the offering within these categories and also some of our for large categories that we'll have for many, many years. And then finally, the 3rd driver is introducing new categories, Categories that previously are not known for the kid customers. And it's very important to outline that the assortment development is in line with the existing principle. Going back to inspiration, Good quality and very important value for money. Example of category expansion includes Premium collection as previously explained today with curtains and the cardio pillars.
We will also expand the premium collection in 2023. Office supply and paperware, kitchen accessories, robes and carpets, lamps and lighting also large You will see growth within these categories and within the kid extended concept. Example of new categories include a Focused assortment of European manufactured larger furnitures like sofas and beds. The assortment is made available online in our physical pilot store and throughout our unique in store online order functionality from all our Norwegian stores. Right now we introduced this we introduced this functionality about 1 year ago and it represents about 1.5% of the total store revenue.
So this is an endless aisle functionality, meaning that you also can sell, for instance, a sofa or a bed that you don't Physically have displayed in your store and the revenue is taken into the P and L for their physical store, meaning they have incentives to sell products that actually is not displayed physically in the store. This has been a very good success for us introducing this on unique omni channel functionality. And if you will for instance sell a sofa from a store It will be delivered directly to the customer without going through our physical store with our 3rd warehouse. Thank you. This meaning also that we will be able for all the new categories either those who are You and also for the expanded assortment to sell them throughout all our Norwegian stores even though not all of them will have the products displayed in the actual store.
The expanded assortment includes larger furniture and beds that already are in inventory with an estimated value of around NOK8.5 million. The extended assortment related to larger furniture and beds is handled by a third party logistics provider in Europe with delivery times directly to the customer of 4 to 7 business days. This is shorter Delivery times than what we can see that we normally see in the market today. We target the gross margin for the extended assortment at around 60% and for the new categories typically the larger furniture at 35% to 40% including operational expenses related to logistics and the last mile distribution. And bear in mind that we already have 3 FTEs as mentioned earlier that have been working for us for a long time now.
The 5 private stores are to open from Thursday next week. The first one as mentioned in Bergen that's a relocation within the The second one will be in Dieke, Wijnfredersta, that's an expansion and refurbishment of an already existing store. The next one in Q1 2023 will be at Sze Stossenthe just outside Oslo. That's a relocation within the existing mall. Next one then will be in Stavanger, a relocation of an existing store.
And the last one will be at Surnav Centre, And that's also every location within the existing mall. All these stores will be at an average of 1200 square meters. These are what we earlier have called the 5 physical pilot stores. So with that said, I would like to show you some pictures from recent photo shoots, so we get a bigger idea of what we are offering to customers. Not all but most of these products are now available on our Norwegian online platform at kid.
No. So if you like them, feel free to buy. Since inspiration is important, it's not only about text and PowerPoints, I would also like to share an Internal movie with you takes a little less than 2 minutes from photoshoots and movies that we make now for these products. I am most excused that this text is in Norwegian, but mostly important thing is the pictures. So Let's try and see if the technical will work.
So we have spent the last 2 years working on this program. We are Enthusiastic about it. With a not high risk, we are entering a much larger market and we're looking forward to see The results, as mentioned earlier, we had a kickoff for the store manager in September and this all the products were shown physically to them The way they responded makes us gives us a bit confidence that this will work. So that sums up Key to extended for now and just let me underline that the extended brand, we will not see that in the communication to customers. That's just an internal name for this strategic program.
So some remarks on the store portfolio activity. We have had, as said during the Q2 presentation, high activity. Right now, we have what we call 27 store project, meaning 27 stores within the relocation, refurbishment or expansion categories. And also please Mark that we now also have signed deals for the Estonian market announced also for Finland. A majority of the 27 stores will be expand also some of them targeting 600 square meters but almost all of them will be expand being able to have a wider and better offering that we see today.
We will close down 2 stores, 1 in Norway and 1 in Sweden. And there's also another opening in Norway compared to the last quarter that is in Trondje and Torgrim. Ullivol will open the week before Black Friday And I'm proud to say that we also have we are now opening in Kristine Kaskus in Tallinn. So our growth within Tallinn and the Finnish markets is now going forward with the signed deals both on new stores and also relocation and refurbishments. So to sum it up, we are well Prepare for the Christmas season.
Last year, the Christmas the majority of the Christmas products arrived late at the end of November. This year, it arrived early, a bit too early, but they're in stock. And we are now the first Style within our Christmas offering is in store. So if you like it, you can run and buy it right now. That's totally different than what the situation was last year.
As mentioned, we have 2 new store openings. And also our new warehouse in Sweden progressed as planned. We expect the building to be finalized in April and operational during springsummer 2023. So we're getting closer to moving out of a good relationship with Schenker, so 3PL partner in HempEx and into an operation for our own warehouse in summer or late spring 2023. And as Stan has said, we expect an inventory build down towards a more normalized level during 2023.
And follow the increased freight cost and our current inventory, we Sorry. Arkane Dohy has a relatively high share of freight costs That will be charged as goods are sold throughout the upcoming quarters. And with freight spots now decreasing and our immediate actions to ensure a normalized gross margin for future good purchases. We expect a gradual improvement of gross margin during 2023 and we maintain our financial objectives for 2023 with regards to the gross margin level. So with that said, we open up for questions.
Thank you, Anders and thank you, Eitan. We'll start then with some questions from the audience.
Yes, feel free, Markus. Yeah.
So thank you. So thank you for the presentation. So I have two questions for me. First, Specifically on your calculation error or the state that you're mentioning, could you try to be a bit technical and explain to us how that happens and what technically you have done now to ensure that this won't happen again.
I understand that you're concerned about the question. And like I said, we have seen increased It's very cost over a longer period of time, but we have failed to include that in our internal calculations. I think it's going to be maybe too big of a challenge to go through that in detail. But if you go back 2020 1 ahead of 2021, we actually had freight cost at fixed rates. There was a change in the summer 2021.
We didn't want to go into spot rates. And we didn't want to stick at the current levels that were offered as Fixed price in 2021, so we went into spot rates. That was a change internally that we didn't fully take into consideration when we do the calculations. They always use the standard rate for freights, but from summer 2021 that's changed and we didn't fully take that into our remotes. I think that is as far as it's possible to explain there and now.
It's important we have corrected the mistake and it will not happen again.
Okay. Thank you. So my second question here is, if you can try to think about how you think revenues would have been impacted if you were to increase prices by, let's say, 10% to offset this higher cost. Do you think that you have gained market share from sort of having too low prices? And looking a bit sort of in the next few quarters, Are you doing anything to increase prices near term and do you expect any sort of consumer demand impact from that?
I think that would be it's a good question but it's kind of speculation what would have happened if we also see Prices of course increasing from all retailers not only within our niche But I haven't reflected much on what would have happened if we would have corrected it earlier. Although If I'm not sure if it's correct to sum it up that we have gained market shape by this. Maybe but I'm not sure. I haven't done a detailed study on that but maybe we will look into that as well but most important now is to focus on what we can do now to correct We have done the correction and how we will handle the pricing policy going forward.
And then secondly, is there anything you can do short term or are the prices
fixed? The prices are the campaign and the marketing has been made for Q4. So that means that it's very small possibilities to adjust retail prices since the campaign has already been planned and it's been produced. So but going into Q1, we see larger
I think it's important to underline that nothing has really changed. We Still have a full control of our other chain. We still have the same purchasing impact that we always had. But in 2, 3 or 4 weeks, even that's too short a time for us to adjust. And then I think The what if question, what would have happened if we increased 10% is of course difficult to answer.
The problem for us was that we should have seen that earlier, so we should have had a discussion. Instead, we have to be we discovered that way too late. I'm not able to have the discussion. At least going back to the summer, having discussed that, maybe tested that would have been possible. Now it's a little bit too late for the next couple of months.
But then in 2023, we have much more space to maneuver. And this is obviously not only a Issue with freight costs, but we haven't incorporated that well enough into other pricing modes. That's our big mistake and that has been corrected.
And then my final follow-up is on how you see consumers responding The price changes in this environment that we are seeing because of course it's high uncertainty and consumers might be a bit more hesitant.
I think that's Mark is asking about Q4 revenues and traffic in a little bit more discussed way. I appreciate the question. We do not give guidance, I'm afraid, but we have said earlier that we ended Q3 with increased football. Football was slower in August and it picked up again in the second half of September. But we will stick with our policy of not Actively guiding on Q4.
It's important to also understand that our pricing model is not very strict. The prices are dynamic from season to season. So we always adjust prices if needed depending on exchange rates depending on the actual cost of the product. So we do that on a regular basis. It's just that we missed to adjust the prices for the increased freight costs.
So we're used to doing all price adjustments on an almost daily basis. Okay. Thank you. Any more questions from the audience? Okay.
We have
a couple from the web. We can follow-up on the gross margin, a couple of questions there. So can you please explain the drop in the gross margin for kid in Terva versus Hemtex and why the difference is so significant. I think that was on Page 5 in the presentation. Yes.
That's also a fully understandable question. First of all, let me say that the business model and the pricing models are the same in both markets. So the same kind of situation applies to both markets. But there will be differences between the two markets, both in terms of foreign exchange rates, for instance. The freight Cost itself might actually be a little different because there's a different distance to the harbor in Gothenburg towards Drummond.
And you might also see Different level of prices and different level of rebating or campaigning. So the reason for the drop in hand text is Also due to increased freight costs, but like I specifically said on one slide, we also have a SEK 6,000,000 Lower gross margin that should have been accounted for in key interior in first half. That's not the same situation in Hempek's. So it's the same dynamics, it's the same approach, it's the same logic. But after going through the numbers over again, there was no need for that large an adjustment in Hempegs.
But both margins are down due to basically and the same nature, the same issue.
Another question from me. If you can go back to the page 5 on the gross margin just so I understood that correctly. Yes, exactly. The gross margin now in Q3 was down 5.9 percentage points. And I think I heard you said that you should expect the same Gross margin for the Q4, I.
E. 55.5 percent that will then translate into a decline of not 5.9%, but 7.9%. So does that mean that you expect a larger decline in the gross margins year over year in Q4 versus what we saw now in Q3.
What I said was that you could expect the same kind of level as in And then the drop yes would be larger compared to last year. But this is not an exact guidance. We are implementing all the We can implement on a short term basis. But in terms of the costs of the goods in stock, they can't really be changed. They are fixed.
So it's hard for me to give an exact or I'm not doing guidance. I'm not giving an exact figure on the Q4 margin, but We expect it to be in line with Q3.
Okay. Then we have a question on the like for like. Is it possible to break it down versus price and volumes?
That's definitely possible, but we normally don't do that. I understand the question. It's a good question. We have that many times. But like I normally say, it's both.
It's not one or the other, it's both. But you do know that we have increased prices, so prices is definitely a factor. And I think it's it creates too much disturbance if we're going to give details on traffic and basket and process, etcetera.
Understood. We have another question here. What challenges Do you expect to face in the upcoming month?
Well, We have seen in retail as you guys as well that retail has been tough. So we're preparing for a bit more Challenging markets although we believe our concept works out also good in the challenging markets. We've had in parts of COVID good tailwind. We will probably see headwind and we are adjusting to that. And then we will do our best to Also deliver good figures for the quarters to come.
Influencing the factors that we can actually import. Yes.
We are not experts on setting rents for Norwegian banks but we are focusing on what we can influence. And What we have also just jumped into in this presentation during COVID we saw that it's extremely important to focus on Business development, new initiatives and the KidXtender program is one way of giving a new boost and introducing new products, New category growth that hopefully will be good sorry, give good effect in both on the short and medium term and also on the long term.
If I may just add to that. So you said that larger volumes in Q3 results through campaigning. Is it then fair to assume that you see more or that you saw more price sensitive consumers throughout Q3 without any guidance for Q4.
You're right. And I think you're right And referring to what I said, I said that we had a larger volume of projects sold during campaigns. So let me just emphasize, we did not increase rebating or we didn't do more campaigning. So It's the same campaign programs and it's the same discounting as previous years, but the volumes sold or Purchase by our customers were larger this year than last year. And one major explanation or one major factor explaining that It's the fact that we didn't have so much products in stock last year.
Hence, the campaigns were reduced. So going back comparing to 2020, We're back to what we say is a normal portion of campaign products. So it's again comparing with the quarter last year that is maybe not fully representative.
And that's also by the supply chain situation last year that gave us some problem with delays on important campaign products. That's the explanation.
But we also gained a lot of interesting experiences last year. For instance, we sold Christmas products during or to Christmas Eve and the period after Christmas Eve, which we basically didn't believe in, but it turned out to be a positive thing. So we will try that this year too. And That's not guidance. That's just giving you an insight into how we think about operations.
Good. Final question and that goes back to the campaign you just talked about. Are you planning for more campaigns for the next, let's say, 2023 versus 2022. Understand that volume sold on a campaign can increase, but your number of campaigns. Is that fairly flattish or is it increasing?
I would say it's fairly flattish. But by introducing more product categories, they will also be campaigned. So that's not comparable with last year but unlike Ben and Curtis and so you will not see more campaigning. We will also we will always move from within the quarter or move some campaigns, but you will not see a higher level of more aggressive campaigning. That's not planned for 2023.
Okay. Any final questions from the audience?
Yes. So Mark, I can take a follow-up on the kit extended and the timing of implementing this because you could imagine that you're sort of delaying sofas and big ticket items in the market environment where you see slower demand for those kind of goods. What's your thinking about this? And do you think this could be a traffic driver or Would it be more it made more sense to focus on sort of bread and butter within your categories that might be more resilient in a weaker macro environment and yes, I would like to hear your thinking about it.
Of course, if you go back 2 years, we didn't know The macro environment that we see today but I believe it's a limit risk since we do not have too much in stock. We have very good negotiation with suppliers. But it is very important Costs have been taking. Yeah, sorry. The cost have been taking.
It's very important also to online The Kildexant is not only about sofas, beds and large furniture. It's also about merchandising, better display for the already existing categories. As some of you know, we opened the largest store in downtown Oslo, Stordgartar 1. This is an area where we've done lots of testing and that leads to one of the elements within key to extend that. We, for instance, introduced 3 beds and we saw that an increase in the sale of bed linens.
We saw an increase of selling at higher quality bed linens. This is an example of how we worked in the development of the kidney extenders. So we'll move that Lesson learned into the key day standing using more physical space to display the already existing categories. So that's one key growth driver. Secondly, we have had very large success with introducing new categories for instance kitchen accessories.
We see a large potential within kitchen accessories and that's not even the answer to the pricing you will see on the sofa, unstable. So we will we've enlarged these kitchen accessories as an example that will also give a good growth driver. And then finally we have the large furniture okay with the macro. We believe the way we've done with pricing policy that we are cheap on reasonable good quality and we have shorter lead times than what you can see within the industry today. So these drivers meaning although you might Argue that this is a bit tougher time now than 1 year ago.
I think we are really at a good position and we are now entering parts of a really large furniture market within Norway.
I think Iperk may also add that You're not supposed to compare us with the ordinary furniture stores. It's not like we have a huge number of different sizes or colors or materials. We have a really limited assortment, like only 3 bets. You don't see 15 or 20 like you can see in some other furniture stores. So this is a limited test and pilot and we do it the kid way which is stone by stone or step by step.
And these large furniture, they're all there we developed them ourselves. We use well known producers that also produced for branded beds producers for instance and the pricing is way below at the same caller that what you can see on Norwegian brands. So we are quite sure it's attractive pricing. But we will see how much time it will take. We will be patient and we have had some You have sold some already.
Some already. So but we'll get back to that during the Q3 presentation. Just
a really quick follow-up to that. So one thing is sort of the increased inventory costs, it's a pro form having additional products. But in terms of larger stores increasing sort of the fixed costs through higher rent and also taking on additional electricity costs. In kind of the current uncertain environment, did you ever just consider postponing the whole thing just to stay on top of the costs in the short term. What was sort of your reflections around that?
Yes, of course, we have discussed that. But that's also why we're limited to only 5 pilot stores, not saying we're going to open extra wide stores in total. So and the length of the contracts is not is similar to what we have in our other contracts. And also we have reduced the risk within the lease contracts. So I'm comfortable with that.
But this has been discussed here. But going back to this we have 3 different drivers that all can drive and will drive top line growth. Some you might see an impact earlier and some might take longer time. But it's of course been discussed, but very happy with the risk.
And like we showed in the Q1 presentation this year, the effects of refurbishing and also expanding stores, Those dynamics won't change in they might change in a really, really short time perspective, but We don't think that they would change in the medium to longer term perspective. So having nice, good looking stores, inspiring customers to actually want to buy the products and then now increasing the bundling concept sort of. We still believe in that.
Then my final comment and it's important to know that this whole expansion of the categories can be sold through all existing kit stores without enlarging them to 1200 square meters So our omni channel.
So we completely agree the environment could have been very robust launch. We couldn't do anything about that. We're still Optimistic about what we have planned. We have a couple
of more from the web actually. And so 2 on costs there. I mean What are you doing to keep costs down given the inflation we're seeing? And then a follow-up question there. Any updates on the warehouse in Sweden and what advantage Stepp will give you.
That's a really good question.
I will answer the last one. When it comes to advantage, we haven't given any guidance on the OpEx side, but it's obvious that we expect lower OpEx since we have Whereas in Norway, we know the OpEx side. So we expect to lower our OpEx. It's a totally different models compared to a 3PL. For instance, now that we have very high inventory, we have to pay additional rent whilst we have a fixed rent of course at our own warehouse.
So we expect to some degree a drop in the OpEx with the new warehouse. Was there more questions around where else?
No. But there was also a question there on the total cost base. I mean, what are you doing to keep the cost down given the inflation we're seeing?
First of all, I'd say that cost controlling has been a part of kids' culture, I think, for like ever and both as a part of being a retail company, but it's actually a part of our culture. We are What's the idea in English? We are holding back as much as we can. At the same time, we have To admit, a lot of the components right now is not so easy to influence. We can't do so much about the current electricity costs.
The inventory situation is a little bit different, but that's actually the 2 most important increases in this quarter compared to the same quarter last year. And you probably better than us to estimate what the reducing cost will be going forward. But in terms of the running daily cost controlling, nothing has changed. I believe we're still as strong on that as we have always been.
And also bear in mind that we have had increase in wagers specifically in Norway, which you cannot see in our personal cost for the store operation in Norway. So we are Good at cost control and focusing on planning the store staff. And I must say thank you to all our employees and our store manager because they've done an incredible job at holding the cost down in all markets.
Thank you. At the end, we have several questions here, but I think most of this has been already answered. So by that, I thank you for the presentation. And if you want to have some closing remarks before we finish off.
Yes, I would like to thank you. My closing remark is that our new products, most of them, not all, are available online. So feel free to shop. For those of you in the audience, you can place the orders at StandardMe after this session. So Thank you.
We might even bring it to you personally within 4 to 7 days. Thank you.
Thank you. Have a nice day.