Good morning, and welcome to this Kid Q2 presentation here from Arctic Securities. Today, we have the CEO, Anders, and the company's new CFO, Mads, who will take us through the results. Before we start, I would just like to remind you that you may ask any questions you have on the chat function on the right-hand side of your screen. With that, I'll give the word to you, Anders.
Thank you very much. Thank you very much. Good morning, everybody, for those of you at the webcast and for those of you present here at Arctic in Oslo. We will kick off with the headlines, which we'll go deeper into during the presentation. We have experienced a challenging retail market, but improvement the, the development during the quarter. Sales were slow in all markets during April and May, but picked up in June. To sum it up, the group revenue decreased by 0.8%, compared to a strong +8.8% last year. In constant currency, the revenue decreased by 2.5%. The like-for-like revenue decreased by 3.3, and the online revenue increased by 9.3%.
The gross margin increased by 2.2%, mainly due to normal freight and freight rates, sorry, and price adjustments fully effective, which Mads will go deeper into later. And then the EBITDA decreased by 1 million NOK to 166.6 million NOK. The EPS ended up at 0.9, compared to 1.28 last year. So, what's been our operational focus during the quarter? The second quarter has been very busy, with many new initiatives being launched. Atelier was launched as a new collection in May. The collection is a collaboration with the famous Norwegian influencer, Camilla Pihl, and it offers customers a limited and exclusive high-end assortment.
The collection was well-received by a customer in Kid, in Norway, with a revenue of NOK 3.5 million in the quarter, and bear in mind that it was launched at the end of May. I must say I'm impressed to see how Kid continuously work with category expansion and development, and the launch of Atelier with Camilla Pihl is an important move, targeting a wider customer base and being more offensive in social media channels. The extended project was launched in Norway in Q4 last year and includes an extended assortment, available online in five pilot stores and in selected larger stores. One pilot store was opened in Q4 last year, two more in Q1, and then the last of the five pilot stores were opened during Q2 this year. Revenues from the extended assortment was, ten point eight million NOK in the quarter.
We continue to see a gross margin for larger furnitures in line with our expectation of 35%-40%, including the last mile distribution costs. We will continue to launch new products and categories within the extended program for the upcoming quarters and also into 2026. The pilot phase has been very promising, and the launch of the Kid Extended concept is considered successfully, both online and in our physical stores. Based on this, we already now have chosen to launch the assortment online and in selected larger stores in Hemtex during the first half of next year. During the quarter, we have also launched made-to-measure sun screening that enables Norwegian customers to order blinds, shutters, and curtains tailored to specific measures. During Q2, we launched a new...
Sorry, we have an old platform earlier, but we launched a new online ordering system, model, and changed our main supplier with which provides us, which provide customer with a broader assortment, more attractive prices, and more seamless online customer experience. The model was also launched as an integrated service in our shop-in-shop model, enabling physical stores, for the first time, to sell these products. So far, with old model, we only could sell these products during our web shops, not throughout our physical stores. As a result, we experienced strong growth from the category during the quarter. This was a part of our e-commerce development, and also during the quarter, we implemented several new initiatives and improvements in our platform, such as chat, chatbot, and also enabling video functionality.
We continue to invest in all our web platform to fuel future growth and strengthen our positioning and focusing on our shopping experience. As one of the first retailers in the Nordics, the Science Based Targets initiative has approved our net zero science-based target during the quarter. This will be an important milestone for our climate emission plan, and future... Sorry, further details are available in our sustainability report, which you will find on our website. And then also during the quarter, we finalized the relocation of our new warehouse in Borås, Sweden, according to plan. We have seen satisfactory progression in the warehouse efficiency and will continue to optimize our operation. I must say, big thanks to all employees working in Sweden. This has been a great achievement with what you have done during Q1 and now finalized during Q2.
In Q2, NOK 2 million is booked as other OpEx related to the relocation. Our ongoing integration program for IT backend systems in Hemtex and Kid progress according to plan. During the quarter, we implemented a common points of sale, also known as POS, in all stores, and we will continue to integrate our IT platform throughout the year and also into the next year. A common IT platform will enable us to work more efficient and reduce time to market. So with that said, I will leave the floor to our new CFO, Mads Kigen.
Thank you, Anders. First of all, good morning to all of you. My name is Mads Kigen. I'm a Norwegian citizen, and live in Oslo. I have studied business administration and finance at the Copenhagen Business School, in Denmark. And after the studies at CBS, I have demonstrated history working in PwC in the different departments, such as deals, consulting as an advisor, and I also have some experience from the pharmaceutical industry as a finance manager, a couple of years. My last role, I've been in Kid Hemtex since September 2021, and I have in the business development department, where I led the project and program with a great team and effort, where we developed and established the new warehouse in Sweden, and also the offices for Hemtex.
And we will now expand with reference to the stock exchange announcement from yesterday, going forward. Enough about me. Let's get into the numbers. So as Anders said, in the second quarter, group revenues decreased by NOK 6 million, representing a decrease of 0.8% in the quarter compared to previous year. In constant currency, the decrease was 2.5%. It was a challenging start of the quarter, and we experienced reduced footfall in our stores across all markets. The footfall development was partly offset by an increased average revenue per customer in both segments, and that is a result from strong category development and effect from our employees, as Anders mentioned. I want to emphasize that the development throughout the quarter.
I want to emphasize that the development improved throughout the quarter, and that we had a positive revenue growth in June for the group, compared to the previous year. Another thing I'm very pleased to point out, that we had a positive growth in our online revenues in both segments, and we had 9.3% growth in the quarter compared to the previous year. And that is also after we had negative growth in Hemtex in the first quarter this year. In Norway, the revenues were down by 1.1%, but we saw an improvement throughout the quarter, as I mentioned, for the group, and we had positive growth in June.
The extended assortment, as Anders mentioned, is only piloted in this market, and we had a positive impact on the online revenue growth from the extended concept. Worth noting is also that we had 70 shopping days in this quarter, compared to 71 days previous year. For Hemtex, we experienced a challenging market, with -4.8% growth compared to the previous year in constant currency, but we had this positive online growth, as mentioned. Another thing I want to point out is that Finland had the strongest development in Hemtex this quarter. I also want to comment on that the Hemtex 24h revenues were stable in the second quarter, compared to previous year.
As stated in the Q1 report, the termination of the agreement with ICA Group will have a negative impact on the revenues for the full year. In terms of gross margin, we delivered a gross margin of 62.2%, which is up 2.2 percentage points from previous year, and the margin is driven up by both segments and in line with our earlier communication. Kid increased by 3.1 percentage points, and Hemtex by 0.7 percentage points. The improvement in our gross margin. It follows an inventory comprising a more normalized freight rate level, in addition to, the positive, price effect from Q1 will fully affect this quarter. That said, we remain confident, to our financial objectives related to gross margin for the full year.
OpEx to sales, excluding IFRS 16, increased to 51.1% compared to previous year. And I want to comment on the key drivers and factors. The HQ increased, but it's due to recruitment to our e-com and IT departments, and this is related to projects and other initiatives to fuel and enable future growth for the whole group. We also saw higher rental costs to our store portfolio, following the index adjustments and our new net new stores, in addition to some expansions in terms of store size. We also had some relocation costs related to the new central warehouse, and we had the general salary and price increases, but partly offset by the tight cost control. From that, we have reduced the number of working hours in our store.
I want to send a big thanks to our employees in the stores and the operation teams in both Kid and Hemtex for their great effort. Please note that we had non-recurring items in second quarter, amounted to a total of NOK 2.6 million related to the relocation, where NOK 0.6 million were recognized as employee benefit expenses, and we had NOK 2 million in the other OPEX, so NOK 2.6 million in total. Also related to the relocation, and then we're now taking the logistic in-house, the logistic operation in-house. We will see a shift going forward from other operating expenses, logistics, to the employee benefit expenses. I refer to a table in the appendix, for those of you interested, where you can see some more details about the logistic costs in Sweden.
To summarize the development in the second quarter compared to previous year, we had slightly decreased revenues in a very challenging market. We had an increased gross margin due to freight and the price adjustments, and somewhat increased OpEx base, partly offset by the strong cost control. All in all, this results in an EBITDA on similar level as previous year. In terms of cash flow, I want to comment on following things. The cash flow from the operations was strong and is mainly due to timing of paid corporate taxes, which was paid in Q1 this year. In addition, we also had a positive effect from the inventory build-down, linked to the freight rates, primarily.
The cash flow from investments relates to capitalized expenditures to our store portfolio, the online digital platform, and our new warehouse in Viared. Compared to previous year, Viared, or the new warehouse, is the key explanatory factor. Cash flow from financing is explained by the dividend with payout in May this year, and the net change in debt. At the end of the period, we had the cash and available credit facilities of a total of NOK 176 million. All in all, it's a satisfactory financial position for the group. That said, Anders, would you would like to summarize the recent activity in the store portfolio?
Yes. As you can see, there are several store initiatives, or project as we call them, that has been signed. Both new stores, relocation, and refurbishment. For those in the category relocation and refurbishment, we focus at... Almost all of them are enlargements targeting our latest concept of 600 square meters. So, going out of the quarter, we have signed 22 projects that will be complete. Today, we opened 3 stores in Sweden that all are, all are relocated, refurbished, and enlarged. So there will be a high activity, both in Q3 and also in Q4, going forward.
So, as communicated in yesterday's stock announcement, Kid ASA has decided to initiate an expansion of the warehouse facilities in Borås, Sweden, for the purpose of establishing one central warehouse for all markets with a capacity for future growth. The expansion is dependent on approval from the Municipality Council of Borås kommun and Trafikverket. The purchase agreement includes an option to purchase another plot for future flexibility. The decision is based on an assessment of the most efficient logistics solution for the group. Currently, the Norwegian warehouse has a high degree of filling, which entails limited flexibility and increased costs. Construction of the warehouse extension of approximately 27,000 square meters is expected to start the first half of next year, and to be finalized during 2025. And that's at 27,000 square meters.
In Norway, our warehouse now is 14,500 square meters, and we also have an external buffer warehouse capacity of 3,000 square meters. So this is giving us much larger flexibility and capacity for future growth as well. As a result of this, the warehouse operation in Norway are expected to be discontinued during 2025. Kid's investment in the joint venture and fixtures and fittings in the warehouse expansion is estimated to be in the range of SEK 120-150 million. And this is expected to mainly be financed with a new separate bank facility. The project is not expected to impact the dividend policy for Kid. Further details are provided in the stock exchange announcement that was released yesterday. So last slide before Q&A.
To sum it up, as Mads already have mentioned, the gross margin is expected to continue to normalize to a combination of price adjustment and normalized freight levels. We reiterate, strange word that, our financial objective with a normalized gross margin for the full year of 2023. The launch of the extended concept is considered very successfully in Norway, both in online and in physical stores. I must say, I'm very pleased, and I'm looking forward to launch the extended assortment online and in selected larger stores in Hemtex during the first half of next year. So that ends our presentation, so now we are ready for Q&A. Carl Freddy, any questions?
Under to Mads. We'll start here with the audience. Just raise your hand and I will give you the microphone.
How has Q3 been so far?
I'm looking forward to give you details on Q3, first with the revenue update in October, then finance with the full P&L in November. We will not give any further comments on Q3.
Any more questions from the audience? Yes, go ahead.
Could you give us a split for Q2 on price versus volume?
Well, we're often asked, how much is the impact of the price adjustment? Honestly, it's extremely difficult to measure that, although there's a constant changes both in the assortment and in the pricing. So we do not focus on that figure. We focus more on how to say, business improvement, so, but the factor that the prices has been increased is a driver, an important driver, but we also have moved the customer to, for instance, coming up here, although it's small, not that big impact in this quarter, moving to better qualities, and the extended is also driving the basket size, selling higher priced items. But we do not have the split between the two drivers, sorry.
Thanks. Since you're moving to one central warehouse, and given you commented that you are going to sublease your Norwegian facilities from 2025- 2030, and given the high degree of fillings and lower flexibility and higher cost, how easy and what price do you expect the sublease to be?
Well, we have had an external review of the potential in the market, and of course, that's been taken into consideration when we have done this move to Sweden. So we are comfortable with the level of rent we see in the market. So when we say that it will drive both efficiency and lower cost, that's included in the calculation.
Then we'll have a few questions here from the web. The first one touches on gross margins, which improved quite significantly from Q1- Q2. Could you give some detail on how much of that positive delta was driven by lower freight costs, and how much was continued price adjustments?
I'm not sure if you want to give the exact numbers, but we see a lower share of the inventory from the freight rates in Q2 compared to the first quarter.
And, as probably, if you follow the index for freight, you can see now that the freights are at a normalized level compared to pre-COVID. And it's an extreme, extreme difference from going back 12 months. So you will use, as Mads said, that's what you will see in our gross margin improvement, in started off in Q1 and now in Q2.
Then there's a question here regarding rent level on your stores. As you mentioned, obviously, there's been quite a significant KPI increase in 2023. But could you give a comment on how the market balance is at the moment now on new leases or expansions?
Well, there is the KPI adjustments that will hit us in all leases. But, looking at negotiating new leases and renegotiating existing leases, at the end of the leasing period, we experienced that both Kid and Hemtex is, I will actually say, an important tenant in shopping malls and other locations. That gives us a comfortable position going into discussions with the landlords. And we also have seen lately that some smaller competitors has closed down during the quarter. So, hopefully, that will offset some of the index regulations seen lately in the time to come. But it's too early to speculate and see, but I will sum it up that we have a comfortable position going into discussion with landlords.
Kid is, and Hemtex has a unique position in the market.
Then there's a question here regarding your expansion into somewhat more smaller furniture, et cetera, which has obviously been a segment quite negatively impacted by lower purchasing power over the last couple of years. Are you willing to share any thoughts on the timing here? Has it been more challenging, a more challenging market to expand into the new thoughts upfront?
Well, the project was initiated three years ago. We did not know that we have the this economic environment that we experience now. But that said, we have already... We from the beginning, we have said that 2023 is a year of piloting. I must say, the message today that we all already in Q2 have decided to enter the Swedish and Finnish and Estonian market with the extended, that's a strong message. I cannot and will not comment on what our competitors experience now, but we are very satisfied what we see with our extended program. And bear in mind that we also do more business development in Kid and Hemtex in addition to the extended program, but that's been highly successful since the launch launch in Q4 last year.
Thank you very much. That was all the questions we had, and so I'll say one thing, once again, thank you, Anders, and thank you, Mads, and to everyone on the line, have a nice day.
Thank you.
Thank you.