Earnings Call: Q1 2020

Apr 22, 2020

Hello, and welcome to the Ax Food AB Q1 Report for 2020. Throughout the call, all participants will be in listen only mode. And afterwards, there will be a question and answer session. Today, I'm pleased to present Alexander Bergellint, the Head of Investor Relations. Please go ahead with your meeting. Thank you, and good morning. This is the Axford First Quarter 2020 Teleconference. And with me today are Charles Falco, our President and CEO and Anders Lichtmann, our CFO. In the Investors section of our website, you will find the presentation for today's call, which is intended to be viewed in conjunction with our prepared commentary. We encourage you to follow along with that presentation. After our prepared commentary, we will be taking questions. A recording of this call will be made available on the Akzoos website. I will now turn the conference call over to Klas. Thank you, Alex, and let me, of course, welcome you all to the presentation of Axovitz's interim report for the Q1 2020, and I will immediately ask you to turn to next page, Page 2. We have an agenda, and we will go through the key ratios for the Q1. We will update on our financial position as well as update on our strategic agenda. We'll also give you an update on the outlook of 2020 and also provide some comments on our business impact of COVID-nineteen and then we'll end with Q and A. Please go to next Page 3. And before we go into the first quarter, as a quick reminder for you who don't follow Ax Food on a daily basis, we are a leading food retailer in Sweden with a clear house of brand strategy with a vision to be leading in affordable good and sustainable food. Our Rolling 12 sales is now almost up at SEK52 1,000,000,000. Let's now go to Page 4. And let me now start to go through the development in the Q1. Please turn Page to number 5. As you are all aware, we are in an exceptional times. Hence, our Q1 has been very special. COVID-nineteen has had and will continue to have a major impact on our society as well as on our operation. In this, it's important to say that the food industry has an essential role in providing the entire country with food and groceries, at the same time to do all we can to prevent the spread of the virus. We've tried to balance this at our best effort at the same time as we have seen a very high volatility among consumers shopping with some clear hoarding effects in March. So we report a strong quarter, influenced by the hoarding, but also a very intense quarter for the organization, particularly at our warehouses and our stores. And even though the focus in this quarter has been on handling the current situation, we have continued to invest for future growth. Please turn to Page number 6. And before we get into the numbers, I just want to provide with some background slides. It feels now as a very long time ago, but the challenges we have faced is actually just in the last month of the quarter as March was a very turbulent month. We noted, 1st of all, a healthy Jan and February and then after the winter holiday week 9, at least the holiday was for parts of Sweden, we started to see some hoarding effects in our stores. This then escalated the week after, something that put tremendous effects on our logistics. And when it was declared a global pandemic by the World Health Organization on March 11, we noted some additional effects. We see an increased effect on cafe and restaurant markets with less people eating out. We noted clearly less traffic in our city centers due to the people working home in an increasing degree. And in mid March, Norway imposed travel restrictions and the sudden dramatic drop in visits to the cross border trade with sales for the euro cash was more or less vanished. We're pleased though to note that in the end of the month, the hoarding has more or less stopped. Please go to next page, Page 7. So the impact on this, if you look at the total Swedish food market, it is clear that we noted some hoarding that resulted in a tremendous growth in March for total food retail. If you go to the next page, Page 8, the effect was then even larger online, a strong increase despite that more or less all players in the market was not able to manage the fast increase in demand. Let's go now to Page 9. And just to provide some perspective on the hoarding effects, and I must state, we didn't have any major issues with supply from our manufacturers. However, a peak like this put tremendous pressure on our system and organization. Clearly, it's been intense months just to keep the shelves filled. And just to give you a number, we have handled over 2,500,000 more parcels this March compared to March last year. And the chart that you see on the slide shows hoarding and shelf availability during this period, and you see the dramatic and sudden impact, something that resulted in some low shelf availability, an effect that with some exceptions we now have sorted out. And I must state that it's been a fantastic job done by the organization to handle this special situation. Let's now go to next page, Page 10. And with this, I would like to go into our numbers, and we'll start with sales. Once again, we report a very strong growth across all segments. Overall, sales has increased by 9.5% to more than SEK 13,000,000,000. And the hoarding that I mentioned contributed with 4 percentage points to our store growth. We also had a calendar effect with a leap day that added another percentage points. Hence, even excluding these extraordinary effects, we have a positive sales momentum. Clearly, a very strong like for like for Willis who outperformed the market. We also noted a strong hemp shaped franchise sales and the sales for the Groupon stores was also impacted by less traffic in the city centers. We have a good quarter for Akzo Snabgos, but challenging situation in the end of the quarter due to the weak restaurant market. And as mentioned on the previous slides, an intense quarter for Daghav where sales primarily was driven by Villis and Hampshire. Please go to next page, Page 11. And if we take a view at our store sales, it is clear that we continue to gain market shares. Our growth amounted to 11.7% in the quarter and should be compared then with 9.1% for the market. And even if our system experienced a very challenging time during March, I think it's clear that we, compared to the market, have handled this situation fairly well. If we now go to next page, Page 12. And in terms then if you look at the online, the online growth was 39%, where we also outperformed the market. The growth compared to 27% for the market is clearly something that we have outperformed. And as shared, we have had some clear capacity constraints online. We will obviously follow the development closely and take required actions. And I will come back a little bit later on in this presentation regarding our plans to further increase our capacity in this sales channel. Let's now turn to next page, Page 13. And let's now go into our operating profit. Behind the strong like for like growth, we report an increased profit and higher margin. And it's particularly been strong development in Villas and Axford Snugos. And the effects that we see from the positive like for like are, must be stated, partially offset by effects related to the COVID-nineteen, such as lower gross margin due to sales mix and clearly some increased costs. But we also have had extra costs related to the dark stores. And some of our businesses experienced a challenging time and required some extra support like UrbanDelhi and Eurocash. And our operating profit came in at SEK544 1,000,000, which is up 12% versus last year. Let's now go to next page, Page 14. And I will now move into our various segments and give you an overview of them. And let me start by our largest villas. And it must be stated that villas have handled the situation in an outstanding way. We reported a strong quarter with strong sales growth of almost 13% and like for like growth of 11%. We started the year in a positive way and noted a significant hoarding effect in the end of the quarter. We also have a strong growth online, and we continue with our efforts to roll out more Click and Collect stores. Our operating profit had a growth of 18.3%, and we report a higher margin at 4.5%. And our operating profit is clearly then driven by the strong like for like, which is again is partly offset by costs associated with the hoarding and somewhat lower results from Eurocash due to the situation in the cross border trade. It must be stated that euro cash effect in this quarter has been fairly limited as the border closed in mid March. Let's now go to next Page, number 15. And then moving into HEMCEP. Total sales increased 9.2%, slightly above the overall market. Our franchise stores continue to do well, and we're pleased to see that the Groupon like for like take steps in the right direction as we have seen somewhat less hoarding in Hampshire, but we also have some Groupon stores that has been hampered by the less traffic in city centers due to the effect of the COVID-nineteen. And in this perspective, it's obviously a positive effort by Hemshaft to grow more or less or slightly above the market. We report the higher profit for Hemshaft at SEK61 1,000,000, which is a flat margin versus last year. Let's go now to next page, Page 16. Looking then at snavgos, that clearly faced a volatile quarter. We started the year in a very positive way. And also 1st week of March, we did actually not see any effects from the COVID-nineteen. So in total, Axosnabios had a strong quarter. Sales were up 6.5%. We noted a like for like growth of 6%. We also had a new store opening just in outside Johan Sjopping. Now operating profit is higher at SEK24 1,000,000 and we note a higher margin and a clear improvement versus last year. There is, though, a challenging and uncertain situation moving forward for Akselasnabios due to the weak market for restaurants. As sales is now, in the end of March, approximately 25% down versus last year. The restaurant market is, as you know, down significantly more. So in that perspective, we are at a better pace. And this is mainly due to Snabgro's also support, as an example, local pizzas and fast foods, which have who have a high share of takeaway meals. Let's now go to next page, Page 17. So the last segment that I will cover is DOGA. And as shared initially, it has been a very intense quarter for DOGA. And I must state that despite all the workload and increased sick leave, DOGAB has managed to handle the situation in a very good way. We report the strong sales growth at 10%, driven by strong performance for Villiers and Hampshire. At the same time, we have a clear slowdown in sales to our convenience sector. We have a slightly lower profit at SEK164 1,000,000 and a lower margin, mainly due to additional costs related in this period to transports and warehouses where we had significantly over time extra shifts. We also have costs related to the dark stores as well as costs related to closing down our dark store in Malmo as shared last quarter. And as mentioned earlier, we had extra support and cost related to support our restaurant business, Urban Deli. Let's now go to next page, Page 18. Now let me end this part of the presentation by providing some additional information in this exceptional and difficult time due to COVID-nineteen. The quarter was characterized by high activity and creativity in dealing with everything this new situation has given rise to. We've seen a higher stream of customers with higher demand for our products and challenging in terms of how we are dealing with a large number of employees home on sick leave, how we are supporting the business that are having a tough time and how we can come up with various ways to help people in risk categories to shop and get their groceries home to them in a safely and securely manner. And I would like to highlight some examples that we executed in this period. As an example, Hemshifts launched early on something called Senor Timmen, which is a special shopping hours for elderly. Maat Horen was launched by Maatopese, which is a dedicated online store for people at the most risk. And Axosnabgos opened up its Stockholm Jadet store for consumers, giving people in the area an option to avoid crowding in other stores. Let's go to next page, Page 19. And at the same time, as we managed to secure food to Swedish consumers, we've also dealt with safety, as safety and well-being of employees and customers always comes first. We have in this time implemented several initiatives to protect employees and customers and to prevent spread of the virus. We were early on launching plexiglass shields and protective screens at checkouts. We have floor markings to help keep safe distance. We have hand sanitizer placed around the stores. We've communicated a lot to encourage spreading out store visits, such as which was very important now ahead of the big Easter period. And pleased to note that our own data shows that some of these efforts are really given positive results as we now see a much larger spread of the store visits versus before this period. Let's now go to next page, Page 20. And finally, another initiative in light of the COVID-nineteen has been to support small suppliers. And in March, we opened up a fast track for small scale producers, many of which ordinarily supply restaurants to give them exposure for their local food products via some of our sales channels. And so far, of about 150 applicants, about 120 suppliers have been approved as they meet our quality requirements. And 20 suppliers have already delivered products to our stores. With this, please turn to Page 21. And with that, I hand over to our CFO, Mr. Anders Lexmann, who will present our financial position. Anders? Thank you, Claus. And let me then first get into the cash flow for the period and then turn to Page 22. And as you can see here in the chart, we have a very strong cash flow in the Q1, SEK 80,000,000 compared to minus approximately minus €1,100,000 last quarter, and that is mainly explained by 2 things. We have a strong net working capital effect this quarter, and that is explained by the increased sales due to the hoarding and that's also increased the accounts payable from mid to end of March. Secondly, the annual meeting in March decided to divide the dividend into 2 this year. And from this, we have a positive effect in the Q1 with approximately SEK730,000,000 On the negative side, we have some higher investments this quarter compared to last year, and that is partially explained by a divestment of an asset hold for sale last year over approximately SEK100 1,000,000 Otherwise, we have small differences in the cash flow and, of course, a strong cash flow from our operating profit. We now also have full effect of IFRS 16 and no differences compared to last year in that case. And then turn to next Page 23. The investments amounted to €267,000,000 this quarter, and that's approximately €30,000,000 higher than last year. We see higher investments in our retail operation, both due to more store establishments, but also higher some higher pace in refurbishments in our stores. We also had higher investments in IT, and that is also according to the higher pace in the store establishments. And we had a little bit lower investments in our wholesale operation, and that's due to our investment last year in our warehouse in Johan Sjope. Let me then turn to next Page 24, and we go back to the development of our working capital. And we see that we have a stable development in this quarter. In this quarter, also we have approximately minus 3% in net working capital compared to sales. And despite that we saw improvements both in accounts payable, receivables and inventory, the strong growth pushed the ratio somewhat was up in the Q1. Then turn page to number 25 and look at our financial position. We as you can see in the chart in the blue color there, we have a net receivable position actually at the end of March, and that's for the first time in a long period that we have a receivable position at the end of March. And that's, of course, also explained by the dividend that is lower in this quarter and also the positive effect in our net working capital. We have a stable ratio of net debt compared to EBITDA of 1.2. And the equity ratio is approximately 18% in the same level as last year. And that is explained by that we now we have half of the dividend paid up now and half in September, but the full dividend is have impacted the equity and the dividend that we will pay out in September is recognized as liability at the end of March. If we then turn page to number 26 and look at our capital employed have decreased somewhat also due to the dividend at the end of the quarter. And as you can see here, we now have the full effect of our return on capital deployed. In 2018, it was approximately 40% and now it's down to approximately 25%, and that is fully explained by IFRS 16. So finally, we can make and conclude that Axford is continuing to have a very solid financial position. And with that, I hand over to you again, Claus. Thank you, Anders, and please turn to Page 27. And let me now provide a quick update on our strategic agenda. And again, even if the main focus in this quarter has been on handling the current situation, we have also continued to invest for future growth. Please turn to Page 28. And just a reminder here of our strategic focus areas. And today, I will only focus on 2 of them, expansion and supply chain. So please turn to Page number 29. And we'll look at expansion online. And we continue to, as you've seen in the report, outpace the market in terms of online growth, and we continue also to invest in our e commerce channel. Lillie is offering online shopping in more stores. We now have 86 stores in 51 locations. For Hemship, we are increasing the pace of the rollout, and we're also expanding Click and Collect to our Hemship franchise stores. I'm also pleased that we now have a new management for Mato Tse, which is now executing plans to further strengthen Mato and Tse's position in the market. Please turn to the next page, Page 30. I also would like to comment a little bit about our online pharmacy, Oppoheme. It is, as you can imagine, been a hectic quarter also for them with a higher demand, and they've done a great job to cope with this new situation. We've seen an increased awareness for Apo Hem. We've had more site visits and significantly more customers, consequently leading to also a stronger sales. Let's go to next page, Page 31. Now going to the supply chain, as I would like to comment on our supply chain and the exciting plans we have here for the future. We continue to make good progress with our new automated logistics center outside Stockholm. As you can see on the picture, the groundwork is almost finished and the overall project continue according to plan. We have now also signed a service agreement with Vitron to secure full functionality of this large facility. And in the quarter, we have integrated also our dark store operation in Gothenburg to cover also volumes from HEMCEP and VILIS together with Marta Tessie. And we also signed an agreement in Stockholm to double the warehouse space for our dark stores to secure the additional capacity that we clearly see a need of, particularly now in this quarter. Let's now turn to Page 32. And let me end the presentation with our outlook for 2020. So please go ahead and turn next page to Page 33. And first, some comments and thoughts on long and short term business impact of COVID-nineteen. As I understand this is of highly interest, but I also have to admit it is also very difficult to assess in this early situation. But first of all, overall, we are currently do not see any major issues in our supply. We may have shortage on single items and some longer lead times of imported goods. But overall, I think it is in control. How COVID-nineteen then will impact our business is obviously dependent on the situation and how that will evolve. As it looks today, we have some areas that goes in a positive direction and some areas in a negative. On the plus side, obviously, food retail market is relatively insensitive to economic swings. So we also see a positive side, obviously, of less eating out is favorable for our food retail and our stores. Price Price value is more important, obviously, in a weaker economy, and Villas is here in a very good position. On the negative side, we virtually have no activity on the Board of Trade, which has a large impact on our euro cash chain. We have a decline in restaurant market that affects Urban Delhi and also has shared partly Axos Namgios. We have less consumer traffic in city centers at the moment, which has a negative impact on some of our larger group owned hemp shop stores. And obviously, it is an uncertainty around the overall consumption if we face a very high unemployment. But then looking at food retail online, we'll most likely continue to have a high growth rate, yet the model is still not profitable. But with the increased volumes and more and more click and collect, we see a clear efficiency improvement in our system. So in conclusion, all in all, it is early days and how all of this will play out is very difficult to assess at this stage. Let's now turn to next page, Page 34. And finally, just a reminder of our 2020 outlook. We have no changes. We plan to invest SEK900 1,000,000 to SEK 1,000,000,000 this year with no major investments in our automation project. We plan to open up 5 to 10 new stores. With 3 new stores in the quarter, we are confident to reach this year's target. Please turn to next page, Page 35. So let me sum up this presentation. It has clearly been a very exceptional quarter with a lot of pressure just to handle the day to day operation. And with that, I'm obviously pleased that we've been able to meet the increased customer demand and in fact better than the overall market. I think it's a clear sign on the strength in the whole organization in a very challenging time. Our sales and profit shows a clear improvement versus last year, well supported by the hoarding effects. And looking forward, we are really well positioned, but we also have some challenges, particularly in Eurocash and Urban Delhi. Our financial position is strong, and we also have sights set on the long term to further strengthen Axwood. With that, please ask you to turn next page to Page 36 and hand over to the operator to open up for questions. Thank you. Thank you. And our first question comes from the line of Daniel Schmidt of Danske Bank. Please go ahead. Your line is now open. I fully understand that. Okay. So we seem to have a technical issue. While I bring Daniel back, can we go to a question from Gustav Sandstrom of SEB. Please go ahead. Will, it's in Q1 on the assumption that perhaps a little bit less favorable mix from typical ordering products. Now that didn't seem to fall through given that we had some 20 bps year over year impact. Gustav, can I just say, we I didn't hear the first part of it? Can you start all over again, please? Sure. Do you hear me now? Thanks. Yes. Yes, we hear. Very good. Thanks. It relates to Willys. I think it was a better EBIT margin than those 2 us had modeled. So you had a 20 basis points expansion year over year despite probably some negative mix given that ordering products, I guess, are carrying lower gross margins in totality. So my question is whether or not that margin expansion we saw in Q1 was more of a one off effect related to the big surge in Q1 of volume or whether it's more sustainable such as pricing? And perhaps if you can comment a little bit on the competitive landscape thus far in April, I believe campaign levels were down quite significantly in March. But if I try to answer your as you well point out, obviously, Ville is with the exceptional strong like for like sales. Obviously, that has a positive impact on the scale in the operation. Now as I shared as well, we have some negative mix effects, particularly on the hoarding products, but also some extra costs just to handle the situation with more or less added as much staff we could at some time and also have increased sick leave cost. But obviously, with the positive like for like, we have some expectations to also get scale on the operation even if the scale is not as high as one could expect if we wouldn't have the extra cost. So it's more or less driven out of that more than anything else, I would say. Regarding the competitive landscape, it's obviously, we have seen the market data and as much as we can relate to. And Ville is clearly been outperforming the market. Axo as a whole has done that during this quarter, but VILIOS has done it even further. And regarding how this has evolved after the quarter, and I have to say, we moved fast after the quarter into the Easter. And as you know, Easter is a large period for food retail. And now we just moved out of the comparison week last year as we had Easter more or less last week last year. So it is difficult to assess at this stage what is the impact after the quarter, and I can't give you any guidance on that. We have to wait some more weeks to see how this will evolve and how will sort out. Okay. If I turn to the cost side, mainly for DOGA, you mentioned sick leaves and whatnot. Could you perhaps try to quantify a little bit what the new government subsidies regarding sick leaves and the similar initiatives will do to your cost base going into Q2? Am I right to think that that impact would be most pronounced in Dagen for your sake? Well, the support on sick leaves will cover the whole organization, obviously. So and to give you a number there, I can't really do because, obviously, it depends on the rate of sickle. We are pleased to see that in the last days or week, we've seen the cyclic go down, which is I think I've seen reports from several other companies as well that we start to see that, which is obviously positive. So we can't really say how that would sort out. The government support in general for us is not that much. I must say, we have some said that it's not really a large part of our operation at this stage. It's more related and supported obviously to businesses that has a significantly more challenging situation than we have. Clear. And then I have a question related to the declining Norwegian krona. To what extent do you feel that this will be a disadvantage in your competitive position with your border trade once the Norwegian border opens again? And perhaps if you could quantify a little bit, what were the savings for a typical Norwegian customer going cross border to Eurocash last year? And what would it be this year given that the fluctuation in FX? I'm not sure I understand the last part. But the first part obviously is, I think, the effects of the Norwegian krona, we expect that, that will not have a major impact. We are still having a large advantage, so to say, for Norwegians to shop on the Swedish side if you look at the price levels on comparable items across the various countries. So we're still that as a it's still a healthy business model despite some now changes on Norwegian krona. But euro cash, I don't know if that was what you were referring to, is obviously impacted now with a bit we are eager to see and to follow how soon they will open up the border again so we can get back into business. But at this stage, obviously, we are more or less seeing a full stop in the operation and that has an impact for us. Maybe if you want to your end question, what was that? It was more related to your competitive position versus local Norwegian competitors. I assume that the sort of business case for Eurocas is that you have a more a lower price point compared to Norwegian locals. But since the Norwegian krona has depreciated, I would assume that the competitors are somewhat smaller too. No, but that's what I think in terms if I look at the price differences for Norwegian, if I look at the consumers, Norwegian consumers, they still even if you've seen some changes on the currency, it's still a large advantage for the consumers to come and shop in Eurocash. Great. And then two quick questions, if I may. First one to online. Have you been able to go through your data and sort of dig out to what extent you've been able to recruit new customers to your online shopping, perhaps senior citizens who previously haven't been shopping online? And I'm primarily looking at sort of the special Markhorne initiatives, Matt, that's sort of your base business. No, I understand. Yes. Now the Maltskruggung is a special one. But if you look at the overall part, if you look at the shopper that has started shop that we have not seen as high levels before is people above 63 years old. We've seen a significantly lift up of these new customers coming in and shop online. It's clearly been an uplift, which also has been somewhat expected. The challenges, I think, we've I don't think we've had, but I think the rest of the market has had as well is to handle this uplift in terms of capacity because obviously we've seen some capacity constraints, particularly in our dark stores. And I can also comment on that, that when we saw this fast uplift and also hoarding in some of our stores, we had to we were forced to close down some of our kick and collect operations in some of our stores just to handle the day to day operation in our stores, just to handle the situation. So that has forced us to basically reduce capacity in March. We're now back on track again. And as I reported in the material here, we're also seeing how we can improve increased capacity, particularly now in the Stockholm area. Okay. One quick last question. You had mentioned 25% decline in sales, the 2 last weeks for snafjobs. Is there any reason to believe that is not a reasonable assumption to the sales dropped thus far in April? No, I think it's we wanted to give that indication just to see what levels we have leveled out on so far. Now obviously, how this will sort out going forward, we don't know. But I think it's important to state that, as you know, Snambro supports restaurants and cafes. And if you look at the many other restaurants, they have a significantly higher drop, while we are, I think, handling it somewhat better even if, obviously, 25% is a large decline, but it's not dramatic as we've seen in some other areas. And that is obviously due to that we are also supporting a large part of the restaurant business that is still having an okay business. We're also looking at, as just noted in the material, to see if we can support the Snavlios by open up for consumers, as an example. We've already done that in one of our Stockholm stores to see how to improve the situation going forward. And then obviously everything now the spring comes, the summer comes, and we'll see how that will impact the cafe and restaurants if and now the old situation is it will start to get back some of the business going forward. Our next question comes from the line of Daniel Schmidt of Danske Bank. Please go ahead. Your line is now open. Thank you. Good morning, Claus and Anders. Do you hear me now? Yes. Good morning. Good morning, Anders. Okay. Good. And a follow-up question on the boarding, you quantified it to 400 basis points in Q1. And clearly, we're leaving that period behind us maybe, but we still have the working from home effect. Would you care to try to quantify the working from home effect? No. But I what we're seeing, and I think if we're clear around that, we have, I'd say, a handful of stores in particular than Hampshire that has that is impacted by located very much in city centers, particularly in the larger cities we have, mainly Stockholm, Gothenburg is the largest impact that we see significantly a drop in traffic, obviously impacting. And that is mainly Groupon stores that is in that area. Now again, difficult to assess how it will go for the future, but it's clearly an impact on these stores. So and then we have stores that is, as everyone else is doing really, really good. So but clearly, the less traffic in some of the city centers has impacted some Hampshire stores. Okay. So basically, you're saying that wholly owned stores in Hampshire seeing sort of a net negative effect on sales in sort of end of March, maybe start of April. And then on the other hand, still positive, of course, for Village. So that's at least my interpretation. And then sort of you also I think we touched upon it in the previous question. You're also saying that there was some negative effects on mix due to the hoarding. But if we start to leave the hoarding behind us now and we have still the working from home and billings effect. Is the mix turning? Yes. It was very much the negative part that we relate to was very much when we saw the massive increase of some hoarding, plastic hoarding products. I think it's been all over the news about toilet paper as an example, but also other rice and pastas and so forth. I'm pleased to say that I think not only for us but from the market in total, we don't see that effect at much any longer, which is positive. It's positive for everyone. I think it's positive for our processes. It is positive for the consumers as well. So then we'll get back to more leveling out. We when you have the massive hoarding, you didn't have same was you have some items that didn't sell as much either and that is we're now back to more normal levels, so to speak, in that perspective. And then commenting on working from home, I just for Willy, I think that partly working from home, but also obviously the less eating out, I would say, is how I would call the positive effects put forward. Yes, yes, that's what I mean. Yes. Yes. Yes, good. And then just finally on you also write in the report and you said it on the presentation that you've signed a service agreement with BitTorrent. Is that agreement aligned with your sort of previous statements in terms of how the sort of profile should look when it comes to the No, it's not changes in that. It's very much in line with the plans. It's in line with the business plan in terms of also the earlier guidance in terms of share of cost and so forth. So we are pleased that we have a strong partner now that will secure and guarantee, so to say, the full operation when we start up here because it will be a very technical platform. Yes. Okay. Thank you. Thank you so much. Thanks. Our next question comes from the line of Niklas Ekman of Carnegie. Please go ahead. Your line is now open. Thank you. Yes, a couple of follow ups. Firstly, is there any impact here on food inflation to expect as a result of the COVID-nineteen? I saw food inflation fell a bit here in this quarter compared to previous. But do you anticipate any dramatic changes here in coming months or coming quarters? Hi, Niklas. No, I think we made the same comment. It fell a bit. We noted the same thing. And I think for the future, it's we'll have to track and follow. Obviously, we I think some of the interesting parts will be some fruit and vegetables and for seasoned workers and how we will handle some of these products. There may be some inflation in these areas early days, but that may come because of the capacity for the producers and higher costs for the producers to handle this situation. So we'll see. But regarding in this quarter, very much in line with what's your comment around that as well. And we'll see and we'll track the currencies as well and see how the particularly on the imported goods, how the euro will develop that, but it may also influence obviously as you're well aware of. Okay. Excellent. And you did mention here that you had supply issues initially here, but you have solved these. So going forward here, you don't really see I mean, you mentioned now fruits and vegetables, for instance, where there could be some food inflation. But in general, you're not expecting shortage of anything. There are no import restrictions that will affect you in any material way that you see in the months ahead. No, I think we will take it day by day here. And I just when you said supply issues, I think overall, I must say, the suppliers and manufacturers has been very, very supportive or handled the situation in a good way. And so overall, we haven't seen really any large supply. We have seen any issues to handle it through our system, so to speak. That has been the bottleneck. Now looking forward, I think it is still a challenging situation for many, but I think in control. So overall, we may see some single items, and we still we have some single items today that is clearly a supply issue, but overall, it is in control at this stage. As I mentioned in the report, we may I mean, we don't see any larger issues at this stage regarding borders and so forth despite obviously or we have some longer lead times in certain areas that is that we are handling. Okay. Excellent. And then we've talked a bit here about hoarding and the Eat from home trend. And I'm just trying to think here over the coming months here, if you net the effects here. Hoarding is now fading, and I assume that you will see you might see some destocking here going forward. Is that effect going to be material, do you think? And could it be more than well mitigated by the eat from home trend? Just your thoughts here. And I know we've covered this topic before. Yes. No. And it's obviously your guess is as good as my guess in that perspective. But I think in terms of any destocking, I'm not sure the I think it's been guidelines from the government also to ask the consumers to stock up a little bit. So you have some stock at home, and I think consumers are reactive partly on that and that maybe so that they will continue to have that. So I'm not sure we will see any larger destocking effects. We'll see. So then obviously, as I tried to point out here in the presentation, we have some clear positive moving forward. Food our food retail situation with less eating out is obviously on the positive side. And then we have some individual example, cross border or the Norwegian border closed. Okay. And finally, on the online sales, I was surprised here that the sales growth, I mean, it picked up slightly from previous quarters, but not materially. But I assume that if you broke it down and looked at kind of the last 3 weeks of March, you would have seen a very different number. Is that a number you could share with us, what kind of growth rates you've seen in the online business kind of in the last 3 weeks? No, but I think it's out there in the reports came this morning from the market in terms of March that was up, I think, 50% online in the overall market. We are growing significantly faster than the overall market. And I think you should when you're looking at growth rates and so forth, you should to look at compare that to the market and versus last year. And I think it's clear that we are growing faster. Now again, as I pointed out, we in this period, particularly then in Villis, we had to close some of our click and collect operations just to handle the physical stores. So that has a negative impact on that part just to handle the situation. So I think when you look at the numbers, you have to compare it towards the total market and because it varies over time as well. Excellent. Thanks for taking my questions. Thanks. Our next question comes from the line of Fredrik Iversen of ABG Sundal Collier. Thank you. A few follow ups from me as well. First, on the online channel. Obviously, you're still in sort of a startup phase here, implying some losses over the last year. I'm curious on what you saw in terms of profitability in the quarter and probably, in particular in March. Can you say anything on this? Did you see lower losses, for instance? Well, obviously, as you know, the model is, as I also stated in the presentation, is not profitable, but with increased volumes and also when we're getting I mean, when we're getting then we're getting higher and better efficiencies. So that is something we are noting. I have to admit, obviously, that when you get these sudden peaks, everything is about forecasting and forecasting the demand. And when you're getting these peaks, it is difficult to really run a smooth, efficient operation. You just throw in everything you have and try to find transports and try to find staff to run the operation, which is and then to sort out the consumer demands. So obviously, that is not an optimal situation. Optimal situation for us is to be able to plan and to forecast the volumes ahead, and that gives us an opportunity to be more efficient versus what we saw now, particularly some weeks in March. Okay, understood. And second one, to get back to the gross margin and the mix effect you saw. Obviously, the gross margin was down 10 basis points. Was the mix effect even greater than those 10 basis points? That's my question. Not sure I understand. But the mix effects was what I mean, you have several mix effects obviously when it comes to reported part and the margins you see in the report is also a more theoretical part that we are very open around it that we had some mix effects due to in the hoarding part, which then you have other effects when it comes to how we are consolidating the numbers, which is also dependent on how the various concepts is developing and doing. Yes. I'm just after what your sort of underlying development in the gross margin is, whether that could actually be positive cleaning for those negative mix effects you saw. Everything equals. And obviously, that's why we are stating it that the holding had a negative mix effect versus normal operation. Fair enough. Thanks. That's all from me. Yes. Thanks. And we have no further questions. Please go ahead, speakers. Well, then I've seen I don't think we have any other questions from the webcast. So I then thank you for listening and wish you a safe and healthy day, weeks going forward. Thank you. This now concludes our call. Thank you for attending. Participants, you may disconnect.