Thank you. Welcome all to our Q4 2023 Webcast. Yeah, I think let's just dive into it and go to the first slide with the key highlights. Yeah, the solid momentum we saw in the Q3 continued into the final quarter of the year, where we increased the top line with 23% or 21%, if you adjust for currency. The growth was supported by both of our shops, Boozt.com and Booztlet, who both continue to reap the benefits from a Nordic department store offering. In Q2 this year, we expanded our offering on Booztlet to offer a broader assortment, including more of our categories, and this has been really well-received by both new and existing customers. We also continue to see an increase in multi-buyers, meaning customers who buy from more than one category.
In Q4, 51% of our customers did that, and I will come back to this in the following slides. Another thing benefiting from a broad offering is the average order value, which continues to increase both on Boozt.com as well as on Booztlet, and this is driven by more items per basket. AOV increased 3% on Boozt.com and 18% on Booztlet. In the quarter as well, we welcomed a lot of new customers, so that we in 2023 registered more than 3.5 million active customers on Boozt.com and Booztlet combined, and this is an increase of 8% versus last year. A major reason for the increase in active customers, we believe, is our high customer satisfaction, measured in NPS and the Trustpilot score, which continues to be at a very high and competitive level.
Our profitability benefited from the solid top line, and in Q4, the adjusted EBIT margin increased to 7.7% from 7% last year. So this is the highest quarterly margin we have recorded to date. And finally, I think it's worth mentioning that we continue to return cash to our shareholders. In the quarter, we repurchased own shares for SEK 31 million as part of our first share buyback program, which is planned to reach SEK 200 million in total. Next slide, please. I'm not going to spend too much time on this slide. However, we believe it's important to highlight our progression towards becoming the Nordic department store.
As you know, this is the cornerstone of our strategy, and it comes with a lot of benefits, including high average order value, lower returns compared to being a fashion store, and higher consumer loyalty. Looking at the full year 2023 for Boozt.com, we now generate around 40% of our revenue from other categories than fashion. Home, beauty, sports, and kids are becoming strong categories on their own, and aside from the mentioned advantages to our business, this also reduces risk, as we become less dependent on fashion trends. Multi-buyers are clearly an important part of being a department store, and during 2023, more than 50% of our customers bought more than one category. This is just the beginning of the journey, and we strongly believe that the department store KPIs will continue to improve.
Looking ahead, we believe that the share of revenue from the new categories can increase to 50%, when we are fully mature. I would not be surprised to see us reach 70%. Next slide, please. You have seen this slide before, and it might be a bit busy, as we have added some data for 2023 to illustrate how powerful the shift towards multi-buyers potentially is. First, let's take a look at the development in the number of categories our customers buy. We have continued to see a good migration towards more categories per customer. As mentioned earlier, now more than 50% of our active customers buy from more than one category.
All groups buying more than one category increased with around 10% or more compared to last year, and in total, the number of multi-buyers on Boozt.com increased with around 15%. Next, if you look at the two charts to the right, you can see some of the characteristics there for customers, depending on the number of different categories they buy from us on Boozt.com. As we have highlighted before, loyalty increases almost exponentially, the more categories the customer buys. Already at three different categories, the loyalty has doubled compared to a single-category buyer, and around 70% of these customers stay with Boozt the year after. And this increases to more than 90% when the customer buys five categories.
So as you are likely aware, the cost to acquire a new customer can be significant, in particular with customers who do not intend to come back. So there is a solid upside to profitability when we can persuade customers to buy more categories. Secondly, as you will see the chart in the lower right side, customers who buy more categories spend exponentially more at our site, which of course is also a consequence of the increasing loyalty. Typically, this also comes with a higher average order value, and combined with the increasing lifetime value of the customers, we see a solid upside potential to our profitability. There is still plenty to do, but quarter by quarter, we have seen this trend persist, continuously confirming the strength of the department store approach. Now, flip to the next slide....
Before handing over to Sandra for the financial, let me spend a minute highlighting the development of active customers in the quarter. We are very pleased to have seen a broad-based acceleration in growth in active customers in the quarter. In total, the number of active customers has increased by 8% compared with last year, with 8% in Boozt.com and 7% in Booztlet. Our biggest region, the Nordics, also increased close to 8%, with Boozt.com being the main driver. We saw the largest increase in Denmark and Finland, but all countries in the Nordics increased in terms of active customers. Boozt.com saw limited changes in rest of Europe, and as we have highlighted before, we do very limited efforts in relation to Boozt.com in this region, as we see better opportunities elsewhere.
However, Booztlet.com saw a significant increase in customers outside the Nordics, which is also visible in reported sales. Active customers increased 42% in rest of Europe, mainly driven by Germany and the Netherlands. These markets remain a strategic focus for Booztlet, as we see interesting opportunities in the Booztlet segment for the region. Finally, active customers in the Baltics continued to increase significantly and was up around 40% for both Boozt.com and Booztlet compared with last year. This is obviously from low levels, but with a continued high average order value on par with the group, we see good profitability and opportunities remain plenty in the Baltics. With this, I will hand over to Sandra for more details on the financials.
Thank you. So let's start with the group results, and despite the high pressure we put on ourselves, given the market condition as well as the comparable numbers for 22, we managed to deliver a growth of 23% for the group in the Q4. Currency impacted positively with 3 percentage points. We believe that our ability to grow significantly throughout the quarter was a showcase of our core strength rather than an improved market situation. Throughout the Black Friday week, the promotional pressure was high, which we believe favors businesses like ours that have a very slim cost structure. This structure, it gives us significant benefits during the high season that Q4 is, where the marginal increase in absolute gross profit kroner contributes strongly to the profitability due to scale.
The Nordic markets increased 19% and was mainly driven by Denmark, with a revenue growth of 30%. Sweden picked up compared to the Q3, with a growth of 9%. While growth in Denmark and Finland had tailwinds from currency, Norway had the opposite. Local currency growth in Norway was, however, on level with growth in Sweden. Growth outside of the Nordic countries was 70% in the quarter. Across the group, growth was driven by the increased number of orders, which came from new customers as well as existing ones. In the quarter, the number of orders increased 16% to 2.9 million. As we've demonstrated over several consecutive quarters, customers continue to increase the number of categories they shop in, and again, we had record-breaking average order values in both stores.
In the Q4, as Hermann just mentioned, 51% of our customers bought from more than one category compared to 48% last year. A positive side effect from this change was the reduction in return rates. In the Q4, the return rate decreased by almost two percentage points. Other revenues increased 15% and constituted 4% of revenue, just as in the second and the Q3. Growth was mainly related to data intelligence. The gross margin in the Q4 were slightly lower than last year, 37.5%, to be compared to 38.3% last year. 0.7 percentage points, that corresponds to almost the full difference, is a direct effect of the conversion of a contract with a large brand partner that went from an agent to a wholesaler agreement mid 2023.
While the promotional activity and pressure on product margin was in line with last year, we believe that the pressure comes from consumers being financially strained and cautious, rather than, as we experienced last year, pressure from retailers sitting on too much inventory. On the contrary, we believe that many retailers with restrained balance sheets and low cash at hand are cautious in their buying budgets. This impacts their competitiveness and gives us opportunities. As we have a strong balance sheet, we're able to gain market share, and we believe that we currently do that. For the full year, the gross margin was 39.2%, 0.3 percentage points lower than last year. The negative impact from the conversion of the contract just mentioned was 0.5 percentage points for the full year, implying a slight improvement in the gross margin, all things else being equal.
The adjusted EBIT margin increased with 0.7 percentage points in the quarter to 7.7%. For the full year, the adjusted EBIT margin increased 0.9 percentage points to 5.2%. And I will come back to the breakdown of the EBIT margin in just a couple of minutes. But before we move to Boozt.com, and there we see that the revenue growth for Boozt.com was 21% in the Q4, in local currencies, growth was 19%. ... Growth was solid across categories and geographies, but Denmark was exceptionally strong with 32% growth. On the category side, beauty and home were the strongest growing categories. For the full year, net revenue, for the full year, net revenue growth was 15% for Boozt.com, 11% in local currencies, reaching SEK 6,448 million.
The average order value for Boozt.com increased 3% to SEK 987 in the quarter. For the full year, the AOV increased 6% to SEK 947, with FX having an impact of approximately three percentage points. Should the currency effect revert, we expect a corresponding negative impact on the AOV. Since 2021, we have continuously improved the average order value. This increase is mainly driven by the benefits we get from the diversification of sales, which impacts both the number of items per order, but also reduce the return rate. It is one of our most important KPIs, and as many of you are aware of, we do not forecast with any increase of the AOV, but rather assume that it stays relatively constant for the sake of being precautious.
Active customers increased 8% for Boozt, and as covered by Hermann, this was driven both by the Nordics and the Baltics. We are very happy with the development of the active customer base, and especially the way that our cohorts develop. It is a testament to our customer focus and ability to deliver on what is important to the customer: relevance in the offering, convenience, price, and speed. In the quarter, the adjusted EBIT margin decreased with 0.8 percentage points to 7.4%. The decrease is mainly related to the conversion of the contract that I just mentioned. For the full year, the adjusted EBIT margin increased 0.2 percentage points to 5%. If we move on to Booztlet.
The strong momentum for Booztlet continued into the Q4 as we continued to invest into more categories and attractive goods to serve the offering on our Booztlet site. For the quarter, revenue increased 33% or 30% in local currencies. For the Nordic markets, growth was 20%, while rest of Europe grew 128%. The solid growth outside of the Nordic region was driven mainly by Germany, which is benefiting from an increased focus from Booztlet. Active customers increased 7% for Booztlet, but around 40% outside of the Nordics. Just as in the Q3, we hit a new record for the average order value. AOV increased 18% compared to last year, to 1,017 SEK. For the full year, AOV increased 15.8% to 955 SEK.
The significant increase in the average order value is a result of our efforts to build up this strong and consistent offering on Booztlet, with less dependencies on availability of old season stock from Boozt.com. Full year revenue growth was 15%, with a tailwind from currencies of 4 percentage points. Full year numbers are negatively impacted by the Q1, where Booztlet was pressured by the high, higher-than-expected sell-through coming into the year, resulting in too low inventories for the Q1. The adjusted EBIT margin was 9.3% in the quarter, compared to 0.3% last year, driven by the high average order value and scalability. For the full year, the adjusted EBIT margin increased from 1.2% to 5.7%, proving that the measures we have taken to get Booztlet back on track has paid off.
So if we move to the cost ratios, we see that the fulfillment cost ratio decreased 1 percentage points to 9.5% as we continued to gain benefits from the competitive setup of distribution, with disciplined efforts to guide customers in the optimal to the optimal carrier from both the cost and the service perspective. In addition, focus on cost control throughout productivity, the fulfillment center continues to improve the cost structure. For the full year, the fulfillment cost ratio decreased from 11.3% to 10.6%, a positive development, showing our showcasing our cost efficiency as well as our focus to get to a longer term double margin. The marketing cost ratio decreased with 0.7 percentage points during the Q4 to 10%. As we continue to gain benefits from lower cost per click in the Nordic markets.
For the full year, the marketing cost ratio also decreased 0.7 percentage points to 10.3%. We continue our marketing pressure to gain market share in the challenging environment that we are in, and we stick to our principles around payback times. The adjusted admin and other cost ratio increased 0.4 percentage points to 8.1% in the quarter. Year to date, the cost ratio was largely on par with last year at 9.8%, compared to last year's 9.7%. The scale benefits we gained during the quarter were offset by higher cost of personnel that was impacted by higher incentive costs relating to the very strong end of 2023. The depreciation cost ratio decreased slightly from 2.4% to 2.1% during the quarter.
For the full year, the depreciation cost ratio was 3.2% and on par with last year's 3.3%, all in line with expectations. The comparison, however, is positively impacted by the prolonged depreciation period for certain parts of the AutoStore installation as implemented in the Q1. So if we move on to the cash flow, we see that net working capital ended the year at 4.1% of revenue, compared to last year's negative 1.6%. The higher working capital is mainly related to decline in accounts payables that went from 20.5% to 14.7% of revenue. This was mainly due to the earlier delivery of the autumn/winter stock in 2023 compared to the previous year, combined with the timing of payments related to these goods.
Furthermore, the previously mentioned changed agreement with a brand partner impacted inventory and net working capital negatively, with approximately 0.5 percentage points compared to last year. However, inventory actually slightly declined as a percentage of revenue, but increased with around SEK 250 million in absolute terms. This increase is mainly related to the investments in never out of stock items and campaign stock, as well as in-season goods that we made in the Q3. The investments also include the improvement of the offering on Boozt. The investments made in our inventory position were made intentionally, and we're very confident with the stock position that we now have coming into 2024. We work with a data-driven approach, combined with a very analytical skills and very talented people to manage our inventory.
This is so core to us, and an approach that gives us benefits and a lot of confidence operating in this volatile and very tough market as we have experienced over the last year. We plan for the coming year to be equally tough, but as we have processes and ways of working in place, we're confident that we will also manage this. Looking at the inventory as it looks right now, it is fresh and very much in line with what we expect for the coming season. Free cash flow for the quarter was SEK 834 million, that is to be compared to SEK 730 million last year. For the full year, free cash flow was SEK 6 million versus SEK 90 million last year, negatively impacted by the mentioned changes in net working capital.
In the Q4, CapEx was SEK 28 million, whereof SEK 25 million was related to our technical platform. For the full year, CapEx was SEK 121 million, whereof SEK 100 million is related to our technical platform. The full year amount is slightly lower than we expected coming into 2023. That is due to the timing of some efficiency-enhancing investments in the fulfillment center that is currently being installed. This means that we expect CapEx for 2024 to be on par with 2023 in relation to our technical platform, while CapEx related to our fulfillment center is expected to be in the level of SEK 100 million-SEK 150 million. We do not expect any CapEx in 2024 related to the development of our new fulfillment center.
However, this project is one of our key projects for this year, and we are currently developing a detailed plan for how the new fulfillment center will look like, and we will update you on timing and level of investments as soon as we have an overview ready. However, we still expect the new site to be up and running in 2026. Our cash position at the end of the quarter was SEK 1.5 billion, compared to SEK 1.8 billion last year, impacted by, among other things, the investments in inventory. In addition, we have, in accordance with the mandate from the AGM, initiated a share buyback program. Out of the SEK 200 million mandate given by the board of directors, we have bought for SEK 89 million so far, and we expect to buy the remainder of the mandate until the time of our next AGM.
So if we move to the final slide, and before I come back to Hermann, let me just shortly give you a more detailed view on our cash development in 2023. With the strong improvement in our profit, one would expect free cash flow to improve year-over-year. However, as you can see from this slide, changes in net working capital had a significant impact on the cash flow in 2023. This is even more outspoken if we compare to last year, which was positively impacted with around SEK 400 million. Some of this has been deliberate, like the increase of inventories to be better prepared for Q1 2024, while some was less planned, such as the timing of delivery of the autumn/winter stock, which led to earlier payments than last year.
While it is always difficult to plan for net working capital developments, I expect the impact to be less outspoken this year, and in conclusion, we expect free cash flow to improve for 2024. However, without giving you a specific target just yet. And with that, I hand back to you, Hermann.
Thank you, Sandra, and, and before we go to the outlook, I would just like to touch on our Boozt Club, as we just passed a very important milestone, 1 million members in six months... And even though it's very early days, and we've only scratched the surface in utilizing the potential of the club, we can already see that the, the club members, they display increased loyalty, increased cross category buy, higher average order value, and increased rebuy rate. Furthermore, it's our best customers who join the club, and, by activating them through the club, using our own channels to attract them to our shop, we can mitigate some of the changes that the tech companies make with regards to targeting.
So even though 1 million club members in 6 months is a promising start, there is still a lot of work to be done to get the rest of our more than 3 million active customers to join the club. So going to the final slide, the outlook. For 2024, the priority is quite clear. We will continue our efforts to secure continued accelerated market share gains while maintaining best-in-industry margins. We expect the market to be difficult, with the market growth for fashion and lifestyle items that might be zero or even negative in 2024. With the continued volatility and unpredictable markets, setting the outlook for 2024 was again difficult and with a high degree of uncertainty. So therefore, we have again decided on a wide range in our guidance.
In terms of revenue, as was the case for 2023, we expect net revenue growth for 2024 in the level of 5%-15%, as we continue to cement our position as the leading Nordic department store, with growth well ahead of the market. In terms of profitability, we expect to deliver a margin at least at the level of 2023, and we guide for an adjusted EBIT margin of 5.2%-6%. Profitability is expected to continue to benefit from economies of scale, as well as different cost initiatives across the group. Lastly, as in 2023, we expect a modest level of investments in fixed and intangible assets, with CapEx between SEK 150 million and SEK 250 million. In terms of our long-term targets, we have little changes.
We still believe that we should grow faster than the market and reach a share of at least 10% of the total market. However, we want to be a little more clear on our long-term ambition to reach double-digit profitability. We now believe that we should be able to reach a 10% margin in 5 years from now. We know it's ambitious, but we have all the building blocks in place to expand our profitability considerably and remain one of the most profitable online shops in the world. So this concludes our presentation, and I would now like to hand it over to the operator.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Daniel Schmidt from Danske Bank. Please go ahead.
Yes, good morning, Sandra and Hermann. A couple of questions from me, and maybe starting with what you ended with Hermann on your last slide. Clearly, sort of impressive numbers for Q4 and a solid trend in average order value, and even a very good pick-up in new customers, and more and more clearly sort of buying from more than one category, and you sound very confident also when it comes to the inventory at the start of this year. Yet, as you finished off with a very wide range when you look into 2024 in possible outcomes, which makes me wonder a bit, is there sort of anything changed for the worse as of late when you look at sort of the market environment?
Good morning, Daniel. Yeah, good question. I think the main thing is that it's still quite uncertain. We can see that consumer sentiment in all four Nordic countries is still below zero, and in some countries, well, below zero. We also know that over the last couple of years, January and February have always been quite difficult/unpredictable. So I think kind of our best bet is still 10%, but we take kind of we want to be a bit cautious going into the year and allowing ourselves a bit of a slack. So we're saying that it will not go below 5%, but it also would be very optimistic to believe it would go above 15%.
I know, I think I said exactly the same thing one year ago, but I think the situation has not changed much, and I think that consumers are probably waiting for central banks to lower the interest rates.
Sure, sure. I was just thinking that a year ago, we didn't know if interest rates are gonna continue to go up or not. Now, I think there's a fairly wide consensus that interest rates will go down, and we've also seen sort of energy prices being much lower than we feared a year ago. But you sense that sort of the sentiment in your customer base is about the same as you saw a year ago. Is that what you're saying?
Well, actually, I think there's one change from last year, and last year we saw that there was a lot of inventory with other retailers, and that was kind of putting price pressure. Now we see that customers are cautious, and they are quite hesitant in general, and you see that in our all market research that we find. And also January, February, as Hermann mentioned, is really hard. But we think that there's some - it's more the consumer driving the cautiousness now than it was, maybe it was more the retailers last year. So we think it's hard to know where it end up, so this is our best guess.
Okay. And just on that topic, or sort of your long-term targets, which you are more specific about now in terms of reaching 10% in 5 years, which is, of course, as you allude to, Hermann, quite aggressive, and quite far from where you are currently. And if you incorporate sort of that target, which then has to be 2028, and what were you saying in terms of margin progression this year, do you think that the sort of reaching 10%, is that going to be a back-end loaded sort of trajectory of the margin, or how do you view it?
No, I think the easy answer is that the ideal plan would be 6, 7, 8, 9, 10, and I think that's definitely the ambition. It will probably not go like that, but it's not a back into plan. I think we know our business quite well. We are in very much control of our costs. We see that when the customers buy into more categories, the basket size goes up, returns goes down. So we think kind of... And also we have our fulfillment center is extremely efficient and effective. So we think it's, of course, it's an ambition. Its ambition might take six years, but the plan is definitely like 6, 7, 8, 9, 10. And again, disclaimer, it probably won't go like that, but that's the ambition.
And also if you push that on, you know, if you're outspoken about that, then we can also be very clear. All everybody in our organization know what we're going to do, and that just, if you have a clear goal, it's just easier to achieve it, right?
Should we interpret it as your sort of margin outlook for 2024, then being extra cautious to be sort of rather on the safe side, while you at the same time really want to strive for 6% this year already? I don't know.
Yeah, yeah.
Yeah.
That's a fair assumption that kind of the 5%, whether it's 5.6%, that is kind of the midpoint, is realistic. But of course, our internal ambition would be to get to 6%, because that's kind of, if we can make 6, 7, 8, 9, 10, that's kind of easy numbers to remember, right?
And what builds your confidence in achieving that? Clearly, sort of average order value then, combined with more and more of your customers picking from more than one category, and the active customer or customer base increase that you've seen recently needs to continue, I assume.
Yeah, I think, I think, you know, it's the Nordic department store. It's our, if you take it from the top, you know, it's a fulfillment. We're getting kind of marginal improvements almost by the day, marketing as well, also with the Boozt Club, meaning that we can kind of circumvent the hurdles that the tech giants are making with regards to targeting. That's going to benefit us, and of course, the categories, because, you know, what we see, and then that's beauty is that customers are embracing the Nordic department store. I think that kind of the stars are well aligned and we are very much in control of the business.
We only have one warehouse, which is a huge benefit, and it's our kind of value chain or is our cost chain. It's very kind of simple, so that I think that's kind of realistic to get there. So I'm quite confident that we will get there.
Yeah. And then maybe just a final question on, you write that you've seen, competitors have reduced their marketing activity. Is that also what you're seeing at the start of 2024?
Yeah, I think not commenting too much on the competition. I think there's kind of a lot in the industry in general. They have issues. Some, some have overexpanded, some have a lot of warehouses, some have too much inventory, and they need to fix issues, as our only focus is to basically satisfy the customer needs. I think that's, for us, it's a huge, huge advantage.
Okay. Thank you. Thank you, guys.
The next question comes from Benjamin Wahlstedt from ABGSC. Please go ahead.
Good morning, guys. I was wondering, could you give us an indication of where you expect to see continued margin gains in 2024? I note that you outperform expectations on fulfillment ratio yet again. Is this something that you see will continue or where will you see the margin improvement, please?
I think we will. It's not like we expect 1 percentage point from one place, but it's small improvements and then it's more timing of when, where will what happen. But yes, we expect continued improvements in fulfillment. We're investing in some really good things that will increase productivity. So we think there's definitely potential. I think there's definitely potential in marketing as well, and not to say the least, the administration.
Perfect. Thank you. Could I ask as well, previously you've given us approximate growth rates for, for the new categories. I think you've split it by beauty, home, and kids or, or sports. Could you do this again, please? Just to get the run rate of, of the newer categories.
I'm not sure how much we have given the run rate or growth for the category-
No.
But they're growing more than on average for the-
I think you can say that, like, the newest categories, like beauty and home, we said, I think it was around a year ago, we said that that combined was around 10%. Now it's more alluding to 15%.
I thought so.
Yeah, for the combined, for both of them. So but, we don't guide on all of those where they're going, but as people shop, 40% of everything is made in other categories, it still sounds growing very strong.
Yeah, sure. So, combined 15%, is that to be understood, that's 15% of 2023 sales or Q4 sales?
Yes. Ex-exactly.
Twenty twenty-three.
Like 15%, but in that level.
Yeah. Also you, you mentioned lower return rates. Could you give us some color here? Is this, like, category specific? i.e., are your, your, return rates lower in, in fashion, or is it a mix effect, from a higher share of, for example, home sales with-
It's a mix effect. It's rather constant. If you look at categories or subcategories, you know, we do it down to item level, basically. But like fashion and women's dresses, it's not like that return rate has gone down, but it is the diversification of sales that drives the return rate down.
All right. Perfect. Those were all of my questions for now.
Mm.
The next question comes from Kristian Godiksen, from SEB. Please go ahead.
Thank you. A couple of questions from my side. First of all, for the guidance for the adjusted EBIT margin, this year is strong, but the EBIT margin, the reported EBIT margin in Q4, that disappointed, and due to the higher share ratio. Maybe can you give us some flavor on what a normalized run rate would be, assuming, let's say, you hit the midpoint of the guidance range? That would be the first question. And then the second question would be a follow-up question on the marketing pressure. So as you said, you kept the foot on the pedal in both last year and also in the beginning of the year, while our competitors have held back.
What are your assumptions here for the remainder of the year in your guidance? And thirdly, well, further on your guidance, can you break down what is your expectations on the growth contribution coming from new versus existing customers?
Yeah. So let's start with the first one, which is a rather technical one, and I know it's really hard to calculate. It's also very hard for me to calculate that one, and that's the reason that we have it excluded from the... We adjust for it. So it contains both share price development factors as well as our expectations on the coming three years and how that is, what we expect conclusions from those programs. But if there's a lot of ifs and buts, so you can thank me if I'm wrong here. But if we assume, like, a constant share price, and that would end up in the midpoint for 2024, I would assume that it's the adjustment for this year related to that would be SEK 50-something million.
Fifty million?
Yeah.
Okay.
I remember taking-
Marketing. There was a marketing question. Yes, we intend to continue to do a lot of marketing. We still have our kind of targets on how much we want to pay for new customer, and we stick to that. It's difficult to say if others are going to turn down the market enough, but we still see good return on investment, so we just continue to do that. So we don't look, you know, of course, it's an added benefit if customers or competitors are turning down because then the cost per click is lower. But we basically keep focused on building a brand and become a household brand in all countries. And the last thing, last question was about the growth coming from new versus existing customers.
It's a mix, but in general, we've said that before, when we go into a new year, we know how much the old cohorts contribute, and they give us a base level, which is more or less on par with the previous year, plus, minus. And then we know that a lot of growth comes from new customers. This is also why we, in general, are quite confident that, you know, when we say that we will kind of not go below 5%, because we know the cohort behavior, and then we know, of course, you know, how we can turn the knobs to get more customers or trying to get the cohorts to buy more and where the club is going to be a big help.
I don't know if that was the answer to that question.
Yeah, it definitely was. It definitely was. Maybe just one short follow-up on the market pressure, and yeah, obviously you can't control what competitors are doing. That's fair, but maybe can you comment a bit on what you have assumed in your guidance then? Because I guess it is a risk that the likes of your main competitors will start reacting or become more promotional and also more active in the advertising spending.
Yeah, yeah. But, you know, as we discussed before, with our basket size, we twice the basket size of a competitor. There's a limit to how much they can pay for marketing. So I think that kind of that's an added benefit of our department store strategy, where we don't have any waste... We said it's just difficult to outspend us. So, we're assuming that they would continue to be active and focus, but again, with our very strong positioning, being the only ones that are actually having a true Nordic department. So we are confident that our kind of marketing efforts will secure the growth.
Okay. Maybe just lastly, before I jump back in the queue. Do you know, do you have a view on where you're winning these new customers from, that you've been successfully, especially recruiting here in the second half of the year?
Is it countries or categories or what, what, what?
More versus all from competitors, you know, which is it the higher online penetration? Is it from the likes of About You or Zalando, or is it from other online companies or-
It's very hard to say, but obviously, if you look at-
Yeah
... them from different countries. Okay, we grow very strong in Denmark. We have a strong position there, but in Sweden, where it has been relatively weak, we've been growing around 9% this far. So I think we're probably a little bit across, I would assume. It's not a non-answer.
I think that's what we don't know.
No. But we try to do it everywhere, basically.
Okay. Okay, perfect. Thanks a lot.
Thanks.
The next question comes from Niklas Ekman from Carnegie. Please go ahead.
Thank you. Yes, all my or most of my questions have already been asked, but if I could just follow up maybe on the issue of campaign buys. Can you elaborate a little bit on how significant the support has that been to 2023 earnings? Is that something that could reverse or at least be less supportive in 2024 or in the coming years? That's my first question.
Well, that always goes. The availability of campaign stock goes up, and it goes down, and that's just, you know, normal for us. But there are also other factors to balance with. So it's not like, oh, we had a lot of campaign buys there, therefore the margin was great, and now we don't know. But we also balance with never out-of-stock items, which is one, maybe not category is the wrong term to use for it, but people tend to buy more into those type of inventory during a recession like we are in right now. So we have different things to balance. And having an inventory that has a good composition is what they work with down on a few floors below me every day with.
So this is something if there's available campaign stock, we of course take it. When there's less, we, we pick other things. So this is, this is more jiggling up and down, and I think we will manage either way.
The ratio is quite constant, actually.
Yeah.
Yeah.
Okay, very clear. Can I also come back to the topic of competition? I think my impression is that the competition seems to have eased a lot in 2023. Are you still seeing that going into 2024, that you're seeing less pressure from particularly the big your big international competitors, or has that competition started to come back in any way?
I think competition is more fragmented because, of course, you have a lot of small players that are struggling to get cash, so that is kind of a lot of activity there. But of course, you know, the big international players who are just south of the border, of the Danish border, of course, it's like, I think they have stuff to fix. So I think that's the main focus, and they are, of course, still fighting for market share in the region, and they're still big and very impressive. But I think that we have, again, we have the benefit that we don't have to fix any issues and just can focus on getting market share.
So I think that kind of, we benefit from, from a business that is in a very, very good shape.
Very good. And also, can I finally ask about buybacks? You mentioned you have this mandate now with SEK 111 million left to execute until the AGM. What's your view beyond that? And particularly now, considering your very strong balance sheet with you had over SEK 1 billion in cash at the end of the quarter. So, will there be a renewed mandate going into or post the AGM?
Yeah, that's not totally up to me and Hermann to decide, obviously, but I—we will probably ask for a mandate from the AGM again. And as we said before, we have an ambition to repay to the shareholders what we took in during the double listing in Copenhagen a few years ago. However, how much that will be next year or the coming year, I don't know. That depends on the situation and what we also need to consider, and this is the plan for the BFC 2.0, that we're doing the final details of how much we wanna make sure that we have flexibility. And having a lot of cash at hand is really helpful for us being a growing company, but obviously, we should be smart around it.
If we have cash that we don't need to use, then we will, of course, return it. But we need to get back on what and how and when.
Very clear. Thank you so much for taking my questions.
Thank you.
Thanks, Niklas.
The next question comes from Simen Aas from DNB Markets. Please go ahead.
... Good morning, guys. So, I have a few questions. So just briefly, I know you don't guide on quarters, but can you just give us some color on how trading has been so far in 2024? And, you know, is it along the lines of Q4, or is it in the midpoint of your guidance, or can you give us any flavor on that?
The short answer is no. We don't wanna do it. You know, we decided some years ago to say not to do current trading because it's only kind of confuses. So we cannot give any color on that. Yes.
Okay, but then back on the marketing spend, could you just try to quantify the positive impact that you had had from, you know, lower clicks and cost of clicks in the Nordics, just to get a feel for that? If you look at their marketing cost ratio, it's obviously down some 70 basis points from 2022. Is that basically the entire explanation, or is it anything else that have been driving that, you know, lower marketing cost ratio?
It's a combination. We have an ambition to kind of lower the marketing cost ratio, and long term, I believe that we've said that kind of ideally, we will go down to kind of between maybe 5%-7%, so there's a kind of a slow trajectory there. What we do is that kind of we calculate return on the marketing investments, and even though click prices might go down, conversion it might be a bit more difficult because if consumers are holding back, so that's why kind of I cannot directly quantify other than we're getting more mileage out of our marketing as we're increasing revenue, increasing profitability, and decreasing marketing cost ratio. I think that's kind of the best...
I know it's a very broad explanation, but that's kind of the best explanation, because if you double-click on the marketing, there's a lot of data that points and it takes a long time to kind of, you know, explain offline, online, different kinds of online media, media. So I think the best sign is that the marketing cost ratio is going down, we are still growing, and we still have the same payback on a new customer, low as we've decided, like many years ago.
Okay, okay, that's clear. Then, you know, on the competition side, Temu and Shein have, you know, started to make waves across the world and now also starting up in the Nordics, I think, yeah. So, what's your view on these new competitors, and how do you know, how do they compare to your offering?
I think they. I saw on Facebook that you could buy some a fashion item for, like, 15 SEK. So it's a totally different category or different segment than we're in. It's very cheap, probably for the very young, so even though I say to my young daughter that she's not allowed to do that, she's still tempted, but it's like, it's single-use items that are crap, but so we don't really see them as competition. So it's, I think it's more noise than anything.
Okay, okay, and then just finally, you know, on the verdict from the Norwegian tax authorities, just to clarify, that is not included in your guidance, right?
No, no, no.
The verdict on that one.
I would never jinx anything with that. No, yeah, but-
That is NOK 45 million or something, right? In Norway. What's the latest figure on that one?
In that level, yeah.
Okay, that was my question. So thank you, guys.
Thanks.
The next question comes from Daniel Schmidt, from Danske Bank. Please go ahead.
Hey, just a follow-up from me. You mentioned that you expect the mix shift to continue between sort of other categories versus men and women's wear, and it was at 39% now, and you said you should be at 50% and then maybe long term at maybe 70%, but 50% sounded like an ambition or a guesstimate, and not that far off. What do you—how do you—how fast is this sort of mix shift moving, basically? What is reasonable if it continues at the path you and the pace you're seeing right now, when is that gonna be 50% of your sales?
If we continue the pace now, that's like in three years, something like that.
Yeah.
So I think we went from 35% to 40% this year. So but it's the interesting thing is that once kind of the categories grow, they get better, customer get used to it, so it might even accelerate. So that's why, kind of long term, we think that 70% share of categories, that's a good target.
Of course, it has to do with what you're doing as well with the assortment, as you alluded to. If you look at the categories outside men and women's wear, are you adding a lot of new brands or items or SKUs in 2024 and 2025 as you look into the future, or how far can you see, basically?
Yes, we are. You know, and actually, across all the categories, even, you know, kids has become extremely strong. Our sports category is growing, adding both kind of subcategories or kind of different sports categories, if you say so. Beauty is almost beautiful, and home is kind of adding brands. So I think that kind of... You get this kind of into this positive momentum when once also suppliers see that the customers are there, and also, I believe that the pure verticals in the regions, you know, they are struggling, and their product offering is maybe getting worse, and customers see that we still deliver fast and good customer service. So it's kind of a virtuous circle, I think you call it so, so-
Yeah, but it's not like we put an on and off button here. This is continuous improvement in what they work with every day, so it's getting better by the day, I would say.
... Yeah. Of course, that would be quite important if you continue to see that mix shift accelerate or keep the pace that it's having right now for return rates and profitability, I would assume, going forward. Apart from that, are you doing anything more specific when it comes to the website experience in sort of helping the customer to get the right size or the right product in a better way than you've done historically? Is there anything that's coming up or that you've recently changed that has improved return rates?
Yeah, we are. It was almost as if you, I asked you for a cue. Of course, you know, we are using AI and trying to get kind of how can we reduce friction in the customer journey, in the customer buying process? So we think that AI is a kind of a gift for someone like us, where we can, without incurring costs, kind of using data to personalize, to get better product descriptions, categorization, tagging, et cetera. As well as back-of-house, you know, using that also to kind of make life easier for our employees in the warehouse. So we are doing a lot behind the scenes and—but in our case, it's always small tweaks.
You know, you don't wanna do any big things, and ideally, the customer doesn't even notice that we're nudging them in the right direction.
Okay. And then just maybe a final question. I assume that you followed what happened to Tietoevry a couple of weeks ago, being hacked, and it has impacted quite a lot of retail and municipalities across Sweden. Do you have you taken any sort of further precautions since this happened? Or what is your setup in terms of sort of internal IP and so on, when it comes to running the website and the warehouse and all that?
Well, I'm glad you asked. Cybersecurity is actually something that we work quite a lot with, but not since that event. But actually, during the fall, we did a review, and we renewed and actually increased our insurance related to cybersecurity. And not only having the insurance, but doing the pre-work to be able to do that and get it up and how much we're covered with. You need to do a review of your whole business and setup. And there, from that review, we know that we are quite strong. We know of course, you're never totally protected, but since we have everything in the cloud, we don't believe that we would end up in the situation that happened in that specific case.
But obviously, this is something that we work with continuously. But since we've done a review quite recently, we feel that we've taken the measures that we can, and we also know we have a few steps that we will continue to develop on.
And do you have anything outsourced, when it comes to that particular service?
So, everything is in the cloud. So we use Google Cloud, and so that gives a certain amount of security that if things are hacked and that you can get up quite fast again.
Okay. Okay, that's all for me.
Okay, thanks, Daniel.
Thank you.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any closing comments.
Okay, thank you, guys. Very good questions, and so this concludes the call, and yeah, we look forward to just meeting you on the road over the next couple of weeks. Thank you.