Good morning, and welcome to the Boozt Q2 2022 earnings call. All participants will be in listen-only mode. Should you need assistance, please signal a conference specialist by pressing Star then zero on your telephone keypad. After today's presentation, there will be an opportunity to ask questions. To ask a question, you may press star then one on your telephone keypad. To withdraw your question, please press star and then two. Please note this event is being recorded. I would now like to turn the conference over to CEO Hermann Haraldsson. Please go ahead, sir.
Thank you, and welcome all to our Q2 2022 webcast. I think that we should just jump into the first slide, the key highlights, and where we would like to say that the continued execution of our Nordic department store strategy has actually made it possible for us to continue growing the business profitably while taking market share in a quite a challenging second quarter. Growth in the quarter was 5.2% despite a challenging market where we can see that discretionary spending is under pressure with consumers impacted by inflation and that is reflected in the historically low consumer sentiment. For the first half year, we managed to grow 13.9%.
Customer acquisition costs increased meaningfully during the quarter, and we remained quite diligent in our approach to growing sustainably. It's quite important for us to underline that we stay committed to our long-term goal of a payback period on a customer within 16-18 months. As a consequence of that, we did not chase the marginal customer on the day. The underlying business drivers are all very encouraging, and this to me is the most important thing to note as this is the foundation for future success of our business. The cohorts from 2021, they continued the positive development compared to the 2020 cohort, leading to an increase in the true frequency.
The return rates, they have stabilized at a low level, and that's thanks to a diversification of categories, and not least our unique fair use concept that limits fraud and abusive return behavior. Last and most important, the average order value has continued to increase, and we are now at a record high average order value. This development is mainly supported by more items per basket. Our inventory position is healthy, and we've managed a satisfactory sell-through of the SS22 season. For the autumn 2022 season that we're going to now, we expect to see delays and cancellations pretty much on par with the prior season. As you are all aware of, we had to adjust our outlook for 2022 in early June to reflect the deceleration in consumer spending.
Our performance in June has been more or less in line with our expectations, and today we reiterate a net revenue growth of 10%-15% with an adjusted EBIT between SEK 235 million and SEK 285 million. To make sure that our organization and cost base reflects the current environment and the growth opportunities, we carried out a right sizing of our organization at the end of June. We reduced staff by approximately 5%, and this corresponds to an approximate annual saving of SEK 36 million with effect from 1st July 2022. We go to the next slide. The most important one, as we always say, is the customer satisfaction KPIs.
If we look at that, we can see that during the quarter, we have maintained our five-star rating on Trustpilot, and we have managed to deliver an NPS at a stable, very high level. As I mentioned last time, our efforts to expand our fulfillment capacity has been successful, and we've seen an improvement in the delivery speed compared to last year. I'm very pleased that we continue to meet and actually exceed the expectations of our customers in terms of selection, price, and convenience. If we go to the next slide, we can see that the number of orders dropped by 10% in the second quarter for Boozt.com. For the first half year, we are slightly down with 1.7%.
The drop in number of orders is partly offset by the increase in average order value and a continuous strong development of our additional revenue streams, be it Boozt Media Partnership and Boozt Pay. The average order value continues to develop strongly in the second quarter and is up to a record high,SEK 1,153 per basket. The main driver for that is actually customers adding more items in each basket due to the continuous expansion of our Nordic department store strategy.
As you know, we always use this opportunity to remind you that our high average order value is what we consider to be the single most important thing to continue to deliver best in class profitability and even more so in a volatile market environment. Moving on to the next slide, the cohort development, we continue to grow our base of active customers at Boozt.com. In the first quarter, we had 10% more active customers compared to last year and 4% more than the second quarter in 2020. Due to the temporary higher customer acquisition cost, we are less aggressive in our pursuit for the mass customer of the day. In comparison with fewer eyeballs during the second quarter, we've seen a sequential drop in the number of active customers at Boozt.com.
For the group as a whole, we are still increasing the number of active customers compared to the previous quarter. The number of orders for active customers is stable and in line with previous years. The true frequency developed positively compared to previous year. We are very encouraged to see that the cohorts from the pandemic years of 2020 and 2021 continue to behave in line with what we have seen from previous years. This also tells us that the changed buying habits during 24 months of COVID, meaning higher unprecedented prices, is most likely to stick. With this, I would now like to hand over to Sandra for some perspective on the financial performance.
Thank you. If we look at the group results, and as Hermann concluded, net revenue increased with 5.2% for the group during the second quarter, with an FX tailwind of around two percentage points. This implies a year-to-date growth of 13.9%. Return rates remain at the same low level as last year in the quarter, as well as year to date. In the Nordics, the Swedish and Finnish markets were the strongest, while Denmark had the weakest performance. As we invested less in marketing in Germany during the quarter, sales declined compared to last year in the rest of Europe.
Even though our organization is very much driven and set up to drive growth at much higher rates than what materialized during the second quarter, we are satisfied to see that we're gaining market share and outgrowing competition on the online Nordic fashion market. We're confident that we can continue to take market share even though market proves to be more challenging. This provides an opportunity for a player of our size with a strong balance sheet. The gross margin was 41.3% in the second quarter, which is 0.4 percentage points higher than last year, driven by the strong development in Boozt Media Partnership. Year to date, the gross margin increased with 0.4 percentage points to 40.4%.
The adjusted EBIT margin was 5.2% in the quarter, a decrease of 1.6 percentage points compared to last year. Year to date, the adjusted EBIT margin was 3%, which was 3.4 percentage points lower than last year. When we take a look at the cost ratios in a few minutes, I will come back to what's driving the adjusted EBIT margin. Profitable growth remains a key priority, and we are confident that we can continue to deliver best-in-industry margin. If we move on to the next page, we can see that the revenue growth for Boozt.com was 0.5% in the quarter and 9.4% for the first half of the year. The average order value increased with an impressive 6.2% to the all-time high SEK 853.
The increase is driven by the pattern that we've seen for a while, where customers continue to put more items in each basket. As we expect in times of macroeconomic turbulence, male customers are the ones most hesitant to buy, and this is what we see in the development of our men's category, which was below expectations in the quarter. Our women's category performed relatively better. The beauty and home category had the best performance of our categories and developed well in the quarter, but with relatively lower impact on the group due to the size of these categories. Trading has been increasingly volatile during the second quarter, and promotional activity has been higher than normal. As the number of eyeballs have been fewer, the customer acquisition cost was higher than last year.
The adjusted EBIT margin decreased from 6.7% to 4.9% in the quarter due to the slowdown in growth and lack of operational leverage on historical investments, which we expect to gradually grow in sales. The adjusted EBIT margin for the first six months of the year was 3.3%. Moving on to the next slide. Booztlet continued its growth trajectory with 34.4% growth during the quarter and 38.6% for the first half of 2022. The inventory mix on Booztlet was strong during the quarter, and this is key to drive growth. Growth in the Nordics totaled 36.4%, where Finland and Sweden were the strongest country. Growth in rest of Europe was 16.5%.
Compared to last year, we have, on top of online marketing spend, put more emphasis on offline marketing efforts both inside and outside of the Nordics. Just as for Boozt.com, the average order value increased significantly in the quarter. The increase of 18.3% implies an AOV of SEK 791. Also for Booztlet, the increase was driven by customers putting more items into each basket. The adjusted EBIT margin was 6.5% in the quarter, to be compared to 7.5% last year. Year to date, the adjusted EBIT margin was 1.2%. As we have talked about before, we believe that during times of economic difficulties, the offering on Booztlet should be very attractive for consumers.
Due to the relatively fast dip in consumer confidence that we've seen over the past month, high promotional activities in in-season goods in all channels does however damp some bad effects as businesses need to manage inventory issues. If we move on to the next page, we see the development of the cost ratio. The fulfillment cost ratio was 11.4% in the second quarter, the same ratio as last year. For the first half of 2022, the fulfillment cost ratio was 11.9%, which was 0.7 percentage points higher than the first six months of 2021. Over the last 12 months, we have been negatively impacted by shortage of capacity.
This shortage had a negative impact on automated processes, as well as added a significant number of man-hours needed in order to maintain high customer service with fast delivery. As we got access to the planned expansion of the warehouse automation continuously over the past nine months, we've been improving productivity in the warehouse, and we expect this trend to continue. With the positive development of the AOV, we're more confident than ever that our internal target for the fulfillment cost ratio of around 11% that we operated on before we run into congestion issues is well within reach, despite higher costs for fuel that has a negative impact on distribution costs. The marketing cost ratio was 11% in the quarter, 1.4 percentage points higher than last year, due to higher customer acquisition costs in relation to new customers.
Year to date, the marketing cost ratio of 11% was 1 percentage point higher than last year. However, we continue to stay true to our core principles that we have for years, where a new customer has to pay back time of around 16-18 months. This target defines what we're willing to pay for a new customer to ensure that we continue to build a sustainable and profitable business. The admin and other cost ratio increased to 10.2% from 9.5% in the quarter. Year to date, the adjusted admin and other cost ratio increased from 10.5% to 11.7%. The increased cost base was impacted by the planned investments into strengthening the organizational structure and capacity during 2021.
With the reduction of staff that we performed in June, we believe that we have a lean organization that is fit to take on the challenges and opportunities expected short term. The adjustments affecting this ratio total SEK 16.3 million, where SEK 9.5 million is related to the right sizing of the organization that would mainly reflect current environment and growth opportunities. The effect from the right sizing is approximately SEK 3 million per month and come into effect as from July, while the cost of the redundancy payments incurred in June. The depreciation cost ratio increased from 2.6% to 3.5% as expected and as a consequence of the recent investments that we made in warehouse automation. Coming into this year, we expected that the investments we made during 2022 would serve the capacity needed until 2025.
As we have improved the utilization of our warehouse footprint, as well as the recent market development with lower growth rates, it is likely that this time is to be prolonged. With the already high but also continued increasing average order values, both on Boozt as well as Booztlet, we continue the path that we've been on since 2016 when we first became profitable. We have consistently improved our margins and delivered upon the plan we set years ago and communicated at the time of our IPO in 2017. While adjusting to market conditions, we stick to our plan and we focus to deliver profitable growth. Moving on to the next page, we see that the net working capital of 9.6% of the net revenue for the last 12 months was 2.1 percentage points higher than last year.
The increase is driven by higher inventory levels, partly offset by increased account payables and other liabilities. The inventory position remains healthy even if sell-through is behind last year, which was an exceptionally good season. Looking historically, the sell-through for this season is on par with what you would call a normal spring-summer season. Inventory for the autumn-winter season of 2022 that is currently being happening is slightly behind last year, impacted by global market supply chain disruption. During the second quarter, we invested in the seventh expansion phase of AutoStore, an investment that totaled SEK 200.4 million.
Year to date, the cash flow from investments amounted to SEK 580.6 million, that in addition to investments in warehouse automation, consists of SEK 35.6 million in capitalized development costs and SEK 185.9 million that is related to the buyout of the remaining shares in Våtenmølla that we executed in the first quarter. We expect to finalize the investments in the warehouse automation during the second half of this year, meaning that warehouse CapEx for 2022 will be in the level of SEK 500 million. As we previously said, we expect significant lower levels of investment in 2023 and 2024 due to the expansion of the warehouse automation, as well as a higher utilization of the warehouse footprint in Oslo. That concludes the financial update, and I would now like to hand back to Hermann Haraldsson.
Thank you, Sandra, and let's just move on to the next slide. Again, talking about our Nordic department store strategy. A lot is happening this year and the uncertainty prompts a lot of discussion around the short-term performance. The visibility is low and customer sentiment is ever-changing. This prompts us to operate at a fast pace and actually make daily changes to trading plans and campaigns. To be honest, this is actually an environment that we thrive in as an organization and we have tried it before. The short-term turmoil aside, the long-term strategy and priorities are unchanged, and we are confident that the current market provides significant opportunities for a company with our size and scale and basket use economics.
Since the listing of Boozt back in 2017, we have managed to establish one of the leading e-commerce businesses in the Nordics. What started as a fashion store has now developed into the largest department store in our region, with a unique curated selection across categories. Categories that are well on the way to establish as destinations on their own. We've managed to establish a long track record of growing ahead of the market, taking shares from both offline and online players. You might say that growth is a key part of our DNA and our organization is currently stronger than ever before, with a scalable and highly automated infrastructure in place to cater for future growth.
Even though we and the e-commerce space in general have made a step change in recent years, online penetration is still in the early stages. The e-commerce space is still highly fragmented, with a long tail of small and mid-sized players, but with a few large established players driving an ongoing consolidation. Boozt is and will continue to be one of those. We founded Boozt on the belief that with strong use economics comes superior profitability. The assumption was that a strategic choice to cater to mid- to premium fashion and lifestyle customers would result in a high average order value that would allow the customers the convenience of free shipping and returns and still deliver profit. This has become our foundation for delivering profitable growth over several years and a significant step change in the margin since the early days of 2011.
Our basket size has been steadily increasing over the years, supported by our Nordic department store strategy. This is a key differentiating factor towards most of our peers, and this is also what will continue to drive profitability as our industry matures and we gain further scale. As we have grown in scale, we have explored the e-commerce ecosystem to gain further control of the customer relationship and to add additional revenue streams. Boozt Media Partnership and Booztpay and Brand Hub are already established parts of our business, providing additional income and value to our customers, partners, and the business. These business streams will continue to develop, and we see a strong earnings potential still to come. With that, I would like to move on to our final slide, the outlook.
You might say that the first half of 2022 proved to be more challenging than what we believed when we set our targets for the year. This prompted us to adjust our targets for the year for us to grow profitable, profitably while ensuring a healthy inventory position. The outlook for 2022 was adjusted to reflect a deceleration in consumer spending driven by weakening consumer sentiment, external supply chain disruptions, and rising inflation. We expect this to have a damping effect on discretionary spending for the remainder of this year, with limited visibility and higher uncertainty than we normally see. We reiterate the outlook for 2022, and we expect to achieve a net revenue growth of 10%-15%.
The net revenue growth is supported by market share gains, continued online penetration, and a stable or improving consumer confidence compared to the historic low during the second quarter of 2022. In terms of profitability, we set out to deliver an adjusted EBIT in the level of SEK 235 million-SEK 285 million, indicating a margin between 3.5% and 4%. Of course, depending on growth opportunities and promotion activities in the markets that we operate in. This concludes our presentation, and I would like now to hand over to the operator and get the Q and A session underway. Thank you.
Thank you. We will now begin the question-and-answer session. To ask a question, you may press star then one on your telephone keypad. If you are using a speakerphone, please pick up your handset before pressing the keys. If at any time a question has been addressed and you would like to withdraw your question, please press star then two. Your first question comes from Benjamin Wahlstedt from ABG Sundal Collier. Please go ahead.
Hello and good morning, guys. Just a couple of short questions from my side today. The first question tries to get a sense of the momentum going into Q3. I know that the reported revenue is sort of the lower end of the range given in the trading updates. Could you talk us through or give a sense of the entry versus exit rates for the quarter, please, in terms of revenue growth?
Good morning. As we said before, we don't want to continue or talk about current trading because it kind of dilutes the picture. Also, you know, in general, July and August, it's the end of the first half, so it doesn't really give you any sense of anything. We don't really want to comment on going into Q3. Of course, you know, us sticking to our guidance implies that we are still confident that we can meet our guidance.
Sure. Thank you very much. I also note exceptionally strong gross margins. Could you elaborate on what drives this compared to last year?
Yeah. It's been high promotional activities and normally that has an impact on the product margin, and it has this year as well. Looking at the scale that we have now and the other revenue streams, we've got a like a positive hedge. This quarter, the Boozt Media Partnership, so the marketing income has increased significantly. That's contributing very well. I think this is a very good sign that that we reached the scale and we have the. You know, we're talking about vertical integration and or expanding the vertical businesses. It has a positive impact. We can trade at quite low product margins. They haven't been super low. They're totally okay. Even at lower product margins, we can deliver a strong gross margin.
I think that is something that we're very happy with.
Perfect. Thank you very much. In the report, you also note that the home and beauty segment support sort of overall segment. Is it possible to get a sense of the, like, difference in growth rates for the clothing assortment and beauty, for example?
No, not really. We don't want to disclose that. Of course, these are smaller categories, so they grow.
Yeah.
They grow. Also know that the home category in general, looking at the home market, it has been quite stagnant. That we are growing the way we are, I think we're quite happy about that. Beauty also continues to develop well. Of course it has a lower impact on the group as the other categories are much bigger.
Yeah. Perfect. All right. That's all from me. Thank you very much.
Thank you.
Thank you. Our next question comes from Daniel Schmidt at DNB Bank. Please go ahead.
Yes. Good morning, Hermann and Sandra. A couple of questions. Coming back to what you did mention quite a lot in the presentation, the Boozt Media Partnership and Booztpay and Brand Hub, could you give us a sense of, sort of, or first of all, can you give us the comparison figures for the coming two quarters, what you had in H2 last year?
Good morning, Daniel. Can you please elaborate if you want the comparison figures from?
I think you've given us that number now for two quarters, when it comes to Q1 and Q2 being SEK 59 million in Q2 and SEK 52 million in Q1. You also gave us the numbers for H1 last year. Could you give us the numbers for H2 last year, so we just know how the progression has been during the second half of last year running into the second half of this year?
I actually don't remember that by hand right now, but we can get back to you with that. I don't have the exact number, sorry.
Okay. It does sound like this has been an important driver for the margin expansion on the gross margin. You mentioned that product margins are lower and that's sort of a thing that you can play with. Could you shed some light on the progression instead of sort of the media partnership going forward then? How many partners are now sort of actively using the service and, sort of, I guess, the gross margin is of course completely different? Could you give us some more information on this?
I'm not gonna give you all the details here, but it's the Boozt Media Partnership we work with quite long, and from second half last year, we strengthened our agreements, and we have a good number of brands that are aligned there. We see continued opportunities in BMP. As we talked about many times before, you know, we haven't guided how much we think it should be, but we think that we could do just as much as some of our international peers does in that area. Yeah, I don't know if you wanna add something.
Yeah, I think it's important also to note that developments in the other income is actually as we have expected for a long time because the Boozt Media Partnership product continues to be refined, so providing better data, better targeting opportunities. Boozt PAY is getting better by the day. And also, we are also getting more trade income as consumers are opting into more qualitative trade options where we charge them. It's actually a comparison, but that you would expect getting the scale that we are getting now. I think that at the moment development of other income is more inspired by the marketing book, you might say.
Since we don't have the second half numbers last year, but given the progression that you've made in the first half of this year, is that a reasonable sort of pace also going into the second half? Or are you seeing any slowdown to sort of the pickup of the service?
No, we think that that's probably in line, yeah.
Okay. Interesting. Moving on. Inventory to sales is actually down to its lowest level in seven quarters. You did mention that you had sort of a lower product margin, but looking into the second half of this year in Q3, maybe in particular, and you did mention that sort of discount activity in the market has been high. Do you feel sort of a bit more at ease when it comes to the inventory situation, your own inventory situation going into this quarter compared to Q2, given the level of the inventory?
I think in a market like this, you should not feel very comfortable with inventory levels. We are totally, you know, focused to make sure that we will drive the sell-through. We are a little paranoid. We're quite confident, but I think we have to respect that we expect a quite tough season. That's also why we're putting emphasis that we are lean. We're ready to make sure that we can stay in the war room and do what we need to do to trade because we believe that all hands on deck is needed there. I think we have a very good inventory position. We don't have any old stuff.
We're according to plan, slightly behind sell-through compared to last year, but then we were more sold out. We're confident, but we're also aware of that it can be very challenging.
Okay. Maybe sort of difficult to answer maybe, but you're in the middle of sort of sales season still and maybe in a week or two, we're back to school season and then to the autumn season with more full price sales. Do you fear that sort of the consumer will be holding on even tighter to their wallet as we enter September and you're supposed to sell more goods at full price than during the summer? If you see what I'm getting at?
As you say, this is a very difficult question because, you know, if the laws of gravity for economics still hold true, then of course, an all-time low consumer confidence in all the countries should reflect in people holding back. We believe that we're in a good position because, you know, historically, there has been a tendency that we've seen that maybe I think it's the last big recession that people trading down to cheaper items, but they might be sticking to quality, so maybe buying a few items but more quality, which is kind of more sustainable both financially and environmentally. I think we are cautious and believe that the consumer is holding back.
The difficult thing is that you have all-time high on jobs as well, so that's a counterweight on the consumer confidence. I think the main message is, as Sandra is saying, that visibility is actually, you know, extremely low, and we just have to be on our toes and make sure that we don't have any inventory issues. That's why we are focusing so much on making sure that our inventory is moving. If it can move at a higher price, that's good. If we need to move it on a lower price, we also do that because, you know, our gross margin is so strong.
I think that, kind of, we are in a very strong shape to take the bumps that for sure would be in the last part of the year.
Yeah. Maybe the sort of final subject, I think, Sandra, you were the one mentioning the fulfillment ratio, and you sounded fairly confident that sort of the efficiencies that you are seeing, coming into 2022, on fulfillment will get you to the 11% despite higher fuel prices. Now we've actually seen fuel prices coming down as of late. It hasn't moved that much, but it has been starting to come down. I guess that is not incorporated into your sort of expectation of reaching the 11%. When do you think that's reasonable to get to that 11%?
I'm not gonna give you a date. I think they need some time. We are within reach. What we see is that, you know, the trend is going the right direction. We have increased productivity. I think that there are many good signs that we're getting there. Also with the average order value increasing, there is some leverage just on that. We're confident that we will get there soon. It's 11.4% this quarter, so we're not that far off. Of course, with the capacity issues we had, it put a lot of man-hours needed and.
The good thing with the crisis like that we had in the fulfillment is that you evaluate everything you do and how you do it. We've been looking at, and that's also the utilization of the automation. We have re-reviewed that. We think we have some good initiatives on how to make that even more efficient. Everything is trending in the way that makes us confident that we will get back to those 11%.
Maybe just a final one also on the CapEx, you mentioned SEK 500 for this year and substantially lower for the coming two years. Any indication on what substantially lower means?
Substantially lower is substantially lower. No.
Half the rate.
I don't know. To be honest, I don't know. Of course, there can be things coming up when we improve things or change things and you're working in the warehouse and trying to do things smarter. I'm not going to give you a number. Yes, we will do that after we've done our budget. Warehouse automation is what's driving the investment. Since we're not going to need any of those in the coming years, it should be very low.
All right. Okay, good. Thanks. That's all for me.
Thank you. Our next question comes from Daniel Ovin from Nordea. Please go ahead.
Yes. Good. Yes, good morning, Hermann and Sandra, and thank you for taking my questions. I had one question also on the inventory side here, because it seems like inventories are still up some 18% year-over-year, and your growth rate at the moment is much lower. You still mentioned that there has been a delay in inventories for the autumn and winter season. I just wonder, what is the actual inventory position here? I mean, how much more is that going to come up? Do you feel kind of confident that you will be able to sell this out at a level that will enable you to still meet your guidance? That's the first question.
Yeah, of course. You know, as Sandra said, our sell-through of SS and T was quite okay. Of course, lower than last year, but close to normal season. The autumn winter items have been coming in now during July and August. They are, of course, based on our revenue expectations. If we meet our targets, then we are in good shape, of course. But if we don't, then of course you will have to deal with that. That's how it is when you make your orders well in advance. We've tried that before. That's this is why we are going into the acquired brands.
We know that there's a risk that there will be a heavy trading activity, you know, for the rest of the year.
I guess I wonder what if you look at the inventory as of now, at this time of reporting, is it up on a similar level, like 18% like it was in the end of June?
Yeah. Pretty much.
I don't think we want to comment on that. It is what it is. We're fine with the inventory level.
Of course, in a business like ours, this is the main one of the main thing you look at always is like how is your inventory, how fast to return it, and is it healthy. That's a key part of our business.
This is what we work with every day and put a focus on the inventory.
Yeah. Okay, perfect. Then I had another question on the layoffs here. If I understood correctly, it was on a full year basis, SEK 36 million that should save. That's about SEK 9 million per quarter. During Q2, how much of that did you see already? How much of that was helping Q2?
Nothing because we had the full cost in there. We executed end of June. We took the redundancy payments, and those we have adjusted for. We had the effect from first of July this year.
Okay, perfect. Just one question. I looked at Q3 operating profit before we came into the pandemic in 2020, that was always actually a loss-making quarter. If it's a loss-making quarter also this year, would you still feel confident then that you will meet your full year guidance?
Our target is that we will not have any loss-making quarters in the future. Of course, on basis, we don't guide on a quarter level. Again, our target is like, I think we said, like a couple years ago that all quarters should be positive, but some will be more positive than others. We're not assuming a loss-making quarter for the rest of this year.
Perfect. That's all my questions. Thank you very much.
Thank you.
Thank you. Once again, if you do wish to ask a question, please register by pressing star then one on your phone. Our next question comes from Michael Benedict from Berenberg. Please go ahead.
Morning, all. Thanks very much for taking my questions. First one I had was just on Boozt Media Partnership again. I guess some may have expected that to perhaps struggle in the prevailing environment, given many brands and retailers are pulling back on marketing. Can you just give us a bit more color on what has driven that strength in Q2, please?
Yeah, of course. You know, if you have a demanding market environment, you are probably scrutinizing your marketing dollars even more. Without being too boasting, you know, we can offer quite unique targeting opportunities, segmentation, brand agency, et cetera. By partnering with retailers like us and probably also our peers, you probably get the most bang for your dollar. I would assume that media partnerships or services like ours would be some of the last ones that you would cut down on. Because it's kind of you have a quite visible return on investment, and we can provide very, very good data on the segments and return on investment.
That's great. Thank you. My second one was just on the autumn/winter product assortment. Are you planning any changes to that assortment given the prevailing consumer environment? For example, any lower priced brands added to the assortment, that sort of thing?
You must say that the autumn/winter buy was done in February. If you would want to do any adjustments, you would do that. But in general, we are quite happy with the assortment, with the brand mix. We stick to the mid-premium position because we think that basket size is the key to profitability. You will not see us doubling down on cheaper fashions, et cetera. We will stick to our strategy. Also, when we have these discussions, we're always talking about fashion, but we have a big sports category, kids overview. We are kind of not depending so much on either men or women buying alone because we have the other categories.
I think that the mix and the basket size, that's the key, and we are sticking to our bets. Having said that again, Michael, of course, you have Booztlet which can adjust to the market environment and which actually is probably benefiting from consumers being concerned.
That's great. Thank you. My last one was just, yeah, I appreciate how difficult it is forecasting and guiding, in the current circumstances. If things do go or turn out worse than expected, would you prioritize growth or margins over the back end of this year?
Margins, we have always said that we would grow more than the market, but we would grow profitably. We will focus on growing with what in a proper way. We see also, you know, with our strong unit economics, we actually probably believe that we are in a very stronger position than most to grow profitably.
That's also one of the reasons that we mentioned more than once during our presentation that we stick to when it comes to new customers, we stick to this payback time of 16-18 months. We don't want to chase a marginal customer that is too expensive because then it won't help us our profitability. And this is nothing new. It's what we've been doing for years and we stick to that, and we believe that that's the right way to do it also in this environment.
Yeah, makes sense. Thanks. That's all of my questions and good luck.
Okay. Thanks, Michael.
Thank you. Our next question comes from Niklas Ekman from Carnegie. Please go ahead.
Thank you. Just two questions here. First on the inventory, coming back to the inventory situation, you seem to be fairly content here that your inventory was adjusted to your targets. These targets were set on the ninth of June, and you also talked about very long lead times for the winter season. I'm just curious, did you see any risk here that you have bought too much considering the weaker consumer environment right now? Or have you been able to adjust your buying here during the early summer?
I think this is a constant risk that we have, you know, but this is what we do. We buy six months in advance and then you have to take a bet on the season. Of course it's something that we think about and make sure, but we also have flexibility in our buying. We use the flexibility we have. We have these risk sharing agreements with brands that also helps with the risk. We are quite confident. We also think that with the marketing that we actually can invest in, even if the market is tough, we can afford to invest quite a lot in marketing so that we can take the growth that is out there.
Yeah. Also you, of course, you can also, if you want to do some conservation, of course, it's to some extent, but of course you try to adjust to the market.
Okay. Thanks. That's clear. Second question is just your view on the physical retail market. Obviously here during the spring we've seen a fairly strong revival of physical retail, and I guess this has been stronger than most had anticipated, at least during the peak of COVID. Can you elaborate a little bit just on how you see this and if you see this as very temporary? It seems like recent signs indicate a tangible slowdown again for physical retail and maybe a revival for online retail. I'd just be curious to hear your thoughts on this mix between online and physical retail.
Yeah. I think, you know, a lot has to do with math. You know, if the base is low, then percentages are high and what we are looking at is that if we look at our numbers, we are up more than 70% versus Q2 last year. No, Q2 2019, I mean. There has been a shift of course. The physical stores are probably selling more than they did last year where this was affected by COVID in the first half. Fundamentally, we don't see the physical stores becoming more competitive compared to previous years. But of course, we see that the online penetration has maybe paused a bit.
Long term, we don't see any signs that online penetration on a X year stack will not continue to do what it's done. We are still quite bullish on online and we believe that our industry is providing a very competitive product to the physical retailers. I think that's, you know, I think it was yesterday that we saw in Sweden, the Stilindex which was quite disappointing also for the physical stores. I wouldn't bet on the online shops to lose the battle.
No, that's a fair conclusion, I think. Just a quick follow-up also. Have you seen any change, any tangible change in the availability of campaign buys?
It's a difficult question.
Yeah, it is. You could assume that the availability would increase going forward.
Yeah. Yeah. There seems to be a lot of goods in the market. Obviously, you know, when you go into a season where you are just insecure, you don't dive into buying campaign goods because you want to make sure that your own inventory position is healthy. I think that it's a kind of a waiting game at the moment.
Okay. You haven't seen it yet, but you think it's very likely to materialize?
Yes.
Yeah.
Super clear. Thank you.
Thank you.
Thank you. That does conclude our question and answer session. I'll now hand it back for closing remarks.
Okay. Thank you for the call and for the very good questions. This concludes our call and look forward to meeting you or seeing you again on the phone call in a few months time. Thank you very much, and have a good day.
Thank you, everyone. That concludes our call for today. Thank you for participating. You may now disconnect.