Earnings Call: Q2 2021

Aug 13, 2021

Thank you. Good morning all and welcome to our Q2 webcast. Let's just dive into it and start with the first slide, looking at the key highlights. As you know from our report, our growth in the quarter was 20 0.2% and some 23% if you look at local currency or currency adjusted with an adjusted EBIT margin of 6.8% and versus 2019, the growth is 64%, which we think is strong. And if you look at the year to date, we have grown 11%. And if you look at currency, it's 35%. So we believe it's been a good first half year. And based on that and also due to a promising start to the Q3. We upgrade our guidance for the net revenue growth for the full year. Having said that it's been a good start and we're quite satisfied. We still haven't seen the kind of the pent up demand that we expect materialize in the market. To be honest, we expect or I expected that the corona pandemic would be kind of post corona in Q2 and that has not been the case. We can see from an auto market that fashion demand hasn't really picked So we believe that the potential upside of the pent up device still is waiting out there. We're still seeing solid growth in the categories, especially home is very promising and we have signed a lot of brands. And currently, I know it would say 100 brands, but currently just below 200 Brands Live, slightly restricted by our capacity strains, but that is being fixed as we speak. And then talk about the capacity constraints, we are accelerating our investments in the Freedom Center. We are slightly delayed on each phase and the next phase of Autostar and this is mainly due to the supply chain issues and being delayed. So we are running very close, almost above our capacity, and this is why We expect to do some additional investment in our fulfillment and automation in over the next 6 to 9 months. And then finally, Osmante, basically everything is in place. It's been executed successfully. They would be a part of our financial statement as of July 1 and contribute to approximately 1% to our net revenue. And so that's all good. If you go to the next page. Just a small comment on the market. We have seen during the quarter that fashion buying in the Nordics has picked up. But still, it looks like We are still not back on 2019 level. We are displaying the Swedish Steel Index, which is the Swedish Fashion Industries or Fashion Retailers reported revenue, and we are seeing that Even though it has picked up during the quarter, it's still below 2019. And for the full quarter, it was some 15% down versus last year and we just got yesterday the numbers for July even and we are still below 2019. This is also why we are extremely satisfied that we saw our growth versus 2020, which was an extremely strong quarter for us. Because it was slowly increasing in June around production growth for the group as a whole and July is going even more. So for us to see that on the back of a very strong quarter last year, we are keeping a very strong growth momentum. But of course, as the market has total market is down, it's very much affected by high competition. Clicks are not as cheap as they were last year. Basically, last year, it was almost as everybody pulled out the market in 2. So marketing costs were very low and now we're getting kind of back to normal. So but in general, we will see that the market is still somewhat depressed and but our revenues are quite promising. So and again, this demonstrates that during June, July, we've seen a good growth that is continuing into August. If we go to the next slide, looking at the KPI highlights. This is always kind of the most important slide looking at customer satisfaction. And that's still high, Trustpilot with a 5 star rating and the 4.6 rating. And our net promoter score for Boost.com is actually an all time high of 77%. It's very high and will probably come down in Q2 because this is unusually high. But I think this basic demonstrates that we've been very strong in the quarter and living up to the customer expectations. So that's promising for the future. We also see that the new customers that we've gained during the pandemic that customers have more or less been forced to buy online. They seem to stay online. That is very good. If we go to the next slide, look at that all developments we saw in the quarter that we have increased by 20% in number of orders. Average order value is slightly down for the quarter, but the most important thing is that it's unchanged for the first half. So all in all is good. We are maintaining industry leading average order value. Order composition is slightly changed as we are selling more other category items. So we're delivering slightly more Ourospa baskets, but that's okay as long as the category that we're selling or adding to the basket, have a lower return rate and we are keeping the market size, which is where the profitability lies. For the full year also on number of orders, we are up some 26%, which is very good for boosters. If you go to the next slide on the cohort development. In Q2, for the last 12 months, we have had some 2,300,000 customers who bought on average 2.3 times same as last year. And if we look at the true frequency, it's down for the quarter compared to last year. And that is not surprising as these customers have bought Corona. We know that basically people have been buying less fashion. So we of course, it's not surprising that that our customers stay by less. But as long as we get new customers and they stick, that's okay for us. So we expect that when we get post corona that these numbers will go up again. And we're seeing already now that the figures numbers for the subsequent quarters are looking quite okay. If we go to the next slide on the fulfillment, I just would like to make some comments around our investments into the fulfillment operations. As you know, We took over the fulfillment staff in general first, and that's been very particular and it's quite successful foreign people. This means that we are in full control of our fulfillment operations. And with the tight capacity, it's been, yes, almost set from heaven that we did this because the extra capacity cost that we have had from the strings that have been absorbed by much lower cost per hour for employees. So that's all good. So we have benefited from Aimsource is quite in sourcing quite well. We just and we integrated the new warehouse next to the current and now I'm in process of building around that, putting investments into automation investments into that and doing some CapEx to fit the new building. Also because we can see that the strong growth course for an acceleration in our fulfillment operations. When we exited 2019 and digital guidance in Q1 2020. We were guiding some 15% to Transfran's growth and looking now back and with the guidance that we're doing for Transcendent. Our revenue is up by almost EUR 1,000,000,000 compared to what we expected almost 1.5 year ago. And This is why we are running very tight capacity and you want to ask yourself, could you do anything about could we have foreseen that? And my claim is that That would have been very difficult because that would have meant that we've had to make some very big investments decisions in February, March, April last year. And I Don't think anyone wanted to make a SEK700 1,000,000 CapEx commitment in a very uncertain situation. So I think this is what it is. It's a positive thing that we are growing more small than we expected, and I think that we've been extremely good at dealing with it. So but we are running close to full capacity. We are installing the what we call the Oslo 5 and 6 as we speak, our building, and it was supposed to be ready by July 1. We are slightly delayed. So we will be ready to deliver beans in mid September. And At the same time, we're actually looking into advancing into Ostrus 7 already now and that might mean that we will push some investments forward to make sure that we are well ahead of the fulfillment need because we think that there's still a lot of opportunities out there and we would like to accommodate that we're able to deal with growth of more than 20% until 2025. So we are preparing for this pent up demand to materialize and not be taken by surprise if growth will stay above 20%. If we go to the next slide and before I hand over to Santa, I just would like to talk some about our priorities for the short term for our priorities for the immediate future. Our main and the first and foremost priority is net revenue growth. We have seen over the last over the past 2 years that size matters and we have huge eCounterscale. We see that we don't doubt anymore if our industry or our business can and will be very profitable that's basically improved. Now for us, it's a matter of growing as much as we can and gain market shares. So that's why growth is our main priority. Secondly, We have to be on the forefront on the fulfillment. We talked about last year that we were behind the curve on fulfillment. We are probably slightly more behind than we had expected also due to the change in category mix where we need more items to generate the revenue kroner. It has positive effect on the return rate, but basically it demands more storage and fulfillment capacity and we want to make a foundation for our plus trend growth over the next five or at least until 2025. And finally, profitability. We are the most profitable player in our industry in non Europe and we intend to stay like that. But we are in no hurry to surpass our midterm goals. That we have stated that we will deliver EBIT of between 5% 7%. But that's the choice between growing 10% and 7% EBIT or going 25% or 30% and have a 5% EBIT. I think there's no doubt that we will go for the latter one because growth is just extremely important in life. So it's revenue, it's investing in our infrastructure and then profitability. The main thing is that we will still be able to fund our own growth. This is my last slide. And now I would like to hand over to Sander for the next slide for the financial update. So if we move on to the group results, it concludes the net revenue growth of 20.2% for the group in the 2nd quarter. Growth in local currencies was 23%. For the 1st 6 months, net revenue growth was 31.1% and 35% in local currency. Just as in 2020, the return rates remained low during the Q2. The return rate was around 1 percentage point lower during the second quarter this year compared to last year. For our biggest categories, the women's and men's, the growth rates increased throughout the quarter. We knew that we had hard cups to beat. And since the market sentiment in the Nordics still is relatively weak for fashion and apparel, We're very happy to see that growth rates in June and also July picked up to a very strong level. The kids, Boards, POC and of course also the Home category delivered strong revenue growth throughout the quarter. In the second quarter, Sweden and Norway were the strongest growing countries. Year to date, Sweden, Norway and Denmark are the strongest growing countries. The gross margin was 39.8% in the 2nd quarter, 1.7 percentage points lower than last year, Impacted negatively by the written down inventory that we sold during the Q2 last year as well as the level of campaign inventory that was relatively lower during 2021 compared to 2020. As we have talked about, last year was quite extraordinary, especially during quarter. The write down in the Q1 provided inventory of favorable prices during the Q2. The share of campaign stock was also higher than normal during 20 one. As we were more or less sold out on the upfront buys of the springsummer inventory after the very strong sales during April and first half of May. While planning for the springsummer 2021, we wanted to make sure that we had enough inventory to capture growth opportunities. Hence, we made sure to build up a strong and opportunistic inventory position. We maintained a high level of attractive campaign stock, however, lower than last year. As we did this expected site in the Nordics to be a little more open than what materialized during the Q2 of this year, It is actually very satisfying to see that the sell through of the springsummer inventory at this point is on par with the super strong sell through we had last year. Hence, we currently sit on a strong inventory position as well as the gross margin that for the 1st 6 months was 40% compared to 37.8 percent last year. If we exclude effects from the write down, the gross margin for the first half of 2020 was 40.7%. However, a full adjustment in the first half of twenty twenty is kind of overstating the gross margin as the inventory from this write down also was sold during Q3. The price investments that we made during the second half of June this year as well as in July was a response to the relatively weak consumer sentiment and elevated promotional activity in the market. Further, we also wanted to mitigate the space constraints that we experienced in our BSD. This allows us to continue to deliver a strong selection of autumn winter inventory That will enable us to deliver strong growth also in the second half of twenty twenty one. As it has been calculated, risk to do opportunistic big investments in inventory, both for the spring summer, but also for the autumn winter season. It was calculated for in our budget diluted price investments we've made. And at this point, we do expect the gross margin to be on par with the 39% to 40% for the full year as we have we communicated. The adjusted EBIT margin was 6.8% in the quarter, a decrease of 4.6 percentage points. For the 1st 6 months, the adjusted EBIT margin was 6.5%, an improvement of 2.5 percentage points compared to last year. However, if excluding effects from the extraordinary stock write down and IFRS revaluation of a lease contract last year, The adjusted EBIT margin was 0.7 percentage points lower than last year. The decrease compared to last year is related to the scenario situation in 2020. In addition to the gross margin impact, we have done additional investments in resources to accommodate the current high and future growth, resulting in an increased cost base. And I will come back to this shortly where we look at the cost ratio. So if we move to the next page. We can see that the revenue growth for boost.com was 18.8% in the 2nd quarter. Negative impact from currencies was around 3 percentage Growth had a positive trajectory towards the end of the quarter, which also has continued into July beginning of August. Growth in June was close to 40% for the Boost.com segment. New customer intake continued at a high pace. The Home category had a positive impact and continued to exceed expectations. True frequency was impacted by the lower spending in the market in general also among our existing customers. The 2020 cohort continues to behave as previous cohorts, So it is the overall lower spending that is impacting Frequency of Hawaii. Average order value decreased with 2.1% to DKK 803. Change in sales mix towards kids, sports and home at the expense of vacationwear categories affected the gross average order value negatively, But it was partly compensated by the lower return rates in these categories as well as a higher number of items for order. For the 1st 6 months, the average order value was marginally higher than last year. So if we move to the next page, We see that Bouygues grew 32% in the quarter and 35% in local currencies. The Q2 of 2021 was heavily impacted by tougher comparison numbers, which especially impacted Fusliff that got access to low value stock after we have performed extraordinary write start in March of 2020. Growth rates picked up during the quarter and was around 60% in June with a positive trajectory also into the 3rd quarter. Growth in Q2 2021 versus Q2 2019 is 233%. Growth in the Nordics was 24%, mainly driven by Sweden and Denmark, while rest of Europe grew 131. As we have talked about earlier, our ambition is for Brutal to invest further into markets outside of the Nordics. We have yet to put more efforts into this. Brustlut is run by a small and very efficient team. And with the high growth we've experienced over the last couple of years, we now expanded the team to enable such a focus, Why we expect the growth rates outside of the Nordics to increase going forward. Average order value was SEK 669, A decrease of 2.6% compared to last year when consumers put more items in each basket as the offering was very strong. Year to date, the average order value is slightly higher than last year, a level that we're very satisfied with as it enables market leading unit economics and profitability. The adjusted EBIT margin was 7.5%, both in the quarter and for the 1st 6 months. So if we move on to the next page, we did the development in the cost ratios for the Q2. The fulfillment cost ratio was 11.4%, which is an increase of 0.1 percentage points in the quarter. That we are currently running our operations on close to full capacity in relation to storage has impacted the cost pressure negatively in the quarter. This was, as Raman said, however, fully compensated for by the lower realized cost per hour for personnel working in the fulfillment center, slightly lower return rates as well as a slightly lower distribution cost, which impacted the fulfillment cost ratio positively in the quarter. The lower cost per hour for personnel is an effect from the in sourcing in January 2021. Our personnel in the BFC previously worked for a 3rd party provider who we paid a markup on the actual hourly wage. So we're not paying the workers lower wage, it is just a markup. For the full year, fulfillment cost decreased with 0.8 percentage points to 11.3%. The improvement is mainly related to the relatively lower distribution costs while fulfillment costs were on par with last year. Given the implications from capacity restraints, there still is an improvement potential in the fulfillment cost ratio looking at the longer term. We, however, believe that the focus we have on continued high growth will impact this cost ratio with a few margin points up and down as we scale our operation. Fulfillment costs around 11% is a level that we're happy with at this time, and that's also in line with what we previously communicated. The marketing cost ratio was 9.6% for the 2nd quarter and 10% for the 1st 6 months. As marketing costs were relatively lower temporarily during the Q2 of last year, we made relatively higher investments in marketing during the Q2 of 2021. The marketing cost development, both for the quarter and for the 1st 6 months, is in line with our expectations that we previously communicated where we want to maintain a marketing investment around 10% to support continued strong growth. The adjusted admin and other cost ratio increased with 1.2 percentage points in the quarter to 9.5%. Of this increase, 0.3 percentage points is related to investments in new employees as we're building our organization quarter growth. In addition, and as mentioned before, we have invested more in business development related activities to support the customer experience. This has a negative impact on the admin and other cost ratio in the quarter. For the 1st 6 months, the adjusted admin and other cost ratio was 9.4 percent, which is a decrease of 0.2 percentage points. The investments in personnel during the 1st 6 months impacted the cost ratio negatively with 0.7 percentage points. However, this as well as other business development related investments was fully compensated for by the scale effects on the net revenue growth for the 1st week. The adjusted depreciation cost ratio increased with 0 point 2 percentage points to 2.6 percent in the quarter, but decreased from 3.2% to 2.9% for the 1st 6 months. As we will invest to secure more capacity in our fulfillment center, we do expect this ratio to increase in the second half of twenty twenty one and coming into twenty twenty two. At the current growth rates, we believe that it is desirable for this ratio to be around 3.5 percentage points on a full year basis. So if we move on to the next page, we see that the net working capital increased from the very low 2.3% last year 7.5% of last 12 months net revenue. In the Q2 of 2019, the corresponding ratio was 11.2%. The increase compared to last year is strongly impacted by the situation where we were almost sold out of springsummer inventory in June last year and where Pain inventory constituted a relatively higher share of the revenue to compensate for the low inventory level. We believe that the current level is a healthy one given our focus to hold a strong and attractive selection of inventory for our customers. Moving on to CapEx. That totaled SEK 65,100,000 in the quarter, where SEK 17,400,000 is related to intangible one. The level of intangible development CapEx was on par with the Q1, both in absolute numbers and relative terms. Investments in warehouse automation of $47,700,000 is related to the continued expansion of Autostar. As Herman mentioned, we are currently installing the build out of Autostar that we call Phase 5six that is expected to be operational at the end of the Q3. To accommodate the past 15 months higher than expected growth rates as well as the strategic investments to build a foundation for a plus 20% growth for the coming years. We are currently planning to push forward additional investments in Autostar of approximately $200,000,000 in 2021. From an operational point of view, it is securing capacity for 2022 and 2023. To secure availability, we need to, from a financial point, Committed upfront payment that is significantly higher than with previous Autostar build up taxes. So even if this build up would be operational in 20 2022. CapEx will be affected already in 2021. As a consequence, CapEx could exceed $500,000,000 this year, but should be reduced in the next year correspondingly. Looking at the period of 2020 to 2022, the average CapEx is expected around 5% 6%, which is in line with the average CapEx for the period of 2017 to 2019. As long as we're successful in growing the business with a plus 20% a year. CapEx will likely be somewhere around 5% of net revenue on average. PFC CapEx is in 2021 2022 To some extent, impacted by higher prices on raw material. From a P and L perspective, meaning depreciations, this price increase is marginal as the operational efficiency from the warehouse automation is very high. The operational cash flow from the Q2 was SEK 111 SEK 200,000 that is to be compared to SEK493,800,000 last year, highly impacted by the changes in net working capital. The outflow was mainly due to intensive stock building to continue our growth journey and provide customers with the best possible assortment. So this concludes the financial update, and I would like to hand back to Norman. Yes. And if we go to next slide, which is our outlook, Just want to highlight that we have operated our outlook. At the same time, it is also is Now it's including the impact from Osmond. So now we expect to deliver an environment growth of between 27.5% and 30.5% at the same time as we stick to our adjusted EBIT margin guidance of 5.5 and our medium term financial ambitions are still the same to outgrow the North Carolina market significantly and stay in the range of in the range of 5% to 70%. So focus is growth, at the same time maintaining industry leading possibilities. So that was my last slide. So I I think I can hand over to Marc for the Q and A. Thank question. One. And we have a few questions already lined up. The first is from the line of Johan Brahm of ABG. Please go ahead. Your line is open. Thank you. Good morning. So a couple of questions from me, and I'll take them 1 by 1. So firstly, thanks for the June growth number is very helpful. But would it be possible to put the comparables in June in the perspective of how they look compared to your Q3 comparables? Good morning. I'm not sure I understand the question, Johan. Yes. I'm Icelandic, but that's maybe, but I just can you rephrase it maybe? Yes. So how much sort of Growth rates in June 2020 versus the Q3 growth rates, if that's possible to give any color on? I think June July last year, I just had a question where it's probably almost the same growth rate, something like that. Yes, I think that June July last year, the group almost the same, I believe, something like that. All right. Thank you very much. And secondly, and my last question as well regarding customer acquisition costs, which are, yes, naturally up as you're mentioning. But how aggressive would you say your competitors are in this regard now as The market is opening up. Our competitors are very, very aggressive. So that's a total different ballgame compared to last year. This is why we are extremely happy to see that we have a very, very high resilience even though We now have 2 German competitors trying to take the market and spending much more than it's done before. We are maintaining momentum in the Nordics. We are keeping the basket size, keep the profitability. Our click ratio is actually increasing during the quarter. So our return on investment is the same as before. So we're actually kind of we're seeing very aggressive behavior from the market and but standing extremely strong and actually growing momentum in that picture. So yes, it's not a steal anymore to buy clicks, but returns on investments still very high. So we are pleased that our notes have basically stood at stand during this aggressive invasion. Wonderful. Thank you very much. Thank you. And our next question comes from the line of Ekman of Carnegie. Please go ahead. Your line is open. Thank you. Just a couple of questions for me as well. And I'll start kind of in the same area there with the current trading statements. You talk about June sales growing 40% for Boost, 60% for Boost. And it looked kind of like July was seeing the same kind of pattern. So on a group level, is it the right To assume that kind of the start of Q3, you're seeing growth rates in excess of 40% or am I missing something? And are we looking at e 0 tougher comps kind of in the latter half of Q3. Good morning, Niklas. No, you're right. Q3 has started very strongly, and we're seeing the growth rates that you are talking about. So this is why we have quite confident in our web upgrades. But there's still kind of There's still some unknowns, so but we're ahead of quite a good start. And I wouldn't say it's surprising, but it's probably slightly better than we expected at the start of the quarter. Very good. Thanks. And in light of that, you talk about an upgraded target, but of course, Rosamond added more than 1% to sales. And I think even for this year, we're looking at an earnings impact of close to 5% from Ruzamond. And yes, you only raise your sales guidance by 2.5% and your margin guidance is unchanged. So It's not a significant update or am I missing something? I think you calculated the numbers wrongly actually. But if Lottermann will probably contribute with around 1 percentage points on the sales this year and that's it. But I think Rosemont is a high margin business, if unless I'm mistaken. Yes, but it's very small in comparison. Okay. And we also get the half revenue or a half year. That's true. That's true. Yes. And also take into account that when we did the guidance in Gethia, was the human constant currencies. We have some headwinds of a bit more than 3%. So this is human unchanged currency. So we think it's actually quite a confident upgrade. Very good. Very good. Thanks. And as you said, the markets during the same period has been a bit more challenging than you had anticipated. So yes, it Looks quite solid. I just wanted to get the numbers straight. Yes. Thanks, Dave. Okay. Yes. Another question is, can you elaborate a little bit more on your private label strategy. I believe you are about to launch new private label brands alongside the Rose Amund. Can you confirm this and maybe tell us some more about your thoughts here on private label. Yes. Basically, we have not much new compared to what we said before. In OIBUS Monday, we think it's a very good company and we can get some learnings and start to pivot towards, but there's no way a kind of a strategy shift with introducing a lot of private labels. We can see that there might be some opportunities could be within the Boosted business to add some missing categories and also kind of do simpleboost.com. But the business of Rose Mendes or the brand top or slash private label to Stelica will be below 5%. So it's not a game changer, but it's just to give us some insight into the supply chain and either opportunities. So there's not a big shift in our predictive strategy and it's just going to again, we are just difficult to host and doing some tests. Okay. Very good. And can you tell us a little bit your thoughts on further M and A? I You still have a strong war chest in case you want to make acquisitions. Are you looking at companies similar to Rosamond? Are you looking at kind of smaller Nordic premium branded products or what is your main focus in terms of potential future M and A? The focus is still the same. If we can end in strength in our categories or if we can strengthen our foothold in the Nordics, we would do that. Of course, now it's been summertime, so not much has changed during the last 2 months. But we are kind of optimistic. We believe that post corona will provide some opportunities for us. And so we have an open mind, but it's we're very disciplined. It will not be outside the Nordics, and we will still be very cautious and we will not see I think nowhere near Ottermann acquisition in size from our side. So it's opportunistic and again, we believe that the next 12 months will be, I wouldn't say, transformative for the industry, but there will be a lot of changes. And I think that is good to have all just in a market that has changed in the cities now. Very good, very good. Thank you. Thank you so much for taking my question. Very welcome. Thank you. Our next question comes from the line of Daniel Ozen of Nordea. Please go ahead. Your line is open. Good morning, Harald and Sandra, and thank you for taking my questions. So first question I have on the gross margin. And I noticed that even if last year was a tough comp, the gross margin this year was actually also below 2019 2018 levels. And I just wonder if you could elaborate around a little bit around this, is this kind of market gross margin moving down? And do you also expect list in that case to continue going forward? That's the first question. Thank you. Well, as we talked about, it's been a very competitive market. So it's been quite intense. And this is something that we also expected when the society would slowly open up because There are offline players sitting on the inventory that they haven't sold. And the online competition is very fair. So it is it's high competition that constitutes that. But we stick to our full year that constitutes that. But we stick to our full year estimates of 39% to 40%. So we believe that We have the tools to do that and we can operate at that margin. So we believe that's a good level to be at. But of course, you have to follow the market. Okay. And just going forward, if you think over the next 2 to 3 years, do you think that the overall gross margin would be pressured downwards or you think that it's going to stay roughly around these levels? In our estimates, we stick to this level that we We believe that, that level is the one that will be for the next coming years. But of course, no one knows what happens in the future, but That's what we build our cases on and that's what we believe. And if I may add to that, Daniel, is that Let's say that there would be a pressure on gross margin versus comparison. That would only accelerate the online penetration because we are probably the only ones that can be highly profitable on gross margins below 40%. So we're not expecting it, but we're extremely well prepared for it. Okay, great. And then a question on the fulfillment cost ratio here. So there seems to be a few different drivers here. You're talking about Capacity having a negative impact, but then still return rates still lower than normal. And then also now we start to see AOVs going down. So I'm just thinking, can you talk a little bit about Q3 and Q4 second half here? How do you think these drivers we developed and perhaps also some comments around the overall fulfillment cost ratio for the second half of the year. That will be great. Thank you. Yes, sure. So if we start with the average order value, we believe that it is stable. If you compare if you do compare it to last year's quarter with all that The stock we had at the prices, of course, people put more items in each basket. But that decrease in the quarter It's not something that we foresee as a trend. And also if you look at the 6 months ratio, it's actually above last year. So we believe that average order is Average order value is stable and looking at food, but also that's also relatively high for being in the segment that they are. So we are We believe that average order value will stay at the level that it is. And looking at the fulfillment cost ratio, there are a few drivers as set. We had lower prices as we did the insertion, so we play lower cost per hour. But of course, working in the environment we do right now, we're very tight in the capacity. We need to spend more hours to make story that we have our inventory organized efficiently and you need to put things move them around the warehouse. So that adds short term cost, but it is a short term thing. And we believe That will go a little up and down as we scale. And that's also why we're investing in CapEx to make sure that we have good capacity. And their return rates, they're marginally lower. That, of course, affects the return handling costs. But it's not that much. The impact of this month or this quarter is not that much in absolute terms. Okay, great. And then just last question, if I can follow-up on this Rosamund acquisition and the impact on your financial metrics. So if I remember correctly, the EBIT margin was a bit was over 50% and perhaps even about 25%. And if I would calculate that still on a second half basis versus second half last year, there would be some positive EBIT margin impact. But perhaps also you have here acquisition cost or integration cost? Or is there anything of that that makes this that's resulting in no positive margin part. Or do you basically expect grossermund going forward also to be no positive impact on the margin? Just a question to clarify that. The acquisition costs are not very significant. So that is not expected to have like a huge impact, and we do expect To keep their level of profitability, of course, we were part of if you look at the sales they had and their financial results, we were we the sales to us were a part of that. So that's we The sales to us were a part of that. So that you need to eliminate. But otherwise, we expect them to continue on but of course, the profitability adds slightly to our own no, sorry, but It's not a huge number. And so it's yes, it's not very, very significant. Okay, perfect. That's all my questions. Thank you very much. Thank you. Our next question comes from the line of Daniel Schmidt of Danske Bank. A couple of questions. When you talk about capacity constraints, it sounds like when you read the text I'm listening to you that it will be an issue in the second half, but it will be a diminishing issue as we go through the sort of when you add the capacity in September and also in February next year. At the same time, you're writing that you're now prioritizing the top line for the rest 2021. Should we believe that the sort of capacity issue that you've had during the sort of past quarter will be even a higher issue or bigger issue given your focus on driving top line until you get these investments in place? Good morning, Daniel. Good morning. I think the short answer is that kind of slightly no. We said that I think that we are have been seeing kind of the top of the capacity issues going out of the second quarter. And the way the capacity restraints materialize is that you'd end up throwing a man out at the problem instead of using robots and of course has some added costs. We are more in deliveries as a percentage of our autumn winter buy than at the same time last year. So that is in place. So but I think that we are We've tried it before, 5 years ago, had the same issues where we are basically stretching it. So we know how to deal with it. But I think that kind of our sales growth, of course, is affected by expected what we have bought. So that's kind of the main driver. And the first thing is where the capacity issues materialize the most is your ability to get them into levers and the cost of getting it delivered. Sandra talked about that in her part that where you end up pushing stuff around to make room for it. So that now that our in delivery situation is very good And we're still selling a lot, so we're making room for new stuff. So we don't expect the kind of is to get worse and they will slightly improve during the quarter. And as of mid September, of course, when we will add start adding bins and ultimately Phase 5 and 6 is I think it's some 210,000 or 20000 piece. So that is adding 4% to the current automation capacity. So that is kind of so meaning that we will be well in place before the very important Q4, the Black Friday. So I hope it's not the same as last was, but I'm less concerned than it was in June. Okay. It sounds like you took a lot of those cost in delivering being a big part of it in the sort of late latter part of June then or in second half of Q2 at least, If I got you right. Then sort of just listening on your wording when it came to sort of the medium term outlook In 2022 and 2023, and you have this target of 5% to 7% margin, of course. And at the same time, recognizing what you're saying in terms of fulfillment staying around 11% and then sort of the gross margin being around 39% to 40 But depreciation is going up on the back of investments that you're doing. And you said that you would rather take a 5% margin and grow 25 percent and take a 7% margin and grow at 10%. Are you feeling a little bit that sort of Keeping this margin above 5.5 percent that you guided for this year is going to get a bit more difficult going into 2022 and 2023 If you want to keep the growth rate? Basically, no. It's It's not a difficult, but we would we can just see the advantage of growth and we just want to grow. And we would rather stay around 5% and then grow in most of our markets and try to get to 5.5% or 6% because we can see long term, I think that benefits the company and ultimately the shareholders. So we are last year was an extremely good year. And in some ways, I also get that we delivered this strong result because we You get tempted to deliver profitability too soon. We are still kind of guiding the high profitability of all players in the market, and we just hate missing out on opportunities because of short term profit need. So we will stick to the 5% to 7%. And if growth opportunities are less, then you're probably close to the 7%. But if growth is more than we expect, then it's probably close to 5%. And because we know we are so religious about our acquisition cost strategy of how much you want to pay for new customer. And as long as we can get the payback within the period that we 5. We will continue to do that. And then of course, as Sandro mentioned, we just shouldn't forget that we are moving fiscal products. So we need to invest in the infrastructure around that. And I think kind of for a part of the reason why we are having more costs in our due to the capacity is that the customer shouldn't feel any difference in the customer experience just before because we have difficulties in getting stuff into the warehouse. So I would rather spend some more hours on fulfillment and making sure that the customer gets the order in time than relaxing on the customer promise just to meet some short term profitability message. So this is kind of a trade off because fundamentally, as long as the customer is satisfied, we're growing and we have the basket size. The rest is just short term issues that you need to fix. Yeah. Robert, it sounds reasonable. Just on sort of demand and return rates and markdown activity and so on. 1 of your Larger competitors was out the other day basically saying that they saw a normalization of demand. They saw a normalization Return rates and they saw higher markdown activity. Then pre I think we're lost, Daniel. Yes. It seems the line is disconnected. I will move to the next question then. That's from the line of Magnus Jenssen of SEB. Please go ahead. Your line is open. Thank you and good morning. Just a couple of questions from my side. First, So you mentioned that sort of there's a different growth in Denmark and Sweden, Sweden doing better than Denmark. And could you Could you talk a little bit about the different dynamics you see in the 2 geographies? Well, Denmark is very strong. I think if you just compare the quarter to quarter, Denmark was even it was extremely strong last year and that because it was much more closed down than Sweden was. So Denmark is doing very well. And if you look at the year to date numbers, Denmark is very strong. But it's more that Sweden actually picked up and became stronger and stronger and basically all markets was good, but Norway as well. So it's more Sweden picking up than Denmark picking down. Okay. And then my next question is to Boost led, you have a pretty impressive growth outside of the Nordics, of course, on a low base, but still 130% up. Which markets are you being successful with Boost led? And are you doing something different? Are you gearing up your marketing efforts outside the Nordics? Yes, we are I know it's mainly Germany that is providing growth outside the Nordisk We are I think the main marketing strategy is still using search marketing clicks. So meaning Google in Germany, so we haven't ventured into any offline media activities. We are doing some offline in in Denmark, which still has grown quite a lot from Buchla. But and we've just only started outside the Nordics. So We expect outside Nordics to even increase more in the coming quarters. So we just started outside Nordics, but it's been a promising start. But For now, it's mainly been driven by Germany, but we're seeing other markets also picking up. Okay. And then to the Net Promoter Score of 77, quite impressive. But Do you have any sense of where your competitors are in general on this measure? No, we don't disclose the NPS scores, so we don't know. But it's we know that from kind of benchmarks, we have this site called netpromoterscore.com. This is world class and it's on the high end. So I think please don't expected that high number going forward because it is normally we are if we're in the kind of around 70, that's still world class. That's kind of our target, 68, 72, but it's what we don't know, but we think that I think they're doing good and We have good competitors and generally think that the market leaders in the markets are kind of forcing the penetration because we are just providing such a good customer experience to previous offliners that are going online and staying online. Okay. And then just a final clarification question. Did you say that CapEx Would stay above 5% of revenue as long as you grow with more than 20%? It's around 5%. So around 5% CapEx if revenue growth, it was 20%. Yes. That's what we believe is. Okay. Thank you very much. That's all of my questions. Thank you very much. Thank you. And we have Daniel Schmid of Danske on the line. So please go ahead. Your line is open. Sorry, guys. Hope you hear me now. Something happened. And I think I asked Entire question, well, I don't know what you missed a lot. But basically, as Alain de was saying, a lot of these things that You don't. It sounds like you're beating them quite a lot in the Nordics or maybe there's a big difference in geographies here Of course, they are, of course, a pan European player. Do you have any explanation to their comments versus what you see? We are seeing return rates, they're still low and for us and that's last part to do with the category mix. Now that we've gone into our growth is almost driven by the new categories. So our online department store strategies looks to be quite well timed for us because it's driven by home, kids, sport, beauty. Women are still not buying occasion wear. So that is kind of also keeping return rates down and but actually, we don't expect to go back to previous return rates of above 40% due to the category mix. But the demand is still hold it back now, you see from the steel index, still below 2019. Denmark, I don't think that the market in Denmark has entirely picked up. Denmark is probably is the one The market has picked up the fastest, but overall demand is still lower than 2019, we believe. So meaning that the penetration that online has gained during the last 15 months seems to stay. Yes. Now I was just wondering, given that you were quite upbeat on June July and they were a bit downbeat on the sort of trajectory for their business. Are you doing anything different? Is there any sort of particular segments that you're seeing very good growth in Which you are standing out or I think that's a strong I think it's more kind of a geographic thing that the Nordics might differ from DACH. I think maybe we're more kind of advanced out of the pandemic than the DACH region is. I think that's it's difficult to speculate because we know what's semi here. But in general, I think that the Nordic countries are coming quite strongly out of the pandemic. And also it's also a question of comps. Being a smaller company. We probably reacted a bit faster than they did in Q2 last year. So where we had a big part of the corona effect in Q2 last year. For them, it was maybe going out of Q2 and into Q3. So I think that's kind of the main thing. Yes, sure, sure. And the comments on mark downs being a lot more intense. You don't feel that, that relates to the Nordics So to your business, so what you're seeing and or any comments on that? Markdowns are still they're actually, In our case, on a similar level as last year, where we talked about the gross margin was higher due last year due to the written down goods and campaign goods. Markdown is more or less at the same level as last year, meaning that the competition is still high. So there's still kind of retailers' inventory that need to clear. So in that respect, don't expect gross margins to SKOVOX over in the coming months because that won't happen. Okay. Thank you, guys. Sorry for the disruption. No problem, Tim. Thank you. Okay. That seems to be the final question. So I'll hand back to our speakers for the closing comments. Okay. Thank you for your time. So this concludes our call and looking forward to you talking to you guys over the next day, I guess, and again, having a conference call in Tricmar's time. Thank you very much, and have a good day.