Okay, good morning. Sorry for that delay. We had some technical issues with the sound, but I really hope that you can hear me now. Big welcome to the Clas Ohlson Q3 report presentation. My name is Kristofer Tonström, and I'm the President and CEO. With me today is Pär Christiansen, our CFO. We'll do a short presentation before we move into the Q&A. I'll cover the business update, and Pär will take us through the financial development and the events after the reporting period. I'll summarize and look ahead before we move into the Q&A.
Looking at the third quarter, which is the most important quarter for us, we're closing a quarter with strong profitability, and a very stable overall result with SEK 378 million operating profit, and an EBIT margin rolling 12 months of 6.9%. We've grown sales in the quarter 7%, and of which 14% is our online business. Very encouraging is also that we have continued to grow our customer base, and we now have actually more than 4 million active Club Clas members. We're also reporting our February sales numbers today, where we see total growth of 8%. Obviously during the quarter, it's been a very.
We have, of course, been influenced by the macro environment, both from a pandemic point of view, with two out of three months still influenced by restrictions. As we now look forward, obviously with the terrible war going on in Ukraine, we're not directly impacted as Clas Ohlson. We don't have any business or organization either in Ukraine nor Russia. Of course it, apart from the emotional impact on everybody in the organization, it obviously might also have other impact in terms of macro environment. Looking a little bit more into the details of the third quarter, our organic and like-for-like sales was up 5%.
Looking at our total sales number, we have seen lower traffic to our stores, and despite that, been able to grow the totality, and that has been driven by our conversion rate, and the fact that we've been very relevant with our offer during the quarter. As said, online sales has grown 14%, and it's also encouraging to see that we have slight increase on our gross margin, despite input cost and other things having gone up. Our EBIT margin is 13.3%, and we continue to build on the very strong financial position that we have. Looking at our overall focus areas that we have talked about now for this full fiscal year, the first one is about strengthening in our key product categories.
Here we do see encouraging results on the categories that we have been focusing disproportionately on. A category like cleaning, we've been growing actually 50%. If you look at food prep storage, it's been growing 20%. We see high growth on the categories that we over-invest in and focus on. We're also putting in the next level in terms of more emphasis also on attracting the best A brands to Clas Ohlson. We already have approximately half of our sales in products that are our own brands and no-name brands. We also see a big value of closing new upgraded agreements with the leading A brands to ensure we have an optimal mix for our customers.
Obviously having the right A brands is also a way to sell more private label. Looking at the second focus area, which is all about capturing traffic, as said before, we have grown our total Club Clas membership to now above 4 million, and I'll come back with a couple of numbers on that. Second, we've also now for the third year in a row been awarded the best customer service in Sweden by Brilliant, our service provider on customer care. This is obviously by real numbers from millions of customer interactions throughout the year. It shows that we really have the ability to give the customers the service that they demand from us. We've also seen higher conversion rates, both in our stores and also online in the third quarter.
Another encouraging fact is that we have become better and better in terms of our last mile delivery from our e-com. Still, almost half of the business goes via the physical stores, and our customers still choose click and collect. Half of the customers that pick up products via click and collect also actually pick up other products while they come to the store. That's also encouraging. The third focus area is about growing e-com. Here we are working even more in terms of differentiating between channels. We have introduced both online exclusive campaigns, but we're also looking at a broader assortment online to ensure that we really give the customers what they're looking for in an online context.
We've also built out our feeder store capacity in Finland because with our central distribution center in Sweden we wanna have a strong local logistics network in Finland and Norway. We've also done that during the quarter. Looking a little bit more into the Club Clas development, we do see active member growth across all the three markets. We know that the most active members, the ones that are most loyal to Clas Ohlson, they actually spend 4x as much as an average member. Seeing the active member growth going up and seeing the amount of high-value customers going up is encouraging.
As you can see at the bottom here of the slide, we have done a lot of activities to increase the relevance and attractiveness of the Club Clas offer. We have both launched everyday membership prices on consumable items that our customers come back to a lot. We're also starting to become more sophisticated when it comes to more personalized offers and more triggered offers based on customer behavior. On our customer service and customer satisfaction, we continue to have a very solid NPS, great NPS numbers across all the physical stores, which is really building our brand.
Great customer NPS also in our customer care, and we've seen an increasing NPS also in our online, and that is also becoming strong now, which means we are above retail industry average in terms of overall NPS levels. Also encouraging is the product reviews, which we track on an ongoing basis, and here we're both above target, and we are improving when it comes to the customer satisfaction with the products that we're selling.
On our sustainability priorities, we have accelerated a lot of work during the last quarter when it comes to our product sustainability assessment model, where we look through every new product that we launch through a certain set of criteria to ensure that we do everything to drive longevity of the product, ensuring the right choice of material, the right choice of manufacturing, et cetera. Since January 1st, we're now analyzing every single product across our private label assortment. We've also put in extra effort in terms of sales of spare parts. We see that our customers are looking more and more for spare parts to products they bought, so they can actually fix products rather than buying new. We've seen more than 30% growth during the last six months.
You'll see on our website that we're upping the assortment also on spare parts. When it comes to our suppliers, 99% of our suppliers are free from critical findings in relation to our Code of Conduct, and we continue to monitor this on a going basis. We also now have conducted environmental audits for more than 71% of our purchased volumes. Of course, we continue to build capability and knowledge and insights across the company with our Sustainability Ambassador Program across all seven countries. With that short intro, I'll hand over to Pär to talk a little bit more about the financial development.
Thank you, Kristofer, and good morning, everyone. Looking at the sales development in the third quarter, we saw total sales go up with 7% and organic sales up 5%, like-for-like sales up 5%. Moving on and looking at the sales per market then, a little bit understanding how we have rebounded since the pandemic. We now have a 10% increase in Sweden compared to last year, but still a decline compared to two years ago. Looking at Norway, we have a 7% increase compared to last year and also increase compared to two years ago. In Finland, we have a decline with 2% compared to last year, but still 17% compared to two years ago.
Looking at online sales in the third quarter, it grew 14% and now corresponds to 12% of total sales. If you look back two years, we have then grown 82%. Looking at the first nine months, Q1 to Q3, total sales was up 4% and organic sales up 2% and like-for-like sales up 2%. Online sales is up 21%, and we have added one store compared to previous period. The gross margin in the third quarter grew somewhat to 41.5%. It was positively impacted by the weaker purchasing currency, the US dollar, and also positively impacted by the sales currency, NOK.
On the negative side, we saw a little bit weaker product mix and a little bit higher campaign intensity, and also a little bit of a rebound of the hedging effect from NOK, and also the currency forwards exchange rate effects related to the inventory delays. The share of selling expenses grew somewhat to 26.3% of sales, a little bit higher than previous year. That was 25.9%. Administrative expenses was SEK 51 million. It was somewhat higher than previous year, but lower than two years ago. We still have a continued cost focus in the company. Looking at the operating profit in the third quarter, it amounted to SEK 378 million and the EBIT margin increased to 13.3%.
We have earnings per share amounted to SEK 4.53 . Looking at operating profit for the first nine months, it's now SEK 729 million. The EBIT margin is 10.4%, and we have earnings per share amounted to SEK 8.49 . The investments for the first nine months amounted to SEK 160 million, which is a little bit lower than previous years. The main areas was into the stores, IT systems, and also into the distribution systems. The inventory level in Q3 amounted to SEK 1,950 million, and we see it as a well-balanced inventory. That means that we are well-equipped for the fourth quarter coming and also Q1 soon.
It was, of course, impacted by external factor as input cost and in transport cost, but we see it as a very well-balanced inventory, given the situation. Cash flow for the first nine months was SEK 923 million. If you look at cash flow from investment and financial activities, it was -SEK 889 million, and we have a net cash position in the company. Looking at the events after the reporting period, we today also report the February sales. It was up 8% to SEK 534 million, which means also organic sales was up 4% and like-for-like was up 4%.
Online sales was down 9%, but it should be seen over two years. It increased by 93% compared to February 2020. We have increased by two stores compared to the end of February last year. As Kristofer mentioned before, we're still quite impacted by macro trends in the world, and we see big changes now in both the NOK and US dollar, and of course, there could be other changes of input cost. We, as a company, do what we can to work with pricing, looking at sourcing and different sourcing markets. Of course, also working with the sales mix and the products and packaging to mitigate everything to continue to defend our decent gross margin. Handing back to Kristofer.
Thank you, summarizing and wrapping up before we move into the Q&A. As we talked about the previous quarters, we will always continue to build on our strengths. We are playing in a very attractive SEK 90 billion home improvement market. We have a strong financial position. We are becoming more and more of a leader in terms of sustainability, and our brand and market position is incredibly strong. We have 200 million customer visits every year, and very high customer satisfaction.
We do see a lot of compelling growth opportunities, and we are very much equipped with the team that is agile, has the right capabilities and I think has proven over the last couple of quarters that we can very much adapt and focus on the things that we can influence even in very uncertain macro environments. We have our Blue Hearts strategy to drive happy coworkers, that drives happy customers and that drives shareholder value over time. That's our focus. Our financial targets remain unchanged, delivering 5% growth and 6%-8% margin, operating margin. The focus areas obviously remains the same for this year with a big focus on the product categories.
With a 90% household penetration, 200 million customer visits, it's all about what we are actually offering to our customers. We're looking more and more on the relevance of the assortment and ensuring that we expand on the right areas and have the right balance and mix between private labels and external brands. Same thing when it comes to capturing traffic. We do have high traffic, and we need to continue to drive increased conversion, increased average ticket value. Here the Club Clas focus is an incredibly important area, focusing on the core customers that represents a big part of our profit and sales.
Then when it comes to e-com, we have done a really good job when it comes to fulfillment, and we are now delivering strong customer service and the last mile delivery options that our customers are looking for. It's all about integrating online even more in our physical store offer. Also here, it's a lot about the right assortment and offer to drive continued growth. Looking forward, as said, we have a strong financial position. We're financially prepared for all eventualities coming our way. Again, as Pär said, we also have a strong inventory with the right products, we believe, for the spring and summer period. We are more and more prioritizing initiatives to drive revenue growth.
Also, we'll send out an invite as we then do the Q4 report on June 8th. We'll also, in combination with that, do a Capital Markets Day where we'll talk a little bit more about the year that we're now starting on May 1st, and a little bit more looking ahead. With that, we'll move into the Q&A. We have Jelena here moderating.
Thank you, Kristofer. We will open up now for the Q&A session, and we can start off by asking the operator if we have some questions from the teleconference.
The first questions already come in from Carl Deijenberg at Carnegie. Your line is now open. Hello, can you hear me?
Yeah. Carl, are you there?
Yes. No audio coming through Carl line at the moment.
Hello. Can you hear me now?
Yes. Hi, Carl.
Okay, perfect. Sorry for that. I think I was muted. I got my first question is on your purchasing exposure in the US dollar. If you could maybe remind us of sort of your direct and indirect purchasing exposure in US dollars, and maybe also a bit on what you've seen here in the recent months. Have you seen sort of suppliers of A brands in particular already starting to raise prices given that the input costs have risen significantly recently, or what's your take on that so far?
You wanna?
I can start. No, but I think if you look at the direct exposure to the dollar, our main purchasing market is China, where we mainly purchase in dollar. Of course, even if we purchase A brands from a Swedish or European distributor, there will be a transfer of currency cost also in that relationship. I guess overall it's a quite big exposure of dollar over time. As we mentioned in the report, we hedge our purchasing in dollar, also to a little bit balance these effects over time so we can adjust selling prices in relation to that if necessary.
If you talk about the purchasing prices per se, they have been a little bit coming from a situation where we have been able to lower cost over time until recent months, where it's a more balanced situation where most suppliers want to increase the cost, either because of raw materials, but of course there are also other input costs as labor and you probably can expect also energy costs now be transferred to the product price as well with electricity and other costs for producing the products. So far I guess it has been a balancing thing, and going forward it will probably shown in the products we sell since we have a little bit of a delay of the inventory.
One way of working is, of course, working with the suppliers to change the product design as well as looking at other sourcing markets. I guess at the end there will be a discussion whether we can transfer this cost to the end consumer or if that will not be the case dependent on what kind of product and price elasticity of course.
Let me just add one thing, as I talked about, we are looking at renewing and closing even more strategic longer-term relationships with the best A brands. We also believe that and we see that we are a very attractive retail destination for 200 million customer visits. We also see a big willingness from our branded suppliers to work on growth plans together. We need to manage price, we need to manage cost, but also we want to have better partnerships so they also invest in growth together with us.
Okay, very well. A follow-up on the topic, I mean, now we discussed mostly input costs, but could you say a bit also what you're seeing on the shipping side? Maybe for Maersk in particular, has sort of container prices started to flatten out or come down a bit? Or what's your near-term feeling there?
I mean, not talking about the most exact recent situations now, dependent on what will happen to cost related to the Ukraine crisis. I guess before we saw lowering price for contracts that are longer and longer. I guess also if we fix the prices, we will get a better price. That, I think the price is little bit peaked a couple of months ago. I guess if you go out and buy shipping on the spot market, it will still be quite expensive. I guess for us it's to have a more planned situation where we have fixed price and we have containers going out in a very structured way, then we will have lower prices over time.
Of course, this recent situation could affect both the container as well as the freight itself. There was an article yesterday about how many people coming from Ukraine and Russia working on the transportation ships. Other costs, of course, but that has not been seen. We had a quite good situation coming out with goods before the Chinese New Year, so we were quite confident on that. Now it will be a little bit of a calmer period for us before we start the new build-up for next Christmas, I guess. It's still too early to say what will be the new trend, but we have seen lower prices over time since it peaked.
Okay, very well. I think my final question is on the current trading year and the sales development in February that you reported this morning as well. I'm just curious of maybe your own thoughts here, what you've seen in February, I mean, given that all restrictions have now been dropped. Has the sort of reaction or the return in footfall in physical retail sort of been in line with your expectations, or had you expected sort of a quicker recovery here in February? Or you see it more as a sort of a gradual return?
Yeah, I mean, we do see a gradual return. Looking at February, Norway obviously lifted restrictions, Sweden in the middle of the month, then Finland was delayed to the end of February, and are really opening up fully now. There was not a big effect from one day to the other. It was very much a gradual return. Obviously we've seen both in our company but also from a customer point of view, that a lot of people have stayed home, based on restrictions, no restrictions. If you look at sick levels, et cetera, we have seen a lot of people actually during this time having to stay at home.
Gradual increase, and obviously with our high traffic areas, in terms of store locations, we also expect that the more customers and people come back to their workplaces, that obviously will have an impact. Looking isolated at February as a month, we still saw lower footfall to the physical stores. We saw, as said, 8% growth, but gradual and not a big from one day to the other effect. Which was a bit similar to as we talked last fall where we looked at the reopening, we really started to see the effect in November, and we saw more of a gradual return September, October. That's been our hypothesis as we look towards the spring and the summer now with the gradual return while of course without restrictions, that's a net positive for us.
You can also add to that February is usually quite a, you know, a neutral month for us with both a lot of winter holidays as well as not any big changes in assortment. We will change the assortment now in March, which hopefully will then go into more spring related feeling. Also now people are back from schools and everything. I guess there's probably a more natural way to return in terms of traffic towards to our stores.
Okay, perfect. I think that was all of my questions from my side, so thank you very much.
Thank you.
The next question is coming from Magnus Råman at Kepler Cheuvreux. Your line is now open.
Thank you. I will follow up on similar topics here. If we start with the end here at the current trading, February sales was, I guess, quite soft considering the very unchallenging COVID streak in comparison that you met here. You mentioned a gradual customer traffic recovery here, but have you seen any behavior shifts among consumer here? Any trading down behavior? Have your average ticket prices or average order values changed in February? Did you see any mix shift in favor of your private labels? Any such patterns you noticed?
I would say we always need to be a bit careful when we look at an isolated month, looking at the overall trends. Looking across now both the quarter but also then January and February, we have seen obviously that our ability to increase the conversion has been there, which means that we've had a very relevant offer. Also looking at the end of the Christmas period, looking at our inventory situation now, we have very relevant products out there. We don't sit with a lot of redundant stock from Christmas, for example. We haven't seen any big behavior changes across January and February when it comes to product mix, et cetera. A little bit, as Pär says, it's also a little bit of an in-between period before we come into spring.
Obviously more recently, over the last one and a half weeks, especially in Sweden, we've seen some behavioral change with products that customers buy in more kind of prepping for more prepping reasons after the government communication and information, especially in Sweden. We have seen a little bit of that product mix shift, but apart from that, no other big trends that are worth discussing for January, February at this stage.
All right. That's helpful. Then also an FX-related question for the gross margin here. You mentioned of course, with regards to this weak Swedish krona versus the dollar that you have hedge contract that mitigates this effect to some extent during a period and whereby afterwards you might have an opportunity to alter your pricing versus end consumer. But in terms of the strength of the Norwegian crown, can you help us here with the hedge contract? Will that sort of beneficial translation come through straight away or will that be mitigated by hedge contract? Thank you.
Yeah. I mean, if you look at both currencies, I guess as you said, the Norwegian crown will give a positive impact given these levels. We haven't seen them since the last crisis, 2014, with the Crimea situation. So they're quite high. Given if everything stays at this level, it will be first, a very positive effect from the Norwegian crown, and then I guess the effects from the high US dollar will come later. The coming quarter, if everything is the same, I mean, given that, it will be a positive effect the coming quarters from all currencies, including hedges. Then I guess it depends how this will level out.
Great. That's really helpful. Just finally on the gross margin, I guess that you're not fully satisfied with the top line you have generated recently. Of course, as you mentioned, you've had new corona restrictions and so on, and you hope for those to ease or they will be, you know, be lifted from now. In terms of price investment to support your top line growth, how is your thinking strategically there going forward?
I mean, obviously we do work a lot with prices every single day and week. We need to always be very aware of the customer reaction on different categories. We track our pricing competitiveness on all the categories versus key competition. Obviously we know that some categories are more elastic than others and impact volumes more than others. Others build the brand, you know, if you are competitive. It's really about finding the balance here. Obviously the good starting point for us is that we have more or less 50/50 in terms of external brands and then private labels. On the external brands in a fully transparent online world, obviously you need to be competitive and we work a lot with, you know, being competitive there.
Whereas on our private labels where we play within certain categories, product groups, in a fairly unique way, we have a bit more flexibility. Our job is of course to balance that mix, ensure that we can maintain a strong, gross margin while of course, as you say, ensure that we invest also in pricing in a way to drive volumes, to really get the revenue growth. So that is the constant balancing act. But longer term, we always need to look at the customers', value perception of us and also the competitiveness and price elasticity. So that's an ongoing, work.
Do you have a strong opinion also of the net of these factors, if that will be somewhat an increase in price investment or if it will be rather flat?
I mean, as Pär said, of course, there are a lot of different input factors impacting our gross margin. If we stay on that, our job and focus is to maintain a solid gross margin, and I think we've proven that over the last quarters, you know, despite input costs going up. Of course, mix will always be a driver, but we're not preparing for bigger gross margin impacting price investments. It's really about the balance.
Excellent. Thank you very much.
Thanks.
As a reminder, if you have a question for our speakers, please dial zero one now to enter the queue. There seem to be no further questions for closing remarks. I give back to the speakers.
Yes, we have some questions from the webcast, from Stefan Stjernholm from Nordea, and he's asking, "What share of sales do private labels stand for today? What's the potential that we see, and is there a targeted level?
Yeah, looking at private label in terms of Clas Ohlson branded products, it's 35% of sales approximately. Then if you add on other no-name products, as said, it's more, you know, 50/50 between products we influence and then the external brands. Our aim is to grow the totality, and we believe that this 50/50 balance is very healthy. We also think comparing us to other retailers, that is a very strong base level, we very much wanna continuously be strong on private label and keep growing that. We also, as said, see an opportunity of adding on more strong external A brands to ensure we have a complete customer offer.
Staying a little bit where we are at the balance, I would say is the focus and not exploding the one or the other, but finding the balance there.
Yes, there is another question which we have already touched upon, and it regards price inflation when it comes to sourcing and if we are expecting to set this off with price increases and whether it will be a delayed effect.
Yeah. I think we have answered that more or less.
Yeah. I mean, as Kristofer said, it's a balancing act between the higher and lower prices because, I mean, you need to make sure that you're relevant and I guess if it's possible and everybody accepts price increases, it will come through all markets right now because of input inflation. But I guess there will be a balance, so you're relevant.
Yeah. Then the final question from Stefan is that inventory has gone up during the past year from the last Q3 by 24%, and he's wondering how much of the growth is foreign exchange transaction cost related with regards to inflation.
I mean, I will not go into the composition of the inventory value, but of course, there's price inflation, there's currency effect and transportation effect affecting these prices. Actually, the main message we want to give is that everything in the inventory we've seen as relevant products, which means that they will be sold probably at a relevant price given the situation. I guess that's the main thing that we focus on.
Yes, with that, we have no further questions from the webcast either, so I hand it back to you, Kristofer, for some closing remarks.
Okay. Thank you very much for dialing in today, and thanks for the questions, and sorry for the slight delay at the beginning with the technicalities. With that, thank you very much. We'll see each other again as we report Q4 on June 8th, and we'll also send out an invite for then, a Capital Markets Day related to that date. Thank you very much.