Good morning, welcome to the Clas Ohlson Q4 report presentation. My name is Kristofer Tonström. I'm the President and CEO. With me today Pär Christiansen, our CFO. It's actually Per's last quarterly presentation, so before he moves on to new challenges after four years with Clas Ohlson. Thanks, many thanks for those four years. We look forward to welcoming our new CFO, Pernilla Walfridsson, that joins us later this fall. Today we will start by going through our Q4 report presentation, and then immediately at 10 o'clock we will move into our capital markets day.
Today, for the first time in over two years, we actually have a room with guests here live, and we also have a lot of guests joining us online. We'll try to accommodate this in a good way when we get to our Q&A. As always, we'll run through a short presentation before we move into the Q&A. I'll do a business update. Pär will take us through the financial development and the events after the reporting period. Then I'll wrap it up, and we'll move into the Q&A. We're obviously closing Q4, which is our smallest quarter, but we're also closing the full year 2021-2022.
We're closing a year with organic sales growth of 4%, and a operating margin growth of 19%, delivering within our range, and a operating margin of 7.3%. We're closing a solid year that obviously still has been fairly turbulent in a lot of different ways. We also continue to build on our strong cash position, which gives us a very strong financial position as we look ahead. It's also clear that we've had a very resilient and flexible business model also during these challenging times. Looking ahead, obviously we, as everybody else, see a very challenging macro environment and a drop in consumer confidence. That said, we very much believe and aim for making this a market where Clas Ohlson will win and grow.
We know we have a stable, strong financial position. We have a very, strong brand, and we're playing in a market with, fairly low market shares still. We also have more than 200 million customer visits every year, and we are, versus our customers, scoring really high on value for money. We have shown over the last quarters that we also have pricing power in the market. Our ambition is to use our unique balance between, solid private labels, but also opportunity of welcoming more external brands that also need growth in this environment. Of course, very humble about the challenging times that we're in the middle of and, ahead, but we're really aiming at making this a market for Clas Ohlson to grow in.
Moving into the business update, a little bit more on top lines of the Q4. Here we saw organic sales growth of 12%, and the total sales of 16%, while our online sales declined 19%, obviously with very high comparables last year when half of the Norwegian stores were closed. That said, online sales is now also established on a higher level than pre-pandemic. Gross margin slight decline, while our EBIT margin increased, and we delivered -SEK 10 million versus last year, a bigger minus EBIT in the final quarter. Again, strong cash position and a net debt to EBITDA of -0.5.
We've been, over the last 12 months, we've been talking about our focus areas, strengthening key product categories, capturing traffic, and growing e-com. Just a couple of points and numbers on the development now in the fourth quarter. Looking at the categories, we did a bet on an early spring, so we had a lot of products in stock earlier, and we started the spring season earlier. We saw some really good progress on some of the key focus categories. Cleaning, as an example, up more than 70% in the quarter. Solar lights, i.e., outdoor lighting driven by solar cells, also significant growth versus last year. Everything related to storage. A trend that we have seen in the previous quarters, that the categories that we're focusing on have really played out well.
Also good news is that in terms of cleaning, we're also selling a lot in terms of the more premium vacuum cleaners, et cetera, which shows the balance we have between higher price points and more consumables. Also, we've seen a continued higher average ticket value, which is also driven by the fact that we have been able to sell also slightly more premium products. On the traffic side, we now have 4.3 million members in Club Clas, which is a big priority for us.
The encouraging thing is, as we have now started to focus even more on Finland as we view as a future growth market, we have actually been able to grow the memberships in Finland with 20% in the fourth quarter, thanks to some changes in the loyalty program, but also more focus on attracting and signing up new members. We've also seen the first quarter now in a long time where we actually see traffic increase, but that is also to the physical stores, which is obviously also driven by the comparables last year. On e-com, we've seen a continued high conversion rate and we have invested during the quarter a lot in marketing to really push the brand, push the key categories and really ensure that we are where the customer is.
We've been leveraging marketing across the full funnel and especially on social influencers, et cetera. We have seen really good progress during this quarter. That has driven the categories that I just related to. In terms of customer satisfaction, it remains really high. We're gonna start reporting our NPS on a more ongoing basis. Actually, in the fourth quarter now we are up towards 56 in NPS, which is obviously a very, very stable level. This is across all the different channels, customer care, our e-com business, and all the physical stores where we measure this daily. Significantly above retail average.
On the product reviews, we of course, the consumers, customers rate our products every time they purchase, and we are consistently now, I think for the fourth quarter in a row, above the target that we have set for ourselves. The customers are happy with the products that they're buying with Clas Ohlson. In terms of our ambitious sustainability agenda, these are some numbers both for the full year but also for the quarter. The good news is we're really progressing. There are some very concrete numbers on here that shows that the business ambitious agenda and all the work is paying out in terms of results. First of all, from a brand point of view, we've been awarded the winners both in Sweden and Norway in the Sustainable Brand Index.
Here we're also the number one across our peer group and industry, which is really in line with our ambition of being industry leading on sustainability. Also very encouraging that our CO2 emissions is decreasing with 18% during the full year, and this includes Scope 1 and Scope 2, the ones that we can really impact. We've also seen decline in Scope 3, and during the Capital Markets Day, Tina will talk a bit more about that, also integrating Scope 3. In the fourth quarter, we also see growth of our spare parts business. We have expanded the range, and we see a big pull from consumers to buy more spare parts across our assortment. We have increased the range, and we have actually increased sales with 40% and sold almost 100,000 spare parts during the quarter.
Also our environmental audits that we initiated a while back on top of everything else, we have now covered 83% of the purchased volume. In terms of our code of conduct, we now have 100% of our suppliers free from critical findings, and we wanna keep it that way. That summarizes the short business update, and I'll hand over to Pär to talk about financial development.
Thank you, Kristofer. Good morning, everyone. I will go through the financial development. Starting with the sales development in the fourth quarter, we had total sales up 16%, and organic sales up 12%. We saw growth in all the Nordic countries, but a decline outside the Nordics. If we go into each country, we can now see that we have a little bit caught up to the pre-pandemic levels, which is encouraging. We now have a platform to start reaching our target of 5% growth. Looking at online, as Kristofer said, we had a decline in the fourth quarter, but if we see two years back, we have a 52% increase of the online sales.
Going to the full year, total sales for the full year was up 6%, and organic sales was up 4%. We saw growth in all the Nordic countries, but a decline outside Nordics. Online sales was up 9% during the year. The gross margin in the fourth quarter had a slight decrease to 39.7%. On the positive side, we saw a stronger currency NOK. We had increased our prices, and we also had impact of weaker purchasing currency US dollar. On the negative side, we saw higher sourcing cost, a little bit product mix effect and higher campaign intensity, and also some balancing effect from the hedging of the NOK.
Looking at share of selling expenses, the volume in the fourth quarter increased a lot, so the share of selling expenses decreased mainly because of that to 37.4%. Our administrative expenses were flat compared to last year at SEK 48 million, and we continue to have a cost focus in the company. Looking at the operating profit in the fourth quarter, it improved to -SEK 10 million versus -SEK 64 million last Q4. The EBIT margin improved to -0.6% compared to -4.2% last fourth quarter, and the earnings per share were -0.25 SEK compared to a little bit more than -1 SEK last year.
If you look at the full year, operating profit increased to SEK 719 million compared to SEK 608 million the previous fiscal year. We had the EBIT margin of 8.2% compared to 7.3%. If we exclude IFRS effect, we had a total margin of 7.3%, which was in line with our targets. The earnings per share for the total year was 8.25 compared to 6.65 the previous year.
The investments for the full year amounted to SEK 158 million, a little bit less than previous year, and the main areas were into the stores, into IT systems, and also into our distribution system and supply chain. The inventory levels increased compared to last year to SEK 2,199 million, and you should see that in the light of what Kristofer earlier said that we start the summer a little bit earlier, and we also have a strategy now to buy products a little bit earlier to be sure that we have them in stock due to these disturbances in the supply chain. We have a strong cash position. Cash flow from operating activities excluding IFRS was SEK 472 million.
Net debt to EBITDA was -0.5, and we have approved credit facilities of SEK 650 million, of which we used 0. Today the board proposed a dividend increase of the ordinary dividend of 8% to SEK 675 versus SEK 625 previous year. That will be distributed in two separate payments. The board also proposed today extra dividend of SEK 625 also to be distributed in two separate payments. This extra dividend should also be seen in that light that we did not distribute any money the fiscal year 2019-2020, as due to the pandemic. We still have a close eye on the macro trends.
Both the currencies, the raw materials, the disturbances in the supply chain will probably affect the business a little bit going forward. We do what we can, and that means that we're looking into pricing. We're looking into different sourcing markets. We also look into ways to improve the sales mix with best healthy mix of A-brands and private labels, but also look into the supply chain in terms of how the products are packaged and labeled to make sure that we have a smoother supply chain operations. Looking at the events of the reporting period.
Today, we also announced that the board made the decision to leave the U.K. market, which you should see in line with a focus on the Nordics and also previous decisions to close stores in U.K. and Germany. We have a short-term financial impact affecting next fiscal year of SEK 35 million. Today, we also announced the May sales. Total sales was up 3% to SEK 630 million. Organic sales was up 2%. We saw growth in Sweden and Finland, but a little bit decline in Norway. We had a decline outside Nordics. We also had online sales up 9%.
Before handing back to Kristofer again, I also want to thank you everybody from the capital markets and colleagues and other friends for this amazing four years, and look forward to look at Clas Ohlson from the outside, and cheer you on for the coming four years.
Thank you. Before moving to Q&A, very quick summary. We will save a lot of the forward-looking to the capital markets today. We will talk about the future. All in all, again, cementing our financial position and also showing financial preparedness now for the challenging macro environment that we are in. Also positive that the board could propose a slightly increased ordinary dividend and also the extra dividend to kind of compensate for the dividend that we didn't do back in 2020. Also as shared, we are investing in both marketing and also improved customer offers. We believe that we have to invest to grow and especially in the markets.
I mean, we are focusing on the top three markets back, also linking back to the decision of leaving the U.K., as Pär said. Also within that market mix, we'll talk more about Finland, where we see some encouraging trends as we have started to also increase marketing spend and investment into Finland. We'll talk more about that as we look at our updated strategy and focus areas moving forward. That wraps up the presentation part. We'll move into the Q&A for the fourth quarter. We have questions both. We'll start with the room, I think, or I'll hand over to Niklas to moderate.
Yeah. Thank you. Yes, as Kristofer said, we have a live audience today, which is very nice. We also have an audience participating via the web and via telephone conference. We will start by taking up questions from the room, and I will also need to ask you to speak into the microphone, which will be given to you. I think we had the first question up on the top row, right? I don't know who was fastest. Sorry.
Hi. Good morning. Nicklas Skogman, Handelsbanken. On the gross margin, I think you previously said that the target for the near term is to sort of keep it flat. How does that look in the quarters ahead?
I mean, our ambition is obviously to continue keeping it flat and stable. Of course, there are a lot of things impacting the gross margin, but I think we've shown in the last quarter that it's a slight decline to 39.7% versus last year's 39.9%. But it's been, of course. There are a lot of things outside of our influence impacting us, but then I think we've also shown that we have pricing power, so we have done some pricing adjustments over the last quarters. And the ambition remains unchanged, but of course, it's gonna be challenging still given the exchange rates, et cetera, impacting us. I don't know, do you wanna add anything?
Okay, thank you. The second question is on the inventory level. We've seen some US retailers talking about or basically having to discount a lot now.
Yeah.
What's your view on the composition of the inventory?
No, I mean, as we have talked about, the inventory level is obviously higher, but that is also deliberate choice because we wanna ensure that we have enough products to be able to grow. It's a very healthy inventory. Obviously now there's a lot of seasonal products for the summer, and we will start seeing Christmas products coming in. We expect inventory levels to be fairly high over the next few quarters, but it's a very good mix within the inventory. It's a deliberate choice, and we believe we have the products needed for the season.
Okay, good. The final question is on the U.K. What sort of earnings did you have in the U.K., or were there losses?
I mean, we haven't reported earnings in the U.K., but we have not been profitable. Obviously, as we're closing, we will save money also in the per year over the next few years.
Any indication of the level of how much you will save?
It's around SEK 10 million.
Okay. Thank you.
Yeah. I think we had a question here in the front row.
Magnus Råman, Kepler Cheuvreux. Thank you very much for the guidance going out here on numbers. I will fill in a little bit on these questions, starting again with the U.K. closure. You mentioned now SEK 10 million in savings annually potentially going forward, but what are the main drivers behind these one-off costs that you will take now in this year? Is it layoffs, or is it inventory write-down, or is it the lease contract on the remaining store, or how does that divide?
I mean, the majority is, obviously we are ending the leases earlier, so that's the biggest driver. Of course we also have the staff in the U.K., so redundancies as well is a big part of that.
Is that the lease of the store, or is it some fulfillment center lease or something, or?
No, we had the fulfillment center within the Reading store, so it's the Reading store and then the other contract as well. Nothing else than the stores.
All right. Could you perhaps also comment on how the cost will spread over the year and if you will treat it separately as a one-off in the accounting?
Yeah, I mean, we will treat it as a one-off, and maybe you wanna comment on the period.
Yeah. I mean, the plan is to be able to take everything in Q1.
Everything in Q1?
Yeah, if the timing allows. That's the plan.
Great. Thank you. On May sales, could you elaborate on the sort of reasons you see to the weakness of the May sales? You mentioned here that you have pricing power, that you have raised prices, while we see some other players in the industry being quite squeezed, especially on the online side and being quite price aggressive. Do you see that could be any reason to the weakening of the sales performance in May, or how do you think about that?
Looking at May, I mean, we're growing slightly. We wanted to grow more, but we don't see that the pricing is the barrier. It's more the fact that we did decide to bet on an early spring back in March, April. That paid off really well. We bought a lot of products. We started early. Now we did the same thing for the summer, so we have bought a lot of summer products, and we did bet on a couple of weeks earlier summer season start, and the season hasn't really started yet. That's the biggest driver. Of course, I mean, we do see consumer confidence going down.
Of course, we are also experiencing that the consumer wallets are becoming smaller, or perceived smaller at least. Of course, the tendency to spend, we're monitoring that on an ongoing basis. That is an impact, but I would say the biggest one is the fact that the summer season hasn't started. Looking at the stock we have on hand right now is very much seasonal summer seasonal products.
All right. That's very helpful. That the inventory is up 20% year-on-year here, going out of this quarter. Should we think about these summer items as something? If the selling sort of opportunity remains a bit poor over the coming month or so, should we regard this as you would do quite steep discounting to get rid of this, or will you keep it to the next year? What's the sort of profile of that inventory hangover?
First of all, I mean, it's a long. The summer is long, and it just started. Of course, we're doing everything now to be very flexible and ensure that we have products at hand the minute the season starts. There are lots of different seasons at the same time, everything from mosquitoes to heat and other things. Of course, we will also be smart in terms of balancing, you know, having the right promotions, et cetera. Of course, we look at what the market prices are to ensure we're competitive. We also have, if I look at inventory, a lot of the products can also stay until next summer if need to. We're not, you know. A lot of the products are a bit timeless.
We will not be pressured to push everything out at the end of the summer. Of course, we wanna take our fair share of the market as soon as the season starts.
Great. Just maybe a final one, just tying into Niklas' question about the gross margin also here. You talk about product mix effects being a negative, a drag here on the margin this quarter and also sourcing costs, of course, as we all know. If you look at these factors, can you describe these factors a little bit in more detail and perhaps give some kind of flavor into how you regard them going forward? Are they turning worse or better?
Do you wanna?
I can start. I mean, if we take the currencies, I guess.
The dollar, if you look at krona, it has weakened quite a lot. Everything we buy now is more expensive, and it will go through the inventory and then come out as a pressure on the margin. There will be a meeting in the Sveriges Riksbank, I think the twentieth in June, and let's see if that will rebalance little bit. That is right now a negative factor going forward, US dollar. The NOK is getting more and more healthy. Of course, it's balancing around a little bit. Raw materials are up, purchasing prices are up, so of course, that will be a driver. We see freight costs are up, mainly now due to fuel prices and, you know, energy prices, which should push it up.
I guess on the cost side, we have now the ability to discuss, you know, pricing power, also product mix and how we, you know, campaign it. If we look at the total amount in articles, we are, you know, constantly now increasing prices to make sure that we cover this. Of course then we are campaigning some articles, so it's a little bit of a balancing act, but it's probably not the same articles that are on campaign that are also increased. I mean, these are the main balancing points that we need to monitor going forward. Of course, the price mix of private label versus A-brands will also be important to defend it going forward. I guess we're aiming for a healthy mix of the products.
Thank you very much.
Yes, we have a question over here as well.
Hi. Stefan Stjernholm, Nordea. A question on store traffic. Can you compare the store traffic during the spring now and compared to pre-pandemic levels?
I mean, looking at it, we're not yet back to pre-pandemic levels, so the traffic is slightly up versus the previous quarter. But if I look at the longer trend in terms of store traffic, we're not yet above or up to pandemic levels. Also moving forward, looking forward, our hypothesis is also that we are not betting on massive traffic increase to the stores. We're focusing in more and more on the average ticket value per customer visiting and also the conversion rates. I mean, we do have 200 million visits a year on both channels, and it's really about capitalizing on those visits. But we're not betting on a massive traffic increase. Let's see what happens. It's again slightly up, but not yet back to full pre-pandemic levels.
In the report, we can see that you will close seven stores up until next summer. But there is nothing about openings. Is it a net we can expect for the coming years, or how do you comment on that?
I mean, looking forward, we're not expecting a big minus, and we're not expecting a big plus. That's more timing effects, especially driven by Finland, becausecause we're now focusing our store network even more in Finland as we wanna start to drive growth. We have closed a few stores in Finland to focus on the prioritized regions. We will see some closures, and we will see some openings. Around the 230 stores, plus, minus, is a little bit what we're looking at ahead.
Do we have any more questions from the room? Then I'll ask the operator if we have any questions lined up from the telephone conference.
If you do wish to ask a question, please press zero and one on your telephone keypad. We haven't received any questions at this time.
Okay. Well, we have no further questions from the webcast audience either, so I'll hand back to you, Kristofer, to wrap it up.
Okay, good. Thank you very much. Again, we will now move in, we'll take a 30-minute break, and we'll move into the capital markets day at 10:00 A.M., and then we'll talk more about the forward-looking, and we will talk about how to drive growth. That's gonna be the focus. Also relating a little bit back to some of the questions we've had here today in terms of our view of our stores, the view of online, but also in terms of categories and focus areas, from a product point of view. That will kick off at 10:00 A.M. I hope to see all of you back then, and then we can take more forward-looking questions as well. Thank you very much.