Good morning and welcome to the Klas Olson Q1 report. I'm Kristoff Drumsgaard, President and CEO. And with me today, I'm Per Kristensen, our CFO. As always, we'll start with a short presentation and then we'll move into a Q and A. So I'll do a business update, Per will take us through the financial development and the events after the reporting period and then I'll do a Summary and then outlook and then we'll do the Q and A.
So headlining the Q1, we have delivered a Solid quarter with strong profitability, a little bit more than SEK 2,000,000,000 in sales and SEK 147,000,000 in operating profit. So the operating profit is slightly down versus last year, but it's the 2nd best Q1 ever and 86% above Q1 in 2019. And we've done that by being agile and adapting to the very fluctuating market conditions and by staying very focused on our core business. So to just dig a little bit deeper, looking at the Q1, we saw organic sales like for like declined 2% and the total sales minus 1%. Worth noting here is that this traffic to our stores has been lower than the sales declined, which really shows that we've been able to convert more of the visitors into customers.
And that is a sign of us being able to adapt to the conditions and ensure we have the right category to the right customer at the right time. Online sales grew 19% and our gross margin increased slightly to EUR 39.5 and our EBIT came in at EUR 7.2 strong financial position with a strong balance sheet and strong ability to generate cash. So digging a little bit deeper into the market dynamics, Starting with supply chains that we've been talking about over the previous quarters as well. There are obviously global imbalances and something that is reported broadly across the industry. We see strained container situations.
We see increasing transportation cost, increasing raw material and component prices. Per will come back a little bit to this, but obviously, we remain firm on our financial targets, and we will do everything to offset any increases. Worth noting is that the Q1, the impacts were limited, but we expect to Obviously, costs go up further in the year. Looking a little bit more at the market dynamics locally, we see that the traffic TAR stores is growing month on month over the summer period, but it's still below last year. And we also see that Click and Collect It continues to grow in demand as it has in the previous quarters, and our online traffic remains strong.
And to just give a little bit more of a flavor on our omnichannel dynamics and also put a little bit the ecom growth number into perspective, Looking at different age groups, we saw as an example that the customer group 65 plus was the biggest customer group that drove growth in our ecom last year. Now this group, as we can see in the graph here on the slide, has gone back to visit stores more frequently, and therefore, they actually have a minus development on our econ. Still, we grow with the age group and we grow a lot of the other age groups within econ. And I think this is a good indication that we need to look at total development, total growth, whereas the channels obviously will interact with each other. Moving a little bit into our focus areas that we talked about last time.
So We have 3 big focus areas for this year, and the first one is strengthening key product categories. I already mentioned the fact that we have been driving Strong conversion in the Q1, so despite the traffic drop, we've converted more customers. And one of the explanations of that is our ability to drive our destination categories, but also to adapt to the needs of the customers within each respective month, week, day. A couple of examples, we've talked organized before, which is a broad spanning across a lot of categories from your kitchen to your basement. We kept growing that mega category 9%.
And looking at outdoor living and home climate, we grew double digit. Some examples in there is we were able to adapt to weather conditions and when we saw heat coming, we adapted to selling more home climate products like air conditioners, etcetera. So I think this is a good example of balancing seasons with destinations. Looking at the 2nd focus there, which is capturing traffic, we have done a launch of our new Visual Identity in the quarter, and I'll come back to that separately. But we've also been able to continue to grow our membership number of members in our Club Class membership program.
So in Norway, we have now added 800,000 new members in the last year, and we have approximately 3,500,000 members in our membership database. And this is a key thing for us to drive higher sales per customer, more value per customer and capture the traffic that we get. On the last point, which is growing ecom, as said, we will focus on growing the total business and ecom is obviously a key component of that. And it's good to see that the investments we have done in our digital channel has paid off. We see shorter lead times, faster deliveries.
We've been able to improve our customer promise on our website and that improved customer promise actually drives higher conversion. So we are becoming better and better and we're building our e comm stronger and stronger. We still have room to continuously grow, but we've seen good progress in the quarter. So then moving into our new Visual Identity. So we just launched our new Visual Identity in the last quarter, which basically is It's a complete upgrade of our brand.
We have a new logo that actually is a version of our logo from 1972, you can see it here on the screen. It's actually still on the walls of our office of Ingraham. And we have also upgraded color palettes, the look and feel of us as a brand to drive more distinctiveness, more stand out, but also to reflect the transformation that we're undergoing as a brand and as a company. We are doing this in a very responsible We are not spending 1,000,000 to rebuild and throw away everything we have and replace with new. We have implemented this digitally already and we are doing it in terms of fiscal assets step by step when we anyway need to change assets.
So we will not we're not planning to spend 1,000,000 to change everything overnight. It's going to be a gradual rollout. That is also the right thing to do from a sustainability point of view to do this responsibly. Last but not least, in terms of our progress on our sustainability agenda, during the quarter we signed a new agreement for green financing. Per will mention a little bit about that, but it shows that we are focusing on progressing on key sustainability targets.
We also work hard with our audits of our suppliers. So looking back over the last 15 months, 99% Of all the suppliers that we work with are achieving and reaching our very high demands in our code of conduct. And we have actually executed 335 supplier audits over the last 15 months, and we will continue doing so. And our ambition is to get every supplier up to 100 percent to ensure that we do things responsibly. And we have also reached our gender distribution target across the company and we're upping that further and aiming at even more fifty-fifty.
So with that short intro, I'll hand over to Per to take us through the financial development.
Thank you, Christoffer. Good morning, everyone. Looking at the sales development in the First quarter, we saw a small decline with 1% of total sales to SEK 2,56,000,000. Development in Sweden was flat. Development in Norway was a decline and in Finland also a decline.
Online sales was up 19% to SEK 219,000,000 and now it corresponds to 11% of total sales. Looking at the gross margin in the quarter, we had the increase of the gross margin to 39.5%. The positive contributors were the U. S. Dollar and also a little bit improvement of the sales currency NOK And somewhat reduced sourcing cost.
On the negative side, we saw the effects of the hedges on the NOK, Also some exchange rate effects relating to the inventory delay, Negative effect from product mix and little bit higher campaign intensity. Moving on to the share of selling expenses. The share of selling expenses increased by 1.8% And the main factor was, of course, that the total sales was down, so the base was lower, But also that the last year, the same quarter, we had a very, very high cost control, but also effects from the COVID with staff being temporary laid off And also other cost measures. Our administrative expenses decreased somewhat by SEK 1,000,000 to SEK 50,000,000. Then looking at the operating profit in the quarter, It decreased to SEK 147,000,000 compared to SEK 166,000,000 previous year.
The EBIT margin also decreased to 7 0.2% compared to 8% the year before. If you exclude the IFRS effect, the EBIT margin was 6.2% compared to 7.1% previous year. Earnings per share was SEK 1.63. Investments in the quarter amounted to SEK 49,000,000. Main areas was new stores and refurbishment, IT Systems and also investments related to our distribution system.
Inventory levels in the quarter increased to SEK 1,793,000 at the end of the period. We increased somewhat the turnover at our distribution center to 5.8x. And as said from Christophe in the beginning, we have a healthy financial position and a positive cash flow. Deposit the cash flow from operating activities amounted to SEK 272,000,000 compared to SEK 440,000,000 year before. And the year before, we have higher decrease in inventory levels as well as some Effects of opportunity to pay later with taxes and government charges that now came back as on the negative side.
We have a net cash position, which is very positive. And we have approved credit facilities of SEK 850,000,000 at the end of the quarter. Just after the quarter, we have signed a green financing agreement with the sustainability linked loan, where our sustainability targets will affect the interest rate. And we also are reducing the amount of credit facilities in August and going forward given the lower risk in the industry And for Claus Olsson. As said before, the proposed dividend is SEK 6.25 per share, And it will be paid in separate payment with SEK 3.13 in September this year And SEK 3,100,000 SEK 3,120,000,000 in January 2022.
And this is in line with our dividend policy and guidance. Looking at the events after the reporting period. August sales came in 3% up in total sales to SEK 711,000,000. Organic sales was up 3% and like for like was up 3%. We saw growth in Sweden by of 8%.
Norway had a small decline, but very tough comparables. We saw growth in Finland and also online sales was up 22%. Also mentioned a little bit of the macro trends that also was mentioned by Christophe. We see that container and shipping cost as well as raw material and commodity prices are somewhat up. We see also impacts from translation and transaction effects on the sales, Mainly the NOK.
We see effects on hedging and other policy effects and also, of course, pricing effects. We are keeping our financial goals and therefore working with counteracting activities Such as pricing, optimizing our price mix, sourcing. As we said before, we're opening up new sourcing offices to Be able to have a diverse sourcing strategy. We're also optimizing our sales mix with private label, Product and Category Mix. And we will also look into further into the products and also how they're packaged to further Improve the logistics cost of that.
Handing back to Christophe.
Thank you, Per. Okay, so to wrap up a little bit as we before we move into the Q and A. So We will continue to build on our strengths. We believe that we are well positioned for the future. We're playing in a very attractive SEK 90,000,000,000 market where we have less than 10% market share.
We also have a very strong financial record and a lot of flexibility to move. We also show that we are an industry leader in sustainability. We Continuously need to do more in that area, but we are already reporting good progress across all the priority areas. We have a very strong brand and a strong market position. We have 3,500,000 loyal members and 100 of millions of visits every single year.
We're strengthening that brand even further with the relaunch of our new Visual Identity to give us even more flexibility. And as you might have seen from the film, It's also getting its way into the product, and we're again phasing it in across also the product range, which lifts the full Private Label assortment as well. So we do see compelling growth opportunities and we believe it's really about focusing on category and customer. I mean channels are very important and we need to continue driving those and become more effective, but we need to focus even further on what we sell to whom. And we are equipped with a strong winning team.
So that team has the ability to maneuver and we have shown that over the last year and we continue to work hard moving forward. We're guided by our strategy, where we put the co worker and creating a winning team as number 1, which then creates Happy customers. And if we do that well, we will create shareholder value over time, and we're really guided by our purpose of Making a Difference to Customers in All Kinds of Homes. So our ambition is obviously to continue to achieve our financial targets. We've delivered on our operating margin over the last We've not yet delivered on the sales and our ambition is to get to that level.
And as previously mentioned by Per, Despite obviously macro fluctuations and cost increases, we do everything to offset that to still deliver on our targets. And to just reiterate the focus areas for this year, the first one is strengthening the key product categories and again moving from Not only we will always work citizens, but not only citizens, but also destinations, which gives customers a reason to visit us all around the year. We really want to solve the overall most important problems for our customers and that goes beyond the product into guidance and also services. And again, we want to grow destination categories. We want to go deep and have a relevant assortment among a few chosen destination categories rather than trying to everything for everybody.
On the second one, we want to capture traffic. Of course, we want to drive traffic, but we are also preparing for a world of continuous Traffic pressure on fiscal retail. So it's really about leveraging our brand, optimizing marketing to drive traffic and then also capture what we get. And I think we've shown that in the quarter with increasing conversion rates. As a key part of that, it's really about seeing our customers and the Club Class program is a key thing to do that to drive value per member, drive loyalty and keep growing the brand in the minds of our most loyal customers.
And last but not least, Ecom, we want to talk total business, but still we have a bit of catch up to do on ecom. It's about shortening lead times, improving the digital customer meeting, but I also then at the end of the day will integrate it with other channels where the fiscal store plays a key role in that customer journey. So with that short wrap up, we'll now move into the Q and A. So I'll hand over to Niklas to moderate that. Thank you, Christopher.
So let me start by asking if we have any questions from the telephone conference.
Thank you.
And we have a question from the line of Karl Dunberg from Carnegie. Please go ahead. Your line is now open.
Perfect. Thank you very much, and good morning, Gisdof and Per. So first, a question here on the shipping costs. You've talked In your annual report that you source around 40% of your products directly from Asia, China in particular, and you're also Highlighting that as a risk here going forward, the container cost in particular, could you say anything a bit more sort of what you Speck here on the gross margin. I mean, are we talking about a severe contraction?
Or is it just a few basis points that you're expecting here in the near term? And maybe also understand a bit sort of if you could say how large your share of private label is also right now to understand sort of your Pricing power to end customers, that's my first question.
Yes. I mean, to start with, we as you say, we source A lot of product from China. But having said that, a lot of our Other suppliers, of course, then have components also coming from China. So there will be probably discussions in those value chains as well. Looking at the total cost of transportation and how that Affect the gross margin, I think it's very important to look at both the price we purchase the products of The raw materials, mainly the dollar and the transportation cost as a whole Before we say the impact on the gross margin and as Christophe said, we will Look at this product by product, category for category and see what's the best strategy To work with this to balance the gross margin, but also to increase total sales.
And if I can just comment on the private label question. So the overall private label share of sales is around 35% right now. And obviously, we work with a fairly sophisticated way with pricing both on private label, but also on A Brands. And in some categories, we start seeing a bit of a shift upwards and we will always be very responsible to deliver value to customers, but we will also ensure that we take pricing where need to in terms of category and product. But but it's of course the balance between A Brands, which is obviously much more broadly across the categories or the market and then the private labels.
Okay, perfect. So maybe a follow-up on that one as well. How would you say that your sort of visibility into this Situation is right now, I mean, can you take sort of precautionary measures here already? Or is this sort of situation that is changing for you day by day? Because you seem quite sort of keen to keep the margin target unchanged, I'm just wondering sort of how you're sort of hedging With this sort of external environment going forward.
I mean, if you look at the process, there is a process where you place orders and then It then obviously goes to shipping and then there's a lead time of the container going To Sweden, so I guess we have a lot of information before the products actually hits our distribution center and we start to sell it. And I guess We could change the price to the customer quite quickly. So I mean, we have a quite high visibility of Now the cost of the products before we sell them and then I guess it's a choice for us to discuss How to take the actions and why? So I guess we have a quite lot of visibility. And also, I mean, it seems that at least the container pricing and everything is rather stabilizing on a rather high level, but It's not, as we expect, in short term, going up much further.
And of course, others are taking countermeasures also to Increased capacity. So over time, it will be a lesser problem. But right now, I think we have a quite long visibility chain of the cost of the product Before we actually decide to sell it.
And maybe just worth adding as well, looking longer term, I mean, I think this is also an opportunity for all of us in the industry to become much more effective. I think if you look at the products we're shipping, CEO. Decreasing air in transportation, making products more logistically friendly, if you like, that's going to help us on the cost side, but it's also going to be the right to do from a sustainability point of view and at the end of the day in terms of customer experience, ecom, logistics, etcetera. So This is also a we're using this as well to really drive that process even harder. That, of course, is longer term.
So I fully agree with the short term countermeasures that Per Talk about.
Okay, perfect. And then I have a question on Sort of current trading here and what you're seeing in traffic, you're talking about improved conversion rates and you also mentioned a few initiatives here that have been sort of Increasing your average order values. I'm just wondering, in your previous report, you talked about sort of traffic normalization to your stores by Tamber, that was what you estimated by then. What do you see sort of where you are today? Is this Have you seen sort of a normalization where you are today already?
Or do you see it sort of more going gradually later throughout this year?
So as shown a little bit, the traffic has increased month on month, but it's still below last year. In one of the markets, Sweden, there were yesterday obviously news about opening up in terms of almost removing all the Frictions by September 29. We've received previously similar messages from Finland. So overall, obviously, positive for society that those Decision can now be made. For us, of course, it proves the hypothesis we had last time, which is that by end September, At least, hopefully, from a restrictions point of view, there shouldn't be too many barriers.
That said, as we also talked about last time, we need to be very open minded in terms of following now the customer behavior because even though you're allowed to go back to work fully as of September 29, nobody really knows exactly what it will look like. So I think the key thing here is focusing on the things we can influence. We will, of course, do everything to get traffic back and now we can do so safely. We have not driven traffic to fiscal stores last year. Now we can do that.
That said, we need to focus on then converting every visit we get. And the good thing for us is we have lots of customers and lots of visits. So yes, we're dependent on traffic, but we need to become even more independent by driving value per member value per visit, etcetera. So obviously, a little bit too early to tell, but at least our hypothesis of a more open society end September seems to be
happening. Okay, perfect, very well. So thank you for taking my questions. Thank you. Thank you.
We have a question from the line of Nicholas Schuhmann from Handelsbanken. Please go ahead. Your line is now open.
Yes, good morning. We'll see what sort of answer I get from this question. But Overall, what sort of price increases on average for your product offering would you Expect to offset both the input cost commodity input
In costs,
are we talking sort of 10% increase on prices on average or?
Do you want to take that or share?
No, I mean it's not necessary to increase prices by 2 digits to offset The cost, it's much lower than that. And as said before, it's different factors Combine that, we'll cater for our decision to increase prices, and we do that daily, weekly, monthly, yearly For all other reasons, I mean, there's inflation all the years. So I guess this is just one factor that has changed Quite quick and but it's just a new factor, but It's not that big in terms of to increase it by 2 digits.
And also we will not just take every single product and make a big price change. That's not how we work. We work with category product, price elasticity and then obviously different products have different roles to play in terms of driving the price perception versus customers. So maybe in some areas we have an opportunity to take more and in others we have no we actually need to take down prices and we try to be very dynamic and doing that more and more. And then of course the input cost is one of the variables, but there are also many more.
So it's so we can't give one answer on overall Price Development.
Okay. Thank you.
And I think, I guess, price increases, freight costs, Commodity, etcetera, that's one part of the maybe the issue right now. But I'm thinking about product availability And then maybe more specifically, as we move towards the important Christmas season, how confident are you that you're That you will have fully stocked shelves going into Black Friday and the Christmas important Christmas season.
Now so we have taken I think we mentioned that last time, we have made the decision to bring product home earlier than usual. So some of the products have already arrived, but obviously others are still either on the oceans or being packed and shipped. So We are trying to do everything to get products earlier. Then the other thing is, obviously, we have a broad assortment. So even if there are issues on some technical products, we also have a big Broad Assortment.
So it's obviously a changing environment. So this is something we track every single day and it's impossible to be 110% confident. However, I think what we have shown is that we can adapt. If we find that there is an outage on one product in one category, we will do everything to then focused on something else versus customers to cover that gap. But I would say we've done everything we can from an internal point of view to be prepared to have full shelves by Black Friday.
So but as you say, it's obviously a volatile market. But I think we have done what we could so far and now it's about tracking day by day what we get and how we get that out.
Okay, perfect.
And I assume promotions increased promotions will be part of the strategy to drive more traffic to the stores. But If you combine sort of more promotions in this very inflationary environment, Could that be sort of tricky to avoid gross margin taking a hit there?
I mean that's one of the reasons we're focusing so much on our membership program. We I mean as you say, if you do big broad promotions that targets everybody all the time, then obviously that will have a direct overall impact. The key thing is really following the highest value customers, giving them the right offers to come back one more time and to be even more loyal. And the good news for us is that a small part of our customer base represent a pretty big part of our profit and sales. So becoming a bit more sophisticated, working even more with loyalty with our program our CRM program, So we don't need to give blanket promos to everybody all the time.
Of course, we'll also do overall promotions, but a way to offset and not have The broad gross margin impact that you talk about is by being a bit more strategic on how we do the offers and think more Longer term customer lifetime value than just the transaction.
Yes, perfect. Last question. August sales, were there any Calendar effects, either negative or positive there? And in Norway, what are you seeing there? It seems like The previously very strong sales in Norway are starting to slow down a bit.
Yes, so last year, if I don't I think Norway was up 9% in August, around that. So obviously, we're meeting pretty high numbers. In terms of calendar effects, I don't think we have any calendar effects for this for August this time.
All right. Thank you very much.
Thank you.
Thank you. The next question comes from Andreas Lindberg from SEB. Please go ahead. Your line is now open.
Thank you. Can you hear me?
Yes.
Cool. Going back to this Inflation or gross margin question. If you combine the I mean, the effects from the U. S. Dollar, which Seems to continue to be very positive for you and also that you had some positive hedging Our value of hedging contracts by the end of July with this inflationary environment, what would you say would be the net effect?
I don't think I want to comment on all the details there. But as you say, the right in this quarter, we reported We had a very positive effect from the dollar because it was a lot of the goods was Bought at a very decent dollar rate. And then the expectations was that the dollar should go even further down, and now it's Been going a little bit up and stabilize around that. So I mean looking ahead, it's very hard to comment on the each Currency, how it will develop, there's a lot of factors now with Banks central banks changing the interest rates and changing the Flow of Money. And I guess Sweden sometimes is a winner or a loser in this as a rather small currency.
So I wouldn't comment on that. Overall, as you saw in this quarter, we had a positive effect compared to last year. And Going forward, we will have negative effect from mainly the cost increases from freight. And then If you look in the report, the sign of the hedges has gone from a negative to a positive. So of course, we will get positive effects, everything same as of reporting day.
But the U. S. Dollar effect on sourcing It looks to be possible also going forward. Is that not correct to assume that?
I mean everything the same, yes.
Cool. And then on the cash position, obviously very strong, SEK 750,000,000 or so. What are you going to do with the cash?
Obviously, we have the dividend now in September and then in January. And then of course, as we communicated the Board's decision last I'm obviously we also want to have a bit of flexibility. So yes, the restrictions are easing, but we are still in in obviously volatile environments and we want to be able to have a strong cash position so we can act on opportunities, invest in the base business, but also be prepared for eventualities. But obviously, the step 1 is the dividend coming.
But you also generate some SEK 500,000,000 in free cash flows?
Yes.
It's the last 2 years, which covers the dividend.
Yes.
So how much cash do you need?
But as Kristof has said, we want to have a strong cash position and whether That will enter in new dividends or investments or other opportunities in Taking growth opportunities, I guess, we have to come back on that. Our first aim to create a positive business environment and then Take the opportunities as they come.
Okay. Thank you so much. Thank you. Thank you.
As there appear to be no further questions, I return the conference to the speakers.
Thank you. And we have one question from the webcast. It's from Stefan Reinholn, Nordea. He's asking if you can give some flavor to your collaboration with MatHem, sales in absolute numbers and the year on year growth. And he's also asking if the collaboration is dependent on Klas Olsson being an owner in MatHem.
Yes, so starting with the first one, we have a commercial relationship with Maarten. It's not dependent on the investment. We still have our sharing Maarten and we're keeping that, but it's not dependent on that. We have now a very solid commercial relationship since a few years back and we intend to continue that. Now when it comes to MatHem, obviously they are not reporting their numbers exactly on sales development, but what we do see is that What we have mentioned before, every 4th, 5th bag in Maarten containing a Klasolson product, we see that remaining.
And then of course, we are as always depending on the development of the Maarten business and I'm not in a position to comment that. But we are continuously happy with that collaboration and we see that Martin is a way for our customers to get this even more day to day interaction with Klas Olson as a brand when they anyway do their grocery shopping, but it's also obviously a limited assortment versus everything we offer in our own e comm. So it's a complement and it's a brand builder and it's a customer satisfaction driver.
And by that, we don't have any further questions. So I hand back to you, Christopher.
Okay. So yes, thank you very much for calling in, tuning in. As said, we've delivered a stable quarter And the year has started in a stable way. As said, there are as always a cloud set the horizon and that's why we have a strong, Happy, creative and winning team in place at Kras Olsson to take on all of these challenges and still deliver on our targets and objectives. So With that, thank you very much and see you all soon again.