Welcome to T he Clas Ohlson Q4 and Full Year Report 2023/2024 Presentation. For the first part of the presentation, participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing hash five on their telephone keypad. Now, I will hand the conference over to CEO Kristofer Tonström and CFO Pernilla Walfridsson. Please go ahead.
Good morning, everybody, and welcome to the Clas Ohlson Q4 and the year-end report. My name is Kristofer Tonström, President and CEO, Clas Ohlson, and together with me is Pernilla Walfridsson, CFO. So I'll take us through or we will take you through a short presentation, and then we will move into Q&A. So, starting with a brief summary of the quarter and the full year that we're closing, we see Q4 growing organically 13%, and we have improved operating profit to SEK 65 million from SEK -7 million last year. So this quarter concludes a solid year, where we, for the first time, is above SEK 10 billion in revenue, with an organic growth of 11%.
Operating profit came in at 7%, so in line with our financial targets, and we're ending the year with an operating cash flow at SEK 1.489 billion, also up versus last year. So all in all, we're closing a year where there's been a lot of activity, where we've completed an acquisition, we have opened a few new stores, and not least, we have also renewed our assortment at a high pace. So we're starting a new year at the solid financial position, with net cash at hand, and also closing an EPS at SEK 8.03 , which is up versus last year. The board has also proposed a dividend amounting to SEK 4.25 per share, which is in line with our dividend policy.
And today we're also reporting May, where we saw 13% organic growth, and we'll come back to that a bit more in detail. So starting by reviewing our targets, they are kept the same, which basically means we wanna grow 5% top line and a 7%-9% EBIT margin every year, also moving forward. And we also want to become industry leading in terms of sustainability. Looking a bit at the quarter that we have closed, we have talked throughout the year about three different growth drivers to help us develop the company, and we do see progress across all three. So the first one is making our assortment relevant all year round. And also in the last quarter, we see that all our prioritized product categories are growing.
We've also continued the very high pace in terms of product news, and we also see that the amount of own brands and own developed products have increased also slightly in the fourth quarter. We also see very positive trends in terms of product reviews from our customers. On our online business, Q4 is growing 11%, and still 50% of the volumes online are delivered via our stores. So we do see a very strong effect of online and our physical store network working tightly together. So concluding Q4, online now represents 19% of total sales in the quarter. On the store network, we've been very busy across Q4. We have opened, or we have a net addition of six stores, so we have opened seven, closed one.
We've also opened two new stores in May, and thereby we're on track for the target of adding another 10 net new stores throughout the fiscal year 2025. We also do a lot of work in terms of evolving our marketing and communications, and we see that our customer base is growing. We have reached a new level where we have added 400,000 new members throughout the year, and we see that they are buying more frequently, and also at higher amounts when they visit us. We've done a lot of work over the year in terms of making the organization more effective, and of course, that's an ongoing priority.
Looking a bit more into the details on how the assortment is evolving, we do have our five prioritized product categories that are the ones that are driving traffic and where we wanna be top of mind with our key customers. And as said, we do see growth across all five, and as well as also the seasonal assortments and spare parts. Looking a bit more into detail, as said, we've had a high pace in terms of renewing the assortment over the last year. We have actually launched approximately 4,500 new products. They've not been fully added on top. We have also done a lot of renewal in terms of taking out slower movers and assortment that is not performing as strongly, but high pace of innovation.
And we do see that the news is a big driver of the sales growth. It drives relevance, it also drives interest, and it also attracts new customer segments into Clas Ohlson. So we see new target groups, new customer groups entering Clas Ohlson. And at the pictures here, you see some of the blockbuster launches we have seen over the last year, and as previously mentioned, especially in the last 3 months -4 months, we have launched a lot of new products that are Clas Ohlson developed. Moving into the store expansion, store network, the expansion is going according to plan.
We laid out a year ago that we want to expand network, and we see that the stores that we have opened have been really well received by the customers, and they've also attracted a lot of media attention locally every time we have opened a new store. We also see a continued positive trend in like-for-like in the existing store network. As previously mentioned, the combination of stores and e-com is very strong and important for us. So key for us to continuously work with optimizing the company to ensure we keep our overhead costs intact and then add profitable stores to the portfolio.
Apart from opening new stores, we're also investing in the network and the portfolio that we have, and it's both in terms of ensuring the right location, we're also extremely active in terms of renegotiating existing contracts every time they end. But we also work to ensure we can optimize the assortment, optimize the sales and storage area, to ensure that we drive conversion in our store network. So adding new and building out the existing portfolio. So the final point from my end before handing over to Pernilla, we see a slight improvement on the consumer confidence. We're still, still below zero, but it's going in the right direction. And as always, no matter macroeconomic environment, for us, it's critical to have a very strong value equation versus our customers.
So we measure our price perception versus key competitors within the discount segment. And we can see from the graph here that we are performing well in terms of value for money rating. Also, when it comes to customer meeting and customer service, we are continuously evolving and are constantly delivering very strong NPS levels. And we've seen, especially on our e-com business over the last year, that that number has also improved. So a very solid position in terms of service. So with that, I'll hand over to Pernilla to take us through the financial developments.
Thank you, Kristofer. Let me give you some details on the financial of Q4 and the full year. We have had a positive sales trend all year, and Q4 was no exception. We saw total sales, including Spares, grew to almost SEK 2.2 billion in the quarter. The organic increase was 13%, and like-for-like grew by 12%. For the full year, we reached a new milestone, with total sales exceeding SEK 10 billion for the first time ever for Clas Ohlson. Organic sales was up 11% for the year, well above our target of 5%, and like-for-like was up 11% as well. Total sales and online sales, in particular, was boosted by the acquisition of Spares. Online, as share of total sales, grew to 15% for the twelve-month period. For Q4 alone, share of online was approximately 19%.
Speaking of online sales, you might have noticed that we have refrained from stating online figures in relation to May sales. This is the way we intend to report monthly sales going forward, but we'll, of course, keep reporting online sales in our quarterly reports. Looking at the strong sales figures, they follow the same pattern as previously during the year, with positive development in all markets, but with particularly strong sales in Sweden and Norway. When it comes to macro factors, there has been a bit more volatility during the past weeks, with increases in freight prices again. During the quarter, however, we saw a more stable situation. After the sharp increase, following the unrest in the Red Sea, prices dropped for a couple of months, just as we indicated in our Q3 presentation.
As always, we follow the development closely, and as you are aware, we have different types of transport agreements, and there is a lag effect from increases in freight due to turnover rate of our stock in trade. Another challenge is the currency situation, with a continued strong U.S. dollar versus the SEK. In a 3-year perspective, we also see quite significant effects from the weaker NOK, which is an important sales currency. Gross margin improved by 0.6 percentage points to 39.4%. Gross margin was positively affected by decreased sourcing and transportation costs; also, effects from product and price mix contributed positively. The gains were largely offset by the weak SEK in relation to the U.S. dollar and hedging effects from NOK. In addition, the acquired Spares Group has, as you know, a lower gross margin impacting slightly negatively.
The income statement shows big progress also in profits. Our Q4 is generally our weakest quarter, and this is actually the first profit-making Q4 since 2016, 2017. Operating profit amounted to SEK 65 million, compared to SEK -7 million last year. For the full year, operating profit, excluding items affecting comparability, is significantly up, SEK 921 million compared to SEK 459 million . The full year EPS landed at SEK 8.03 , an increase from SEK 2.85 last year. Moving into our inventory situation, we have a good and well-balanced stock in trade. The total inventory level is up. Important factors for the increase are new stores, more products, and the fact that we have added Spares inventory. Cash flow for the fiscal year was strong.
Cash flow from operating activities total SEK 1.489 billion , a historically high level and a big improvement from SEK 941 million last year. Net debt/EBITDA, excluding IFRS 16, was minus 0.2. We maintained a net cash position and well in line with our financial targets. Finally, a quick look at investment, which increased quite a bit following the acquisition of Spares, totaling SEK 554 million . As you can see, we increased the level of investment also in our store network, following our strategic focus to open more stores, but also as an effect of refurbishment of existing stores.
Investment in our store network will increase during 2024-2025, as we are moving along with more store openings and additional refurbishment and relocations in line with our ambition of building a more robust store network. In 2023-2024, we made very small investment in our IT landscape. This figure will increase to approximately SEK 30 million - SEK 50 million this year as we are implementing new standardized systems. But all in all, we intend to invest approximately SEK 200 million in 2024-2025, which is in line with our normal investment level. I, by that, hand over to Kristofer.
Thank you, Pernilla. So moving into the events after the reporting period, starting with the May sales development. We see that the year has started well with organic sales of 13% in May, adding approximately SEK 100 million top line. Looking at Sweden, we see 12% organic growth, Norway 17%, and Finland 7%. Across all three countries and also across the five key prioritized categories as well. The season, the summer/spring season has started well, but again, it's also broad-based sales development. Including also Spares, total sales amounted to SEK 848 million, and when we closed May, we had 10 more stores than we had closing May last year.
As Pernilla noted, previously, we do no longer, as of the new year, report our online business on a monthly basis. We'll continue to do that quarterly, but on a monthly basis, we stick to the total sales development. Moving then into the dividends, so the board has proposed a dividend that is in line with our dividend policy. So following the strong EPS development, the proposed dividend amounts to SEK 4.25 per share, and this is to be distributed in two separate payments of SEK 2.125 each. Then moving, looking forward, so we're closing one year, and we obviously have kicked off a new year. So just reiterating a little bit the strategy forward and also the plan.
Starting with our financial targets and framework, our objective is to grow 5% organically every year and delivering an operating margin of 7%-9%. Our dividend policies is distributing at least half of EPS, and we want to remain our net debt EBITDA below 2. So no changes to the financial targets moving into the new year. Then describing a little bit our strategic position, we do see that we have a few key competitive advantages as a company. First, it's our assortment. We are a destination for some very key categories, and we do have a very much need-based assortment, which makes us unique. We also have the strong Clas Ohlson brand with high awareness, but also high relevance and likability with our key customers.
And thirdly, our customer meeting and our ability to deliver high-quality service and support to our customers no matter what channel they contact us in. So leveraging this, looking forward, our continued focus is to differentiate ourselves and really focus across what we refer to as our niches. So we see ourselves as a multiple niche business, where we have the five key categories that really make us stand out. So we want to continue focusing on those, going deep in terms of assortment to always be relevant for customers. Then we want to continue to develop and evolve our scalable operating model to ensure that we stay cost competitive also versus the discount competitors. We also want to continue to generate a strong free cash flow, so we can reinvest into our assortment brand and customer meeting.
And at the bottom of this slide, you see these separate niches, which we also refer to internally as our consumer mission. So they also remain the same, and as you also can see, we have our Spares business closely integrated into those missions as a way to give customers the correct assortment and service. Looking then at the focus areas for 2024- 2025, we see that the strategy and the plan is working; it's delivering results. We're gonna continue with high pace to work across assortment, our profitable and growing online business, and also our store network. So we're gonna take the next step across all of these areas, also based on the learnings from the year we're now closing.
When it comes to customer communication, it's tightly linked into being a destination across each of those niches. So we're gonna continue building that leading position. And we also want to maximize value per customer using Club Clas as a clear vehicle. On the competitive cost base, we wanna take further steps, obviously. One of the actions we are undertaking is simplifying and implementing some standard IT systems across the next couple of years to simplify the operating model further and ensure that we maintain our strong cost focus and position. When it comes to sustainability agenda, apart from our targets, it's also about evolving our business model, making it even more sustainable.
And this is closely linked into the assortment strategy with spare parts, but also delivering products that have the quality for customers to buy, keep, and use for a long time. Then summarizing and closing the presentation, we are executing on our strategic plan that we laid out a couple of years ago. We're also well-positioned as we kick off the new year. We have seen the results coming in in the right way over the last year. We still have lots of work ahead of us to continue building a stronger Clas Ohlson, and it relates into the focus areas that I just briefly mentioned. So, closing one year and already the team is fully engaged on delivering even more strongly moving ahead. So with that, let's move into Q&A.
If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad. The next question comes from Niklas Ekman from Carnegie. Please go ahead.
Thank you. Yes, if I can start with a question on current trading. May now is the first month where you're facing really tough comparisons, and you're off to a very strong start. I'm curious, do you see any weather impact, any one-offs, anything that could suggest that you—we shouldn't extrapolate this May sales figure? Any reason why you shouldn't reach sales growth of 10% plus, rather than your target of 5%? That's my first question.
Yeah, good morning, Niklas. So, yeah, I wouldn't extrapolate 13% for the rest of the year. As we have communicated, obviously, we're building plans to deliver the 5%. That said, obviously, we are happy to see the momentum. There are some seasonal effects. Obviously, looking at the main numbers, we have seen strong sales in terms of home cooling, like air conditioners, fans, but also pest control, given the mosquito season starting. But at the same time, we also, on the things we are pushing very deliberately, we see solar cells developing strongly, and also the overall base business is continuously performing. So as always, we should be careful looking at one isolated amount and extrapolate, but of course, the trend and the start to the year is good. But I wouldn't extrapolate 13% for the rest of the year. But, yeah.
Okay, yeah, fair enough. And on a similar topic, you are now at the very peak of your margin guide as of 9%. Given, again, the strong current trading, if your sales would grow more than 5%, shouldn't there be room for margins to expand beyond the 9%? Or are you foreseeing any immediate pressure on margins? Besides, you're talking about a little bit of cost inflation, et cetera, but it doesn't look like the drama we've seen in the past. So any reason why your margins shouldn't be able to expand further beyond the 9%, at least temporarily?
I mean, again, as, as, said before, of course, we know these, these targets are on a yearly basis, and then there are some years where we might be stronger. So of course, if everything goes as well as it did the year we're closing, of course, there are sometimes upsides at the same time. So there's no, not that we see any huge clouds at the horizon, but it's of course up to ourselves and our ability to continuously executing. And then, of course, we are living in a very competitive world with great other players out there doing a good job as well. So I believe the, the targets are well balanced, and we'd rather be on... Yeah, so the, so the targets are well balanced, I would say that.
There are some clouds, obviously, with the Red Sea that Pernilla talked about, so we see, container prices, increasing again. We believe it's still manageable, but it will have a slight impact. And then, of course, as always, we are also dependent on currency fluctuations, et cetera. So no major clouds, but as always, we have been in this business, for a long time, and we know that, there are a lot of other unforeseen things that could, could happen.
Okay, very, very clear. Thirdly, I'm, I'm curious about the, the dividend policy here. You have 170 million in net cash. Dividend now, there's a payout only of 55%. I'm, I'm curious, what are you— what are you saving for? Are you considering buybacks? Are you looking at M&A? What, what are, are your thoughts here? Because otherwise, I would assume that you could be able to increase the payout ratio, given the, the strong level of profitability and, and the significant net cash.
I think the way the board obviously has looked at the year we're closing and then maintaining the recommendation within the policy. But then, of course, we also need to think longer term, ensuring that we have the ability to invest in our business. As Pernilla briefly mentioned, we do see some further investments ahead in the year that we have just started. We do see that on the store network side, there are lots of opportunities, and we wanna be in a position where we can allocate capital in a way where we also create longer term growth. There's no other new news, but it's really about giving us the flexibility to ensure we can deliver very long-term growth as well at the same time as obviously distributing value to shareholders.
Sure. But, but can you elaborate a little bit on your thoughts on M&A, given that you have made your first acquisition now in, in many, many years, or Clas Ohlson has very limited track record of M&A, and then now you've acquired Spares, that have had a few quarters now to consolidate that. Are you looking at additional M&A and, and kind of in the same field where you add, online expertise, to your store network, or what, what are your thoughts there?
I think it's important to be clear that looking at the targets ahead, the financial targets, they do not assume any further M&A. Then, as you said, we just recently consolidated Spares into the business. We're really happy with that acquisition. It fits perfectly with our multi-niche business. It gives us an ability to meet our customers and give real expertise and depth within some of these. So the way the outlook looks, it doesn't assume any further M&A, but I think we have shown that if the right opportunity arises, we do not close that door, but it doesn't assume anything else within the next couple of years.
Okay, super, very clear. Thank you for taking my questions.
Thank you.
As a reminder, if you wish to ask a question, please dial pound key five on your telephone keypad. There are no more questions at this time, so I hand the conference back to the speakers for any written questions and closing comments.
Yes, and we do have a couple of questions, a couple of written questions from the webcast. First up, Magnus Råman, Kepler Cheuvreux. He wants to know if we can give any examples of products that has been introduced that resonates with the younger audience.
Yeah, good morning, Magnus. Good question. So I think, there's a few very good examples that shows when we work from a category point of view, developing in our expertise, we all have also ability then to get new target groups in. So one concrete example is that we are a destination for what we call tidy up your home, so organize your home, and we have launched thousands of products that help you organize all different parts of your home. Over the last year, we moved into organizing your bathroom, organizing makeup, as an example, and beauty products. That started to attract younger female shoppers, so between 18-24. And, obviously, we have been very active of being relevant from a communications point of view, primarily working with social media, et cetera.
So we started to see a new target group coming in, and obviously, with that target group coming in, that gives us a great opportunity to build adjacencies than from a customer group point of view. So we have complemented with more products towards that customer. So beyond makeup organizing, we have launched makeup mirrors, lighting, and then also other bathroom accessories, and then also within personal care, we have evolved, launching more personal care products, targeting that audience. So I think it is a good example of when we work both from a category product expertise point of view and, in parallel, also from a target point, target group point of view. So we stay very disciplined within the areas that we wanna win within, and it also gives us an ability to, to win with new audiences.
And there's a second question from Magnus Råman. Could you also comment on how many Starlink terminals you have sold since the collaboration with SpaceX started? Unfortunately, I don't have that number in mind.
I had it in mind in the first few months, but, now I actually don't have that top of mind. But it has been a steady development, and we have seen, a very solid, solidly sales level. But I do not have top of mind the exact amount of terminals. But I think what it showed was that when a new, very interesting brand wants to launch across the Nordics, they chose Clas Ohlson as the first exclusive partner. Now, they have rolled out distribution elsewhere as well. So I think it was a sign that we are a very- available and relevant, retailer for those type of products. But unfortunately, I don't remember exactly how many, so, we can have a look at that separately.
Yes, and lastly, also, how do you anticipate the recent sharp increase in container rates, and how it will affect you? And, do you do annual negotiations or specific freight rates or taking spot rates, minus asks?
I mean, transportation cost has obviously increased during the last couple of weeks, after a period where we saw more stable and somewhat decreasing prices. As for now, we do not view this as something that will have the same kind of impact as the bottleneck effect during the pandemic. But we will, of course, monitoring the situation closely.
Yes, and we have another question also from Watch Media, Vivian Storvik, asking about Norwegian sales increased more than Swedish sales in the fourth quarter. Do you think also relating back to the growth of the store network in Norway, asking, do you think it's possible that Clas Ohlson will become bigger in Norway than in Sweden, and then become the most important market for the company as a whole?
Yeah, thank you for the question. So looking at the Norwegian business as you state here, obviously the development is very strong, and our brand in Norway is extremely well-established. And I do think there is such a possibility. As you mentioned, we're approaching or we are above SEK 4 billion in sales on a rolling 12 months basis now. Of course, we do have some very healthy, fun competition between our teams, also internally. So I think the Swedish team is doing everything to keep the number one position, but I think it is impressive to see the development in Norway, and I wouldn't rule out the fact that one day, maybe Norway could be even bigger than Sweden, but let's see.
Yes, and finally, we have one question from Sina Aas from TDN Direkt . How should we think about gross margins for 2024- 2025? Any chance you could reach your historical average of around 40%?
So obviously, we, looking back at many years, our gross margin has always been very, you know, around 40%, plus minus 1 or 2%. And there is obviously a high correlation with the U.S. dollar. Gross margin is one part of the equation, and obviously, we do everything to evolve that, but at the end of the day, it's about finding balance across the business and ensure that we deliver a stable EPS development, and gross margin is a part of that, obviously. But as long as the U.S. dollar is as strong as it currently is, I wouldn't assume that we go back to historical record levels.
But our job, and I think we've shown that in the last year, is to ensure that we find a balance between sales, gross margin, and costs to ensure we can deliver a stable operating margin and also an increasing EPS, and also an ability to continuously generate cash.
I think that was our final question for this Q&A session. Thank you, very much. I'll hand back to you, Kristofer.
Yeah, thank you very much for calling in this morning, and we will all see each other again when we report our first quarter. And now we will all go back to drive a strong summer for Clas Ohlson. So thank you very much!