You very much. So good morning and welcome to the Klas Olsson Q3 report. My name is Christoph Tonstrom, and I'm the President and CEO of Kras Olsen since February 8. And here with me, I have Prakis Jensen, CFO. Next slide, please.
So today, we'll cover the following topics. I'll first introduce myself briefly. And then moving to some of my first reflections after a month in the job. Then I'll cover business office and we'll then move into together with Per, the financial development and events after the reporting period, and then we will move into A summary and then a Q and A. So before I go into my initial reflections, given that this is my first Q report, I wanted to quickly introduce myself.
So as I said, I've been in this role now for a bit more than a month. And before coming to Claas Olsson, I've spent the last 8 years as CEO in 2 different industries, both pharma on the Northern European level, but also most recently in the apparel world. Before then, I have had roles within Fast Moving Consumer Goods, a bit more than 11 years and spent time across 4 different countries and in roles like marketing and sales director and also strategy manager. And whatever country, industry or company I've been in, my focus has always been to build strong purpose driven organizations and also very customer centric ways of working. So that's shortly about me.
So next slide, please. So after having had an intense first period, I've had the chance to meet hundreds of colleagues Across all our different regions' offices, also been able to spend time in our stores and also time at our distribution center and our offices in INKTRO. And looking at where we stand as a company, there are some very clear strengths and That's as I look at it coming out in now from the outside. And the first one, which I always value highly, is that we have a very telling company purpose. We are, as an organization, very passionate about simplifying life in all kinds of homes.
And from my perspective, the home is a very relevant platform now and for the future. And the home has never been more relevant than today. And being a broad solutions provider for people in their homes is a very compelling place to start from. The second point is that we have a very strong brand position in our home markets with more than 90% awareness and very high likability and positive attributions to our brand. And most importantly, we have a strong proactive organization and a very customer centric culture that has evolved over the last more than 100 years.
And I think we'll see that as we go through the Q3 numbers that we have an organization that has the ability to adapt to change the external environment and focus on the things that we can influence. To me, that is a clear strength. Also, we have a very broad household penetration. 9 out of 10 households have visited Klasolsohn in our key markets over the last year, and we also have a loyal customer base. So the platform from a brand, customer and organization point of view is very stable.
And also financially, We do have a good platform to stand on with long term owners and also an ability to adapt to changing environments. Looking forward, obviously, it's going to be very important for us To realize growth potential, we have areas growing like our ecom, Norway, etcetera, and we need to get even more broad growth and continue the digital transformation. And we also need to get and ensure we get all countries up to the same level, including Finland. So the intent is not to start a completely new Strategy revision, but actually start from the very solid base strategy that we have in place. We also intend to speak to the financial targets entering now the next year starting May 1.
But of course, we will be working on our strategic priorities to ensure that we spend the time on the things that make the biggest difference, and I'll come back to that later on. Next slide, please. So moving into the business update and looking back at the last quarter from an overall point of view before we go into more details. Next slide please. So looking at the Q3 in Greece, obviously, we have been impacted by The new COVID restrictions across our countries and we have seen a pressure on our sales 5 with a total sales down 9% and organic and like for like down 5%.
At the same time, we've been growing our online business with 59%. And the good news is that we have So improved our gross margin and our EBIT margin. And we'll come back to the drivers of that. But again, I think It's an example of that we focus on the things that we can influence when there is uncertainty in the external world. Next slide please.
So looking at the current COVID-nineteen situation, as we all know, The environment keeps changing almost on a daily, weekly basis. But right now, We see that if I start with Sweden that there are new restrictions as of Christmas and there are some new restrictions that came just out of the week. And obviously, as you'll see, that will have and has had an impact on our store traffic. We have also over the last quarter for the first time Since the pandemic started, been forced to close stores temporarily in Norway and we've had up to 30% of the stores closed. And there are still stores closed as we're now entering March.
Looking at Finland, it was declared a state of emergency as of March 1. And we do see traffic being severely reduced across both city locations, but also stores that usually benefit from our cross border sales. So we're humble looking forward. We obviously have we obviously also have a macro environment When it comes to currencies, but also increasing freight costs and other areas that we'll talk more about. So we're humble looking forward and obviously we are monitoring the Development across every country on a daily basis.
Next slide, please. So summarizing the Q3, it's a very different kind of quarter. And of course, During the quarter and also today, the safety of our coworkers and also our customers is, of course, a top priority for us. We have also seen that the Black Week very much for us became a Gift Week at the end of November. And as you'll see to the right, we have seen increases in online sales with traffic going up, but also the transaction count in terms of our Click and Collect and our fiscal stores have had an increase each month of the quarter.
So obviously, we have spent a lot of time on ensuring that we can leverage our fiscal stores as logistics hubs, both for Click and Collect, but also our effective feeder stores that can send orders directly to consumers across our countries. As you can also see at the bottom to the right, we've seen traffic decline across the countries and across our stores. And of course, that is very impacted by the sharper restrictions. Next slide, please. So as I briefly mentioned earlier, we do have a clear foundation and a clear strategy in place.
Our job is will be to very much capitalize on the transformation that has been started and has been ongoing over the last few years. And of course, ensure we can maintain our cost control at the lower cost levels that we have seen over the last year. And of course, we need to focus on the things we can influence, and that is going to be obviously focused on identifying the right growth initiatives to also get our top line going. Next slide, please. So looking through the different areas of our strategy, Starting with what we call smartness and simplicity, we are always striving for efficiency, and we have a couple of examples here.
First, we just opened a European purchasing office in Warsaw, Poland. And this is to become more agile when it comes to our sourcing strategy. We want to shorten lead times to our key markets and, of course, have an impact on our environmental agenda as well. And our goal is to double the procurement from Europe over the next 3 years. The second thing is that we've seen that we are able to get synergies out of focusing on our customers and then ensuring that our channels can work together.
And we have seen that in with the example of using stores as logistics hubs during the last quarter and also before. Of course, we continue to streamline and go for becoming a more efficient organization. As we have talked about before, we have implemented a model inventory management system throughout the fall, and we see the effect of that when it comes to our inventory levels as a percent of sales. And we're also investing in more ecom automation in our distribution center. And this will be an important area for us to ensure that we can get the cost per order down on our ecom.
Next slide, please. So looking at the second area, which is the unique customer offer and to the triangle at the right of the slide, our ambition It's to build a very holistic customer offer that can serve our customers and deliver on the purpose of simplifying life across all kinds of homes. Of course, the foundation is always going to be our products. And we continuously work on driving a relevant assortment. We're working more and more with insight driven ways of developing new products.
We also actively capture feedback I work with Ratings and Reviews to ensure that we keep our offer relevant. And of course, having availability of our core assortment is always critical to ensure that we have availability across channels on the most important parts of the assortment. On the 2nd level on guidance and inspiration, we have during the quarter kicked off a new take on hardware and do it yourself. And we call it Give Some Love. I'm here the idea is that we help customers solve problems in their homes with renovating furniture an average in your house instead of always having to buy new things.
And then the next level is really delivering on I'm developing our service offering, which is kind of the ultimate level of delivering on our purpose. Next slide, please. And the last area in terms of outstanding customer service, here we do work with, of course, strengthening the relationship with our existing customers, but also to grow the customer base. And one example here that I'm very proud of is the fact that we won the 1st prize for best customer service in Sweden within real estate. And this is not based on a jury.
It's really based on 2,500,000 real customer service during the year 2020. And there's been 135 companies competing for this award. And after having seen firsthand In kind of how we work with our directly with our customers. I'm not surprised we were awarded this, but of course, It's a great recognition for the way we work. Our cloud clouds, our CRM Program is critical for us here and for the future.
And we see that the customers that do shop around across our channels are our most possible customers. So we work with building up the membership base in Norway, where we just launched closed class during the fall. And we will prioritize doing more development on our CRM to continue that developing moving forward. Next slide, please. When it comes to our sustainability agenda, we have also taken new steps with a lot of focus on trading and the broad organization rollout of the strategy that we announced during the fall.
We've also received a Grade B in CIBB's Global Sustainability Index, which is a recognition of the work we're doing. And we are continuously working on evolving our business model to make it more sustainable. One good example is the launch of our cloud video service where our customers can get in direct contact with our specialists in our service centers to get support to repair products instead of buying new ones.
And last but
not least, our collaboration with ChinaHood continues. And this quarter we've sold more than 86,000 packs of plasters, where the revenues go to the childhood course. Next slide please. So my final point before handing over to Paris that, Of course, next phase for us now is to ensure that we prioritize the areas within our strategy to help us drive sustainable profitable growth. And we, as I said earlier, intend to stick to the financial targets as we're entering the year 2021, 2022, where the ambition is to grow sales 5% and to deliver an operating margin between 6% 8%.
We're obviously humbled given the development in the market, but that's the way we look forward. So next slide, please. And with that, I'll hand over to Perk to take us through our financial development.
Thank you, Christoph. Next slide, please. Looking at the sales development in the Q3, we So sales dropped by 9% totally. Organic sales was down 5% and like for like sales was down 5%. We saw growth in Norway, but the other countries had a decline.
Looking at online sales, it grew 59% and now contribute to 11% of total sales. Next slide please. Looking at the sales development for the 1st 9 months, total sales have been down 5%. Organic sales and like for like sales have been unchanged. We have seen quite significant growth in Norway, but other countries have seen a decline.
And for the 1st 9 months, we had online sales up 50%. Next slide, please. Looking at the gross margin in the 3rd quarter, it was up to 41.3% compared to 40.1% same quarter previous year. It was positively impacted by improved product mix. We had lower campaign intensity and lower sourcing cost.
On the negative side, we saw a negative FX from weaker sales currency NOK. Looking at other currency effects From the purchasing currency effects from the hedging and effects from the hedging going through the inventory, the effects were marginal. We are constantly reviewing and reducing purchasing prices as part of our strategy. And we're also continuously reviewing product offerings and price And on the product, to strengthening the margin. Next slide, please.
Looking at the share of selling expenses. Share of selling expenses was up 0.7% points to NOK 25,900,000. It was mainly due to lower total sales, and it was almost counterbalanced by lower cost levels in total. Next slide please. Then looking at the administrative expenses in the 3rd quarter, They decreased by 13%, down to SEK 47,000,000.
This is in line with expectations we have by implementing the C100 plus activities. And our objective is to maintain and continue to improve the cost level over time. Next slide please. Looking at the operating profit in the 3rd quarter, it decreased to SEK 358,000,000 compared to SEK 378,000,000 previous year, same quarter. Looking then at the margin, it improved to 13 point 6% compared to 13% previous year.
If we exclude IFRS effect, the margin was 13% versus 12.2% previous year. Earnings per share was SEK 4.18. Next slide, please. Looking at the operating profit for the 1st 9 months, It has improved significantly to SEK 672,000,000 compared to SEK 590,000,000 previous year. Looking at the EBIT margin, it improved to 10% compared to 8.3% previous year.
And if we exclude IFRS effects, IFRS 16 expects, it was 9.2% compared to 7.2% previous year. The earnings per share for the 1st 9 months is SEK 7.57. Next slide, please. Then looking at the investments for the 1st 9 months. Total investments amounts to SEK 160,000,000 compared to SEK 147,000,000 previous year.
Investments have come to new stores and refurbishments, IT systems and also investments related to our distribution system. Next slide please. The inventory level has decreased to SEK 1 SEK575 1,000,000 compared to SEK 1,800,000 to SEK 1,800,000 previous year. We have increased the turnover rate at RBC. So and we can also say that we have Quite healthy inventory levels in terms of the products.
Next slide please. Looking at cash flow for the 1st 9 months. We had a very positive cash flow excluding IFRS 16 activities. It was SEK 1,106,000,000 compared to SEK 943,000,000,000 due this year. And looking at our net debt to EBITDA position, we have a net cash position right now and we have approved credit facilities of SEK 1,100,000,000.
Next slide, please. Then looking at the events after the reporting period. Next slide, please. February sales development. Total sales was down 13%.
Organic sales was down 11% and like for like sales down 11%. This month, we saw a decline in all countries. Norway has a different trend, mainly due to restrictions in Norway, where we had store closures for topping at 28 stores and their steel store that are closed as we speak. With a negative calendar effect of 4%, online sales had a very strong growth, up 112%. Next slide, please.
Looking a little bit at the current situation. Currencies are still impacting our profits and sales quite heavily. We have seen a A bit of uplift in the Norwegian krona, the last of days weeks, which is positive for us. And we have seen a decline in the U. S.
Dollar SEK relation, which is also positive for us. But we continuously look at this, looking at the Pricing effects, the sourcing effect and also optimized sales mix to optimize our sales and EBIT. Next slide, please. And also handing back to Christoph.
Thank you very much, Thierry. So a quick summary before we move into Next slide please. So way forward, we will obviously continue to focus on where we can make a difference and on the things where we can influence. And obviously, it's going to be always a balance act between the short term and delivering the 4th quarter, while also looking forward. I believe that we do have a clear strategy and a clear foundation in place.
And as I said, we do not intend to change the financial targets for the New Year that we're entering 2021, 2022 now in May. We do need to prioritize initiatives that drive revenue and obviously profitable revenue growth. We need to be very customer centric, ensuring a relevant offer, the right experience and convenient delivery no matter what channel our customer chooses. And the digital and e com transformation and scale up that has been going on over a few years, we need to continue obviously. Also the good examples of our increased efficiency and the optimized costs, we need to ensure that It continues and that we can work from the stable foundation.
But as I also mentioned, we are humble about the environment right now and the changes in our respective markets almost on a weekly basis. So it's going to be about balancing, taking the right action for the here and now, but also ensuring that those actions are the right ones for the longer term. So we will as we report to the Q4 In June, we'll talk a little bit more about the strategic priorities for 2021, 2022. But we are not spending time on changing the foundational strategy as we believe that we have a stable platform to work from. So with that, I will hand over to the Q and A.
Thank We have a question from the line of Nicholas Gopman from Handelsbanken. Please go ahead.
Yes. Hello. Good morning. Welcome, Christoph, to your new role. You said a couple of times now that you feel comfortable with the current strategy Maybe highlighted some high level initiatives that you will pursue to Deliver towards the current financial targets.
But I'm just thinking, if recently store openings Head Sloat. And looking at the like for like sales development in the Nordics over the last 3 years, you have an average of 1%, 1.1%. So I was thinking What sort of tweaks within the current strategy do you think you will need to do? What will you need to focus on We move from 1% to 5%.
Yes, Yes, thank you. And thank you for the welcome. Good to be here. And obviously, a very relevant question. And I think it's a little bit too early after a month in the job to point out a clear direction right now.
But I do believe that Step 1 is obviously to deeply understand the areas where we are growing and not growing and the reasons for that. There are obviously some areas where we do see growth like in our ecom channel, where I believe that there is more potential. There is also from a country point of view good development in Norway despite what's going on right now. So of course, it's going to be about balancing continuing that while also getting Sweden back to growth in Finland. So there are some obvious areas where we need to evolve the trend.
And then it all comes back to, I believe, a few different things. The first one is deeply following the customer satisfaction across every single channel on a going basis and ensure that we keep evolving our assortment and develop new products and and ensure availability of the products that we have in an efficient way. So I mean, those are some overall comments, but we need to Obviously, dig deeper and do more diagnosis in terms of understanding what's driving growth in some areas and what is lagging growth to have a clear action plan moving forward. But obviously, a very relevant question and one that I'm engaging myself in
Okay. I definitely understand it's been a mouth roughly. So On the ecom opportunity, could you talk a bit more about that? Is it What sort of things do you would you like to do on e com?
I mean, I think one area, we need to start from the customer and then work ourselves back, so to really look at the customer satisfaction and customer experience. And then As always with the e commerce business, it's going to be back to having the right assortment at the right price level with the right distribution. I I believe we are making progress across those 3. I think looking at the one area where we have done a lot of work over the last Year has been on the fulfillment and ensuring the product reaches the consumer in the way that they want. And I think we need to continue that work.
We saw examples of setting up a feeder store in Barkabil outside I'd stock up in just 2 weeks ahead of the black week, and that has obviously improved the experience for the surrounding customers. And we need to continue doing that to secure availability of products and deliveries that meet expectations. And then it's, As always, going to be a continuous work on having the right assortments for the consumers, but also the right assortment to optimize profitability for us and optimize the logistical sales basically. And then thirdly, on the pricing side, we've seen in the Q3 now that we have been more even more disciplined on the promotional spending, not to drive too much traffic to our physical stores and to ensure that we Promote the things where it makes the biggest difference. And I believe we have also a lot of opportunity to look at the way We think about pricing strategically also in our e commerce channel.
So we see good growth trend. And obviously, we still have 90% of the sales in our physical stores, and we expect the consumer demand to continuously increase on ilkom. So those are some general thoughts on the Lecom business.
Okay, great. Perhaps a question for Per. Is it fair to sort of expect that the current quarter will, In many ways, similar to Q3 in terms of you holding back on promotional spend and being tight on cost and so forth.
I think we entered into the Q4 with the restriction in Norway starting A little bit end of January, so I guess that is a big change coming into the Q4 where stores are opening up and closing a little bit On a daily basis, it's dependent on restrictions. So of course, that will impact the Q4 a little bit how this will evolve. And we also had tighter restrictions coming out in Finland that we interpret will not impact us as much, but maybe the consumer. And in Sweden, there's still quite a lot of debate how to implement restrictions. But given that we are trying You know, sell as much as possible as Christoph Rus is into, but also do it on a quite Smart way, where we don't drive traffic where there's no traffic to drive.
So we don't give away the products Cheaper than necessary. So I think we will be tight on cost. But of course, we will see the light in the tunnel now coming out, which means that we need to start to focus on long term priorities again, given the pandemic is actually Hopefully then ending. So of course, that could impact the cost of EBITDA up as we speak, but not dramatically.
Okay. Thank you very much. That's all for me for now.
And we have another question from the line of Niklas Ekman from Carnegie. Please go ahead.
Thank you. Yes, a couple of questions from me. Firstly, This growth target of 5%, if you can elaborate a little bit on how you think you can achieve this and then kind of disregard it from the Short term COVID impact here. What is the mix here? What do you see in terms of store closures or downsizing versus online sales growth and like For light, just if you could elaborate a little bit on the different drivers here.
I mean, how would you get to 5% sales growth?
I mean, first of all, we'll come back with a bit more in the next as we kick off the year. But Of course, it's going to be a combination between the channels. And I think it's about really focusing in on the areas that are currently performing well. So I mean, we do see across our store network a lot of stores performing well despite the circumstances. And of course, it's the right Finding right balance between the ones that progress well now and then also as we see the Consumer behavior evolving, ensuring that we prioritize the stores that we also believe will drive growth in the future.
So I think it's really about going from Too much channel focus into really focusing in on the customer. So it's going to be the combination of the ecom And our fiscal stores, I'm finding the right balance there. And then it's also from a country perspective, as mentioned. Norway has I've had a great year in local currency. And of course, we need to identify what we can do to continue driving that.
And then we do have a different position in Finland. And we're looking at what right what are the right Activity is to turn that around. So I think that's as specific as I can be at this stage. I don't know whether you have anything to add, as we look into the next year.
So I think it's the overall thing. And of course, we are looking at Effects declining from the pandemic, expecting the traffic to our stores to be a bit return and not maybe To the same level as we start, but slowly return to normal levels as people return to normalize. And that I would also drive the business back to our stores that has probably been somewhere else, but at the same time then keeping the econ sales and by As Christoph has said before, focus on the customer and convenience and be even better at the assortment and deliveries.
Very good. Thank you. And as a follow-up there, what do you think will be the long term impact From COVID here. In terms of obviously online migration has accelerated significantly, But do you expect a significant difference in footfall to stores going forward? A lot of shopping malls maybe have lost a lot of traffic, maybe that won't Come back to normal levels ever or what is your take here?
Do you see a sustainable shift In footfall to your source going forward or do you think that things will gradually normalize to the way things were before?
So obviously, it is very difficult right now to predict exactly what's going to happen. As an example, we've seen, of course, the stores that are located outside of city centers where you have easily access to easy access to parking, etcetera, they have grown. And we see that outside also Klas Olsen that those locations that maybe had challenges before the pandemic now are growing, whereas city locations have A pretty big loss in terms of footfall. I think it's too early to say exactly what's going to happen with the Traffic to physical stores. We do believe that looking at the online migration, I mean, that has been a big trend Before the pandemic, it's been, of course, accelerated.
But we expect the work under the hypothesis that, that will continue. Because of course our consumers and also new customer groups have gotten used to the convenience of shopping online, and we don't see why that would stop. But when it comes back to the physical store locations, I still think this is a time To be a little bit patient and not jump too quickly on kind of store network drastic changes, because I still think the jury is out in terms of what is going to happen to customer behavior host to the pandemic. That said, as Per mentioned, we do believe that some of the lost traffic over the last year will Return once we have a society with broad vaccination, etcetera. But then the exact levels and exactly to which stores, I think it's a bit too early to Predict.
Very good. Thank you. And then can you talk a little bit more about these investments in automation that you Talked about here in the presentation, what size of investments are we talking about and over what time frame?
Yes. If we look at the distribution systems, as you know, in September, we changed the Inventory Systems. And now we also took the first step in automation. And now between April June, we will Implement automated picking and packing in a distribution center, which will increase the truck that could be You know, only one touch and almost automated, which then could facilitate the aircon growth, but also more stable lead times And then on customer demand. And it's all the investments that we expect going forward will be in the levels that we have Had in the past both looking at the store IT systems and this type of Investments.
So it's in the same range as we had before on a total level.
Okay. Very clear. And the same here, the question on the European procurement Aiming to triple or sorry, double the procurement in Europe. From what to what level? And then can you tell us, is there Tangible difference in pricing and what does it suit your lead times as well?
Yes. I wouldn't comment on the levels, but The purpose it tells is, of course, to cut Littend because it's closer to us. And the product we choose will be, of course, things that could be produced more automated where the Label intensive is lower, which means that the difference in price is not that big. And then we will, of course, look at the total cost I'm getting it to our market, which then obviously will have a lesser cost of So we don't expect it to be more expensive, but it's of course yes, it's some type of products that are very suitable for this and some are not.
Okay. Very good. Thank you so much for taking my questions and welcome to your new position, Christopher.
Thank you very much.
And as there are no further audio questions, I'll hand it back to the speakers.
Yes. I I would like to present 2 questions from the webcast audience. We have the First question from Stefan Rahnholm, Nordea. He is asking if it's fair to assume support from less campaigns also in coming quarters Or was this more of an impact from pre Christmas sales, which likely is a more campaign driven period? I think this comes from 2 aspects.
1 is that we're getting better and better to understand how we should actually drive campaigns that are both customer centric and profitable. So that will be a structural change. But also the given traffic trend, we are not trying to Just buy traffic by buying it, which means that if we will have this pandemic situation in the Q4, we will still expect to have Back to margins on the things we said. And Stefan's second question, can you share some figures Or comments on how Class Vixtera and the MatHem collaboration are developing?
So looking at At MatHem, firstly, that is a business that has grown over the last year. And we have seen, I think, the latest numbers every 4th bag in MatHem now includes the Klasolsson product. So obviously, that is evolving strongly, and it's a good way to give access to Klassolsson products in a very convenient way while buying your groceries. So that's where we're seeing a good development. When it comes to Klas Hicks area, this is an area, As I briefly mentioned before that we really believe in moving beyond products up to services.
We see really Strong customer satisfaction from the customers that have used Carlsxare. And this is one of the areas that we're looking at as we're talking about Growth priorities for the future of what we do to further grow that. But from a customer satisfaction point, It shows a very promising development.
Thank you. And with no further questions And from the webcast audience, I'll hand back to you, Christopher.
Okay. So thank you very much for spending the time with us. And as we're now concluding the Q3 and are obviously busy moving right into the Q4 that has already started. So We look forward to getting in touch a few months from now. And with that, I'll ask I wish all of you a good day and thank you very much for participating.