Good morning, welcome to this presentation of the Q4 and year-end 2018/2019 report. My name is Lotta Lyrå, I'm the CEO and President of Clas Ohlson, and I will do this presentation together with our CFO, Pär Christiansen. It is now approximately a year since we launched our new strategy. To highlight that, we will, following this presentation, have a session we call Retail Views, where we share our latest insights and some more details around some of the strategic initiatives we are pursuing. There will be a short pause between this presentation and the Retail Views session, where we will turn off the connection and take a quick pause, and then you can reconnect. Most welcome to both this presentation and Retail Views.
With this Q4 report, we close the first year of the CO100+ program. We are on track with our action program, and we're working with a lot of energy, both in delivering on our growth initiatives and our cost saving initiatives. We're also closing the stores in U.K. and Germany, and that is also proceeding according to plan. With Q4, we deliver a full year in line with the guidance we have given, achieving an operating margin of 3.5% and an underlying operating margin of 5.7%. The agenda for this presentation is that I will take you through a quick business update. I will then hand over to Pär, who will take you through the financial development and some events after the reporting period. We will then do a summary and a Q&A together with Niklas Ferm from SEB.
Starting off with Q4, a little bit in brief. During the quarter, we grew organically with 2% and total sales were 4%. The gross margin increased to 38.2%. All in all, this led to an improvement both in the reporting operating result and the underlying operating result. We have, during the quarter, had a lot of focus on delivering some of the cost initiatives we are pursuing as part of the CO 100+ program and reached important milestones, and I will come back to this in a minute. The CO100+ program has a very clear purpose, and that is to create preconditions for Clas Ohlson to be long-term, drive long-term profitable growth. We achieve this by implementing a number of growth initiatives and a number of cost saving initiatives.
In these initiatives, we are investing 1%-2% of the underlying operating result during 2018/2019 and 2019/2020. The cost saving initiatives shall in total deliver SEK 200 million-SEK 250 million, and during the quarter, we have reached two important milestones in this work. The first one is that the first phase of the organizational review has been implemented. In total, the organizational review that we are doing will impact 150-200 full-time employees. During the first phase and this quarter, 65 full-time employees have been impacted. The second important milestone is that we have reached the end of the first phase of the reduction of indirect costs. We have achieved a saving of SEK 70 million. This will start to materialize already during 2019/2020 and fully materialize during 2020/2021.
There are, of course, other important cost initiatives ongoing, one of them being the reduction of purchase prices. Secondly, our growth initiatives, they aim at increasing sales per square meter, increases per customer, and doubling sales online. During the quarter, one of the most important focuses in this area has been to continue the optimization of our assortment. We are systematically addressing product category by product category, and I would like to give a couple of examples. The first one comes from the electrical installation range. In this product category, we have cut the assortment in half and still managed to maintain sales. By doing this, we can use the space that has been freed up by reducing the range for other products with higher sales per square meter.
Another example is, the change we have done in mobile and audio, where we have reduced our product range with 7%. We have changed our merchandising setup and sales solutions and achieved a growth of 12%. We have, at the same time, renegotiated purchase prices of these products in order to achieve a better gross margin. This type of work we are now doing for each product category of the Clas Ohlson assortment. I will now turn to the store network. We have, during the quarter continued, the process of closing our stores in U.K. and Germany. All stores in Germany are now closed. In the U.K., we have two more stores to be closed, and the last one will be closed before the beginning of September. The cost for this closure is 210 million SEK, and has been part of the 2018, 2019 financials.
The P&L contribution of SEK 75 million will start to materialize after the second quarter in 2019, 2020 once the last store in the U.K. has been closed. In total, Clas Ohlson now has 232 stores. 95% of our sales happen in these 232 stores. It's therefore very natural that we spend a lot of effort on optimizing both commercially and operational-wise our stores. We see that during the last years, the preconditions for operating retailing in stores have dramatically changed. This is due to competition becoming global, traffic patterns impacted by different new shopping behaviors, but also that customers require a different shopping experience. This means that our stores are becoming increasingly both hubs for distribution, but also a place to go for real qualified service as well as convenience.
The initiatives we are doing to increase sales per square meter are essential in order to ensure that this sales channel continues to be competitive and profitable. We also see that there is a structural problem that needs to be addressed, and that is the fact that retailing in the Nordics is becoming increasingly exposed to global competition and profit margins are going down. So far, we have not seen that this has impacted landlord behavior when it comes to conditions for rental premises. We have now initiated a major review that aims at changing that. We will in this review include all our leases in the Nordics, we aim to address the structural problem of actually adapting to the new conditions of retailing in stores.
We believe that this is crucial in order for both retailers and landlords to be successful going forward. If I then turn to online, during 2018, 2019, online in Clas Ohlson grew with 47%. This is in line with the ambition of 50% growth that we have set out for ourselves. This is due to a number of important initiatives that we have implemented connected to both the digital experience on clasohlson.com, but also the introduction of new customer-friendly delivery options. During the coming year, we will of course continue this journey. To create preconditions for further improving the online experience, we will during the coming six months do a major upgrade of the back end of clasohlson.com.
This will help us and create preconditions for making bigger changes such as improving the responsiveness of our site to the benefit of the many Clas Ohlson mobile shoppers. The cost for this upgrade is part of the already communicated 1%-2% investment of the underlying operating margin. With that, I will hand over to Pär for the financial development.
Thank you, Lotta. I will start to talk about the fourth quarter and then talk about the full year results. Looking at sales in the fourth quarter, we saw a increase of 4%, organically up 2%. Like for like, the sales was flat. Online, as Lotta said before, was increasing by 33%. We saw growth in Sweden and a flat growth in Norway. Finland, we had a small decrease. As announced, we are closing the stores in U.K. and Germany, which will affect in a lower sales volume. The gross margin for the quarter increased 1.5% units to 38.2%. The major positive effects came from improved campaign profitability, a stronger NOK, positive effects from FX hedges. On the negative side, we saw impact from the stronger purchasing currency dollar, also somewhat increased sourcing cost.
The selling expenses was flattish compared to last year, increased by 0.1%, and the major impact came from our CO100+ program in that part. Administrative expenses fell to SEK 51 million, and that is in line with our plan to overall reduce cost over time. The profit for the fourth quarter came in to SEK -77 versus SEK 106 last year. If we deduct the SEK 25 million for the one-offs and the CO100+ program, we ended with a underlying result of -SEK 52, which is better than the SEK 61 underlying result we had previous year. Looking at the full year result, sales was up in all markets and also up in all channels, which is important, so we grow both online and in stores. Organic sales was up 4%. Like-for-like was up at 1% and online up 47%.
The operating profit for the year was SEK 954 million and we had SEK 405 million of non-recurring cost related to the action program and the closing of the stores in U.K. and Germany. If you deduct that, you end up with a underlying result of SEK 497 million, which means a underlying operating margin of 5.7%. We ended the operating margin excluding the U.K., Germany of 3.5%, which is in line with the guided around 3% that we had talked about in the third quarter. The investments total to SEK 211 million compared to last year we had the major investment in MatHem. We had investment both in the physical stores but also in IT system for the year. We still have a very strong financial position. We had positive cash flow of SEK 312 million for the year.
We have an inventory level now of SEK 1.987 million, which is less than last year. Net debt is SEK 178 million compared to net cash position the previous year. For the dividend, we have from the Board a proposal of SEK 6.25 per share, and we also will propose to have it distributed two times, one in September, another one in January, to support and improve the cash flow. Thank you. Handing over to Lotta. No, I will take this one, sorry. May sales. May sales was up 6%. Organic sales was up 5% and like-for-like 5%, so a very strong month. Online grew with 26% and we had added one store compared to last year. Now I will hand it over to Lotta.
Thank you, Pär. To summarize, the year, we have a year where we managed to grow both in our stores and online. At the same time, we are moving ahead with a lot of high energy in the CO100+ program. All in all, we deliver an operating margin of 3.5%, which as Pär said, is in line with the guidance we gave connected to the Q3 report. Going forward, we will continue to push ahead with the plan we have set out. A lot of focus will go into improving the uniqueness of our customer offer. We will continue to do initiatives to grow online as well as optimizing stores. A very important priority is to fully conclude the cost initiatives that we have started up during the year 2019 and 2020.
All in all, we are fully committed to deliver an operating margin of 6%-8% from 2021 and onwards. We will take the measures needed in order to achieve that. With that, I will invite Niklas.
Good morning, everybody. My name is Niklas Ferm. I'm working for SEB Equities as a analyst. Thank you for inviting me this morning. I will be moderating the session, so just raise your hands. Let me start, perhaps. When we last met here after Q3 results, you were guiding implicitly for results around SEK 100 million losses in this quarter. Obviously this morning results came in a bit better. I was just wondering, to the extent the factors are in your hands to control, what were the main explanations that, sort of, explains the difference between the previous guidance and the outcome in Q4 results this morning?
I think it's what we have seen during Q4 is increasingly better sales in combination with better margins. together with a very strict cost control-
Yeah.
We managed to overperform in relation to guidance a little bit.
It's not really, sort of a major decision to shift around cost spent within the strategic investment program or something like that?
That was one of the reasons why we decided to give the guidance in relation to Q3, that we believe it's right to stick to the plan and take the measures needed now to improve in order to create preconditions for long-term profitable growth.
Yeah.
That is not the reason.
A follow-up question, I mean, as promised, the Board of Directors propose an unchanged dividend per share this morning. I would be just very interested to hear your thoughts on the dividend payout as such, and also if you can share some commentary on the discussions, because obviously there's always different options when it comes to handing out money to shareholders or investing them in future growth.
If I start, and then you can, you can fill in.
Mm-hmm.
When we met a year ago and had the presentation of the strategy, one of the important parts of the starting point was the strong financial position of Clas Ohlson. What we said then was that we would use that strong position in order to both invest in the future through the program and invest, underlying operating margin, and at the same time have an ambition to maintain the dividend level at SEK 6.25. That is the background, and I think that has been very much the discussion now as well. Please feel free to add.
Of course you can add that the underlying factors is that we stick to our plan and we stick to our.
Mm.
That this will be the way going forward. If we will have a different view on the future, of course we had to consider that. This is a strong signal of our plan as well, I would say.
Mm.
I believe it is. I believe it is. Final question from me before we open up for the floor. I was just wondering if you could give us some quick guidance on CapEx and perhaps also working capital development for this fiscal year, please.
I think we said already in the Capital Markets Day one year ago that we will try to keep the investments on the same level as in the past. Also what we said was that a lot of these investments will move a little bit from the stores into the systems and the online channels and also in the back end. This is also what we think for the future.
So fairly unchanged CapEx.
Yeah. Yeah. Yeah.
When it comes to inventory levels or working cap?
I think we are.
Obviously improving in the quarter today.
Yes. I think we are looking at, as part of all these things that Lotta is mentioning, overseeing the assortment, overseeing the store. We are trying to increase the velocity of products in our company, which over time will decrease the inventory. Of course, it also need quite accurate sales forecast because we don't want to miss sales, with lack of inventory, so it's a balance. Over time, we're expecting the inventory to go down.
Mm.
As part of our program.
Wonderful. What a start. What a start. Who's next? Niklas?
Yes. Niklas Ekman here from Carnegie. I want a question on your store network. I see now that you have three planned store openings. You mentioned here in the presentation a bit of a problem with landlords having not-
Mm.
-adjusted, rental costs.
Mm.
Can you elaborate a little bit on what your plans are regarding store closures or how you're going to address this, besides negotiations? Are you looking at decreasing store space? Are you looking at significant store closures? Or what measures are you expecting here to address the mismatch?
Mm.
Rental costs?
I think we have adopted a different tonality in our negotiations, all the way from when we start to look into a potential store, all the way through the life cycle to also when we have leases ending and how we handle that. I can say that today we are actually resigning from contracts if the conditions are not good enough, and handling that situation. I think we are much tougher now than we were 18 months ago. It's a big difference. I think that's an important part of this as well, to look at all of this with completely new glasses.
It's, I think it's fair to say that it's quite polarized because a couple of the stores that we have in the pipe now, this is about increasing the density of Clas Ohlson in the bigger cities in the Nordics. That we see has a big potential. Where we have done that, it's very successful. We have at the other end of the scale a number of cases or cities, where we are of course questioning, is there room for two Clas Ohlson stores here or should it be one? That we are tackling city by city. That is how we are working with it.
It's very, it's a lot of both/and, I would say, and applying hårda nypor, whatever that is called in English, for real, in this area.
What could that mean in terms of numbers? Are you looking at a significant number of store closures in the next 12, 18 months?
I think it depends on also what will happen in some of these negotiations. It has to be each store has to be profitable. That is the basic assumption. Then there are a lot of levers to work with. It's the actual operation of the store, it's how we commercialize it's the rent and so on. The acceptance for non-profitability is zero, I would say.
Mm-hmm.
Mm.
Okay. another question is regarding the transformational program and the costs, the CO100+. What kind of costs are you expecting in the coming year, and how those will play out during the different quarters? Is it going to be front-loaded and with lower costs towards the end?
I think you, as Lotta mentioned before, there will be other parts of the organization changes, that will come in different phases, dependent on how we reach the agreements also with unions and also how, with the dialogue with the different organization parts we will handle. That will probably come in buckets. Then also as Lotta said, we will invest in the back end, both in the e-com channel, the store, the systems around that but also in the back end for logistics. I guess some of them will be rather linear, and some of them will come in buckets dependent on when we re-reach different agreements with that. Yeah.
At the same time, maybe to add, as I mentioned, the SEK 70 million, for example, that we have reached in terms of savings level for indirect costs, that will start to materialize-.
Yeah.
as well.
Yeah.
There are two effects here during the coming year.
Can you just say if there are any material cost reductions that you've seen already here in Q4?
I would say no. None of the ones that have been mentioned, not when it comes to the organization part and not when it comes to the indirect part, no.
Okay.
Just coming back to Niklas', second question there, or first question. For the record, how much strategic costs did you actually charge the P&Ls with in this fiscal year ending April? What do you actually expect roughly to be charging your P&L with in this fiscal year, please?
We mentioned in the report and also in the presentation a number of 180 as that part. I mean, the guidance is still to invest 1%-2%. As Lotta says, we'll also meet some savings by the end. Dependent on you if you see the gross or net number, but still around 1%-2%.
Okay.
Yeah.
Okay. Yeah, next question, Magnus, please.
All right. Magnus Råman, Handelsbanken. I can just come back firstly to the rent reductions. Have you looked at leading examples from other countries that might have come a longer route on this progression? Do you have an idea of what potential rent reductions could be? Perhaps not commenting specifically for you as Clas Ohlson.
Mm.
Rather for the industry.
I think we have an ambition, of course, internal with this initiative that we are in the startup phase of now. I will not communicate exactly what that ambition is, but it's a substantial change that needs to happen. I think it's important, it's not only the actual rent level, but it's also flexibility in terms and other things that need to come into play. It's a total, I would say, it's a new look of rental agreements that we are aiming at.
I believe historically when you've had the questions about potential store closures in the Nordics, you've mentioned that all stores are still contributing positively to-
Mm.
to group profitability.
Mm.
Has that picture changed somewhat? Is that also why you have identified some stores where you would need to see a reduction in rents, or otherwise there is no reason to keep them in business?
I would say that, I mean, had we had a lot of stores that were not contributing, we would have had to initiate a store closure program. Given the situation we have right now, we see it more beneficial to actually look city by city and optimize that situation. I think it's important to say that Clas Ohlson is the sum of the 232 stores and an e-com. Each store needs to deliver 6%-8%. I mean, it's a sort of, it's a portfolio thinking. I think it's more that you can be positively contributing, but if you're not reaching 6%-8%, it's still an issue because we need everyone to be there. It's more that thinking that has led to that we need to initiate this review.
I would like to emphasize, I think it is a structural problem.
Right. On indirect costs that you also mentioned, you talk about here reaching now SEK 70 million in savings.
Mm.
I think you historically have talked about SEK 1 billion of total spend.
Mm.
Do you see potential for additional savings, or do you deem that you have reached what you aim for here?
I don't think one ever reaches the full potential of things. I did say it's the first phase. I think what we want to be clear on is that we have come a good way on the SEK 200 million-SEK 250 million by reaching this first step. There is always more.
You mentioned that one-third of these SEK 200 million-SEK 250 million is the indirect savings that you plan for this year.
Mm.
The annual saving of SEK 70 million should be what we should expect in that part, of potential savings for this fiscal year.
Fully from 2021. The reason for that is that the new contracts are valid once the first order against those contracts start to happen. That can happen a little bit into the year because we might have a stock of working clothes or whatever it is. It's not completely 100%.
Thank you.
All right. Let's break and listen with the operator if we have any questions from the conference call, please. Operator?
Thank you. Just as a reminder, if you do wish to ask a question and you've dialed into the conference call, please press zero one on your telephone keypad now. No questions registered on the telephone line. Back to you.
All right. Thank you, operator. Yes, Andreas.
Can I get a microphone?
Yeah.
Just one second.
Thank you, Andreas Lundberg with ABG. Just a short one first. I know it's a short period of time, but could you give some comments on the strong like-for-like in May? That's my first question.
Yeah, it was a good month. No, it was a good month, and I think it's commercially well, well, related to sort of what the season is about. It's a commercial, I would say, good plan that has materialized. That is the background, I would say. It's very much across the board, but of course most significant is Sweden.
I think it's, traffic mostly to the stores, or is it the price mix component that obviously drove gross margins?
No.
Or-
I would say that it's mainly a combination of It's traffic, but it's also increasing receipt. It's a little bit of both end.
No specific campaign driving?
I mean, we have a campaign schedule for spring and early summer and so on. I think what we've seen is that we have targeted the right things in that campaign. That's the background to it.
On the gross margin in the fourth quarter, obviously it was up 150 bips year-on-year. I think in Q4 last year you saw a drop of 500 bips versus the prior year or 2017. I think you also said that maybe one third of that loss was one time in nature, if I remember correctly. Could you give more color on actually what drove the margin? I mean, did you get any year-on-year help from the perhaps some negative one was the prior year, or what was it?
I think the major part that drove the 1.5% units was the commercial part, the campaigns. If you look at the currency and the other parts, they were quite neutral as a block. I mean, we have, you know, different types of annual closings every year and that together with the currency balanced. I guess the 1%, 1.5% comes from a better commercial plan and better campaigning.
Is that something you think is sustainable?
I think over time, as part of our program, we're working quite hard on being better in promotions and having better commercial plans that increase the gross margin. Of course we also want to balance sales and the gross margins, especially in the e-com channel where it's quite sensitive for campaigns. You sell a lot, but also the margin goes down. We're getting better and better to balance that. On the cost side, there will come a lot of positive effects on the COGS side from all these negotiations we're doing, both from the category reset project, but also in normal negotiations.
The only red flag is of course the strong US dollar and of course we look at the market, especially in Sweden, and see how will others and we do to increase pricing to offset the cost of sourcing. I guess that will also be something that we need to consider over time.
Lastly, on these 1-2 percentage point investments for this fiscal year, that excludes potential savings, correct?
Yeah. That is the cost side of it.
Yeah.
Thank you.
All right. Let's go back to Magnus. Please, go ahead.
Yes. Just to follow up on current trading. You mentioned May sales here being strong number. When we look into June now, should we, May and June, perhaps also look at both months, should we consider that you had a quite different trading period last year when I believe May was quite weak with 1% like-for-like sales due to you preparing for your 100-year celebration, and then June was very strong at 9% like-for-like sales. Could we expect the same trend that we saw in May here in June, or is it likely that there will be a slightly worse outcome on a very challenging comp in June?
Yeah. I will not give any forecast on the June sales, I think it's reflecting back, of course, the first calendar half of the calendar year last year was very much about the 100-year celebration. I would say this impacted also the sales level in Q4, because we started off the 100-year celebration with very successful campaigns already in March last year. Of course, the birthday in June was of course the highlight. Of course this whole six-month period, we are impacted by the fact that we had a lot of commercial investments during those six months. I will not comment specifically on June.
Right. I believe I did a little bit myself perhaps. Just finally also on cost savings, the strategic cost savings that you plan, that you outline here on SEK 200 million-SEK 250 million, should we expect the store closure savings to come on top of those since the planned savings were not sort of, the store closures were not when you made the initial-?
I think you should see it as a whole. We, for this year, we're talking about 4%-6% margin. Next year 6%-8%. Of course, as Lotta says, the negotiations on store closures is only if we can't reach that. It's not. It's part of that package. The other cost savings is to reach the 6%-8% over time. Hopefully, I hope that we will reach good negotiations with the landlords so we can keep a lot of stores and grow together. That will be the best solution for everyone. That will keep the growth, and that would keep, you know, positive momentum. If that will not materialize, we need to take the measures.
Profitability ahead of top line.
Yes. We have promised 6%-8%, and we are committed to that.
Thank you.
Just a follow-up. I think this is the third attempt, I admit. If your plan goes through in terms of stores, how many stores will you have ending fiscal 2019? Let's just assume that you come out in the better end with the landlords, and your plan is actually being executed on. How many stores will you have?
236.
Excellent. Thank you.
All right.
It's in the report, Niklas.
Okay. Of course it is. Of course it is. Now it's in the air as well.
Yeah.
All right. Any more questions from the floor? Perhaps it's time to wrap it up. I have maybe one or two more questions. I was just thinking, you just towards the end of last year, launched the Clas Fixare .
Mm-hmm.
Service. We haven't been discussing that for some time.
Mm-hmm.
I was just a little bit curious to understand how the services business model will be maybe rolled out during this year, basically.
Mm-hmm.
We're starting from zero, right?
Mm-hmm.
Could you give us an idea of the plan for this, please?
Yeah. We started very small in this area, as we all know, with a couple of neighborhoods almost in Stockholm on the 26th of November. We have scaled it in the Stockholm area. When we start to look now at some initial conclusions, we see that we have a Net Promoter Score at 80, so we have very happy customers. It's clear that this addition in terms of offering for Clas Ohlson, and I think it may be even to the market, is very, very positively received. We are actually, as we speak, looking into how to scale, where to scale, and at what pace. We'll have to come back with more details, but that is where we are in the process right now.
Mm-hmm. Let me see now. I had one more really good question, but I forgot it. Can I come back?
Absolutely.
Okay. Unless there's any more questions from the audience. Yes?
Very well.
Excellent. Andreas.
Can you give any teaser of the next session, your retail insights? What's the key insight you found?
Absolutely. What we will, what we will do is that we will update on some trends that we see in the retail industry right now or impacting the retail industry. It's Patrick Finch, our insight manager, that will do this presentation. There is a second part where we will more in-depth talk about some of the initiatives, including Clas Fixare , including MatHem, as well as the project we have where we go through the assortment, and that will be done by our manager in Sweden, Fredrik Uhrbom. That's a little bit of the content.
All right. What an excellent bridge to that presentation then.
Mm-hmm.
I think I will hand back the word to you.
Thank you, Niklas.
Thank you for having me, and good luck.
Thank you. That finalizes this part of this morning. We will now close this part of the morning, the Q4 and year-end report presentation. We will take a quick pause and be back in 10 minutes. Five, 10 minutes. There is time for a coffee and then just reconnect. Thank you. Good morning, welcome back to this Retail Views session. It is about one year since we launched the Clas Ohlson new strategy, 100 More Years, that was then put into the action program, CO100+. We just concluded the first year of implementation of that program. We wanted to highlight that by having this session. It will be three different parts.
I will give a short introduction and then hand over to Patrick Finch, our Insights Manager, to highlight some of the trends we see impacting retailing right now. We will then hear Fredrik Uhrbom, our manager in Clas Ohlson Sweden, elaborate on some of the strategic initiatives we are pursuing right now. One year into the transformation journey. When we kicked off this journey, even when starting the work to actually develop the new strategy, it was very important for us to have a solid foundation. Clas Ohlson founded this company 101 years ago with a very clear mission, that mission we saw no reason to change.
It is as relevant today as it was 101 years ago when he came back from Stockholm and had seen the many things people in Stockholm had that people didn't have on the countryside and decided that that was the thing he wanted to take on, to actually make things available to people all throughout the country. Smart, simple solutions to improve everyday life. This is the mission we have built the CO100+ program on. Everything that we are doing today, one way or another, connects to this mission. What we did was that we looked at this mission in the light of a number of changes that are going on today. This can be described in so many ways, and this is just one of them.
It is a lot about people's behavior changing and people's behavior being amplified and driven by technology changes. We are less patient, we want more transparency, and so on. All of this, we try to take into account when looking into how do we deliver the Clas Ohlson mission in 2019 and onwards. One thing that we saw very early was that it is the offer that needs to be excellent, unique, outstanding. What was a unique offer 101 years ago is not the same thing as what is unique today. In the consumer research we did when we developed the strategy, we could see that for many people, solutions are no longer the same thing as buying products. It is a lot about understanding how to use the product and even having someone do the job.
Putting together this pyramid for our customers is at the core of our strategy. The strategy that we put together has two important objectives. One is about making sure that people around us, our customers and other stakeholders, see us as passionate about simplifying life in all kinds of homes. This is about happy coworkers, because it is the interaction with our coworkers that many time drive the impression of Clas Ohlson, and that will lead to happy customers. With happy customers, a broader customer base, and thereby growth and profitability and shareholder value. That is the logic that the strategy has been built on. We work with 3 cornerstones: unique customer offer, outstanding customer service, and smartness and simplicity. All of this was put into the CO100+ program, where we very clearly aim at delivering our financial goals.
We run a number of initiatives to get there. We invest during 2018-2019 and 2019-2020, 1%-2% of the underlying operating result to drive them. There are 23 initiatives running, more or less in parallel in order to deliver this strategy. I would like to highlight some of them. The first one is what we call category reset. This is the optimization of our assortment where we product category by product category, review the customer meeting, review the range, and review the deals we have with our suppliers. Fredrik will talk more about this in the next session. The second thing is optimal store footprint. Here we have moved from looking at things store by store to looking at the stores more from a customer behavior perspective. In a certain city, how do people shop? How do the stores interact?
How do online come into the play? We are applying a different thinking when it comes to optimizing our store footprint. As we just informed about in the Q4 year-end report, we're also taking a step now to adapt our rental conditions to make the store footprint more profitable. Smart and simple organization has been about, or is about both making sure that we have an efficient organization, but also that we have the right competence to embark on the journey ahead. All of the changes we are going through do require a different competence mix, and we need to get ready for that. We have just concluded the first wave, where 65 full-time employees have been impacted by this change, of a total of 150 to 200.
Smart and simple buying, is about the work we are doing within purchasing and the reduction of our purchase prices. Here we are turning every stone when it comes to making the whole chain from supplier to customer more efficient. It includes, of course, interaction with our suppliers, but it also means reviewing specifications, looking at new markets for sourcing, and so on. We have initiated a partnership with, a specialized, Asian company to improve our sourcing in Asia and also look into broadening the base of sourcing markets in Asia. Finally, what we have called GNFR procurement, goods not for resale or indirect cost. This has been about turning every stone in the SEK 1 billion spend we have on everything that we buy for Clas Ohlson that we don't sell forward to the customer.
We have reached a savings level of SEK 70 million, this is the first wave. This saving will start to materialize during the year 2020 and will have full effect during 2021. We have also, as part of this initiative, built a small internal team that will focus on this going forward, something we didn't have before, that we now have, so that we can run optimization of these costs continuously going forward. I will stop there and welcome Patrick to the stage. Patrick, you are our business insights manager and will take us through some of the retail trends that we see.
Lovely. Thank you, Lotta. Good morning, everyone. As Lotta told you, my name is Patrick Finch. I joined the team here at Clas Ohlson last year, working on a business insights and analytics program. This buttons forwards. Great. I'm gonna talk quite briskly over six trends that we think are some of the most important forces acting on our market right now. I'm going to offer observation perspectives on these trends. I'm not gonna comment directly on Clas Ohlson strategy. We will also hear after me from Fredrik, who'll talk through a bit more details on strategic initiatives. I'm going to dive into these and go quite briskly.
Firstly, I want to talk about the topic of sustainability, which I think we feel is somewhat underpriced in the market right now as a consumer trend, if you will. Clearly the global narrative on the question of sustainability is evolving from discussion of climate change increasingly to one of crisis. We certainly see within our markets a sharp increase in consumer interest. Svensk Handel has reported this that retailers in the region see this from consumers. Some intend to act, some say that they don't know how to act. I think it's clear that our territory is a leader in sustainability trends, that Nordic consumers are some of the greenest.
In the recent European elections, there was perceived to be a green wave across Europe. Sweden actually was one of the few places where the environmental parties didn't even make gains. The analysis of this was that it's already actually a mainstream established narrative in political discourse in this territory. People are already demanding it, if you will. We know that this region leads in innovation and sustainability, that we have highest rates of recycling, that consumers here, the consumer economy here is typically rated as in the top five, all of the Nordic markets are typically rated in the top five sustainability economies.
This trend around, if you will, shopping shame or consumer guilt, the analysis that we've seen reflects that most guilt around consumption centers around collective harms or failure to recycle, and excessive consumption wastage, rather than more introspective harms, such as eating junk food and so on. Putting all this together, we think that sustainability is going to move much more from being more of a corporate social responsibility topic and really drive consumer preference. We think that there's two key activities around this. One is, you know, management of supply chain to increase sustainability, and the second, to look at opportunities for disruption, resulting from this consumer trend.
Again, I'd emphasize that we think only the most nihilistic of consumers a few years down the road aren't gonna be responding very, very strongly to a message around this. What we think are rational responses to this trend, first, that sustainability must become much more integrated into the organization, that a retailer will need to have sustainability as a hallmark of its brand, not merely an adjunct to it. Come to life, it needs to be integral to how that business is operating. Secondly, we need to consider what this means for what a retailer is selling. I would say this goes, you know, across industries, right? If you're Volvo, you don't wait for Tesla to eat your business, right? You need to start to adopt new competencies.
Certainly, the same will apply, in retail, and we need to understand what that means in terms of new patterns of consumption or non-consumption, sharing, renting and so on, and formulate responses there. Thirdly, we need to consider adjacent sectors. Forgive the colorful metaphor here, but thinking about eating your neighbors, looking for excess consumption inefficiencies in adjacent sectors. So for us, we can immediately think of other things consumed in the home, food, water, and so on, where there are opportunities to disrupt. Speaking of disruption, the second topic, this is a very prevalent trend in analysis of retail. The disruption that we see in retail, which is typically ascribed to e-commerce, entrants, taking a lot of growth out of the space.
I think it's a fairly well-established trope in the industry that the growth in durables will almost entirely or will entirely be claimed by e-commerce entrants going forwards. We can certainly reflect on massive disruption that we've seen in retail due to e-commerce. I mean, going back a long time, it feels like we're talking about it more now, but specialists have been especially badly hit, and we start to see a bigger disruption now than ever before. Record numbers of store closures in Norway last year, for example. We can think about specialist music retailer. I spent so much of my childhood in record shops, right? They're all gone, right? We can think of high-profile closures of entire chains in the region recently around toys.
Kitchen was very badly hit in Norway last year. Decor also in Sweden. To crystallize this, I was in our store in Södertälje, and I met a customer that was trying one of the guitars we sold, and he told me, "You know, you're the only place in Södertälje that sells guitars now," which amazed me, and it was in fact true. The last, like, store for musical instruments had just closed. What does this mean? That the presence of volatility creates a great deal of opportunity also for bricks and mortar retailers, even if the overall growth in durables is going to e-commerce, that also masks a picture of huge changes in market share for different categories amongst bricks and mortar players.
E-commerce will not, at least in the short term, address the whole market. The question that I would say is faced by any generalist retailer is which categories do you wish to invest in? Which categories do you think you can win that have been disrupted? Thirdly, the topic of data and personalization is also very prevalent in analysis of the future of retail. This engaging cover as most covers from The Economist tend to be, from I think last year describing data as the world's most valuable resource. Do we think it's the most valuable resource in retail? Certainly one of them. I think you could also make a case for good people and brand and so forth. That's not to underplay the importance of data.
New retail experiences. Certainly in new and innovative retail experiences are going to be increasingly personalized, understanding what the customer wants, what the customer likes, and offering it. We shouldn't kid ourselves, right? Direct to consumer and e-commerce players have a huge advantage here over traditional retailers because their relationship with the customer is intermediated by data. So there's a gap to close there. What's more, within the EU for retailers, GDPR also represents a barrier or cost to overcome in order to have this quality of relationship with your customers. The question is, how do you go about mining this valuable resource? You need to invest. You need to invest in a program, a loyalty program, with customers that incentivizes the customer to want to opt into a deeper experience with you, right.
We already see some players electing not to go full bore here, right? To have very superficial programs that just essentially print out bonus checks in exchange for a high volume of purchases. A lot of analysis that we see, it suggests that those are programs that essentially eat margin and have little effect on overall loyalty. We actually need to create differentiated experiences based on the interaction with the customer. You need to invest in a brand that a customer actually cares to get closer to, and these things all play together. For example, I'm a vegetarian. I've never bought meat in my life, never gonna buy meat in my life.
One supermarket that's enrolled me in a program, and as I said, it's a very low-friction program, very little opt-in required, invites me to buy meat every weekend, right? That's not a brand association they really want me to have. There is a potential harm in creating these kinds of relationships if you're not prepared to invest to a point where they really deliver value for the customer. If you want to talk to me frequently, you have to get to know me. We need to invest in the desire around the brand, the warmth that the customer feels for Clas Ohlson. I'm gonna talk a bit about last mile, another frequently discussed trend here.
In the narrative that I increasingly encounter is this idea of it being a race to zero, that there are more and more extravagant investments in delivering products to customers extremely quickly. First, I think we'll reflect a little on history of digital disruption and thinking about the publishing space, where we saw many traditional publishers adopt equivalent business models of new digital entrants into their market. Many of those organizations went out of business. Some that were prepared to play an exceptionally long game and sustain losses over the course of a decade or longer, eventually reached the kind of scale that they were then able to come out of.
But there were also some digital publishers who actually, in the face of much derision, persevered with a traditional business model and, you know, kept content behind a paywall that, you know, invested in the desirability of their brand, like the Financial Times, for example, who have come out on the other end rather successfully. The point about this is a lot of digital entrants are aiming for scale and are prepared to run at a loss. Often, they're backed by VC money, which is, has an appetite for scale, and a winner takes all or winner takes most market condition. Which means that some of these, especially eye-catching rapid deliveries, are not necessarily sustainable from a financial perspective, nor indeed from an environmental perspective, relating to the earlier point.
Nevertheless, consumers' expectations are going to increase about how quickly they can receive orders online. We think it's incumbent on any retailer that's gonna play this game to really understand what their level of ambition is and deliver against that, right? We do not necessarily need to match the fastest in all cases. You can see this, you know, race to zero played out at massive scale now in the United States, right? Walmart just last month increased their delivery program, their next day delivery program, and Amazon responded massively, offering, I think, an eye-catching number of 10 million SKUs available next day across the across the country. Walmart's response seems fairly rational, right?
Which is to approach those products where they really believe there is consumer value and the consumer's prepared to pay even for faster delivery. Those will relate to things like emotional purchases, that thing you really wanted and that you bought impulsively, you don't wanna wait 10 days for. Consumables, especially, of course, medicine, as well as groceries, right? You're hungry, you need food. Business to business, where it's a question of productivity. Some research suggests that over a third of expedited deliveries that customers are willing to pay for is because they just forgot someone's birthday. It's quite contextual, and we don't think that it necessarily makes sense to go full bore in this race to zero, so to speak.
In the longer term. If you're a retailer that's purely a channel, you are gonna have to be able to play this game. Consumers' expectations are going to be raised, and raised, and raised. It's imperative that you also command desire around your own brand, and that you have other channels that want to fulfill your product to customers. Then the imperative on a generalist retailer is that, you know, your private label commands more and more desire. Next, I'm gonna talk a little about how we might consider economic contraction in consumer spending in the coming years. I think a consumer spending downturn is widely forecast. I'm not going to debate that here.
I think there are finer minds in the room that can, I think it's accepted generally that we can expect a contraction in consumer spending. Under those conditions, it's reasonable to suppose consumers become more conservative. Experience of the last downturn, and research would back this up, that in these circumstances, generally patterns of consumption stay largely the same, but tastes change. Consumers prefer, or become a bit more risk averse, prefer brands they know, will look for cheaper alternatives, reduce spending on luxuries, increase proportion of spend on essentials. Instead of going on a holiday to Thailand, maybe they go to Majorca. People still eat out with the same frequency, but they're probably having pizza a little more often than going out for steak. What does that mean in the context of generalist retail?
Probably everyone can relate to this in some way or other, right? I always buy my flip-flops from H&M, but I would never buy my tuxedos there, for example. The point is, there is an opportunity to increase familiarity with your brand and with your own label, if you can be in a position where the consumer is more inclined to experiment with you, right? You buy that tuxedo from H&M, and actually it looks, you know, it looks pretty good, and maybe you'll consider them for higher value purchases in the future. The question this poses to a generalist is, again, in which categories do you really have the opportunity and the permission to grow, share?
Where can you really invest in your private label and enter new categories that consumers haven't previously referred you in? Okay. Lastly, I'll talk a little about changing traffic patterns. There's been a macro trend for out of town consolidation. I think this is also a large factor in what the disruption that's ascribed to e-commerce, right? That we see specialist downtown stores have been especially badly affected by this. I think this is one of the most interesting trends in retail, and one that we're paying close attention to. We see a lot of big box players are now experimenting with smaller formats in high traffic, you know, densely populated locations. Generally, this is done for two purposes. Well, I mean, brand development, increased familiarity with a brand.
Seeing it, you know, on your commute to the office every day increases your preference for a brand. Also considering omni-channel strategy, it offers many more opportunities to offer service around e-commerce, service around using a product, rentals, whatever that may be. We can see that within our market, right, IKEA has started experiments in Sweden, started in fact had some experiments in Norway, I believe. Elgiganten appears to be doing a very good job of conceiving of small urban formats around smartphone usage. You know, Amazon is gonna open a store network in the U.K., they just announced recently. Very, very interesting to see how they try and bring those experiences together with their online offering.
I don't think anyone's got a particular answer for this, but this is certainly something that we pay close attention to. If you have a store network like we do that really has a very strong blend of both in it really presents a large number of opportunities to us, and there's many ways forwards we can proceed with a number of our initiatives supported by such a hybrid network. Clearly it offers a head start in developing omni-channel offerings, but also it creates the ability to even be more hypersensitive to context. With application of more advanced analytics, and better situational awareness, we can also better sense around our store network what the market conditions are, I think.
I think everyone working at every brand overestimates preference for their own brand and underestimates preference for their competitors. The competitive context matters a great deal. Understanding what is around our stores will also help us as we think about what categories customers really might want Clas Ohlson for. Okay. Those are my six things. With that, I will hand over to Fredrik, who's gonna talk a bit more about our strategic initiatives.
I will do that. Thank you, Patrick. Good morning, everyone. I'm Fredrik. I'm heading the home market. I've been part of Clas Ohlson here since two years. I will give you some insight where we stand in different strategic initiatives that were launched here during the past 12 months. As Patrick said that there are a lot of changes taking place now in the retail market, of course, also affecting Clas Ohlson, not at least in our home market. An important part of that, we can see that there's new competition coming from online, of course. We can see that consumer patterns change behavior. People spend money and consumption a bit different compared to previously. New competitors also coming from e-com entering the market.
On top of that, we can also see that the whole strategy coming back to the customer offer getting more and more important, how we can shape the uniqueness of that, but also how we can position ourselves towards competition, but also with a long, big and loyal customer base. How do we make sure that we are the one that can keep the customer? How do we make sure that they will be the one that attracts the Clas Ohlson to our brand and our customer offer, creating this emotional connection to the customer? I think that will be extremely important, and that's what we're working so hard in the total customer offer. On top of that, we can see a trend that where the home is becoming more commercial arena. That's where you get inspiration what to buy.
That's what you do a lot of the buying. That is also a lot where you receive the goods when you bought the products. This is also something we kept in mind here when we have developed or strengthened the customer offer. As Lotta said, this customer needs pyramid or offer pyramid, I mean, the product in it will of course remain the base for Clas Ohlson. No about that. Here, we'll continue to develop that, making sure that we have an attractive, optimized range, continue to drive and develop with our own brands and strengthen that position in the market. We will also work with optimization of the assortment in the stores. I will come back a little bit to what that means more specifically with this category research project.
On top of that, we are adding then, complementary services, you could say, not at least focus more on guidance, customer service. If you enter a Clas Ohlson store in Sweden today, you can find a lot of different new services on top of products. You can develop your photos, you can repair your mobile phone, et cetera. It's a lot of new services entering into the stores to make it give better customer value for the customer. The top part of the pyramid, the total, full service offering, that is when we also enter and goes all the way home to solve a problem for our customers at home.
I think that is a very, very clear hands-on example with Clas Fix it, how we can really live up to our customer promise, simplify life in all kind of homes, that we also take the full journey. If you would like to buy a hook at Clas Ohlson, you will be able to continue to do that. If you would like to have guidance how to put this hook on the wall, on a concrete wall, we will have that expertise to instruct you how to do it. If you say that I would like to have the total painting on the wall, we will fix that as well. In order to do this, we're aiming to become a more full service or full offer supplier, a real problem solver in another aspect. I will give you a few examples.
I will start with Clas Fix it, what that's all about. Let's see here if it works. You could see how quick we were. 20 seconds, all the problems at home is already solved. Fantastic. A unique solution. Now, what is the positioning of Clas Fix it? Because, you know, a lot of companies are offering different types of assembling services, et cetera. I think what we said with positioning this service is that we are aiming for the type of fixing projects at home that are a little bit too big or difficult to handle yourself. The you're bad conscious all the time at home, but also a little bit perhaps too small to do on higher normal support from a traditional craftsman company.
We have continued to develop this, and we launched this, you could say we had a soft launch here in November this year, end of November, where we covered three regions in Stockholm, and we were most aiming at family and friends and some selected Club Clas members. We have now increased and expanded the service to covering basically metropolitan part of Stockholms and surrounding enabling parts. How do you do this? Well, you have different alternatives. You could see in the film that we are using app. That's where we get 80% of the bookings coming in, which is very good because that drives productivity. A customer sends photos, good descriptions, et cetera, what they want to have done, which is very important for us.
It's more difficult to handle that over telephone, for example. Also you can call to contact center, but not at least, of course, you can go into a store in Stockholm and book the service and get the guidance. Yes, I mean, the launch in November, scaling up here first of March, and we could say that until today, we have carried out about 1,800 fixing missions done in Stockholm, where 80% of this mission had taken part the last three months from we started to scale up the business, started to market about it. What has been the reaction? Lotta touched upon that early before, when we measured on the NPS, Net Promoter Score, more than 80%, actually 83%, would recommend this service to a friend, which is extremely high.
This is also so important for us because the whole idea with this service solution project initiative is also, of course, to drive our brand and position our brand towards competition and see Clas Ohlson as a full service provider. We have today, some 20 people in our team, Fix it team, Clas Fixare team. Most of them are out on doing assignment, but also part of them are working with back office and taking care of administration and all the inquiries coming in. To be honest, I could say that we were almost overrun when we started to market this in social media and different magazines here in Stockholm. We get hundreds of inquiries coming in a very short time, and we are not really scaled at the back end to handle so many requests at one time.
We had actually to back off a bit and stop all the marketing, taking care of the customer. Now we're back again and can, and continue to push it. We have a quite interesting mix of Fixare in our team. We have external recruited people coming in with a craftsman background, electricity, water, plumbing. We also have our own people coming with a craftsman background, have been working in our stores. This is very important that they also understand and know Clas Ohlson, but also our assortment and total offer. When we visit the customer's home, we also, of course, carry out service projects and do that, but we also bring assortment. It's also part of a last mile provider that have consumable products with us in the vans.
You can shop directly from the vans, for example, or that you know that you're going to buy this heavy printer, and you can ask and book that we carry this printer with us out to the home. Then you can see what do we do with the Clas Fixare, the team, when they're not busy being at home at different customers? They are all based and stationed at different stores located in Stockholm. When they're not on assignments at home, people's home, they work in the stores, and they work with guidance and customer service. How we'll take this further, how we will continue to scale this? We will continue to focus now for the coming three to six months on Stockholm.
If you look at the total market for household services in Sweden, it adds up to SEK 12 billion actually and grows with 30% per year. 40% of that market is in Stockholm area. It's a lot of market shares to get here in Stockholm. Here will be a high focus to penetrate the Stockholm area and Stockholm market. We're also preparing for scalability to take surrounding cities to Stockholm, but also other urban cities. What we have in plan is, of course, to see, Gothenburg could be very interesting, but also Malmö, for example, just to give you a few hints. We will continue to expand the service offer. Today we have some 40 to 50 services. You can see them all if you go into the app.
We're also looking into more seasonal services where we can see high demand for example, Christmas, and to hang up Christmas decoration, et cetera. We are also exploring potential partner platforms to get even wider customer base for this. That could be residential communities, for example, Bostadsrättsföreningen in Swedish, where we could make agreements and support both people living there, but also light facility management. If you have bigger digital lock companies or security companies, we could help with installation, et cetera, since we have the task force. We will continue to accelerate now. Since March, we have started to market the service. Still, I would say it's pretty unknown. I mean, it takes time to reach out.
Clas Ohlson is not known for this type of service, we'll continue to market it and start to do more branding around about it. The start has been very positive. What is most important for us at Clas Ohlson is that extremely positive customer response. We have basically no reclamations so far and an NPS of over 80%, which is basically a little bit unique in this business. Good. The other important initiative we'll touch upon here today is how we can drive convenience and accessibility for our products. One example of that is, of course, the collaboration with MatHem. We entered into this cooperation already in December 2017, but the formal go-to-market launch was taking place here in April.
That was a soft launch when we basically had a trial launch of some 150 products at the MatHem warehouses in Stockholm. Today we have continued to expand the total offer, and we are having more than 2,000 SKUs covering all the MatHem warehouses, Stockholm, Gothenburg, and Malmo. Very important part of this is actually that this provide us with the customer service potential together with MatHem to reach 50% of the Swedish households the same day or next day delivery in a very sustainable way. Because we co-ride with the trucks that are already out there driving and creating bigger value for the customers by teaming up with MatHem. We will also have different distribution strategies. We have part of the assortment, the more consumable, fast rotating, we have that at the MatHem warehouses.
We also have cross-docking stores in Stockholm, Malmo, and Gothenburg that are picking the products in the Clas Ohlson store, and the truck arrives early in the morning and cross in the order together with the MatHem order. This makes it very flexible that we can add a lot of products very quick. How is this doing? You could say from a customer perspective, we have had a lot of positive feedback. We can see that the initial thoughts regarding is it possible to sell Clas Ohlson consumables together with online food, it works very well. One of 10 shopping baskets leaving MatHem contains a Clas Ohlson product. We have made just a quick comparison here.
If you're comparing what MatHem is selling online on their page versus what we, for example, are selling at Drottninggatan, if you take the tea lights, we sell then, MatHem sell then 2.45 times more of this product online compare what we do. If you compare to what we sell at our own homepage, own clasohlson.se, MatHem there we can sell 14 times more, basically. It drives a lot of consumable sales in a very high degree. We could see during different seasons, if we take the Christmas season, that we also could sell high volumes of Christmas gift, which was very positive. It's a combination. I mean, the base of the business is very much Clas Ohlson's consumables, the product you see here, but also adding in with more capital products.
99% of the products that we have at MatHem today is Clas Ohlson's own branded products. How do we see the way forward? One important part to be flexible in the assortment, but also provide good customer service and customer value is to make sure that the systems are talking to each other, so we can be quicker in updating the assortment, updating our prices, moving assortment from cross-docking to storage assortment, et cetera. That will be done now before the holidays. We will continue to speed up and have a closer cooperation in both the tactical and the more brand building together. We made a very successful campaign in November last year, but that was boosting sales really good, and we'll continue to do this now after the summer, school is back activities.
We also see potential here with the two assortments, the food part from MatHem and non-food products, consumables from Clas Ohlson, that they have an interesting portfolio here to offer to also B2B customers, small and medium-sized customers. Here, MatHem has also good opportunity with Fruktbudet part of MatHem with a key account organization that we can reach out in effective way to these customers. All in all, very interesting initiative, going according to plan and a very fun initiative. It's extremely fun to work with MatHem. It's, we have a very good cooperative spirit between the companies. Finally, short about what Lotta mentioned before, how do we make sure in our product base, how we can optimize our assortment and having reaching high customer value?
We have here a project initiated, what we call category reset and space optimization. It's really about a customer-centric approach that we can see how should we, what type of assortment should we have in the different stores? Also what type of product can be reduced to decrease complexity in the stores with the very wide assortment we have today. By doing that, we can see that we can increase sales and margin per square meter, we also can have better transparency in our pricing in a total way that we visualize our assortment in the stores. That is a challenge for many stores with so many products. It's hard to get an overview what is the offer from. It's also hard to make a good inspirational view, a feeling of the stores.
That is creating space for that, adding new high-margin assortment, fast-rotating assortment, but also creating space for making more inspirational store environments. It's not only about reducing SKUs, it's also a new way of working for us with more commercial product management, starting with the category strategy and also understanding from the customer needs. What type of customer do we have here in this specific area? How should we meet that need from a product portfolio perspective? Historically, you could say that all the Clas Ohlson store independently, if they've been in Stockholm or Kiruna or Helsingborg, small or big store, basically the same assortment. Now we are adapting the assortment much more according to what is the store and what type of customer base are we meeting there.
On top of that, we are doing a lot of trials to secure that we are fitting the right assortment. A lot of pilots have been ongoing here the last 12 months. Thirdly, an important part is of course to create even tighter relationship with the suppliers, making them on board on this project, where they have a very important role to play. Working with a bit fewer supplier, but much tighter cooperation will drive this. We also have then worked very hard with go-to-market plans for each market. How do we roll out this? This project is covering all the assortment down on product level, SKU level for all stores in all markets. It's a huge product. It's I wouldn't say it's a project, it's more a program that will continue to run year after year.
Now we are in a very intensive phase to get it, the first important phases done, but then it will continue and move on all the time. What we can see then, as Lot also already mentioned, we can see positive sales uplift by having a more simplified offer. We can have COGS reduction, but also that we, by reducing the complexity, reduces the cost in the whole chain. We can also reduce the storage and warehousing costs, reducing the stock levels, et cetera. It's a complete new way of working for us. I would say that these are examples of three very important initiatives that we run the last 12 months.
I think you touched upon it, Lotta, but this was example from the multimedia where we started out here this year, that we actually reduced the SKUs with 7% at the same time then increasing the sales with 12%. I think it's a good example that this really works. That was a short sum up of the three strategic initiatives we've been working with. Thank you very much.
I guess then, Yeah, come to us. I think it's time to see if there are any questions in the room or that has come in over the webcast.
Who wouldn't want to have Clas Fix it service? Would I be prepared to pay the full price? Not necessarily. How do you handle that?
I'll try to answer that. Most of the services that we have here today, you have the tax reduction on it. You can have, what we say in Swedish, RUT or ROT, so you can deduct 50% or 30% of the working cost. That is something that is driving the whole market for house-related services. That's why it's growing so fast in Sweden at the moment. I would say that, based on that, it's quite, it's quite attractive market and a quite good priced market.
Yesterday even there was a political decision to increase the frame of RUT to from SEK 25,000 per person to SEK 50, I think.
Mm.
It seems like political stability is there.
Also if you look at the ones consuming, these RUT services, it's spread all income levels, so to say. I mean, 7% of the ones that has bought the RUT service in Sweden last years are average earning about SEK 30,000 per month. Basically an average Swedish income. That means it's not only for a certain part of the income level in the society.
Yes. Niklas Ekman here from Carnegie. Can I ask you about product optimization first? When you talk about reducing in electrical 50% of the SKUs and in multimedia you took away 7%.
Mm.
What are you replacing it with? Are you still keeping basically the same number of SKUs, or are you actually reducing the SKU count significantly?
I think it's a little bit different store by store. As a basic, we see some ranges that we would like to add to most of the stores, and that we are creating space for now. There are certain parts that we will, you will see that happening during the year as well. That's why we are a little bit in the hurry with these first steps. In other cases it is so that, as a measure to make the store more profitable, we want to reduce the space or we want to relocate, and then it's actually good to shrink it. It's a little bit different store by store.
Regarding Clas Fixare, I can see that this could be very valuable for customers, but is this something that you think over the next five, 10 years could have any material impact to sales? Is it a product that could be profitable?
We will during the autumn come back with more figures around this, but we want to continue in this pilot and evaluation phase and look at the scaling and then come back more on that.
Mm-hmm. The third question regarding your financial targets here, where you talk about 5% growth and 6%-8% margin.
Mm.
It seems now you are very committed to the 6%-8% margin target.
Mm. Mm.
Now that sounds like a promise.
Mm.
The 5% growth target, is that more of an ambition or can you deliver on both of these targets?
Yeah. Well, if you read the goals, thoroughly, it says on average 5% organic growth. That means that a single year or a single quarter, it can be lower and there can be good reasons for that. While when it comes to the margin, we actually say every year. I guess that gives an indication that it can vary, but we are as committed to both of them.
Given what you communicated around the Q3 results and how you were at that point maybe a little bit disappointed with the sales development, do you think it will be more difficult to reach the 5%?
I think it's more where we put the focus actually. As I think we have said as a red thread throughout the morning that it is essential for us to deliver the SEK 200 million-SEK 250 million in cost savings, because that's actually the base that we will scale Clas Ohlson going into the future. For me, that is a must to deliver that. The next four quarters are when we'll do that.
Excellent. Thank you.
Thank you. Magnus Råman, Handelsbanken. On Clas Fixare, did I get it right that the starters, they are employed by Pegital, your partner?
We have a joint subsidiary. We have actually now, we call it Fixare Partner or Fixare Support Partner today, where they are employed. They are, you can say operating, the Fixare team for us.
We co-own that company-
Yeah.
with Pegital. Pegital and Clas Ohlson co-own...
Co-own that, yeah.
Clas Fixare because we wanted to have access to competent that actually know how to run that part of the business. It's a co-owned company.
The staff, they are not store staff. They are working in stores when they're not on mission.
Yeah.
With product advice.
Exactly.
Yeah.
You're not sourcing this staff from stores.
Yes. Yes.
Exactly. I mean, basically if you look at the middle of the pyramid, we talked about customer service and guidance, and that's what we really need to have in the stores as well. When people coming in have a more technical question regarding problem-solving at home, what type of drill should I have for a concrete wall? Whatever. We have the Clas Fixare team also there in the stores. Also to sell and promote the services, of course, the customers come in wanting to book that in the stores. Quite a few customers actually book the service at the store when they have bought the product and they would like to add the service to the product.
I think to answer your question, a person that is a Clas Fix it person is employed in the company that is co-owned by Clas Ohlson and Pegital. They can then spend one hour in a Clas Ohlson store, but they are still employed as a Clas Fixare.
The idea basically is that or the fact is that they are full-time employed so that you don't wanna have salary costs for someone sitting waiting for services.
No.
That's why you try to utilize them in stores. Okay.
Exactly.
Yeah.
Exactly.
Secondly, You mentioned the number of works done here in the past three months.
Mm.
Which suggests some kind of annual run rate of 7,000 services or something now in the Stockholm region. I heard you were coming back with financial numbers later. Could you give us some sense of how many services annually you think you would need to do to cover sort of fixed costs for this initiative and you break even?
I think those are exactly the type of questions we would like to come back to. The run rate we have had during 2019 is doesn't mean 100% either. That's why I want to come back with the full picture.
I think as you touch upon an important part, of course, having fixed employed, Clas Fixare is, of course, occupancy of them using their time.
Mm.
In the best possible way. That's what we can do. Having all the stores, of course, we have that opportunity to drive customer service and guidance on top of that.
Mm.
Basically you could say when they're not out and traveling, we have 100% occupancy.
Mm.
Of the team.
Mm.
You still deem that you would be competitive versus competition that use more modern sort of app-based layout where there's more gig-related jobs, that they get one kickback for each job and then they're not employed somewhere?
I would say that there's a lot of good companies out there with service industry, of course. What I think an advantage opportunity we have as Clas Ohlson is we have a fantastic brand and we tie this very much to our customer club, the loyalty program Club Clas with 2.5 million members to take it to a more value program for them. It's basically tailor-made a little bit.
Mm.
For that type of customer segment.
Mm.
There we have a very close connection and high loyalty. That gives us a high advantage. On top of that, I think this, you feel pretty safe letting a Clas Ohlson team into your house compared to a company where you don't know the brand and where they're originating from, et cetera.
Just a final one for me. With the success of the MatHem cooperation that you outlined with one out of 10 baskets including an item from Clas Ohlson, I know you historically have also commented that this is not an exclusive cooperation. Do you look to do more of those cooperations? For example, in Norway you have Kolonial. You also have, of course, several more place online grocery in Sweden.
Yes. Yes. We're looking into that. I think the interesting hypothesis, of course, that we can sell consumables at a different scale is, of course, also a way to get more volume and therefore get more purchasing power. There is an interesting scale here in general on the consumable side that I think we have proven that we have access to by using these type of cooperations. Absolutely.
Yes.
This is Ludvig Kaplan with ABG. A couple of questions like connecting how you work with the trends you see within retail. What are your, so to say, key initiatives to become more sustainable as a company?
We are working, I would say, across the value chain, but maybe the most important contribution is that we enable a more sustainable lifestyle. There, there are a number of concrete measures we have taken now, like for example, taking out one-time barbecue, barbecues. We have communicated that we will take out plastics for one-time use and so on. We are really working hard to make sure that the range enables a more sustainable way of living in general. That is where we are putting a lot of the efforts. Also, on the whole, if you look at the whole carbon footprint across the whole chain, for example, in transportations and so on, we're quite far ahead when it comes to using train, as an example.
There we are looking into more steps now to reduce our footprint there. I would say a lot of efforts, both on the product side in the chain, on the social side, a number of partnerships to also support there. A very broad range of initiatives.
How do you work with data collection and personalization, both in stores but also online?
As Fredrik mentioned, we have Club Clas already with 2.5 million members. That is today in Sweden and Finland, and we're looking into a setup for Norway as well. There is work ongoing now to make that more sophisticated and to allow for different, you can say, different types of segmentations and so on. That is we have a team that works on that, actually located in Fredrik's organization that support the whole company in that.
Okay. Thank you.
Okay. I think we say thank you, everyone that participated over the webcast. Thank you everyone in the room for coming.
Thank you.