Thank you very much. I also would like to start with a good morning and welcome all listeners to Clas Ohlson Q4 Report, as well as summarizing the closing of the financial year 2016-2017. Besides myself then, I have our CFO, Göran Melin, joining me. Next slide. From an agenda perspective, a similar setup to the Q3, meaning Göran will take you through the financial figures, while I will focus more on the business overview and the strategic outlook. Then again, we end with the Q&A. Next slide. Business overview, actually I move straight into the next slide, the fourth quarter highlights. We have a solid sales improvement over the quarter with 5% growth. We have 2% growth in local currency. We have a rather soft spring and very much affected by the weather actually, and a quite delayed phase of our spring range.
We also have a calendar effect due to the leap year of minus 2%. With that said, we are glad that we have improved the profit at SEK 17 million for the quarter, very much driven by improved gross margin and cost efficiencies. We again closing the year at SEK 610 million. It is close to last year's record level, which we also are happy about. Parallel to this, we take steps on our strategic agenda, both by developing our customer offer, both from a range as well as a service perspective. We're active with strengthening position in Germany, and we're executing on our U.K. store optimization program. Next slide. Swedish retail market, which is rather stable. We have consumer confidence keeps growing, but maybe at a slower pace. Retail growth is stable over the period.
What we can see is within the categories, we have a fairly big variation, and some of our categories are fairly soft. Next slide. In Sweden, our position is solid. With that said, a soft sales development over the quarter with 1% sales growth. We keep broadening our service offer. We see this as a very important part in strengthening the totality of our range, by in this case, launching the installation service of robotic lawnmowers to get an overall better business and customer service. We have a total network of 87 stores. We have one new store during Q4 and two additional stores net compared to preceding Q4. Next slide. Norway, little bit similar to Sweden. The consumer confidence keeps growing actually, quite strong. The total retail growth is fairly flat in line with Swedish market. Next slide.
We have a steady performance. We have stable sales development in the quarter with sales growth of 4% in the local currency. We have also now implementing the new format in Norway, i.e. the Clas Ohlson Compact Store in Lillestrøm, which we see as an important part of penetrating the markets further. Total network of 80 stores, three new stores during Q4, as well as 8 additional stores net compared to preceding Q4. Next slide. Finland market is a slight recovery in the retail market. With that said, we see more of the consumer confidence growing, not necessarily reflected in the similar growth in the retail trade. Next slide. Our position though remains strong. We have a healthy growth of 8% in local currency. We keep strengthening our position and very much optimizing our store network as part of that strengthening of the position.
Total network of 37 stores, one new store during Q4, and three additional stores net compared to preceding Q4. Next slide. The new markets, we have a high activity. As you are aware of, we are in Hamburg, where we have a very high energy in our commercial agenda. We get positive customer feedback, which is encouraging. We keep building the brand and driving traffic to our store network and the e-com. In U.K., we keep optimizing the store optimization program. We have now closed two more stores during the quarter. One was Watford, and later on, we also closed Newcastle. We continue to focus on our London cluster, and in particular, our new smaller formats, which we see actually a very positive trend in the trade.
Total network of 12 stores, no new stores during Q4, as well as two less stores net compared to preceding Q4. With this, I now hand over to Göran to take you through the numbers and the financial development over the quarter.
Thank you, Peter. Going into the numbers, we start with our fourth quarter, covering the period 1st of February to end of April. Next slide, solid sales improvement. In the quarter, we had a solid sales growth of 5% in SEK. In Sweden, the growth was 1%, and in Finland and Norway, 11%, and outside Nordic countries, a decrease of 21%. In local currencies, sales growth was 2%, and like-for-like growth was down 1%, affected by negative calendar effects of 2% in the quarter. There are 11 more stores in the network compared to end of period last year. Next slide, sales development per market. Divided by country and local currencies, we see a solid sales growth in our home markets with a 1% growth in Sweden and 4% growth in Norway and 8% in Finland.
Outside Nordics, the sales decline of 17% in local currencies affected by six store closures in the U.K. compared to quarter four last year. Next slide, strengthened gross margin. Our gross margin is up 1.2 percentage points, positively affected by improved sales currencies and sourcing efficiency, partly offset by pressure from negative hedges in NOK and delay in subsidiary stock. Regarding inbound transportation, I would also like to comment that Clas Ohlson will, like the rest of the market, be affected on the ongoing conflict in the Port of Gothenburg. Which delays deliveries and could also increase transportation costs going forward. Next slide, improved cost efficiency. We continue to improve our cost efficiency.
Selling expenses are down 0.9 percentage points as share of sales due to reduced costs in the U.K. as an effect of store closures, partly offset by costs for the establishment on the German market. Next slide, profitable fourth quarter. This adds up to an operating profit of SEK 17 million in our smallest quarter, supported by strong sales currencies and increased cost efficiency, somewhat negatively affected by currency hedging in NOK. The operating margin is 1.1 percentage points, and earnings per share is SEK 0.31. This is our first profitable Q4 since the financial year 2011 and 2012. Next slide, financial year 2016-2017. That concludes our quarter four, and we now move into our full year. Next slide, solid sales development.
For the financial year 2016-2017, we had a solid growth of 5% in SEK, 4% in local currencies, and a like-for-like growth of 1%. There are 11 more stores in the network compared to end of period last year. Next slide, profit at record levels. Profit for the full financial year is SEK 610 million, and it's negatively affected by hedging effects in NOK compared to last year. We also have invested in our expansion into Germany. On the positive side, we have had cost savings in the U.K. of SEK 35 million due to our store optimization program. The operating margin is 6.7%, and earnings per share is SEK 7.59. Next slide, continued investment.
We continue to invest at the same level as last year, mainly in new and refurbished stores and also in our new IT system score. The implementation of the new business system proceeds according to plan. Next slide, continued strong financial position. We have a strong financial position and a strong cash flow of 699 million SEK, inventory levels end of April are at healthy levels. We have a net cash position of 625 million SEK. Next slide, proposed dividend. The board of directors proposed to the annual general meeting in September a dividend of 6.25 SEK per share compared to 5.75 SEK last year. This is equivalent to 86% of net profit, it's in line with our dividend policy. Next slide, financial development in May. That concludes our fourth quarter and financial year.
Let's move into our May sales. Next slide, May sales. Sales in May are up 5% in SEK and 3% in local currencies. Divided by country, the sales development is up 2% in Sweden and up 9% in Norway and Finland. Outside Nordics, we see a decline of 34% affected by the store closures in the U.K. There are 10 more stores in the network compared to end of period last year. That concludes the financial part, back to you, Peter.
Thanks, Göran. I'm now gonna give you an overview of our strategic agenda going forward and take some headlines from that part. Overall, we have solid plans, I would say, across the whole business where we want to go and our strategic direction. Next slide, customer offer. We keep strengthening our customer offer, and what that means is that we keep developing and expanding our own brand portfolio, meaning more increased focus on design, build up competence and resource, both in Insjön as well as our trading office areas. We have launched new ranges, as I probably told you in the, well, as I did actually in the Q3. We have a new workwear range which has had a successful launch and also a solid sell range, which is part of this taking new steps on expanding our own brand portfolio.
This autumn, we look forward to a new LED and lighting range to be launched. Complementing the range launch, as we're also working with the growing importance of our service offer, such as rentals, installations, spare parts, which we again are giving us a better combined business going forward. Next slide, sales channels. Sales channels is very much about the omni experience, how we can develop the sales channels in totality, between the store network and digital channels and make this customer journey seamless 24/7. We're also optimizing our store formats and becoming more relevant in our network. We have opened a Clas Ohlson Compact Store now also in Norway and built, as you know, that now from Insjön in Sweden to complement the current network and to be more relevant within the location.
We are also upgrading our e-com platform to improve speed and flexibility and to become more agile in developing our customer experience. Next slide, sustainability. We are active on the sustainability agenda, and we take new steps all the time. We have adopted our goals, already reaching our current goals, of sustainable product range. We have decided to be more ambitious and to set at least 25% of sales, which should come from product with a sustainable lifestyle. We want to keep reducing our emissions of CO2 over time in relation to our turnover. We're also then expanding the range for a more sustainable lifestyle. One of the initiatives we did was to have the Product Innovation Challenge, where we invited innovators, entrepreneurs, and students to come up with their own proposals actually of the new Clas Ohlson products that are supporting sustainability.
We have a winner, as you can see on that image. It's actually saving water. We're also engaging the public, I think one of the nicest, fantastic things we do is the Battery Hunt, or the Batterijakten in Swedish, where we are engaging young students in the 4th grade, over 50,000 in Sweden, Norway, collecting and recycling batteries. Having an attitude towards a proactive sustainability and recycling agenda. Next slide, it's about the new markets development. Again, we have United Kingdom, the London cluster strategy, where we keep working with our commercial focus. It's about the brand, it's about the traffic, and to have a successful development of the new store formats. In Germany, we have our first phase ongoing. We keep building brand, and we keep strengthening position in general.
We work with both the traffic as well as positioning of what we are as a brand. We also re-announce that we are complementing the current network with one more store. It's the Spitalerstraße, which is a very good complement to the existing store network. It means we now have a 4-store network in Hamburg plus e-com. Next slide. This leads into the summary. To summarize the quarter and 16-7, we can summarize it as we have seen solid sales growth across all markets. We have profit at record levels in for both the quarter as well as the year. We take further steps on a very solid strategic agenda, and I would say we are full of energy in the company to try to develop Clas Ohlson further for the future.
With this, I would like to hand over to the operator and lead into the Q&A session and say thank you very much.
Absolutely. Ladies and gentlemen, we are now ready to take your questions. If you wish to ask a question, please press zero one on your telephone keypad. That's zero one on your telephone keypad to ask a question, and please stand by while we register the first question. The first question comes from the line of Niklas Ekman with Carnegie. Please go ahead. Your line is open.
Thank you very much. Yes, a couple of questions. Maybe I can start with the gross margin. You said it was up 120 basis points year-over-year, and you talked about the NOK, you talked about sourcing costs. Is there any way to break down the split between those? How big effect had the what was the NOK and how big was sourcing costs? Also if you could say anything about how these, the external factors at least will impact your coming quarters, at least in theory, based on the current exchange rates. Thanks.
I will try to answer that one. I mean, looking at the improvement in gross margin compared to last year, as you said, and I also said, we have cost efficiency from our DC handling, transportation costs and so on. The major effect actually is we have increased selling currencies top line. We do not have this quarter as negative hedging effects as maybe we thought a couple of months ago. Compared to last year, we had positive hedges in NOK, and that is the effect year-over-year.
Going forward, if we see the currencies as they are right now, as I stated after we presented the Q3 report, we can see that we have positive hedges going forward in Q1. Compared to last year, we had negative hedges in both Q2 and Q3. If the currencies stay at present levels, we will have a positive effect from the hedges if we just take that one alone in Q1.
Is there any way to quantify that, the magnitude? Is it similar? I mean, because you've seen a fairly sharp gross margin contraction in the past quarter, so that should basically reverse of a similar magnitude.
It will reverse, yes. I mean, if you see the effects on the hedges on the gross margin for Q2 and Q3, it was significant. Going forward now. We'll have slightly positive effects. You will have quite an effect, but not as the negative effect of last year, since we then compared a positive quarter to a negative quarter.
Okay. Great. Well, thanks. That's very helpful. Just to clarify, when you talk about U.K. store closures, you talked about SEK 35 million in profit improvement. I assume that's spread kind of over Q4 and then Q3. That means that you have another SEK 25 million of cost reductions that will kick in in the next financial year. Is that right to assume?
Yes. I mean, the cost savings, as you say, it's the EBIT effect of SEK 35 million for the full year. That is distributed over the year at the time we did the store closures. Going forward for this year, 2017-2018, as we have stated before, we see a cost reduction, so SEK 60 million for as an effect of the six closed stores. Yes.
Yes. SEK 60 million minus the SEK 35 million you have already delivered.
No, 60 is the effect on 2017-2018 if we have the, and we will of course have the six stores in the U.K. closed. I mean, we have closed them. If you compare 2017-2018 to a full year when all the stores were open, going back to year 2015-2016, so to say, we will see an EBIT improvement of SEK 60 million.
Okay. Yes, that makes sense. Is there any progress on Croydon and when you can expect to close that?
No, it's still open for Croydon. We have no firm date yet.
Okay. In general here, when you look at the non-Nordic sales, we can see that the sales density here is almost half the level of Sweden and Norway, but it's a little difficult to tell what is what now that you've been closing a couple of stores and opening stores. Is there any way to clarify what trends you are actually seeing? What's happening in the U.K.? How are the German stores progressing? Any just data here would be very helpful.
Well, there won't be any data, but I can make a comment on of course, both the U.K. as well as the Hamburg stores. I think for the U.K., the smaller formats that we are testing there are doing well, and they are trending well in general without stating any numbers. For Germany, we see the Germany as a positive start. We have again a rate that with the commercial KPIs, i.e. the ATB and the conversion is at good levels for being the first year of trade. We see that ongoing development going forward.
Okay. Okay, good. Also just curious, when you announced that Lotta Lyrå would take over here, when you announced that in December, you talked about her starting the 16th of June, that's next week, but it's been delayed until the first of August. Is there any particular reason for this?
There is no reason for that. I think we announced that all of the board. She's on introduction program, getting to know the company, hence that's just that I keep that until first of August, then she will take over. There's no reason for it.
Oh, okay. She will be working for the company, but not as CEO until the first of August.
Yeah, she's on the introduction program.
Oh.
Getting to know the company, having more freedom, what she can, I guess, in a way.
Yeah. Okay. That makes a lot of sense. Excellent. Thank you very much.
Thank you. Moving on to the line of Niklas Frykman with SEB Equities. Please go ahead. Your line is open.
Well, thanks operator, and good morning. Could I just follow up on May trading, please? 5% growth, what were you planning for? Could you give us a little bit of flavor on current trading, please?
I think the current trade is that we see it as a stable growth in May. We think the whole spring could have been a bit stronger if we had the weather with us, to talk honestly, but we think we are in line and a little bit better than the market overall. The weather has been a little bit up and down, so hence the spring rains, the gardening tools and so forth have been slightly slower to start up. Otherwise we are pretty content with May.
Mm. That goes generally for all the Scandi markets, I suppose?
Yeah. Yes. Yeah.
Yeah.
The Nordics are very similar in that sense.
Yeah. Yeah. Could I also go back to, cost of goods or gross margins and ask you a little bit about share of private labels and mix, effect into the, significant increase in gross margins in this quarter year-on-year, please?
Well.
Was that an important driver?
No, I mean, we have seen an increase in our private label, and of course, that is to some extent supporting our gross margin. That is not the main explanation for this. That is, as we have stated, the currencies and also the efficiency improvement in sourcing.
I know you do have some CapEx plans of course, that you outline in this report as well. But, could you share any thoughts on or sort of anything on the discussion that led up to the dividend proposal of SEK 6.25? You do have a net cash position, a strong balance sheet, probably some store expansion ahead, et cetera, et cetera, but a very strong starting point. Would you care to share anything on sort of the dividend policy at this stage?
I mean, the dividend policy is to distribute more than 50% of the net profit as we are doing. As you stated, we have a strong balance sheet and a good cash position. Going forward, we see investments in line with this year and the previous year. Regarding to the dividend of SEK 6.25, I mean, that is a decision from the board, and they've taken everything into account. I mean, the balance sheet, the cash position, investments and so forth.
Perfect. I'm not sure I understood your answer necessarily to the previous question, but what was your answer on cost of goods in local currency in sourcing? What you're buying now, is there any inflation there or is it still deflation?
I mean, we, you know, we buy a lot of different products from different locations in Asia and Europe and so on. Some cost prices are going up and some prices are going down. I mean, we can see, or I can say there are no major inflation or deflation. It's quite steady.
Thank you so much for taking all these questions.
Thank you very much. There are no further questions in queue. Ladies and gentlemen, as a reminder, please press zero one on your telephone keypad if you wish to ask a question. Zero one on your keypad if you wish to ask a question. We have a follow-up question from the line of Niklas Ekman with Carnegie. Please go ahead. Your line is open.
Yes, thank you. Just coming back on when we look at the Nordic expansion, I'm a little curious if you look at the Nordics in general and then maybe Norway in particular. I think you now have 80 stores in Norway, and you have contracts for another seven. It seems you're running for a fairly high penetration level in Norway. Could you, do you in any way elaborate on what kind of target, long-term targets you see for expanding in Norwegian? I guess in the Nordic market in general and Norway in particular, given that you have a very high penetration there.
I think that we've been, as you say, been having quite a high penetration for quite some time. With that said, as we have been developing our formats and relevance, we've been able to penetrate to smaller towns and also complementing then the current network with more smaller stores. I'm not only talking about the compact stores, but I do think. We can't say any number now when we talk, for example, about the expansion going forward. What I could say that if we are now successful with this, with the compact stores, then we have more possibilities to penetrate both bigger cities and actually smaller towns. That is both for Finland as well as for Norway and for Sweden.
So far, the signs in the compact store which has been traded the longest, which is the Hornstull, is good. As you know, we have to open up Lillestrøm in Norway, so I guess we're gonna get kind of a KPI or a kind of verdict on that one in a few months time, how that's performing. That can open up more possibilities.
Okay. Good. Good. Thank you. you mentioned here the dispute with the Port of Gothenburg. Is this something that could have a tangible impact, or is this more a nuisance for you rather than a major financial impact?
I mean, what we can see now, I mean, it's the same effect for everybody in Sweden exporting or importing. I mean, Gothenburg is our major port. What we see now, I mean, the conflict is between the unions and the employer. If this continues, it will be disturbances on transportation, both inbound and outbound from Sweden. I mean, we are trying to mitigate this and relocate or redirect the deliveries. If this continues, it will of course affect us in, you know, transportation prices.
Okay. Okay, good. You mentioned here installation and services. I'm just curious, is this something that is run by Clas Ohlson personnel, or is this something that you have outsourced?
It's mixed. We have a third party when it comes to the installation of the robotic lawn mowers in certain parts of Sweden, and we have our own staff in other parts. Then when it comes to, for example, the spare parts, of course, is on trade. But it's a third party set up when it comes to the robotic lawn mowers.
Okay. I assume that this is still a relatively minor share of your sales.
I think so.
Is this one where you see a lot of potential or more an add-on service?
Yeah, I think in general we see potential for the reasons, one, that the consumer today wants and demands more service complementing the range. Two, I think we have a good confidence to develop these concepts in general with our workshops up in Insjön that we have kind of set the scene for the third party, for example. We see both regarding the consumer needs that that's going to grow, and we think we can join that journey to have a better total business.
Okay, excellent. Thank you very much. That's all my questions.
Thank you very much. We also have a follow-up question by Niklas Frykman with SEB Equities. Please go ahead. Your line is open.
Thanks. One final question, please. Could you give us some I mean, you don't disclose online sales anymore, but it would be helpful if you could give us some idea of how your online proposition has been trading, you know, so far this year, or maybe describe the developments over the past year, please?
We have a healthy growth in our online sales. Without going into numbers, it's in line with the market in general, if I will say so, looking at the e-com. I think also we have a very good traffic drive into our website. I think we talked about that before. It's what we call the ROPO effect. How many that are using the browsing part of the web to lead into shopping in our stores. I think that's the biggest job actually that the web does for us. With that said, We also seen a steady development on the online sales.
All right. Thanks again.
Thank you very much. No further questions in queue. With that, I would like to return the conference call to the speaker.
Yeah, with that, I'd like to thank you from our side. Thank you for listening and participating in this morning.