Good morning. Welcome to the Clas Ohlson Q2 report presentation. My name is Kristofer Tonström . I'm the President and the CEO of Clas Ohlson. Today I'm also happy to introduce and welcome Pernilla Walfridsson, our new CFO since a few weeks back. Pernilla will have a chance to introduce herself later on during the presentation. As usual, we'll go through. I'll start with the business update. Then Pernilla will take us through the financial development. Then a part of the events after the reporting period. Then I'll wrap up. Then we'll move into a Q&A.
Looking at the Q2 that we have just reported, we can see that we have delivered 6% sales growth in a very tough market where we actually start seeing a lot of the markets contracting. Especially our numbers are driven especially by the online business growing 28% during the quarter. We also delivered an operating profit of SEK 112 million, and our financial position remains solid with our net debt to EBITDA at 0.8. Obviously, during this quarter, it's been extremely important with the value for money perception with our customers, and looking forward, of course, enhanced operational efficiency, flexibility, speed will be more important than ever.
Today we'll also talk a little bit about some changes we're making to build a more efficient Clas Ohlson forward. We'll get back to those details. We also reported our November sales today. We'll come back to the details here, but it's also encouraging to see that we're growing November 6% in total, 3% organic. Again, also driven by our online business, despite again, a fairly challenging online market in the recent months. Looking a bit more into the details of the Q2, the organic growth amounted to 3%, and our gross margin landed at 37.7%, and obviously a decline since last year. We'll talk through the drivers of that.
Important to remember that Q2 last year was a historically strong quarter across all the parameters, but we'll talk a little bit more on the effects on the gross margin in a second. Our EBIT margin closed at 5% and again, the net debt to EBITDA at 0.8. Our strategic framework that we launched last or earlier this year remains intact, and obviously we are navigating towards our 3-year ambition. Since then, of course, a lot of things have happened and the market has been very challenging. Our relentless focus on building a strong organization, happy coworkers that drives happy customers, that translates into sustainable, profitable growth remains a key focus.
Adjacent to this strategy, we have also laid out our 4 key growth drivers that we're looking at over the next three years. Just a couple of points on each of those. The 1st one and the key driver of our future growth will be our assortment. We're here to sell great need-based products to our customers. What we can see across the 2nd quarter is actually positive development across our key categories. We also see that the pivot that we did earlier this fall to focus even more on energy saving products, money saving products, and also being more deliberate on what our products not only cost to buy but also cost to own has paid out well.
The growth that we see in the Q2 is very much driven by the deliberate choices that were made on a category level. The second point on, availability and convenience across all the channels to reach our customers, we see that the traffic is increasing now in our Q2, compared to the first one across our stores. Looking at our online business, the conversion rate is improving. Also we have done a lot of work in terms of further optimizing our store network, but also in order to give more delivery options to our customers on our e-com business. When it comes to Club Clas, that's a very important priority to continuously drive that. This quarter, we closed at 4.7 million members.
Last year, this time, we had 3.8 million members. We have grown that membership base with almost 1 million customers over the last 12 months. We also see that that is broad-based. We're growing across the markets and also the sales from our Club Clas members is actually growing 21%. This remains a key priority for us forward in order to drive value with the right customer groups and also to drive sales and growth with those. The fourth growth driver is Finland. In October, we celebrated 20 years anniversary, and we've seen a bit of growth in Finland. Looking forward, Finland remains a priority over the next three years. The key thing here is to get more customers in. The customers that we have, the customers that know us really like us.
Our NPS levels are higher in Finland than in any other market. We also see that we are growing with our Club Clas members. The key thing is to get more members, more customers. As a part of the Finnish plan, we have also opened a new store, our first big box store outside of Vaasa in Finland, and I'll show a picture of that in a second. Just a couple of examples on helping our customers save money. This has been a big focus area for us in terms of how we're selling and also how we're marketing ourselves during this fall. We have examples of both guidance, helping customers how to know how to save energy at home.
We have also been much more clear in terms of claims when we talk about the products that are actually are consuming energy, how many kilowatt hours, et cetera. We have seen that has been extremely appreciated by our customers, and we have received more questions than ever when it comes to these type of areas. The second area where we have been strong but we have also shifted a bit of the focus to talk even more about bringing food boxes to work, ensuring that your food lasts longer in your fridge. That has also played out well, and we have seen growth across those categories. Of course, given the food prices across the markets, customers are extremely willing to invest in products that can help their food last longer.
On the availability and convenience, in the intro slide, we actually saw a picture of the Linköping store in Tornby that we opened just a couple of weeks ago. We were happy to have 400 customers queuing as we opened that store. Here's also a picture of the new Finnish store in Vaasa, Finland, which is a bit of a new thing for us in terms of going out to a big box area and competing in a different way in Finland, and it's had a promising start so far. We've also added more delivery options on our online business, so now we also have Instabox in Norway, which is appreciated by customers. We have also added on home deliveries from our feeder stores now via Bring in Norway.
More options for our customers, and this has been crucial to handle the increased online volume. As always, we're obsessed about driving customer satisfaction and ultimately overall value perception. The value perception is always a combination of the strength of the brand, the service we deliver and the product quality we deliver and the price point. It's really the combination of the three. Looking at the service level, despite increased traffic, more customers, we've been able to improve our NPS from already high levels. We saw an NPS level of 56.4 now in the Q2. On the product reviews, we keep ranking high, with 4.5 out of 5, and versus a target of 4.4. The customers appreciate the quality and the products that we're selling.
Very importantly during this, very importantly always, but especially during these times when the households are under economic pressure, it's encouraging to see that we're continuously building our value perception of Clas Ohlson. We're measuring this every quarter, the overall price perception of Clas Ohlson, and we benchmark ourselves versus the low price competitors in our segments. The good thing is that we are actually perceived as more value for money than even the low price retailers in the last quarter. You can see on the scale here from zero to 100 where we are at 17, where zero is cheap, 100 is perceived as expensive. This is a very important position to work with and to defend and keep longer term, especially as we see that the consumer confidence across the markets are at record low levels.
We also see that the price sensitivity is higher than ever. Customers are shopping around looking for the best offer and are actually leaning on the retailers that are able to have a high value for money rating. It's important for us to continue with that. Which leads into some of the things we'll talk about later, which are the some of the operational efficiencies that we're going into as a company to ensure that we can defend this position also in times when our gross margin is under pressure. We are spending a lot of focus and time on all our cost basis. Of course, across purchasing prices, we start seeing some raw materials going down, and of course, we're doing everything to get prices in down.
When it comes to transportation cost, we also see pricing started to drop here. When it comes to rental costs, obviously, we have the indexation happening next year, and we're intensifying our work to ensure that we can agree on good rental levels with our landlords. But also as said, we're also making some tough choices when it comes to the organization, where we are simplifying the organization and we're also simplifying our IT landscape. This will have an impact on the Q3, and it will have a cost-saving impact next year. Pernilla will talk a bit more about that in a second. Last but not least, no matter market conditions, economic environment, it is a key priority for us to continuously moving forward versus our very ambitious sustainability strategy and ambitions.
We have some examples here, both when it comes to product work that we're doing and also supplier work. One of the highlights on the product side is that we continue to see growth in our spare parts assortment, and we're now rolling that out to even more physical stores to ensure that you can easily pick up a spare part to a otherwise functioning product. This is good for sales, it's good for the value perception with our customers, and it is also good from a sustainability point of view to ensure that the products we have sold lasts longer with our customers. The second point is on the product assessments. We have our sustainability assessment model, and here we take all the private labels.
We run it through this model to ensure that we're doing everything to improve the products from a sustainability point of view. Now it's encouraging to see that almost 50% of sales on private labels have now gone through and been ranked according to this model. On the supplier side, we have now 99.1% of our suppliers free from critical fund findings. We do audits obviously related back to our code of conduct on a going basis. When it comes to the environmental assessments, 85% of our purchased volumes are now covered, and we've actually done 165 environmental audits just in the last quarter. So with that, I'll hand over to Pernilla to talk a bit more about the finished development and also introduce herself. Thanks, Pernilla.
Thank you. Good morning. Nice to be here. My name is Pernilla Walfridsson, and I started as CFO for Nobina a couple of weeks ago. Before that, I was CFO for Nobina, but I also have a background within retail companies like IKEA and also a long journey together with Byggmax. In parallel, I also have board assignment, for example, NetOnNet. I'm really pleased to be a part of Clas Ohlson's journey going forward. Let's dig into the figures and starting with the sales. Sales recovering in Q2 after a weak Q1, and sales are now in line with the same level as year to date as the same period last year. Total sales grew 6% to 2.2 billion SEK, and organic sales was up 3%.
I would also like to highlight that our online sales grew 28% in the quarter and 17% year to date, and online sales are now 11% of the total sales. Looking at our market, we see a positive development overall, organic sales grew 4% in Sweden and Norway and 2% in Finland. Looking at the total sales, we see that Sweden grew 4%, Norway grew 10%, and Finland grew 8%. Being new into the company, it is impressing to see the strong position that Clas Ohlson holds in its home market and also the strong price perception, as Kristofer Törnström talked about before. It is also pleasing to see that the sales in Norway has picked up significantly in recent months. Macro continued to put a pressure on our gross margin.
We have the high sourcing cost, the weak currency as the two main factors, with a large impact. We also see that the US dollar is still historically at a very high level. We have tried to illustrate in this diagram that, during the Q2, it is macro-related factors that are the main explanation to the lower gross margin. We also see in the Q2 that customers are awaiting sales and campaigns, and we also see mix effects. Turning to the financial statement, we see that we have an operating profit of SEK 112 million compared to SEK 204 million the same quarter last year. However, bear in mind that last year was a record quarter and also that we got a one-off repayment from Fora that contributed with SEK 25 million.
Looking at the selling expenses, we see a decrease of 1.8%, and that is due to that we have the higher sales figures. We also see a rather flat administrative expenses, and we continue focusing on costs. Another thing to highlight on this picture is that we have a one-off in Q1 connected to the closing of the UK operation amounting to SEK 75 million. The inventory value increased to SEK 2.8 billion in the end of the period, primarily orders of autumn and Christmas products. The inventory value are affected by macro-related factors, sourcing cost, the currency and also transportation cost. It is also positive to see that we have a very high on shelf availability when we entering our most important sales period.
Turning to the cash flow, we see that we see an effect on working capital. That is then connected to that we have paid suppliers when building up a reliable inventory in front of the most important sales period. I would also like to highlight that we have a dividend payout of SEK 412 million in September. We have also approved credit facilities of SEK 800 million and we are using SEK 600 million approximately out of those. Net debt to EBITDA is 0.8 times. We can conclude that our financial position is well in range with our financial targets. Moving into some macro trends that we see have an effect on Clas Ohlson both now and going forward.
Starting with the freight cost, we see a sharp decline, but still at a higher level compared to previous. It's also important here to bear in mind that we have a lag effect connected to inventory turnover, but also to long-term freight agreements. Looking at the currency, we see a positive effect from the development of the NOK/SEK, but by far, a greater effect from the weak SEK connected to the US dollar. Looking ahead and looking at event after the reporting period, as Kristofer mentioned, we are now taking measures to mitigate both cost inflation and to make Clas Ohlson more efficient. We continue our focus on purchasing price, transportation cost, and rental cost. We have closed 6 stores during the first 6 months.
We are continuing now to simplify our way of working, and we have decided to reduce 85 FTEs at our offices. We are also simplifying our way of working through rationalizing our IT system in line with our strategy. We are also now reducing office space. These initiatives will give us a cost saving and decreased depreciation of approximately SEK 110 million that will have the full effect next financial year. It will also entail a one-off cost of SEK 120 million that will be reported in Q3. I hand over to Kristofer.
Thank you, Pernilla. Moving into the November sales development before wrapping up and moving into Q&A. Looking at November, our total sales was up 6%. It's the second time we're above SEK 1 billion in sales in the November month. Organic sales was up 3%, and we saw strength, especially in Norway with 8% growth and also solid delivery in Sweden. Finland was weaker after a stronger October, but the other two markets compensated. Also encouraging to see that the online sales was up 27%. We saw a overall gift week that coincided with Black Friday and Black Week that delivered strongly. We saw significant growth during that week.
Also looking at promotional levels, et cetera, it was not that much. We didn't see a huge difference versus previous years, a good overall delivery across November. We should also remember that we have 5 stores less in the comparison period here in November. The season sales and the Christmas sales have started in a good way now in November. Quick wrap-up before moving into the summary. Obviously we believe that we are very well positioned in an uncertain market despite the turbulence and the challenges that we are all currently facing.
The sales growth and the loyalty from our customers is really a strong proof point that we are able to adapt and that we are also playing a significant role in terms of need-based products, also during this environment. We are doing everything to increase and strengthen our customer position, so the loyal and larger customer base is gonna serve and drive value longer term. We also see that increased customer satisfaction is crucial during this time, but also the value position is important today, but also very important tomorrow. Of course, there is uncertainty. We do not know what will happen when the households will have seen the full effect of all the price and cost increases hitting them with rent increases, interest rates, food prices, energy prices, et cetera.
We are expecting a continuously uncertain environment. It's more important than ever to focus on the customers and drive loyalty, while of course also doing everything to make ourselves simpler and more effective, which then links back to what Pernilla talked about. Obviously some tough choices on the organizational side, and some choices also to simplify the IT landscape to make us simpler forward. That concludes the presentation, and we'll now move into our Q&A. And as always, let's start and see if we have any participants in the telephone conference that has lined up for questions.
If you wish to ask a question, please dial star five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial star five again on your telephone keypad. The next question comes from Carl Deijenberg from Carnegie. Please go ahead.
Thank you. Good morning, Pernilla and Kristofer. A couple of questions from my side. First, on the, if we could elaborate a bit more on the details on the sort of the gross margin contraction here in Q2. You highlighted the sort of significant drivers here, which I guess is the currency and the increased cost for transportation, but also increased markdowns. Would it be possible to say anything, sort of an approximate mix, sort of the 540 bips decline year-on-year? Would it be sort of possible to quantify these three impacts out of the total?
Good morning, Carl. As Pernilla showed in the bridge, on the gross margin, that is showing the relationship between the two buckets. A majority of the 540 basis points comes from the purchasing prices, transportation cost, but also currency related. Obviously, we should remember that again, what we have sold during the last quarter were also purchased during previous times when all of those factors were higher. That's a vast majority of the decline. Then the other part is obviously promotion and mix. The relation in the graph is more or less indicating the relationship between those two factors.
Okay, very well. Following up on the topic, and looking now further on the P&L, you had very good cost control during Q2. I think your OPEX was rather unchanged during in Q2 while it grew around 5% during Q1. I'm just curious sort of, how you're reasoning on the OPEX going forward. Are you a bit more sort of cautious on your spending here considering the gross margin development or how should we think about going into Q3?
Obviously we need to balance and be very tight on any spending. Obviously the two key things that we are focusing on is ensuring we have the right service in our stores, so we'll maintain a high level of service there. Then of course also smart marketing choices we continuously do. We can see that across the last quarter that we have been able to do a lot of relevant marketing here in our PR, et cetera, to get the messages out. But yes, tight cost control to do anything to manage also the gross margin situation. It's a balance act to also ensure that we can continuously drive the sales that we've seen. I think as you point out in the Q2, we have had tight cost control while actually seeing 3% organic growth and we want to ensure to continue that forward.
Okay. Thank you. Following up on another topic here on the cost savings. You're talking about SEK 120 million in one of during Q3. Around 20 of those relates to sort of the employees layoff. I'm just curious sort of the other remaining SEK 100 million, is that a IT write down or what kind of IT initiatives are we talking about here, if you look on sort of more on the details?
Yeah. No, majority of the remaining is the write down of IT systems. We've done a review of the system landscape that we currently have, and we judge that there are certain systems we do not see the need of moving forward, so we are actually scrapping those, and that is the majority of the, of the remaining one-off cost. We're also not expecting that any of those systems will be replaced forward.
Okay, perfect. My final question was on the sort of the layoffs that you're doing on the personal side. Could you say anything on sort of what kind of functions that relates to? Sort of do you see any risk or sort of loss on sales in a longer perspective on what you're doing now or anything on the customer experience or just curious what kind of functions you're adjusting to?
Yeah. Obviously, we do not make any of those choices lightheartedly. Of course, there's been a lot of work to ensure we find the right, the right levels and the right balance here. The 85 FTEs that we relate back to is a cross functions. It's cross offices. We have three offices in Sweden. We have office in Oslo, Helsinki, but also in Shanghai. It has an impact across all the functions and across all the offices, so it's not one function. Of course, the ambition is to become simpler, work in a smarter way, and also doing it in a way to continuously drive sales rather than actually having any impact on the sales. That's of course the ambition, and we've done this carefully to find the right balance also moving forward. That's approximately the overview of the roles impacted.
Okay. Very well. I think that was all from my side for now. Thank you very much.
Thank you.
The next question comes from Andreas Lundberg from SEB. Please go ahead.
Good morning, everyone, and thank you. If I start on the demand side, can you talk about what products sold well and what did not sell well during the four months? Specifically, what are you thinking now about the lightning assortments when we head into Christmas?
No, looking at the Q2 sales and then also November. Across Q2, we saw a lot of increases in sales on energy-saving products, light bulbs, et cetera. We also saw growth in terms of our organized assortment, so the food storage, et cetera. Looking more into November. November, we both sold a lot of gifts during gift week or what we expect to be gifts during gift week, so kitchen appliances, et cetera. We've also seen an encouraging development on Christmas. One of the learnings from last year was that we wanted to really start Christmas a bit earlier. Here we've seen a huge demand actually for our Christmas trees. We're becoming somewhat of a Christmas tree destination.
We see now with best-in-test scores on Christmas trees, et cetera. We've also seen actually that the Christmas decoration, both lighting and Christmas stars, et cetera, has also started well during already at the end of November. The string lights sales and the lighting sales is of course an important part. Here we saw a bit of softness in the beginning, with of course customers being very aware of the energy prices and being careful before buying. We've also seen that starting to pick up now in November. That's overall need-based products has continuously been big across the four months, anything related to energy saving, food storage, et cetera. Also a good start on all the Christmas products. Last but not least, also the gift, expected gifts.
That's good. Thank you. On the inventory side, can you talk a little bit more about what it consists of?
Yeah, no.
How do you view the inventory at the moment?
Of course, the inventory is high with 2.8 billion SEK worth of products. Looking at the composition of the inventory, I would say it's very, very solid in terms of products that we believe we're gonna be able to sell. We do not have that much left from the summer. As you all know, we sold out a lot of the summer products via stores. There's still some summer products that we expect to start activating early spring.
The majority of the increase of the inventory versus last year is related actually to Christmas products, everything seasonal, but also an increased focus on the base assortment, anything that has to do with consumables like batteries, plastic bags, all of these basics, which we also believe that we're gonna be able to sell. Then, of course, a big part is still Christmas-related string lights, et cetera. The ambition is to get as much as possible of that out in the next few weeks. All in all, the composition of the inventory, I would say is good.
We should also remember that some of the value increase in the inventory is obviously also driven by the factors like transportation cost, dollar, and purchasing prices, which drives a bit more value than volume in the inventory.
Right. Thank you. Maybe back on the efficiency measures you're taking. Did you say the rationale is both from the offsetting cost inflation and making the company efficient as such?
Absolutely. Of course, I mean, we are seeing pressure. We have seen a big pressure on the gross margin over the last couple of quarters. As we all know, the US dollar will continue to have an impact. There are a lot of macro-related factors to offset cost. Of course, we're also trying to do it in a way that where we become even more simplified, even more focused. We have the three markets now. As you all know, we took out the final part of the U.K., Amazon, et cetera, in the Q1. Of course, the ambition is to simplify, make us faster and more efficient as a consequence of this as well.
Lastly, on the gross margin, you showed some pictures about the pricing as developed for transportation, et cetera. Given your, you know, lag or lead times, do you expect these drivers to be worse or improve going forward or in the near term quarters?
Obviously the transportation cost will gradually come down and be a positive driver. Obviously the US dollar will continue to worsen. Those two factors we already know will have an impact. Of course, when it comes to anything on stock today, we know that, you know, the products have been bought at fairly high prices. Anything we do now as we're trying to get the inventory down and then also buy new things, of course, we're doing everything to get purchasing prices, et cetera, down. The two main factors is transportation costs down, US dollar impact up, in the next few quarters.
Lastly, in the Q2 gross margin of last year or the comparable margins, it was exceptionally high in Q2, right? Not so much on the other quarters. Correct, or?
Exactly. Looking at last year, the gross margin was 43.1%. If you look back at the last few years, on average, we've been between 40% and 41% during that quarter. Of course, there were a lot of factors driving the higher gross margin last year. Actually, last year, we had some positive currency effect. As an example, we had the US dollar at below SEK 8.50. That was one of the drivers. As you said, the Q2 last year was exceptional, both in terms of gross margin, EBIT delivery, and then also in terms of sales in... the sales was also developing fairly strongly. The comparison set is high, yes.
Thank you so much.
Thank you.
The next question comes from Magnus Råman from Kepler. Please go ahead.
Thank you, both to Kristofer, and welcome, Pernilla. Yeah, the major topics of the gross margin here has been very affected in terms of FX and transportation. You also mentioned in the presentations and campaign activity and mix effect. Of course, a more price-aware and campaign-attracted consumer might be what to expect in the near term quarters. How about this negative mix effect that you also mentioned? Should we regard that to be structural or at least longer-term trending, or could that turn in the next few quarters, please?
I mean, when we talk about the mix effects, it obviously relates both to, you know, private label versus known brands, and then also mix in terms of channels, and then also mix in terms of categories. The mix effect, one thing is a bit more well-known brands sold online, which obviously has a bit of an effect. Some of that, we believe is built in as we build and drive the online business.
That's not a major part. The, the key part on the mix is more the customers actually waiting for campaigns and waiting for offers and also buying when the prices are lower, actually. That's the biggest driver of the mix. There is also a little bit built in as we continue to grow online business, which also means and that's also other reasons we're making ourselves more effective to offset that part.
Right. Because that actually leads to my second question. Since, I mean, online is becoming quite sizable for you now, 14% penetration in November here. Do you have any long-term plan to get profitability in the online up to sort of group average? Or is it more that you will accept this long-term sort of dilution from increased online penetration and that a general sort of efficiency measures should counteract this? Perhaps if you could also remind us of the split of home delivery versus click and collect and the willingness from consumer to pay for home delivery and such?
Yeah. No. I mean, in general, we have the exact same profitability demands across any channel, and that holds true also for our online and e-com business. Of course, it's about giving the customers what they want and then also driving profitability. That work is constantly ongoing in terms of the right pricing, but also ensuring the delivery part being as effective as possible. Relating that to your second question is now actually during the last period, even more than 50% of sales have, one way or the other, passed through our store network when it comes to the online sales. Click and collect, pick up in store is a big thing, which is obviously good for the customers, but also very cost-effective.
Then also the feeder store part is growing as well. As you know, we are actually charging customers for home delivery, et cetera, and they're willing to pay. More than 50% has gone via the store network. Then also we are seeing better and better effect of the work we've done on DC in terms of efficiency and getting more orders out quickly. Obviously, that holds true to ensure high. The good thing is that the average ticket value, the sales online is higher than it is typically in a, in a store environment. Ensuring we drive that and then keeping cost per order down is obviously critical for the online business. We do constant work to optimize that, to drive the profitability.
Thank you. That's really helpful. Then on Finland, you mentioned here that you have a very strong standing or customers are really happy, the ones you have in Finland. This need to attract more customers, does that imply a need, in your opinion, to invest more in marketing to get this scale, or how do you view that?
I mean, customer acquisition is extremely important in Finland to get more customers, more visitors in. A part of the Finnish growth plan that we activated for across Q2 included marketing. We have a new brand campaign that we're running, and we're doing new things to really strengthen the position of the Clas Ohlson brand. As we move forward, we will continue doing that. Of course, it's also about optimizing and doing the right level of marketing to really get the customers in and really make them members. The Finnish plan across the next three years includes also investing marketing, but doing it smartly to get more members into Club Clas. We also see strong development online in Finland.
The feeder stores gives us a unique opportunity to deliver now same day to next day to 99% of Finns, which is actually very strong in the local Finnish market. We believe that over-investing a bit in online is worth it to get more customers in. But of course, we'll do it in a responsible way to also balance now given the overall cost pressure on the company.
All right. Then a final one for me on the one-time cost here. Majority of those IT write-downs, and you mentioned you will not procure sort of any replacement systems. Should we expect that the majority of these one-time costs, or at least all which were not the stock related, are non-cash?
Yes.
type of items?
Yep.
Thank you.
It's our final question from the telephone conference. We have a couple of questions from Stefan Svanberg, Nordea, from the webcast. With the indexation of some 11% of rent in Sweden, the outlook for next year looks challenging, he writes. How is negotiations with landlords progressing, and what kind of increases should we expect for 2023? Yeah. Great question. Obviously, the indexation is linked back to the October KPI of 10.9%, which is of course true for the full retail in Sweden, but also impacts Norway and Finland. That indexation is obviously happening as part of the contracts. Our ambition is to ensure that we have strong agreements across stores to ensure maintained profitability. It's too early to tell exactly where we will land.
It's very clear that Clas Ohlson is one of the absolutely most important and biggest traffic drivers to shopping malls, to city centers, across especially Sweden and Norway, but also to a certain extent in Finland. We have high expectations to ensure that we can continue a strong partnership as we've had for years with our landlords. For now, obviously the indexation is happening, the work is ongoing to ensure we reach good agreements across the stores and the countries. As we have shown, as Pernilla talked about in the last six months, we have closed now more stores in Sweden. We've closed stores in Finland. We don't want to close stores. We want stores to be profitable, and we wanna grow with our store network.
If we can't reach the commercial terms, we will intensify that work even further. That's. I'm hopeful, the strength of the Clas Ohlson brand and the growth that we see across the brand is gonna help us a lot here. A final question from Stefan as well, regarding gross margin and the outlook for fiscal Q3 versus Q2. How are external factors developing quarter-over-quarter, and do you expect more campaigns year-on-year also in Q3? I mean, as you know, we don't guide on a quarterly basis on gross margin, but as said, the gross margin will continue to be under pressure. The US dollar will have a big impact. We'll get some positives from the transportation cost as already talked about.
When it comes to promotions, I think we've shown in the bridge for this Q two that we're doing everything to be responsible in terms of how and when we're campaigning and doing promotions. We intend to continue doing that. Of course, ensuring the price perception, value perception is important, which also means, of course, we are also dependent on what happens in the market with price levels.
That said, we should expect the gross margin to continue to be under pressure as long as the US dollar continues, we do everything to offset with pricing. Since there's no further questions from the webcast, I think we can close the Q&A session for this time. Okay, great. Thank you very much for calling in this morning. We'll now run out and sell more products leading up to Christmas. That's the key focus of the full Clas Ohlson organization. We'll see each other again as we close Q3. Thank you very much.