Welcome to the Clas Ohlson Q4 and Full Year Report 2022, 2023 Presentation. For the first part of the presentation, participants will be in listen-only mode. During the questions and answers session, participants are able to ask questions by dialing star five on their telephone keypad. Now, I will hand the conference over to CEO, Kristofer Tonström, and CFO, Pernilla Walfridsson. Please go ahead.
Good morning, and welcome to the Clas Ohlson Q4 report and the year-round report. My name is Kristofer Tonström, and I'm the President and CEO of Clas Ohlson, and I'm here with Pernilla Walfridsson, CFO. I will do a short presentation before moving into the Q&A. I will start with the business update, then Pernilla will take us through the financial development, and then I will cover the events after the reporting period, and also a wrap up and short strategy update before we move into questions. As we are closing now a closing the year, obviously, we are closing a year where we've seen rapid transformation from our end. We have done many things right, and we have tried to focus on the things that we can influence.
In closing the year, we see that, in the fourth quarter, we closed with 2% organic growth, and then 1% organic growth for the full year. We also see sequential improvement in our gross margin versus the previous quarters, and EBIT came in slightly better than last year before, while we're down, obviously, on the full year. We're also entering now the first quarter with healthy cash flow and also balanced inventory. It's also been a year where we have proactively gone after overhead costs. Obviously, we have seen big macro impact on the company, and high inflation across purchasing prices, transportation costs, and also a big currency headwind.
We believe that with the changes that we will talk a bit more about today, we're establishing a new cost base moving forward. Of course, cost efficiency and flexibility is gonna be continuously very important as we expect macro to still be volatile. We wanna be best when it comes to assortment, and we can see in the quarter, but also in the, in the May, month of May, that we're reporting, that we do have a relevant assortment, also in tough economic times for our customers. The prioritized categories that we're working continuously with are driving growth, and we can also see that our price perception as a brand remains very strong, also coming out of the fourth quarter.
We've just started the new year, we saw a strong start to the year in May, with 8% organic growth and 6% total growth. That's the headlines, we'll go through now some further details. I'll start with framing a little bit where we are versus our focus areas that we laid out for the year. First of all, our strategic framework remains. We have been working hard in terms of creating one winning team, obviously, this year has been a lot related back to simplifying the organization, becoming faster, more flexible, and also then with the lower overhead costs. We spent a lot of focus on our core customers via Club Clas.
We have more than five million members in Club Clas, and we have done a lot of deliberate work to work with that customer group as we build forward. When it comes to owning key consumer missions, that's really our five big overall destination categories, and there's been a high tempo in terms of assortment development. We've been launching a lot of news, and I'll come back to that in a second. When it comes to our unique and strong brand, we have continuously done work to build further. We have shifted a lot of the marketing spend to digital channels, and we see high engagement with our customers.
When it comes to providing availability and convenience, we've done a lot of work to become better on online, and we see that online now represents 12% of sales and is above SEK 1 billion in sales for the first time. We've also done a lot of work to optimize the store network, and now we're ready to take the next step to actually start expanding the store network as well. Apart from this, obviously, we've had full focus on anything related to cost, and we'll come back to that. Double-clicking quickly on the growth drivers. We do see a big trend that our customers are very much focused on need-based shopping, less nice to haves and much more in terms of need-based.
We do see strong performance on our key consumer missions, and we also see a trend that customers are buying things to help do things themselves, to also save money on other areas in related to the household. When it comes to the second growth driver, availability and convenience, we have seen good conversion rates in the last quarter, and we actually also see good positive like-for-like development in the store network. When it comes to customer satisfaction, apart from being best on assortment, we also want to be best when it comes to customer satisfaction. It's encouraging to see that we're further improving in terms of NPS. From already high levels from last quarter, we're now improving to 58 in NPS.
Our store network is working well and is driving customer satisfaction online. In the quarter, we were also awarded for this innovative logistics solution, i.e., our stores that also serve as distributed e-com warehouses across our countries. When it comes to core customer focus, we are continuously driving membership growth in Club Clas, and over the last year, added a million members, so we're now slightly above five million members. We also see that the member share of sales is now 66% of total revenue. When it comes to the fourth growth driver, being in Finland, we have not seen the growth that we want yet, but I would argue that Finland is stronger when we exit the year than when we started. There's been a lot of work in terms of optimizing our store network.
We have closed down stores that we deemed not to be strategically right, neither contributing enough to our profitability. Apart from that, we have also grown Club Clas significantly with everything that we have undertaken on Club Clas in Finland, which serves as a very important base as we're embarking further on the Finnish journey. Quickly, just overlaying a little bit our sales development versus the total market. The graph that you see here is the sales development in Sweden versus total durable sales, i.e., the total durable retail markets, which where we see both in fixed price and current prices. In general, we do see that we have performed fairly well versus the market, month by month during the last year. Looking at our consumer missions, i.e., the prioritized categories.
The two to the left, tidy your home, light up your home, have driven significant growth. We have launched a lot of new products, and we have taken a strong position when it comes to organizing your home, cleaning at home, and then over the spring, and for the numbers in Q4 and also in May, we have seen very strong development on our lighting assortment, and then especially in terms of solar cells. There is a trend that consumers are looking for things that do not consume electricity, and we have launched a lot of new products that have been well received. To the right, we see the remaining three consumer missions, and we are reapplying a lot of the learnings of the good work we have done on the two to the left, on the ones to the right.
Right now in the market, there is high focus on fix your home, we have launched a lot of new products within home fixing, with tools, power tools, garden machinery, et cetera. We can also see that in terms of conscious home environment, the prepping trend continues, and we have launched a lot of new products related to energy saving, solar driven products, et cetera, which is out right now, and we expect that to be important for summer. Looking at the market and at the consumers, obviously, the consumer confidence remains on very low levels across the three countries. However, the trend is going in the right direction. Looking at price perception, which is something we measure every quarter, this is crucial for us.
The graph to the right shows a scale between zero and 100, where zero means cheap and 100 means expensive. The graph at the bottom is the Clas Ohlson price perception, and the graph at the top is the low-price competitors. As we can see, we actually do have a, still a gap, a positive gap versus the low-price players, i.e., our price perception remains very strong throughout this year. Moving into sustainability, we're doing a lot of work to help our customers lead a more sustainable life, and we're approaching this both from a product point of view, but also in terms of our value chain and suppliers.
The good news on the product side is, our spare parts assortment is really well received, and we have rolled that out now in more than 120 physical stores, and we do see a big demand for buying spare parts, fixing something you already own, rather than buying completely new. We also assess our own products that we develop, versus a sustainability model, and now more than half of the assortment has been measured. On the supplier side, we can see the trend versus last quarter going up, so we have 99.6% of our suppliers free from critical findings, and our environmental assessments now is up to 93%, and we have actually conducted 178 environmental assessments in the quarter.
When it comes to, given that we're closing a year, obviously, we're focusing on reporting our CO2 emissions. We can see that in the year, we have seen a reduction of 23%. Versus the base year that we're comparing ourselves to, 2019, we see a reduction of 39%. Our target remains fully climate neutral and circular by 2045. We also, as we announced in the last quarters, want to be climate neutral in own operations, i.e., Scope 1 and 2, already by 2026. Also in the quarter, we have committed to the Science Based Targets initiative. That is gonna support us moving forward. That concludes the short business update. I'll hand over to Pernilla for the financial development.
Thank you, Kristofer. Good morning to you all. Let's take a deep dive into the Q4 and full year financial development. We are all aware of the past year and quarter as being quite tough times for many retailers, and in this environment, I think it is positive that we can report an organic increase of 2%. Total sales of nearly SEK 1.8 billion, and that is in line with Q4 last year. The weak and NOK has worked against us recent months. Also worth highlighting is that this increase was made with seven less stores compared to the previous year. Online sales was flat for the quarter, but up 9% for the year. Online sales now stand at 12% of total sales. Now looking at the sales development in our three markets.
In Sweden, we reported organic sales increase of 4%. In Norway, we reported total sales decrease of 5% and organic sales increase of 2%. The weak NOK, as I mentioned, worked against us in recent months. Finally, Finland, we reported total sales increase of 7%. representing a flat organic development. Here we have the opposite trend with the strong EUR versus SEK. If you go to the gross margin, we have been able to mitigate some of the macro impact on the gross margin by price increases and from a favorable product mix. As you already know, the impact from the U.S. dollar, transportation cost and sourcing cost is still great. All in all, our gross margin decreased by 0.9 percentage point to 38.8% in the quarter.
Let me now give you an overview of our earnings, starting with the fourth quarter. The operating profit was minus SEK 7 million, compared to minus SEK 10 million the same quarter last year. Share of selling expenses decreased by 1.6 percentage point to 35.9%. The decrease is explained by our focus on reducing costs. Administrative expenses totaled to SEK 40 million, compared to SEK 48 million in Q4 last year. This is also explained by a continuous cost focus, but also worth mentioning, it was a lower than usual outcome for a quarter. Profit for the period was minus SEK 23 million, compared to minus SEK 60 million last year. Looking at the full year, operating profit landed at SEK 305 million, compared to SEK 790 million last year.
Let me point out that before the full year has reported one-off cost total to approximately SEK 154 million, of which SEK 100 million relates to disposals of IT systems, SEK 90 million to cost for headcount reductions, and SEK 35 million to the closure of the U.K. operations. Also, we had a full one-off repayment of SEK 25 million last year. Excluding one-off items, operating profit was SEK 459 million, compared to SEK 695 million last year. Profit after tax was SEK 181 million, compared to SEK 523 million last year, and earnings per share was SEK 2.85, compared to SEK 8.25 last year. If we then turn to the inventory, compared to the end of April last year, the inventory level is somewhat down.
It is important to have in mind that during this financial year, inventory value was impacted by external factors, such as increased costs for purchase of products. To counteract the impact on these external factors, we have put great focus on effective inventory management. Looking into the cash flow for the year, cash flow from operating activities totaled to SEK 941 million, compared to SEK 986 million last year. The difference between the years is a combination of lower operating profit, compared to last year, and the difference in change in working capital between the years. Last year, we had an inventory buildup from SEK 1.8 billion- SEK 2.2 billion.
Our approved credit facility totals SEK 800 million, of which SEK 244 million was utilized at the end of the period. Net debt, EBITDA, excluding IFRS 16, was 0.2x , which means that the financial position is well in line with our financial target. If we turn to some macro trends having an impact on Clas Ohlson, let me start with freight cost. Let me just remind you that these figures refers to spot prices. We also have a lag effect, given the fact that it takes time for a product to move from order placed to product sold. The sharp decline we can see is a positive sign going forward. The effect from the weak SEK, however, seems to remain.
We are still at historical high exchange rate, U.S. dollar/SEK, which will affect us also going forward if this relation remains. A new aspect is the weak development for NOK/SEK, which will affect us if this trend remains. We are monitoring the currency development closely, along with the hedges. Our policy, just to remind you about that, is that to hedge 50% of the expected flow continuously with three-to-nine-month maturities. I then hand over to Kristofer.
Thank you, Pernilla. Moving on to events after the reporting period and starting with cost. To recap a little bit from the year that we've just closed, we have had a high focus on internal cost efficiency. Obviously, driven by a lot of the macro trends that Pernilla talked about, but also because we want to ensure that we can protect our strong price position long term and be competitive. During 2022, 2023, we have done both organizational changes, impacting office functions by approximately 85 roles. And we have also done and started the reassessment of our IT systems and reduced office space. That was changes we announced previously during 2022, 2023, and everything has been executed according to plan.
That will correspond to savings of SEK 110 million per year, with full effect from this year. However, obviously, what has happened since this was executed is the fact that we have seen the rent increases coming through in the market, and we have also seen the wage levels increasing at historical high levels. We've also seen the need to complete and work with a second round of savings. To be clear, this is something that will have an impact on the starting now in the first quarter of 2023, 2024.
The ambition here is to save another SEK 100 million on a full year basis, it has and contains a similar mix of activities versus the first round, which was both focused on simplifying the organization, finding new ways of working, and thereby removing roles on a headquarter level across all the countries and all the offices. Obviously, these are decisions we're not taking lightheartedly, we believe that with these changes, we will be in a competitive cost structure moving forward. We've also finalized the assessment of IT systems, related to that, we will also see some write-downs that will impact our first quarter, that will result in a saving with lower depreciations in the next few years.
All in all, concluding now the last twelve months, including now the activities in the first quarter, we will have proactively gone after SEK 210 million in terms of structural costs within the company to ensure we are prepared for the expected continued volatile markets. Today, we also reported our May sales development, we see that we landed total sales at SEK 670 million, which is up 6% in total, organically up 8%, and like-for-like, up 11%. As Pernilla talked about, we obviously have seven stores less versus the comparison base. We also do no longer work within the U.K., this is obviously based on the business that we intend to focus on moving forward.
An encouraging development in May, and we do see organic growth in Sweden and Norway, while Finland has been more disappointing with a -3%. Online is also encouraging, up 18%, and our indication is that the overall e-com market is still under pressure, so we also believe this is encouraging. Moving to, given that we're closing the year, the board has also recommended a dividend to the AGM. Here the recommendation is in line with our dividend policy. We wanna distribute at least 50% of earnings per share after tax, and then, of course, also take into account our financial position. The board has landed in a recommendation of SEK 1.50, and this will be distributed in September in one payment.
This decision by the board has been to ensure flexibility and balance in terms of protecting our financial position also moving forward. To wrap up with a few points now on the year that we've just started and the focus areas that we're gonna work with. First of all, our financial targets and framework is unchanged. We wanna grow 5% organically per year. We wanna deliver a seven to nine operating margin, and we wanna maintain our dividend policy of distributing 50% of earnings per share after tax. We also wanna remain our net debt, EBITDA, between 2x . Looking then at the focus areas, so obviously, a lot of things are the same. We're focusing a lot on our core business, but we're also adding a few exciting things in terms of taking the next big leap.
First of all, the most important thing and the key reason the customers visit Clas Ohlson is thanks to the assortment. Here we continue to work with the things that I talked about earlier, and we're expanding across our five consumer missions, and we do plan for further assortment expansion in relevant categories. The second area is that we wanna continuously grow and grow a profitable online business. Here we also see that there is continuous room for assortment expansion online to suit the customer needs online. The point we're adding, which is exciting for us looking forward and a sign of self-confidence, is the fact that we wanna start expanding our store network.
Obviously, as reported, we have done a lot of optimization over the last couple of years with the store network we've had, and now coming out of the pandemic and coming, looking ahead, we believe there are opportunities to also drive profitable growth give with expansion, and I'll come back with a bit more details on that. Last but not least, we wanna continue the work done on our efficient customer communication, and this is a combination of working smartly with marketing. We have transferred a lot of the investment and spend into digital media, and it's performing well, and we see high engagement, and we also wanna continuously leverage Club Clas, which is a real asset for us. All this based on a now competitive cost base moving forward, and obviously, we wanna continue to execute on our sustainability agenda.
We're gonna follow these points as we progress the year. Just a couple of words on the expansion of our store network. As reported, we have seen solid like-for-like development in the network that we now have optimized. We also see that thanks to the reduced cost base when it comes to overheads, we also see that this gives us an opportunity to invest further in store expansion and an opportunity to add profitable stores to our network moving forward. We also see over the last few years that for us, it's very much the combination of our stores and our e-com business, so it's really one plus one is three. It's not either/or.
We also see that some of the stores we've recently opened have performed well, and we do see demand from customers with further stores within our network. The ongoing discussions with landlords following this spring has turned much more constructive, and with a lot of the landlords, we now look at overall opportunities. As of today, we have now two new rental leases signed, that we're announcing today, and we expect that we will open another 10 stores net during this fiscal year. I will follow that development closely and hopefully have the ability to continue this over the next years. To wrap up, we believe that closing a very turbulent year, obviously, we have done rapid transformation. We believe we are now positioned for sustainable and profitable growth.
We have seen sales development fairly solid in a very tough market. We do see, of course, continued uncertainty when it comes to consumer spending and confidence. Thereby, it's critical for us to be relevant when it comes to assortment, value for money, but also the speed and flexibility. Encouraging with our customer satisfaction increasing and also our strong price perception, which is something we want to very much protect. That's why also we have executed on all the cost-saving measures, and we believe that we have a solid base, but of course, we're gonna continuously optimize always forward. With that, we will wrap up the presentation and move into 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. As a reminder, if you wish to ask a question, please dial star five on your telephone keypad. I hand the conference back to the speakers for any written questions and closing comments.
I think we'll give it another 30 seconds to see if we have any more questions coming in from the conference call. We still have no questions posted from the webcast, so we'll give you another 30 seconds to see if there's anything you wish to ask.
The next question comes from Rebecca Gustafsson, from Carnegie Investment Bank. Please go ahead.
Hi, good morning, Kristofer and Pernilla, and thanks for the presentation. I was curious on the organic growth that you report in the quarter. If you could give us an indication of the price and mix effects, how much roughly is attributing to price versus volume? Also, if you see patterns of customers down trading, just elaborate a bit on the impact on your private label sales and also on the strong gross margin in the quarter. Thank you.
Yeah. Hi, Rebecca, thanks for the question. When it comes to the organic growth in the quarter, and then for me, we do not report our volume sales, and of course, it's a combination of volume and price increases slash working smartly with pricing. Looking at total sales, of course, that's impacted, but we do not see a big divide between volume and value development. But of course, some of the organic sales is driven by pricing. Looking more specifically at the May number, 8% organic growth is definitely not only driven by price, but also the volume growth. On the gross margin, we do see that customers are obviously continuously price sensitive.
When it comes to the sequential improvement of gross margin, we have been careful and tried to work smartly with campaigns during this spring, and we have also been able to increase prices on some parts of the assortment where we see lower price sensitivity and also lower price elasticity. There, it's really those efforts that have helped improve the gross margin sequentially, while, of course, the macro, the macro effects keep putting pressure on us. I think that's shortly on the price slash gross margin impact.
Excellent, thank you. Also on the cost inflation levels and the development, quarter-over-quarter on an aggregate level. I understand that from listening to you, that they are still on a high level, but breaking down the different components, you mentioned the freight rates. Also, how is the pricing from your suppliers and such? Yeah, would you say that they are easing or how? Yeah, how is the development?
Looking at, so first of all, when it comes to, so the last question in terms of the pricing development, I think we have had more than 1,000 price negotiations over the last few months. Obviously, we do everything we can to follow raw material prices, et cetera, and get prices down when we can. But also here, we do see a currency effect. Obviously for European suppliers, they have an impact on the euro. And then, of course, we see also, even if we get prices down, for example, from Asia, we have a dollar effect. We're deliberately working with anything that related to raw materials to get pricing down, but here also the currency is impacting us.
When it comes to the other components, obviously, as Pernilla shared, the transportation cost has gone down significantly, which is gonna be a positive for us in the next few quarters. Obviously, with the time lag of the U.S. dollar impact on our purchasing prices, that will have a very offsetting effect of the positives from transportation. I think I've said in the last few quarters, that we expect this to have an impact on our gross margin also in the first few quarters of the new fiscal. Of course, it's gonna be very also related back to what happens in the market in terms of the pricing. We saw last summer, for example, other retailers and competitors having high inventory levels and thereby doing lots of discounting.
We believe we have our inventory in order. We have a good plan for the summer, but of course, there are always effects outside of our control that might happen, so we're preparing for that.
Okay, great. Just one more question from my side, regarding the new cost savings program. When will we see the full effects from the program? Will we see the full SEK 100 million in your next reporting year? Also to be fully clear, will this fully be in addition to the previously announced program?
This is on top of the previous program. When it comes to full effect, majority of the one-time cost will impact Q1. We will start seeing a positive impact as of Q2 in terms of the underlying. We're planning to realize the full, the full saving on the rolling 12 months or on a full year basis.
Okay.
The majority is non-cash as well, just to be clear.
Right. Got it. Okay, excellent. Thanks. That was all for me. Thank you.
Thank you.
We don't seem to have any more questions, lined up from the conference call, and no further questions from the webcast. By that, I would like to hand over to Kristofer again for just some finishing remarks.
Okay. Thank you very much for calling in. Now we are preparing and planning for a strong summer. Then we will see all of you again back in September, when we report the first quarter. Thank you very much for calling in. Have a good day.