Good morning, welcome to this presentation of the Q3 results 2018-2019 for Clas Ohlson. My name is Lotta Lyrå. I'm the CEO of Clas Ohlson. I will do this presentation together with Par Christiansen, our CFO. Before kicking off and going into the agenda, let me just mention three key points in this Q3 report. First of all, Clas Ohlson is growing both in stores and online despite a challenging market. This gives an organic growth of 4% for the quarter. Secondly, our underlying EBIT result is increasing compared to last year, amounting this Q3 to SEK 363 million.
Finally, our growth, as we see it, is better than the market, but not living up to our internal expectation and is therefore impacting short-term profitability for the full year 2018-2019, which we expect will arrive at approximately 3%. The agenda for this morning is that I will start by giving a business update, then go into the financial development, handing over to Per, who also will take you through the events after the reporting period. I will then summarize, and then we will, together with Andreas from ABG, have a Q&A. Starting off the business update, I think this Christmas 2018, is really evidence that retail is changing. Looking at customer behavior as one example, all growth in our market segment happened online. Consumption pattern was more peak-driven than before.
For the first time in many years, the prognosis of a growth in Christmas trade did not happen. Instead, Christmas trade was lower than last year. For me and for Clas Ohlson, this just emphasizes the need to push forward with the change program that we have in place in Clas Ohlson 100+. I think especially emphasizes the need to really challenge the cost structure to have both a lower cost but also a more flexible cost to handle more Christmases like this one. Summarizing Q3, we deliver on organic growth of 4%. We do this by growing 2% in like-for-like stores and 51% online. This growth is better than the market, but we expected more, and this is the reason why it affects the profitability for the current year.
We see an improving underlying profit of SEK 363 million. This is very much thanks to also a reasonably stable gross margin. You will see in the report that our inventory turns a little bit faster now, and it leads to a reduced inventory level. During the quarter, apart from the so important Christmas trade, we have also had full focus on continuing to deliver and implement our Clas Ohlson 100+ program. An important part of this is full focus on cost, and we're also on track with our growth initiatives. Christmas is by far, both from a sales and profit perspective, the most important quarter for Clas Ohlson, and with that comes a lot of preparation.
We prepared with attractive offerings to our customers, not only in terms of products and campaigns, but also in terms of adding new elements to the shopping experience. We invested in increased digital capacity, that is not only for the people who decide to shop with Clas Ohlson online, but also for the big amount of people that use their mobile before going to the store. Finally, we introduced more and better delivery options, such as Click and Collect, that I will come back to in a second. All of this resulted in an organic growth of 4%, as I said before, we expected more. We invested, we also managed to sustain the gross margin at 40.4% during the quarter.
All of this leads to an improving underlying EBIT of SEK 363 million compared to SEK 359 million last year. An important focus area for us in Clas Ohlson is online growth and online in general. For the quarter and for the first nine months of 2018-2019, we deliver a growth of 51%. This means that the online business now for the first nine months amounts to SEK 337 million. How did we achieve this? The main focus for us online has been to improve mobile conversion. As you can see here, we improved online sales with 56% from Black Friday until Christmas Eve.
42%, we increased conversion rate with 42%, and that was a very important contributor to this growth and led to, together with a decent traffic increase, transactions increasing with 74%. To amplify, then conversion, in terms of improving the mobile experience, we also in the second week of December introduced click and collect as a delivery option for our customers. This is important not only from the perspective of offering convenience to our customers, it's also by far the most profitable delivery option that Clas Ohlson has online, meaning that the introduction of click and collect is a very important step in further improving the profitability of our e-com business.
On top of this, as you can see here, the people who shop Click and Collect with Clas Ohlson compared to entering the store spend 82% more, so the average ticket value is 82% higher on a Click and Collect order compared to a receipt in the store. Going from Q3 into a little bit of an update on the Clas Ohlson 100+ action program that we have. You will not see so many new initiative here today. We are fully focused on implementation and really achieving the results we have set out. Before commenting a little bit on the implementation, let me just recap what this program is about. It is about enabling Clas Ohlson to deliver our two financial goals: to achieve an average annual organic growth of 5%, and from 2021 deliver an operating margin of 6-8%.
To do this, we do cost saving initiatives that shall deliver SEK 200 million-SEK 250 million. We also invest in a number of growth initiatives. We finance this by investing 1%-2% of the underlying operating margin during 2018, 2019, and 2019, 2020. Starting with the cost initiatives, we work within three areas here: a more efficient organization, a more optimized assortment, and to be more systematic in several areas. Two areas that I would like to mention today more specifically where we have taken steps are on the organizational parts and when it comes to our purchase prices. Starting with a more optimal organization. During February, we announced that 150-200 Clas Ohlson coworkers will be affected by the organizational review that we are pursuing.
Yesterday, we informed about that we are now doing a first formal notice that concerns 80 coworkers. This is for the first 6 months of this calendar year. This is the first step in now moving forward in being more concrete of what this organizational review entails. The second area where we have focused a lot during Q3 is on the purchase price side. We have addressed a significant part of the spend that we have in EU, and that is mostly known brands. We're now also increasingly focused on the Asian side, where it's more about our own brands. Commenting a little bit on the implementation of our growth initiatives. We have 3 focus areas as well here: increase sales per square meter, increase sales per customer, and doubling sales online every other year.
The first area I would like to comment on, where a lot has happened during the quarter, is in the optimization of the assortment. We are, as we speak, rolling out a new setup for a number of product categories in all our stores in Clas Ohlson. This is very much focused on the multimedia product categories. Basically, what we have done is that we have taken out a big part of the tail in these product categories, not profitable for us today, and instead given more space to the product that gives a better sales per square meter. This work will continue throughout all product categories and all stores. The second thing, the main event during the quarter, has been the introduction of Click and Collect.
Apart from giving a better convenience for our customers and improving the profitability of our e-com channel, I would also say that it's a prominent example of what we mean with combining a strong store network close to the customer and a good digital experience. The final part that has been important in Q3 has been to implement the decision of a new strategy for our markets outside the Nordics. This is progressing according to plan. We will by the end of April have closed all our stores in Germany, and we will over the late spring and summer close the stores in U.K., where the final store in the U.K. will be closed in September. We will stay within the frame of SEK 210 million that was communicated when this decision was announced in the previous quarter.
We expect the SEK 75 million to come up in the profit and loss statement as the last store is closed. Summarizing all of these actions that we are taking from an EBIT perspective. First of all, the Clas Ohlson 100+ program. We are on track with both our cost saving initiatives and our growth initiatives. We are investing 1%-2% in our underlying margin to pursue these initiatives. We will stay within that frame of 1%-2% for 2018-2019. As I mentioned before, we have grown better than the market, but not fully up to our own expectations, and this impacts the operating margin for the year. We expect to arrive at approximately 3% for 2018-2019, and 4%-6% for 2019-2020.
On top of this, we are taking the steps to close down the store network in UK and Germany, and this impacts the Q3 result on EBIT level with SEK 210 million. That finalizes the business update, and I would now hand over to Pär.
Thank you, Lotta. Moving on to Q3 sales. We saw an increase of 6% in the quarter. If you look at the organic part, it was 4%, and like-for-like, up 2%. I think as Lotta said before, it's very important that we grow both online and in the stores. We have added 14 additional stores compared to last year. Looking at the sales per market, we saw growth in all our markets except for Finland. As we announced in Q2 when we discussed closing U.K. and Germany, we also announced that we need to look closer into the Finnish market since it's not delivering the margins we expect. We also have, since beginning of this calendar year, a new management in Finland that will take on that task.
Looking at the first nine months, we had sales up by 8%. Online up by 51%, following our target. Like-for-like up 2%, and organic sales up 5%, also in line with our targets. Looking at the gross margin, we maintained the gross margin at 40.4% compared to 14.8% the previous year. We had positive effects from the strong NOK, also the FX hedges, and a somewhat weaker purchasing currency, the US dollar. We negative impact from the commercial activities in the quarter and also some increased sourcing cost. The selling expenses, as percentage of sales increased, 1.7 percent units.
According to our plan, the cost, we have, as Lotta said, expect a little bit more sales in the quarter, we are, as Lotta said, also better than the market. The main component here was the program, the Clas Ohlson 100 Plus program and the commercial activities. Looking at the administrative expenses in the quarter, we had a decrease compared to last year, that will be the following trend also in the future here when we see more and more effects of our Clas Ohlson 100 Plus program. The profit for the quarter, the operating profit amounted to SEK 105 million, operating margin of 3.6%.
If we take out the non-recurring items, the cost for the action program and closing the stores in UK and Germany, of SEK 260 million, we end up with the underlying result of SEK 363 million, which is slightly better than last year. The underlying margin is 12.4%. Looking at the profits for the first nine months, we had the operating profit of SEK 171 million and the operating margin of 2.4%. The cost of SEK 380 million connected to the non-recurring cost action program, the sCORE, and also closing the stores.
If we take out that we have a underlying profit of SEK 549, slightly below the previous year of SEK 599, and having underlying EBIT margin of 7.8%. The investments in the quarter amounted to SEK 174 million, compared to SEK 422 million the previous year where we had the Mathem investment. The main part is new stores and refurbishments and IT systems. We have still a strong financial position. We had a positive cash flow from operating activities of SEK 728 million. We have an inventory of SEK 1,983. Looking at the picture here, you can see that we reduced the inventory of SEK 362 million between the Q2 and Q3.
If you compare that to the previous year, where we reduced it by season of SEK 188 million, this means that we have now reduced down the inventory from the buildup we had previously to be prepared for the sCORE implementation. Now we're back on normal levels. The cash flow after investing and financing activities amounted to SEK 70 million, and we had a net cash position of SEK 185 million. Looking at the events after reporting period, the February sales that was announced today was SEK 542 million, up 5%. We had organic sales up 2%, and like-for-like was flat. Online sales is up 47%, we have added 13 additional stores. Back to Lotta.
Thank you. Summarizing a little bit the quarter, we've said it a number of times, but so important for us growing both in stores and online. Growing better than the market, but not fully according to our own expectations, and this impacts the profitability for the current year. I think it's also important in this context to take in the consumption pattern of being increasingly peak driven, because this also impacts the margin, and this is what we have seen during Christmas. All in all, it means that the operating margin for 2018, 2019 is expected to arrive at approximately 3%. We see an improving underlying operating profit and a stable gross margin. We are on track with our Clas Ohlson 100 Plus program.
We will stay within the frame of 1%-2% investment. The cost saving initiatives of SEK 200 million-SEK 250 million are according to plan, and so are the growth initiatives. Finally, I would like to say a couple of words about going forward. A little bit as I started, the market is really changing, and we have seen during Christmas that this is now going faster than expected. The change is very much in line with what we have foreseen and designed our strategy to meet. We believe that by developing a more unique customer offer, doing the combination of growing the online business and optimizing the store network, as well as challenging the cost structure, we have the right pieces to meet this development.
We are taking actions to meet what is happening now. What I would like to emphasize is that we will also take additional steps within these areas as we see needed to deliver long-term profitable growth for Clas Ohlson according to the financial goals that we have set out. That's all from the two of us. I guess Andreas?
Thank you. Hi, everyone. My name is Andreas Lundberg. I work with ABG. If I start off with some retail, general retail questions, you mentioned, you know, an industry in a quick change. Given that the path to purchase is dramatically changing, I mean, in the past, you had traditional media, the industry had at least TV and stuff like that taking consumers to stores. While today you don't have a defined or predictable path to purchase. I mean, given that, how is Clas Ohlson changing to this landscape, and how are you working to, say, get into this new customer journey where it's extremely hard to even market what you do?
I think first of all, we are investing quite a lot in the insights field to really get to know our customers and the different habits that you're talking about, more in detail. For example, there is a big part of the customer base today that have this no commercial please sign on their doors, and they don't watch TV. How do you reach them? You also have a big portion that don't have that sign and that still watch TV. The trick right now for us is to be more granular in our understanding of the customer, and those are capabilities that we are investing in.
I think based on that, we, I believe that the big advantage that we have is that we have a combination of a store network, which is easy accessible, and then we are investing in our online capability. It's about making sure that those two are connected and can provide them a shopping experience the way you like it, whether you like to start mobile and then continue in the store, only do mobile, or start in the store and then shop. That is a little bit how we're trying both to sort of address the situation, but also use the benefit we have of a very strong store network.
On a similar topic, I mean, it seems successful retailers of today is working a lot with innovation, investment in human capital, investment in technology.
Mm.
I mean, people of today probably don't go to stores for products. They go there for experts or people.
Mm. Mm.
How do you think Clas Ohlson that, at least in the past, correct me if I'm wrong, where consumers have gone to the store for products...
Mm.
fit into this new environment?
I think when we ask our customers what is the reason they shop at Clas Ohlson, actually, apart from the products, an important part has also been that you can actually get advice on the problem that you come with. I think the service and the knowledge that we have among all the Clas Ohlson colleagues is a very big advantage. I think there are more steps to take in this area, exactly for the reason you point out, that that will be one of the reasons you decide to go to the store versus shopping online. A lot of advice can also be given online in digital matters, and there will be a part of the customer base that want to do it that way. So we have to provide both, I think going forward.
Given that many companies are working on these changes, so to say, how do you think you will stand out versus competition?
I think an important asset that we have is that we have been around for 100 years, there is a trust connected to that. Now it's about safeguarding that trust and building on that, adding all the new capabilities, but with a very solid core of who we are and who we've always been. If you look at other markets where maybe players like Amazon and so on have stepped in, there is almost always a couple of players that have remained very strong because they are trusted by people and have been around. I think it's a, the combination of safeguarding where we come from and the uniqueness in that, and at the same time adding new capabilities to be competitive.
You mentioned a lot about your changes or the commercial investments you have taken.
Mm.
or is taking. I mean, what have you learned so far? What has worked well, and what has not worked well?
I think it's a good point because we are really on a learning journey when it comes to finding the right balance between brand tactical campaign versus other things. I think one learning is, of course, if you look at Christmas then, if I take the example of Sweden, there was a prognosis of growth of 3%, and we ended up with a decline of 1% in the market in general. Of course, knowing that, had we known that before, we might have trimmed the investment into the market a little bit. On the other hand, had we not invested, I'm not so sure we would have given the 4%. I think the learning sits in the details to really understand what is the way to be effective in the commercial part.
What we see is that the more we segment and the more personal we are in the offers, the better it becomes. That is really then what we believe is the way forward, more focus on loyalty and personalization when it comes to the offers.
On the cost saving program, you touched on that. Do you feel more or confident today that you will reach those targets? I mean, has anything changed now? I guess you have talked to suppliers, et cetera.
No, we are still very confident when it comes to SEK 200 million, SEK 250 million. On top of that, we're doing the restructuring of UK, which is sort of additional money, you can say. That's one of the main focuses that we have as management. Together with moving the performance of Finland, specifically also, I think is big step changes that we can make.
All stores in the UK, Germany will not be closed as of end of this fiscal year, or how is the status?
The stores in Germany will be closed by the end of this fiscal year. In the UK, there are a number of stores that will be closed also during the spring. The final one will be closed in September.
Okay. I think let the audience take some questions.
Hi, Niklas Ekman here from Carnegie. A couple of questions. On the guidance that you provided today with a 3% or 5% margin, I think that seems to suggest a fairly sharp further deterioration in Q4, basically losses doubling in Q4 on relatively easy comparisons. First of all, is that calculation correct? What exactly do you see as the main drivers behind that besides weaker than expected sales?
If I start, I think actually the main reason behind that is, we mentioned, I think in the Q2 that September was weaker than expected. The other driver is mainly actually that Christmas trade is below our expectations. That is the majority of the reasoning behind the guidance.
Yes. You should not read into it that we expect the fourth quarter to be really bad, as you say. It's more what we come into, and we don't expect the fourth quarter to pick up what we have lost rather.
Mm-hmm. I noticed in this quarter also the SEK 50 million in additional one-offs related to Clas Ohlson 100+. What exactly were those investments, and how much more can we expect in terms of one-off costs, in the year ahead?
As we had said, we are investing 1%-2% in the Clas Ohlson 100+ program. We will still remain in that frame for this year, being on the topper of that percentage. As we said on top of that, in what we say is the one-offs is of course the cost related to the sCORE implementation that was previously and some other one-offs, mainly connected to the 100-year celebration that amounts to what we will have. There will be some remaining costs in the fourth quarter for this program.
Yeah. You're still sticking to your margin guidance of 6%-8%. Obviously now you're saying that the sales have disappointed. Does that mean that you require much stronger sales in order to get to the 6%-8%, or can that be achievable in a challenging environment with the kind of the current growth rates?
I think a little bit where I ended the presentation, I think the 6% and 8%, we are very firm that that is the ambition we stick with. We have identified, we believe, the important areas to achieve that. You can always put in more fuel to those areas. I think that's also the way to look at the current situation and Christmas, but it's a sign of what will be required going forward to make money in retail. There has to be a strong focus on the cost side and I think that's where we are. Not changing the target, but rather looking at do we need to do more.
Yeah. Finally, from my end, you talked about 150 to 200 employees that will be let go as part of this program. What areas, where are you seeing the biggest reductions?
We made a formal notice yesterday of 80 people that are impacted during the first six months of this calendar year. That is white collar. It's focused on our headquarter functions. We're not sort of further into the formal process than... Yeah, I cannot say more today than that.
Does that headcount reduction, does that include consultants as well?
No, it's only our own employees.
Okay.
Yeah.
Yeah. Thank you.
Yes, good morning. My name is Niklas Zahr with SEB Equities. I need to understand the guidance. If you translate the 3% operating margin into reported EBIT, what would that number be, please?
As you state, 3% of the turnover, that will be the number.
Mm.
Except the SEK 210 million from U.K. and Germany.
Okay.
The underlying, as we say, the underlying profit will be 5%, which is a 2% difference from the Program. That is the simple math, if I put it so.
Okay. 5% is the underlying EBIT guidance?
Yes.
You would take the strategic initiative costs and you would end up at 3%?
Yes.
Okay. Thank you. Can I also ask you, 4%-6% for next year is a fairly wide range. As we have discussed already, it's been a bit complicated in the market. Nevertheless, I mean, you're one year into the program pretty much. Don't you think it could make sense to make it slightly tighter, that margin range? Do you just feel that uncertain that you don't know whether it's gonna be 6% or 4%?
I wouldn't call it that we are uncertain. I think it's more a matter of also reading more signs of what will happen and then have a better projection. We will not give more specific guidance today than 4% to 6%. What we have said is that as we go into 2020, we move up the range. Of course, that means that part of what we are doing need to materialize during the year as well, as it's not sort of a off and on situation that we are in.
Final question for now. Inditex also reported this morning, and one of the key takes is that their store expansion has basically ceased. It's been that way for a few quarters back. What are your plans for this upcoming fiscal year, please, in terms of store growth net?
Yeah. I think first of all, I think it was December last year when we announced that message. That has already sort of been embraced for a long time in Clas Ohlson, that is not our main way of growing. What we do see is that there is synergies between having the store network and an online presence, and that is what we're building the business model on. We're closing our most unprofitable stores in the UK and Germany, and those who are bottom of the list. It's the same approach as I have mentioned it before, that we try to take it store by store. Of course, should market conditions evolve in one direction or another, then you have to review that list.
That's what I mean, that I think the approach will remain, but the bar will move, so to say, a little bit depending where the market goes. I'm very confident in the approach we have taken. We started early. We're not opening. We're very selective, I would say, in the stores that we even consider today.
You're not closing in the Nordics either. So is what you're saying today your best estimate for the coming year will be the same store network that you operate today, basically?
I mean, we have mentioned that, for example, in Finland, we see that there needs to be a step change profitability-wise. Of course there we are looking at different ways of achieving that. That also goes for Sweden and Norway. We have a store-by-store approach, and I feel very confident that that is the right way for us.
Yeah. Should we see, operator, if there are any questions on the phone or from the webcast?
Thank you. Ladies and gentlemen, if you do wish to ask a question, then please press zero one on your telephone keypad. Our first question comes from the line of Stellan Hellström from Nordea. Please go ahead. Your line is now open. Stellan Hellström from Nordea, please go ahead.
Thank you. First I'd like to come back to the cost for the action program. If you just seem to do the math on 3% and 5% on the guided EBIT margin for the full year, it seems that Maybe there's a big drop-off in the costs in Q4. Is this something we should expect going forward also into next fiscal year?
Maybe you can give me a little bit more flavor to what you mean with a drop-off of cost.
I think the. It seems that you're guiding for very limited cost on the, on the action program in Q4, implicitly. It seems like there's a SEK 10 million difference only.
Yeah
... between the... Yeah.
I mean, as we said, we started a program and a lot of costs comes early because we want to start a lot of activities.
Mm-hmm.
These costs will then go down. Going into next year, this cost will be lower than this year. Of course, then the cost will go away completely coming into 2021. Of course, then we will also get these effects of SEK 200 million-SEK 250 million, which is the goal with that in addition to the growth that we're expecting from these activities. Gradually, this cost will decrease quarter by quarter.
From now. Yeah, okay, good. Question also on U.K. and Germany. Given that you have taken this provision of SEK 210 million, what should we expect in terms of contribution to earnings from these stores in the coming quarters? Will it be zero or will it be the sort of run rate of results contribution from these stores?
I think the fourth quarter will probably be the most complicated one to look at from your side, because it will be a mix of stores that are open and closed. But I guess we will report the like-for-like sales when the stores are normal. Then I guess one month from closure, it will go into a closure period, and then it will not be as normal sales. Going into then the first quarter next year, it will be very few stores that probably won't affect, you know, any significant numbers on sales.
Mm-hmm. Mm-hmm.
It will be the same way we did for the closures of stores, yeah, a couple of years ago. Yeah.
Finally, I just also wanted to ask about the store network in Sweden and Norway, where I think previously you said that closing stores would not be an option. This was a year ago, because then you would lose out. They're all giving a contribution to earnings. Is this still the case, given that we have seen a relatively weak market this year?
I think you're pointing at exactly the point I was trying to make, that I think that as the change now happens, the bar for which stores that are contributing and not is moving. That is where we of course also then need to, yeah, make new assessment of that. For now on, as of today, we don't have any store closures to announce. We will continue to build on the same model, that is the store network and the online presence that together give us a lot of benefits. It's more about looking at the individual store and if the contribution is strong enough. That we do continuously and in the light of the market conditions here and now and going forward.
I think you can mention in addition to that as Lotta said before, we are looking through all categories right now, which means that the sales per square meter will go up, giving some sort of a change in this. Of course, there could be categories that we will take away. In addition to this, we will negotiate all the rental costs. Of course, the first step will not be to close a store. The first step will be to increase sales per square meter and also to negotiate the rent cost, as changing what we can control. If market is that severe, of course, the last step will be closing the store.
Mm-hmm. All right. Thank you.
Thank you. Just as a reminder, if you do wish to ask a question, then please press 01 on your telephone keypad.
We have one question here from the web call.
As there seem to be no further questions, I will hand back to the speakers.
Okay. We take 1 question from the web call, from Marcus Heiervang from Kepler Cheuvreux. Can you give us a number on the expected effect on the FX effects for this quarter compared to last year?
I will not guide on that.
No.
Shall I continue? If I go back to the question on the UK, Germany closure, I think you mentioned some sales effects. What of costs? Will you see cost savings already now in the fourth quarter, or when will we see the first initial effects from lower costs? Yeah.
I think as Lotta said, since we're closing the store, most of them by end of fourth quarter, I guess the fourth quarter will not have any, you know, big savings in them. It will be coming into Q1, where we'll see the savings. As we said, the second quarter of next year, we will see the full effect, which means then we have closed everything and see that. I mean, the cost part is the staff costs. It's the store costs. Of course, there will be also a lot of one-offs in depreciations and other things that is non-cash related to this.
Okay.
Also there was a question on the one-off costs or the CO100+ program. I mean, if you are more concrete, what are those costs that you can now take away after next year?
I mean, taking the part that we discussed now is of course if you look at the indirect purchasing, we have had a project for a long time which has gone through the full cost structure with this, the indirect part, negotiating like laptops and everything, which have been a task force that had additional costs. Those people will go out, the cost will go down. Then we will have, you know, the reduced cost. We will have done the same with, for example, freight. A lot of incoming freight and also freight, like e-com, where we have an extensive negotiation program to reduce that cost. Then the cost will go away, and the new contracts will be effective. That is a typical part.
The other part is of course related to looking at organization. Also, redundancy costs and other costs like that that will appear, and then we will have a lower cost structure. We're very certain that this cost will disappear because it's not built into our normal business. It is a separate cost, and, therefore we're pretty certain that this helping to accelerate the change and then, it will be removed.
Does that also include as a commercial cost, so to drive sales, let's say campaign activities and stuff like that?
I guess the main part is building the. We have put a lot of effort building up, like the Click and Collect thing. And some of these costs could not be taken as CapEx because we're doing so many changes at the same time, which means that we will have a new version of this next Christmas. We have, I mean, been quite aggressive in building capabilities that we need to build sales. We know that this will not be the final version of it, therefore we need to put it as a cost in the P&L.
We could have been very conservative in this and put a lot of CapEx, but then we would have expected with this rapid change in the markets to have a lot of write-downs, and we don't think that is the right way to do it.
Mm-hmm. A question on the dividend. I think you promised the same dividend for 2 years. Is that same the case?
Yeah. We don't have any change regarding that to communicate today.
Okay. Any more questions from the floor here? Niklas?
Yes. Thank you, Andreas. It's Niklas Zahr with SEB again. A few questions. I was just wondering, there are indeed a few market surveys and some sort of macro data suggesting perhaps slightly weaker consumer demand, I would say. I think it's fair to say.
Mm.
Could you share some thoughts just from your end? I realize it's extremely complicated because you're in a transformation to separate the pieces from the pieces. Do you have anything to add? Maybe even if you would like, if you would care to give us some update on trading so far in March.
Like I said before, I think what we have seen during Christmas and the unexpected drop and all of that, I think what we have to do is more to see that as the new normal. Then it's our responsibility to make sure that we have a cost structure that can handle that, and that means also handling an economic downturn. Again, I think we have the strategic pieces in place to address also a downturn in consumption. Then there might be need for new ambition levels in new in some areas in order to handle a then a potential downturn. That we are of course also prepared for. I don't think it's about doing different things. It's maybe more about doing more in some areas.
I think it's a good point that, I mean, that is what we saw during Christmas, not only were sort of a redistribution between November and December, but if you put November and December in the market together, it was lower than last year. That of course we have embraced in the planning going forward.
Yeah. I guess you can also in addition to that mention, I guess we believe that both the service and the assortment we have is, a pretty good fit for a wallet that is under pressure. Which means that we still believe that we can attract a lot of consumers, even if they will have, you know, higher electricity cost or interest or other things affecting their overall wallet. I think they will still come to Clas Ohlson because we're not perceived as a high-end store network.
Mm.
Any comment on current trading?
No.
Okay. I think maybe final question. I understand you will implement IFRS 16, which is about capitalizing off-balance sheet leases as of May, first quarter next fiscal year. Do you have any idea so far in terms of the magnitude of leases that will go within the line in the balance sheet, please?
I think we will wait and communicate that as a part of a package. I guess the first companies that will implement this will now start to report their Q1. So I guess we will also a little bit await how things are communicated in the right way to really be perceived in the correct way. I mean, we have of course done our homework now, and we know pretty much how it will affect both the balance sheet and EBIT. I think we'll communicate that as part of the package in due time before the report is communicated.
As part of that also the impact on our financial goals.
Yeah.
That's very important. We should expect some communication from you on financial target implications before Q1 is being released, yeah?
Yeah.
Yeah.
Thank you.
Mm-hmm. If we continue on a topic you didn't mention, or at least, or maybe I missed it, the Mathem corporation, your ownership there. What's your take so far? Can I get you an update on number of SKUs and then the plans going forward? Lastly, I mean, given the last mile is getting more and more important, how do you think you can capitalize on the fact that you own or part own-
Mm.
a last mile company?
No. The reason we invested in Mathem and started that cooperation was to really have a position in last mile in Sweden that is unique. I don't think there is a competitor that can actually deliver with the same short lead time as we can today, thanks to the cooperation with Mathem. I think it's given us a unique position in Sweden, and we are also investigating similar setups for our other markets because we believe a lot in that. Not necessarily then investing, but the sort of, the collaboration as such. We believe that that plays an important part together with Click and Collect and everything else.
When it comes to Mathem and the number of SKUs, what we have seen is that during season, for example, Christmas, we had an enormous sales uplift. Seasonal products and everything connected to what you do at home at specific points in time, there is a lot of commercial potential. What we have done now is done a technical solution that enable us to scale the assortment very quickly and change the assortment very quickly in order to harvest that potential. We're probably going for a base assortment and then adding relevant pieces as the calendar year progresses. We have a common business plan for pursuing this collaboration going forward, and we're very, yeah, positive in general around this.
On the demographic side, I mean, it obviously has changed a lot if you go back 10, 20, 30, 40 years. In the past, it was very easy for a retailer to make money because everyone wanted the same products. Today is quite different.
Mm.
How do you think that has affected Clas Ohlson and how do you work with it?
As I said before, we are investing a lot in consumer insight and understanding the diversity of the customer base. I think the main impact is, of course, doing exactly that and understanding what it is that makes a difference for the customer. We absolutely have a potential to attract more people in the younger segment. That we know for a fact. Gender-wise, we're more or less 50-50, but when it comes to age, we have a skew towards elderly people like myself and you and so on. We have a potential when it comes to the youngsters.
Mm-hmm. One for you, maybe Pär, the gross margin and given the US dollar strength of late, how do you see that going forward?
I think, I mean, we are As part of the question from SEB, I guess one of the reasons we have a four to six then six to eight is, of course, there's a lot of macroeconomics to our business. The purchasing currency right now is heavily burdened by the US dollar and the weak crown, I guess. In addition, we, as Lotta said, are working on reducing the underlying COGS to mitigate that. Of course, if this weak Swedish currency will remain, we need to look at the pricing in the market like everybody else.
Also the saving program, is it tilted toward cost of goods sold or is it, you know, split between OpEx and COGS?
I mean, if you look at what we have, I mean, we have around 500 people in our head office. We have, as Lotta said before, about SEK 1 billion in indirect cost, and we have SEK 4 billion in COGS. I guess if you want to save a lot of money, you go for the SEK 4 billion. I guess we will attack where we get the most impact.
Mm-hmm. Any more questions out there, anywhere or somewhere? I think I stop my side at least.
Thank you very much.