Good morning, everyone here, at Clas Ohlson in, at Drottninggatan in Stockholm, and also good morning to everyone joining over phone and online. My name is Lotta Lyrå, and I am, since six weeks, CEO here at Clas Ohlson. I will today, together with my colleague, CFO Göran Melin, comment and present the results of the first quarter and also the sales for August. Looking then at the agenda for the morning, I will start by giving some initial reflections of my first time here at Clas Ohlson and what some of the short-term priorities for me and the management team will be.
We will then go in and look at a little bit at the business during the first quarter and August, and then Göran will share a little bit more in detail the financial development. We will round off with a Q&A that Nicklas will lead us through. Starting then with my reflections, I had the great privilege of during my first weeks at Clas Ohlson to see most parts of the company, both visiting markets, meeting customers in all our markets, but also the different functions that we have in our business.
Based on that, I think it's fair to say that I believe that we have a very timeless and relevant mission, which is about people, their every day, the issues we have in our everyday life, and to offer solutions to support that. I think that's a mission that we can live with for a very long time, and we can fill a lot with as a business. That's a fantastic starting point. Looking at the company, I think it's obvious based on the both the solid financial results over many years but also a well-run balance sheet, that there is a financially solid platform to build further on. Also, as a previously a family business, you can say, we have a very solid ownership structure.
There is also a good foundation to really develop the business further on. Wherever I've been, whether it's in a store in Oslo or in Kingston in the U.K. or here or in Insjön, I met a very clear and alive company culture, and this makes me extremely happy because that's almost impossible to copy for our competitors. That's something that we are truly unique about. I think it's also obvious, and I hope you see that when you visit a Clas Ohlson store, that the energy that our coworkers have, no matter where they work, is truly unique. That's also something that is very hard to copy, and that comes from that we all believe that we have an important role to play for people.
If I look at Sweden and Norway and call them our home markets in some sense, I think it's also obvious that people living in Sweden and Norway have a really, really high trust for Clas Ohlson, and that's of course also something very solid to build further on. If I then go a little bit more deeper into the product, the offer that we have for our customers, which is something that is a big, I think the core of the business in a way, I think there is something in the klurighet, we say in Swedish, which is a combination of being practical, simple, but also a little bit with a twinkle in the eye that really makes us stand out.
If I take just more to illustrate what I mean with this, some of the recent launches that we have had, pet accessories, workwear, but also the indoor lighting assortment that has just been launched, I think that really demonstrates what I mean when I talk about a great offer. Starting with pets, I can just personally confirm that both the pet, in our case a dog, and its family is super happy about this assortment, and I think it's an excellent way of also expanding our customer base. If we then talk about workwear, I think that's a way of demonstrating the in-depth knowledge we have about DIY and what you need both at home but also outdoor in your life. Finally, I would like to say that the indoor...
Sorry, the indoor lighting assortment really demonstrates the big effort we make around both design and functionality. I think there is a lot of solid things that have been built up over the years in our assortment that is really, really unique. Moving into customer interaction and the meeting with the customer, I talked about the spirit, the Clas Ohlson spirit before, I think service orientation is maybe one of the things that are most deeply rooted in that. That is of course about a knowledgeable staff when you are in a store and you need help to, yeah, whatever it is that you're going to buy. That can vary of course, depending on if it's a tea candle, then you might only want to know where it is.
If it's a robotic lawn mower, then you need more, and I think we can really serve customers in all of those angles. What really surprised me as a former only customer of Clas Ohlson is the really in-depth knowledge we have in our workshops in Insjön. I dare to say that I don't think that there is any retailer where you can actually call and get in-depth assistance from someone who knows how that robotic lawnmower looks like inside, who can disassemble it and give you advice on what your issue might be, and there I think we are truly unique. Maybe this is something we should talk more about to our customers in order to spread the word.
I am a firm believer in that retailing in the future will entail physical meeting points, but that they will look differently in the future. I'm very happy to see the new small formats that we have launched, for example, here in Stockholm in Hornstull. The reason I believe in it is, and I think Hornstull is a really good example of that, is that first of all, we get a lot closer to the customers. Secondly, I think it really illustrates in a much clearer way what we are about as a brand and what we can offer, and in that sense also creates clarity.
Of course, this is one of the parts of the business where we'll also go into a development phase, in very short time. Having said this then, this fantastic platform, of course, there are many opportunities. I think, as for a company like Clas Ohlson, there have never been more opportunities in a way. That is, of course, valid for us and everyone else in the business, and also, new competitors or potential competitors looking at retailing and seeing things that could be done in a different way to serve the customer in an even better way. Many opportunities, but for all of us, and I think that the one closest to the customer will win. Of course, that's where we want to be.
What is that then all about? Well, I think it's a lot about actually gearing up the whole value chain in the company to really focus on the customer, whether it's about the offer, shopping online, shopping in a physical spot, delivery times, whatever it is. The whole company must be geared towards delivering the best to the customer. That is the way to win. This is, of course, what we now need to gear up for in the future. If I then look at what my priorities will be short-term, I think it's obvious, and I'm sure the most of you have read the report and see this as well, that we have a need to really now short-term focus on delivering the best Christmas and autumn ever.
This will be our way to break the sales trend that we have currently. Of course, this is top of the agenda. Having said that, I think it's important to mention that we really believe in the product launches that we have coming. Indoor lighting, I already mentioned, already in the store since last week, but also a lot of good stuff coming in preparation for Christmas. Now it's about really making that plan happen in the best possible way. That is about every customer, every day, every meeting. That is how we will make it happen. As maybe some of you know, Clas Ohlson was founded in 1918, next year it's 2018, meaning that we will celebrate our 100-year birthday next year.
We are preparing to celebrate together with our customers and our coworkers. We believe that there are huge commercial opportunities also connected to this 100 years celebration. This is something that we will come back to in a coming report. I would already now like to mention that this is one of the things that we are preparing for. We celebrate 100 years, but then it's also, of course, time to prepare for the coming 100 years. We are, as we speak now, kicking off a strategic review for Clas Ohlson, this is really about turning every stone in order to find the best future path. I'm sure you will have a lot of questions later on what is it exactly then that you are intending to do.
Of course, that is what I want the process to give because I might have ideas, and of course I have ideas after having traveled the company a little bit, but I'm sure my colleagues do too. With more than 5,000 colleagues, I think we can deliver something better than I can do alone. The process that we will kick off now will really aim at that. To give you just a little bit of flavor of what I will lead this journey with in mind, one is that it's about the customer, the customer, and the customer. That will be our starting point and our end. Secondly, I believe that growth is good, and growth can come from many places.
It can come from geography, it can come from being in different segments, but it can also come from actually trying completely new business models. This is really the scope of this strategic view as well, to really look into what is the future path for growth for Clas Ohlson. Then, thirdly, I would like to mention that I believe that this is a journey that really needs to be long-term and will also require us to build new capabilities, and that is also part of the year that we will now enter. That's a little bit the exciting days, weeks, and months to come.
In the spirit of this, I would like to then go into the first point, which is to comment a little bit more about what is then the first quarter a little bit more in detail. Starting off with a short summary. Growth 1%, which I think is fair to talk about as a slow growth development. Why this then? We see two overall root causes to this. One is very concrete and linked to us as human beings, what we do when we have time off, and that is the fact that we have had a very, you can say, in between summer, not so rainy, not so sunny. Meaning that part of our true summer assortment has been a little bit challenging.
Then I talk about picnic fans, things for the beach, and so on, and that is part of the explanation. I think it's also important to say that the retail landscape is changing because our behavior as consumers is changing, and that's not something that is unique for us. I think it's sort of something that we as a, as a whole industry live with right now. We see this in both that we have a challenging situation when it comes traffic to our stores, but we also see it in increased e-commerce traffic, but e-commerce traffic not offsetting the traffic to the stores enough you can say. That then, is one of the explanations to the sales development during the first quarter and as well as August.
Having said this, I think we deliver an okay profit under the circumstances driven by mainly an improved gross margin and cost efficiency. All in all, I would like to emphasize that we are not satisfied with this result. We will look at a little bit the different main markets, starting with Sweden and what's the business conditions look then? I think consumer confidence is actually increasing. We see a retail index also increasing and a little bit weak maybe. Sweden in this context, unfortunately then, loses 1% in sales.
This is of course, something that we're not happy with, but I would like to say that still we are doing some very important developments in Sweden that I think are important for Clas Ohlson in its totality, and that is the broadening of our service offer. To mention too then, we are continuing to push installations, of robotic lawn movers, but maybe a little bit more recent. I don't know if you've seen it, but we're now offering grinding, services, knives, and that has really taken off in a fantastic way. Here we see a big potential going forward, and this is only a start, I believe, of something that will be a lot bigger for us. During this period, Clas Ohlson in Sweden had, 87 stores.
We then go to Norway, where we have a positive consumer confidence and a positive retail index development as well. We then deliver growth of 2% during the quarter. One thing that stands out a little bit is the transition that Norway is right now making in closing down the FM network and going over to Digital Audio Broadcasting, also known as DAB. This has been a big success for us and a big business opportunity that we have been able to capitalize on explaining a little bit the growth. During the period, we had 81 stores in Norway. Going then to Finland, where the climate is a little bit tougher, even though consumer confidence is growing, it's not really materializing in a growing retail index.
In this environment, we grew 4% in local currency. One thing that I would like to point out that I'm really, really happy about is that we have now introduced the new store format Clas Ohlson Compact Store also in Helsinki, the first one in the Finnish market, and really looking forward to seeing how this will turn out. We, during the period, had 38 stores in Finland. We go outside the Nordics, starting a little bit with Hamburg. I've seen the three stores in Hamburg, all of them myself. I think it's obvious that there is a lot of energy in our Hamburg market and everyone working there, and we're now preparing for the fourth store.
Of course, during this year we have learned a lot what it takes to be competitive in the German market and what the German customers require. What we're doing right now is really taking all of those learnings and implementing them to even become stronger in demonstrating what we are about as a brand and more commercial of course. U.K., as you know, we are in the middle of a store optimization program and focusing on the London cluster. It's really good to see that we now have a very positive development in the new formats in London, so a good trend here. In total, we then had 12 stores in London during the first quarter.
That rounds off my business update, so I will hand over to Göran, who will go a little bit more in detail on the financial development.
Thank you, Lotta. Let's see. Going into the numbers, we start with our first quarter covering the period first of May to end of July. In the quarter, we had a rather soft sales growth of 1% in SEK. Divided by country, Sweden was down 1%, Norway up 5%, Finland up 8%, and outside Nordics we saw a decrease of 24%. In local currencies, the sales were unchanged and the like-for-like growth was down 2%. There are 11 more stores in the network compared to end of period last year. Divided by country in local currencies, we see a rather soft sales growth with Sweden down 1%, Norway is up 2%, Finland up 4%, and outside Nordic sales are down 22% affected by store closures in the U.K.
Our gross margin is up 1.4 percentage points affected by hedges in NOK and improved sales currencies. The share of selling expenses increased with 0.2 percentage points to 32.1%. The share increased as a result of lower sales in comparable units and partly due to this to establishing operations in the German market. These effects were mostly offset by lower costs in the U.K. This adds up to an operating profit of SEK 100 million for the first quarter, with an operating margin of 5.6%, and earnings per share is SEK 1.22 . We continue to invest at more or less the same level as last year, mainly in new and refurbished stores and in our new IT System Score. The implementation of the new business system goes according to plan.
We have a strong financial position and a strong cash flow of SEK 93 million. Inventory levels end of July are at healthy levels, we have a net cash position of SEK 668 million. As a reminder, the board of directors, they proposed to the annual general meeting now on Saturday, a dividend of SEK 6.25 a share, an increase with half a crown compared to last year. This is equivalent to 86% of our net profit and is in line with our dividend policy. That concludes the first quarter, let's move into the August sales. Sales in August are up 1% in SEK and in local currencies. Divided by country, the development is flat in Sweden.
In Norway, it's 2% up, and in Finland, 4% up, and outside Nordics, it's down 12%, affected by store closures in the U.K. Starting from now, we will report our like-for-like sales on a monthly basis. For August, the like-for-like sales were down 3%, and there are 12 more stores in the network compared to end of period last year. That concludes the financial part, so back to you, Lotta.
Thank you, Göran. I just quickly summarize before we go into the Q&A, soft summer sales, as I already mentioned. Having said that, based on our profits in this quarter, but also a solid balance sheet, still a very solid financial position, and a lot of energy to now dig into both the long-term strategic work that we're going to do, but also really gearing up for commercially strong autumn and Christmas. That's the summary of the presentation of quarter one in August. I think with that, we close our presentation, and we hand over to Nicklas, who will take us through the Q&A.
Thank you. Morning. Hey.
Hey. Welcome.
Thank you. Hey, Göran. Morning, everybody. My name is Nicklas Fhärm . I work for SEB Equities, and I will be the happy moderator for today's Q&A session with Clas Ohlson. Thank you for having me. Lotta, we haven't really met before.
No.
I guess the obvious question would be what's different from IKEA to Clas Ohlson, et cetera? I'm not gonna be different. I'm gonna ask you that actually, but in a more specific way. For example, when you look at sales efficiencies, like performance per square meter, et cetera, realizing there's a different assortment mix.
Mm.
Have you identified any specific categories that you think could actually drive sales at Clas Ohlson if you benchmark versus your previous employer?
I think as a starting point, it's important to say that IKEA is IKEA, and Clas Ohlson is Clas Ohlson. More what is it that I see from IKEA that we could really, I think, benefit from in terms of general thinking, I think it's about really putting the offer in the center of the business model. Connecting to your question, I think one of the challenges is that Clas Ohlson's assortment is very broad and very different in terms of the customer journey it requires. If you again, compare tea candles with robotic, lawn movers...
Mm
... it's very different customer journeys. I think then based on the principle to put the offer in the center, we need to be able to offer journeys that really match both of those.
Mm.
That is, I think, a challenge that we need to take on and be even stronger on, come going forward.
I think it's fair to say that Clas Ohlson did some concentration of the SKUs and the store, obviously the layouts and everything. Do you think you should move further in that direction, higher volumes, less SKUs?
I think that you need to sort of lift it one level because overall it's about what is the role of the different channels, starting with that it's one customer. The customer expectations are very clear today. You don't want to feel the difference whether you're browsing in the sofa, buying in the store, or if you're browsing in the store and buying in the sofa. That's a little bit the starting point. There, as I mentioned before, I think different physical formats, like the Compact Store, which then has fewer SKUs, you can say, of course plays a certain role in that. That's the context to put it in. I don't think it's a question to talk about in isolation.
Before I hand over to the crowd.
Mm
questions, on that note, obviously a big, big paradigm shift going on.
Yes
... for some time now.
Mm.
I was just thinking about the old store growth target opportunity...
Mm
... has been put at around 190 odd stores in the Nordic region.
Mm.
You're at 219 now.
Mm.
I know that's nothing you've said, but what do you think, given what you just said about, you know, new sales channels?
Mm.
consumer behavior, what do you think is an appropriate penetration, in the more mature scanning markets for-?
Mm.
Clas Ohlson?
First of all, I think the potential for Clas Ohlson in our markets is everyone living in those markets, because I don't think there is a single person living in Sweden, Norway, Finland, U.K. or Germany who couldn't benefit from our products. That's the potential. I think based on that, it's about what channels do you have to serve those customers in the way they want to be served.
Mm.
I think that's one of the biggest questions in our strategic, exactly that.
Mm.
We have to come back on that one.
Yep, looking forward to that. Who want to kick off on the floor? Niklas, please. Do we have a microphone over there? Yeah.
Yes. Niklas Ekman here from Carnegie. Can I start by coming back to the strategic priorities? I know that you will come back with more details here, but you're hinting at growth being good, so continued expansion. You talk about online and new channels. I'm curious, how do you see, you know, in terms of geographic rollout, do you see a potential to add on additional markets? Do you see an increased shift to online sales that you need to do much more in that channel? What, what will your key priorities be going forward? Do you, do you still see, going back to Nicklas' question here on store rollout, is there still room for an aggressive continued rollout in the Nordics?
Growth is good. Just to be very specific, growth for me is one additional crown on top of what we had as turnover last year. That crown could come from many different places. It could come from new markets, but it could also come from new segments, or it could come from new business models. I think that's what I said in the beginning. In that, of course, there are a lot of opportunities, I think that there are opportunities also in our home markets, but I think it's not the right starting point to talk about store or if there is room for more stores or not, because growth is a lot bigger than that. It's exactly that path to growth that we need to nail in the strategic review that we are now initiating.
Again, we have to come back to that question.
A reason I'm asking about the store expansion as well is because if you look at the past 10 years, you have more or less close to quadruple the store count.
Mm.
Your earnings are marginally up.
Mm.
during this period.
Mm.
It's been a very costly expansion.
Mm.
More of the same to me suggests that maybe that's not going to be a major earnings driver.
Mm.
So...
If I personally, in general, if I look at retailing, I think the physical format, if I express myself like that, has an important role to play, and it's connected to the personal meetings because most of us actually, especially if we want to buy something that is a little bit more complicated, appreciates the personal service. I think that it will always be a mix between a physical meeting and an excellent online experience. That is the recipe. The question is how that looks. I think it's not about saying that it's either/or, it's both/and the question is how.
Yeah. You mentioned that your online sales have been growing but not strong enough to mitigate-
Mm.
The weakness in the physical stores.
Mm.
I'm curious what you're seeing in terms of competition here.
Mm.
Is, has online migration started to affect you in the forms of new players taking a lot of market share?
Mm.
in some of the more online friendly product categories?
Mm.
Is this something that you need to significantly address to reverse that trend?
Yeah. No, I think it's clear that the competitive landscape is really changing, and that's both about what you are onto, that we see new players, and really globalization, which is one of those words that have been around for decades, I think. Now it's really, for consumers, it's really reality. You can really shop both from the U.S. and China and almost get it at the same time as you get it from a company here in Sweden. That's reality, and of course, that impacts everyone in our industry. I think one thing that is also important to be on top of is that the borders between retailers are also becoming less and less clear.
I think it's about new online retailers that are of course important to keep an eye on, but as important is, I think I mentioned to someone else before, if you look at headphones today, I think it's easier almost to mention a place where you cannot buy headphones than where you can buy it, because you can buy it almost everywhere. I think that's also an important change in the competitive landscape to be onto.
Mm-hmm. You talk a lot about the strategic review here. When will we hear more about this, and when do you expect to start executing on the new strategic agenda?
Yeah. We will, as soon as we have, more information around this, we will also, talk about that, time plan and sort of communication dates and so on. You will have to be patient a little bit.
Okay.
on that one.
Mm. Uh, also-
Just adding on.
Yeah.
Follow-up question.
Yeah.
On Niklas' question. Do you think you will also include new financial targets on a group level in connection with that launch?
That's one of the questions that I would like to save, for the first, information point on the review.
Yes. Thanks.
Also just a question to Göran on currency effects.
Oh.
An inevitable question. Obviously a lot of currency headwind in this quarter, and I believe you signaled before that, you will have even greater, positive effects from currency hedges going into Q2. Can you elaborate a little bit now with the development of the NOK, and also we've seen the U.S. dollar, weakening and how that, will affect you in the coming quarters?
Yeah, starting with the NOK, we can see from a hedging point of view, everything else unchanged. We have slightly positive effects going forward now in Q2 and Q3. Compared to last year in Q2 and Q3, we had a negative effect. Comparing year on year, we will have positive effects from the NOK in the Q2 and Q3. Moving into the dollar, it's... I mean, going back a number of years when the dollar started to increase, we had a time lag before we saw that in our gross margin as a negative effect. Now when you see the dollar depreciating towards the krona, it will also take time before we see that effect in our P&L.
Going on Q2 and Q3, we will not see any positive effects from the weakening U.S. dollar.
The reason, or not reason, but the weakening of the NOK in the past couple of months, will that negatively impact you in 2018, or is that more negligible?
On a short basis, I mean, the hedges will be positive if the NOK is going down. Long term, I mean, a weakening NOK is not good for Clas Ohlson since it impacts our sales.
Okay. Good. Thank you.
Any, any follow-up question there, Stellan?
Yes. Stellan Hellström with Nordea. I wanted to talk or ask you, Lotta, about, you highlighted the strength that you saw within Clas Ohlson on the energy and the service that you get in the stores and also, the service offering that you're expanding and highlighting that. Maybe what I missed was also sort of some kind of words about how you see your online offering today. Are you feeling that you have a good position online?
Going back to the results from the first quarter, as I said, we see store traffic challenging and e-com increasing but not offsetting. Of course, in that lies that we cannot be satisfied with that situation. I think it's very, very dangerous to look at online in isolation because, again, it's about the seamlessness and the channels together that matters. I think that's the code we maybe need to sort of find and even the next gear on, so to say. But obviously, since we're not sort of, the store traffic is not fully going to our own e-com, we cannot be happy with the performance e-com wise.
Right. Just one question on also Germany here, where, I mean, first of all, it would be interesting to hear any comments on your sales development there, how you did in U.K. at the same stage of evolution. Also, I was a bit surprised to see that your results were burdened by Germany, given that you had SEK 10 million of cost in Q1 last year for the opening of the first store. That seems to imply that you have a higher loss rate in Germany than you have on your U.K. stores.
I mean, comment on Germany, as you said. There's an echo here. Come on. We last year in Q1 had, don't remember if it was SEK 10 million or SEK 15 million in startup cost in Germany. Q1 last year, we had one store going. Now we have three stores going.
Perhaps I could follow up with a question there, on sort of sales per square meter performance or store. How does the German sort of expansion at this stage compare to, say, the launch in Finland or the launch in the U.K.? What's the early takes from some efficiency measures, please, in Germany?
Maybe I can say overall that I think a lot of learnings from the journey in the U.K. have been implemented in the journey we're now doing in Hamburg.
Mm-hmm.
That I think with that we have sort of that lesson we have learned, so to say, and really taking care of. I think what's important, again, you know, if I refer back to what you talk, what you asked me initially, comparing to IKEA, I think there is a lot of effort to be done when you come to a new market to actually educate people a little bit what we are about and the clarity around the concept and so on. I think that takes time. It's also about getting to know your customers and what they require and all of that. I think it's a good plan that is in place now that we're sticking to. We've been there one year. We're taking learnings.
We're implementing that in order to be more clear also for the German consumer. I think we're according to plan and then of course, there will be a point where we need to put the foot down and say, "Okay, how do we look at the future?" Right now, we continue according to plan.
All right. Next question. Please.
Hi. Magnus Råman . Thank you. Just to talk a little bit more about your online offering, you mentioned here that you're not satisfied. I mean, the first steps you will take now, will those be primarily on the back end or on the front end? For example, on the back end to be quicker in deliveries or on the front end developing app services, meeting mobile traffic?
First of all, this is one of the things that we need to sort of, formulate in a clearer way and really plan in as part of the strategic review. If I personally give you my take on it, I think the key is that you need to have the whole process in place. Because again, starting with the customer, even if you meet a great webpage or a mobile app with great commerciality, you find what you need, but then the delivery time is not meeting your expectations, you're still not so happy, right? I think that is the trick. I don't, I don't think it's about prioritizing one or the other. They need to pace, so to say.
I think what we can see is that the companies that really have their logistic chain in place tend to be the ones who sort of run first a little bit. I believe that is a super important piece of the puzzle to make sure that you have with you.
Of course, you have a highly modern, logistics, business in Insjön.
Yes.
Do you think that logistics business is adapted to single parcel delivery from e-com? Also secondly, if you can comment on the share of your online traffic that comes from mobile today?
If I start with the first one, I, as I said in my introduction, I think that the one closest to the customer will win, and the whole value chain needs to be geared towards that. I think that based on the strategy that we will put in place and the channel part of that, we need to look at what does the value chain need to look like. I'm convinced that there will need to be things to be sort of fixed and adapted along the whole value chain, including logistics, because it follows from sort of the strategy. Then the second question.
Mobile traffic as share of your total online volumes.
No, that's not something that we can comment on today.
Is it high or low?
I think we all know the general trend, right?
Yeah.
It's mobile first.
Right.
Yeah.
I have a question on Germany. You say here now that you're ready to open the fourth store in Hamburg?
Mm.
You have a different strategy than you had when you opened in the U.K.
Mm.
Obviously, sort of winning city by city.
Mm.
When do you think you would be ready to move to the second city in Germany?
That's too early to say. Now we have a plan for Hamburg that we stick to, and we will open the fourth store, which we believe will give us a good base for elaborating further on this. That's what we have in the plan right now.
In the planning as of today, you don't have any other cities?
No, not today, no.
I just have one final question here on, just maybe elaborating a little bit more here, Göran, on the currency effects. You say that in this quarter, you were helped both by the NOK hedge, reversal, hedging effect, but also in translation of favorable, revenue translation currency-wise.
Yeah.
Could you maybe give us a sense of the split there between those two drivers behind the 1.5% year-over-year margin uptake in gross margin?
Not in detail, I mean, if you compare on the selling part, you can backwards calculate, I mean, the impact from the sales currencies, and then you can keep on calculating, so to say, to find an estimate of the effect of the hedges. Also, if you look into, in the report under the hedge part, you also have extra information regarding the level of hedges, both in NOK and in U.S. dollar.
Thank you.
Perhaps just a follow-up question on that theme, Göran. How did the share of private label develop in the quarter compared to a year ago, please?
During the quarter, I mean, it's, geared up to a higher level of around 35%. During the quarter, it's, been around 35%.
Okay. Okay. Andreas?
Yeah, Andreas Lundberg with ABG. Maybe back on the gross margin and currencies again. If I hear right, you expect the dollar weakening here relate to be more of a impact in 2018. Is it still fair to assume that the sensitivity you mentioned once in a while is, you know, 5% dollar movement versus the SEK is some, let's say, SEK 70 million on your pre-tax profit?
Yeah, it's still valid, but, that is a calculation of the absolute impact of the 5% change of the U.S. dollar. You have to pay in, into the calculation when this actually hits or helps the P&L. You have to look at the time lag. I mean, we are hedging 50% of the U.S. dollar six months before the delivery, we also have the turnover time of inventory. I mean, this won't hit the P&L before maybe 9- 12 months, that part. If you take that into the calculation for the P&L, you get a pretty fair estimate.
On U.K. and the cost savings there, you talk about some SEK 60 million.
Yeah
... excluding the remaining store to be closed. Where are we in these cost-saving programs, and how much is left?
As we said from the beginning, closing seven stores, that would save us SEK 70 million. Now when we close six stores, we have said SEK 60 million. That is compared to when all the stores were open, I mean, going back to year 2015, 2016. We also said that during 2016-2017, we saw SEK 35 million in saving, meaning comparing 2017/2018- 2016/2017, you have additional SEK 25 million. You're actually calculating the saving of SEK 60 million compared to the right year or the right comparison. We are on track on that plan.
Lastly, more nitty-gritty question. Your international segment, the sales decline were a little bit lower than we have been used to the last year. Is it mainly due to that the drag from closed stores in the U.K. are less, or is it something underlying on Germany or U.K. picking up a little bit versus last months? Thank you.
Yes. As we write in the report, it's due to, mostly due to the store closures in the U.K.
Is the difference in sales growth in that region or the international segment, which was a little lower in August, compared to the last, you know, two, three quarters, is the drag less from stores or is it something else that has happened?
No. It's the number of stores in the U.K. since we closed a number of stores in the first quarter last year.
Perhaps I can just do a couple of quick ones. You mentioned the DAB transition in Norway, which is something that Mikael Norman has also been speaking about.
Mm.
... but more from a context of a very negative margin driver actually. I was just gonna ask you if you would agree that it has boosted sales but perhaps at the expense of margins, please.
No, I don't think.
No.
We comment on.
No
... margin on products.
Maybe I'm a bit dense, but if I look at the August sales numbers, you had basically no FX effect, reported +1%, like-for-like -3%, space stores +2%. That leaves another sort of +2%-ish. What's that? I would typically call that space conversion, but that is very seldom positive. What's the difference, please?
I mean, in the calculations, the total sales and the like-for-like sales, you also have at least what we call newcomers. I mean, stores that are not included in like-for-like, but they are coming additional sales, so to say.
Mm.
They're not yet in the like-for-like.
Okay. Okay. Maybe, yes, Andreas.
A follow-up on Nicklas' last thing here on August there. Online, where you reported as like for like or where does it shows up in any of your sales numbers?
Online is included in like-for-like.
Yes. Next question, please.
Yeah, just a final one. Magnus Råman, Handelsbanken. You mentioned that you will sort of gear up the company for a record autumn and winter season. Are you also thinking in one SEK additional sales that you mentioned before? Is it a top-line target or is it also for results?
No, it's about delivering the plan. We have a great offer, we have a great plan. We're going to deliver that plan. That includes both dimensions, of course.
Right. Just looking at the balance sheet, I would have envisioned that you sort of stock up ahead of such a record autumn and winter, but inventory is actually down slightly year-on-year in absolute numbers. Do you have any comments on that?
Yeah. The explanation is actually what happened last year. We had a quite big inventory build up in Q1 last year. Now we have a lot in stock, but we haven't purchased so early as we did last year. I can assure you, we have everything in stock that it takes.
That sounds reassuring and also helpful. Thanks.
Mm-hmm.
All right. Any, any final questions from the floor, please? Andreas.
On your balance sheet, I mean, obviously you have a payout, target at least 50%, and more if, the balance sheet can take that. Obviously you have a very strong cash position. I mean, what's your initial thoughts on, on that, and, why are you not being more aggressive on, on your balance sheet?
As I said, I think it's a fantastic foundation for development. I think I also mentioned when I talk about the strategic review and a little bit the direction for that, I think that it's important that we look at what capabilities we need to build in order to deliver that strategy. Before commenting on those types of questions, I would like us to finish the strategic review and also have a plan in place that also visualizes what it will take to deliver that plan, also from a balance sheet perspective. Then, I think it will be more relevant to comment on that in that context.
Lastly, you mentioned in your earlier comments that growth is good, do you think that all growth is good growth? Thank you.
Like-for-like is the best growth.
Yeah. maybe if I can finish up with a general question. I mean, as have been mentioned during this very interesting Q&A, I mean, you've expanded a lot over the past years. Profit levels are basically more flattish, perhaps. some big consumer change going on.
Mm.
I was just thinking, the Rusta, the Jula, the Byggmax, every competitor you can think of, they're still out there. I was just wondering, from a mathematical point of view, I would certainly agree that the U.S. dollar would be a major margin driver, theoretically at least, going forward, admitting the time lag you're on. Still, what do you think you will actually in a more dynamic context be able to maintain that sort of on-paper profit from the U.S. dollar? Can you touch a little bit about the competitive landscape and the dynamics? Do you think that your competitors will take the opportunity to lower prices? What are your plans?
First of all, I think as a starting point it's important that the commercial strategy, in relation to competitors is a lot more than price. As I said, one of the, I think, differentiating things for Clas Ohlson is the service level we offer, but also the accessibility.
Mm.
Of course price is something that we review on a constant basis, product by product, day- by -day.
Mm.
It's part of a totality.
Sure. Still, I mean, do you really think you will be able to maintain that profit from the U.S. dollar? I mean, that will boost your margins, and you have a choice.
Yes.
How should we think about that?
Yeah, as I said, I think it's part of a total commercial strategy that we will implement.
I'm sure we'll be back on this issue.
I'm sure.
We've been talking about that over the past couple of years, and we'll continue.
Yep.
Okay. I think that's it from me, unless there's any more. Maybe I forgot to ask the conference call if there's a question?
Thank you. Ladies and gentlemen, if you do have a question for the speakers, please press zero one on your telephone keypad and you will enter the queue. There will be a brief pause while questions are being registered. As there appear to be no questions from the audio, I'll return the conference to you.
All right. Thank you very much, operator. Thank you so much for having me.
Yeah. Thank you, Nicklas.
Thanks for all the Q&As.
Mm-hmm.
Thank you.
Mm-hmm.