You for standing by and welcome to the H and M Second Quarter Results for 2015 Conference Call. At this time, all participants are in a listen only mode. There will be a presentation followed by a question and answer session. I must advise you this conference is being recorded today. And I would now like to hand the conference over to your speaker today, Mr.
Nils Vinge, Head of Investor Relations. Please go ahead sir.
Thank you and welcome to this telephone conference on the occasion of H and M's 6 month results 2015. Our CFO, Jyrki Tervalen is with me today again, and we'll be happy to answer your questions after the presentation. You'll find the presentation slides to this telephone conference on hm.com. Looking at the first half year in brief, H and M has continued to perform well. With well received collections for all group brands and successful expansion with stores and online, sales developed strongly and we continued taking market share.
Profit also developed well with an increase of 19% in the first half year. This is despite the fact that the increasingly strong U. S. Dollar has pushed up purchasing costs and that we have continued to increase our long term investments compared to last year. Our long term investments are necessary in order to build an even stronger H and M.
Among other things, these investments would enable us to be a natural part of our customers' increasingly digital world, where the distinction between shopping online and in physical stores is fading. Our goal is to offer a customer's experience where online and stores are closely interwoven. This would strengthen our customer offering further. Now to look at sales in the Q2, please turn to the graph sales. Sales development in the Q2 remained strong, especially given the more challenging conditions that we faced with strong comparable figures, sales grew 16% in local currencies in Q2 last year.
Unfavorable weather, This spring, the weather was unusually cold in many of our important markets in Europe and negative calendar effect of approximately 2 percentage points. In local currencies, sales increased by 10%. Translated into SEK, sales including VAT amounted to SEK53.2 billion. That is an increase of 20% from the Q2 last year. Sales for the first half year reached more than SEK 100 billion, an increase of 12% in local currency and 22% in SEK.
And now to look at results, please turn to the next slide. Gross profit in the second quarter was SEK 27,200,000,000. That corresponds to a gross margin of 59.4 percent compared to 60.8% last year. The combined effect on the purchasing costs from the external factors was negative. This is mainly due to the strengthening of the U.
S. Dollar. And markdowns in relation to sales increased slightly compared to the Q2 last year by approximately 30 basis points. For the 6 month period, gross profit amounted to SEK 49,500,000,000 with a gross margin of 57.4%. Please turn to the slide SG and A.
Cost control in the group remained good. In the Q2, selling and administration costs increased by 22% in SEK to €18,900,000,000 In local currencies, the increase was 12%. The increase in SG and A is mainly related to the expansion and the long term investments. To look at profits, please turn to the next slide. Profit after financial items increased by 10% to $8,400,000,000 in the 2nd quarter and by 18% to $13,200,000,000 in the 6 month period.
Profits were impacted by positive currency translation effects from when we translate our subsidiaries' results into SEK, but also by the negative transaction effects from the strong U. S. Dollar on purchasing costs. Higher costs for long term investments also had a negative effect on profits. Please turn to the next slide.
With an estimated tax rate of 23.5 percent, tax amounted to nearly SEK 2,000,000,000 and net profit increased by 11% to dollars in the second quarter. This equals earnings per share of kroner, up from kroner 3.51 percent last year. And now for some more key data. Please turn to the next slide. Stock in trade on the 31st May amounted to almost €20,000,000,000 an increase of 32% in SEK.
In local currencies, the increase was 27%. Both the composition and the level of the stock in trade are considered good. The reported increase in the stock in trade is explained by the store and online expansion as well as by the strengthening of the U. S. Dollar.
As the dollar appreciation has impacted purchasing costs, the value of the stock in trade has also been affected. And as a share of sales, stock in trade was 11.8% compared to 10.3% last year. Cash flow from the current operations was DKK 13,600,000,000 up from DKK 11,900,000,000 And investments in terms of CapEx totaled €4,700,000,000 for the first half year compared with $3,900,000,000 last year. Investments covered mainly new stores, but also IT and logistics. For 2015, CapEx is still expected to reach approximately DKK 11,000,000,000 to DKK 11,500,000,000 based on exchange rates from 30th November 2014.
The financial position of the H&M Group remains strong. Liquid funds increased from €9,600,000,000 to €10,300,000,000 and that is after the dividend payments of €16,100,000,000 Return on equity was more or less unchanged at 50.3%. And now for some words on expansion. Please look at the slide Store Expansion 2015. H and M's strong expansion continues.
In total, we will open approximately 400 new stores net in 2015. The largest expansion is taking place in existing markets with China and the U. S. Hosting the highest number of new store openings. In New York, for example, we opened a new flagship store in May on Herald Square in Manhattan.
It is the largest H and M store to date and we are very happy with the customer reception. During the first half year, we added 128 new stores net. And at the end of the period, we had a total of 3,639 stores, all group brands included. We're adding 5 new H and M markets this year. Taiwan, Peru and Macau have already opened and the customer response has been very good in all three markets.
And now we're looking forward to the opening to opening the first stores in India and South Africa 2 interesting and large markets where we see great potential for H and M. The first stores will be in New Delhi and in Cape Town and they will open towards the end of the year. And expansion continues for all our brands. Please turn to the next slide. The newer fashion brands of the H and M Group are Kos and Other Stories, Monkey, Weekday and Chief Monday.
Expansion for these brands in 2015 will focus mainly on and Other Stories and costs. Both these brands will open more new stores in 20 15 than in 2014. Kos will add at least 4 new markets this year. Bahrain opened with franchise in February. Luxembourg, the Czech Republic and Canada are planned to open in the autumn.
In parallel with our store expansion, we are also adding new H and M online markets. Please turn to the next slide. H and M's online store, hm.com is opening in 9 new markets in 2015. 8 of them opened already this spring: Portugal, Poland, the Czech Republic, Romania, Slovakia, Hungary, Bulgaria and Belgium. All of them have been very well received.
With the addition of Switzerland this autumn, there will be 22 H and M online markets. And we continue our preparations to roll out the H and M online store to the rest of the group in the years to come. H and M is reaching more and more customers globally and we keep developing our customer offering with new fashion initiatives and new concepts. Please turn to the slide H and M Beauty. H and M Beauty is our latest initiative.
This new concept will be rolled out gradually in 900 stores in 40 markets as well as online starting in July. H and M Beauty will offer a broad range of makeup, body care and hair care. The products will be of high quality at very good prices and in specially designed packaging. This winter, 2 subsidiary collections will also be added, a premium beauty line for body care and a conscious range of eco cert approved sustainable products. H&M Beauty is one example of all the investments we are making in order to broaden H and M's product range even further.
And now before we move on to the Q and A session, just some words on current developments. June has started well. Sales in the period from the 1st to 23rd June increased by 14% in local currencies compared to the same period last year. Meanwhile, if we look at market conditions regarding sourcing, we see that the market situation regarding the external factors for the purchasing period to the 3rd Q4 of 2015 is very negative. This is again because of the substantial strengthening of the U.
S. Dollar against most currencies, which has led to substantially higher purchasing costs compared to the corresponding purchasing periods in the previous year. We have great faith in our offering. And although the increasingly strong U. S.
Dollar will result in gradually higher purchasing costs when sourcing for the coming quarters of 2015, H and M will still make sure to have the best customer offering in each individual market. And with that, we are now happy to take your questions. And please remember to only ask one question at a time. Thank you. Thank
And your first question comes from the line of Paul Steggers. Please go ahead.
Hi, everyone. Thank you for your time. Just a quick question on the incremental investment costs in Q2. Can you as you did in the Q1 highlight what the amount was and how that was split between cost of goods sold and OpEx please?
Yes. In Q2, the incremental cost was approx SEK 150,000,000 and it's divided more or less fifty-fifty on cost of goods sold and SG and A.
Okay. Thank you very much.
Welcome.
Thank you. And your next question comes from Niklas Baum. Please go ahead.
Thank you, operator. I just have one question. When you say that you expect purchasing costs and external factors to be very negative in the second half of this year, is that a change compared to exactly what you said at the end of fiscal Q1 please?
There's no change to what we said in connection with the Q1 report.
Thank you very much.
Thank you. Your next question comes from Richard Chambers. Please go ahead.
Yes. Thanks a lot. I just got a question guys on the capacity situation you're seeing amongst your major suppliers. I know you it's one of the external factors on margin. How are you seeing the capacity situation?
Are you seeing any excess capacity coming on stream in Asia? Thanks.
It's pretty stable at the moment and so nothing dramatic, but yes more or less neutral.
Okay. Thanks. And just one follow-up. On customer loyalty, can you just give us an update on which markets you've introduced some sort of loyalty scheme in for customers? And what are the plans there?
And how is that going?
Certainly, we have since many years the loyalty scheme in Sweden and Denmark. And last year we introduced a new program in Austria and the Netherlands. And of course, the results are we're very happy with the results and the plan is to continue to roll out in the rest of the group.
Okay. But should we expect a big increase in new markets for that this year? Or it's going to be fairly steady?
I think we will come back when we have more information. But of course, the plan is to roll it out. But again, it's a balance of quality and speed.
Okay. All right. Thanks.
Thank you. And your next question comes from Frederic Leclercet. Please go ahead.
Yes. Good afternoon, Frederic Lacresse from Raymond James. I have a question on your new segment initiatives. Could you update us on where you stand in sports and if you are happy about it and where you want to take it? And maybe where do you see these new segments sports beauty that you are adding to your offer as a percentage of your global sales within I don't know 3, 5 years maybe?
Thank you.
Yes. Again, try to remind you one question at a time. But regarding our new initiatives, you asked about beauty shoes extended shoes and sport. We are happy with all of them. Well, beauty we are just about to launch, but it looks very promising at least.
And regarding sports and extended shoes, we're in early stage, but so far we're very happy and we continue to roll it out in the group.
Thank you. And your next question comes from Rebecca MacEwen. Please go ahead.
Yes. Hi, good afternoon. Can you tell us sort of give us an update on your views on average selling prices for the autumn winter and springsummer 2016 2015 and 2016 and whether you think there's any capacity to adjust them slightly in order to try and dampen the impact of the average unit cost inflation?
This is of course the $1,000,000 question. And as you very much know for us, it's always about having the best combination of fashion price and quality in a sustainable way. And we will never be the 1st ones to raise prices. So it will be very interesting to see what's going to happen this autumn.
So at present prices are relatively stable ahead of the season. Price expectations are stable ahead of the season. Is that right?
Yes. As you know, we don't comment on our pricing strategy apart from what I just said. Sorry.
Okay. And may I just ask, you said that the CapEx guidance is 11 to 11.5 as that currently is at the end of November. What would the guidance be at current rates, please?
The guidance is still that it will land somewhere between SEK 11,000,000,000 SEK 11,500,000,000. And as you I think you mentioned, it's based on the currency rates prevailing at the year end closing. So when translating that to Swedish krones, it can differ at the end of the year. But it's the same guidance when it comes to CapEx.
All right. Thank you very much.
Thank you. Your next question comes from Charlie Muir Sands. Please go ahead.
Good afternoon. I had a number of questions, but all related on the operating costs in the quarter. Firstly, in the past, you've been kind enough to indicate whether comparable store costs rose or fell in the quarter? Just want to gauge that aspect as opposed to the expansion.
The cost in comparable units they increased during Q2. So there was an increase.
Okay. And on the calendar impact, which you've said is negative 2% on the revenues, would that also have been negative 2% on the costs or?
No, that's the fact because even when we the stores are closed due to a Christian holiday whatever it is, we still pay rents in most cases, right? So that's why it's important to be aware of the calendar impact because it clearly affects top line, but not so much on the cost side.
Fantastic. And sorry, the third part of that was the long term cost investment you indicated €150,000,000 more in the quarter. Can you confirm that the guidance for the full year of I think it was $400,000,000 to $600,000,000 is still as it stands?
Yes. It stands still.
Great. Thank you.
Thank you. And your next question comes from Anne Critchlow. Please go ahead.
Hello. My question is about the incremental costs, not for this year, but what you're thinking for next year at this point. I mean, do you think there'll be incremental costs in addition to this year's level or the same level or decrease? Do you have any idea about that yet please?
Well, it's far too early to start to talk about 2016. But as we many times said, we have a lot of good initiatives where we see possibilities. So I'm convinced that we will find really good business cases also for 2016. So but we will come back to that in connection with the full year report.
Okay. Thank you. Thank you. And your next question comes from Simon Owens. Please go ahead.
Afternoon, gentlemen. Can you just talk a little bit about your input costs? Obviously, you talked about FX. But if you exclude FX, is there any material increase or decrease in dollar terms?
No, not really. I mean, we talk about these external factors such as raw material costs and capacity, salaries, etcetera. And the sum of it, as we said, very negative for the purchasing period now for the quarters to follow. But if you break it down, of course, some I mean, obviously, cotton prices have come down a little bit, so that's a positive. Capacity is more or less neutral.
Salaries are up, which is good, we think, because this is something we actively drive for sustainability reasons. So I mean no dramatic changes I would say. But at the end of the day, I mean I'm talking about market prices now. Then of course, we could negotiate better or for some reason have different output in our results for other reasons. But as I said more or less neutral for the ones except for U.
S. Dollar.
Okay. And then just following that on into your inventory. And obviously, you said that most of that is down to the U. S. Dollar and to the increases in capacity.
How should we think about the kind of markdown risk? I mean, do you consider your inventory in reasonably good shape? Therefore, there is no incremental markdown risk in the second half of the year?
Yes. As we stated at the end of the second quarter, the stocking trade level is good and so is the composition. But when it comes to reductions in Q3, it's still over 2 months to go. So it's far too early to draw any conclusions based only on the stocking trade levels and the composition. We don't know what the selling turnover circumstances will be for the coming months.
Okay. And can I just ask a quick question about the June trading statement? Is that how much of that is down to a calendar effect?
Right. There is a calendar impact. For the full of June, we estimate it to be around 3% and all of that is included in these 14%.
Okay. So it's probably a bit lumpier than at the margin then?
Well, of course, I mean, if you take away the net for the calendar impact, the top line is lower, right? Absolutely.
Okay. Fine. Thank you very much.
Thank you. Your next question comes from Chris Chiaviaris. Please go ahead.
Good afternoon, guys. Two questions. I have one at a time. The first question is on some consumer behavior in several of your territories. So what I've noticed if you do a simplified version of like for likes, if you try to do is that Northern sorry, yes, Northern Europe and Central Europe have experienced a decline in the same store sales, while in Southern Europe, you've got and Eastern Europe, you've got a very strong like for like momentum there and even the U.
S. Is doing well, which might come especially in Europe as a bit of a surprise given the different states of the economy that the different territories are in. Have you noticed any major change in consumer behavior in the 2 territories? And would you have any comment of why this of why your sales have such a behavior?
Yes. It's very simple because the cold spring we talk about is mainly in the Central and Northern parts of Europe.
Right. And in terms of Southern Europe and Eastern Europe, you don't see well, Southern Europe, you don't see any impact from the tough economic conditions there?
Of course, we do. But we've had actually a pretty strong development in Southern Europe for more than a year now even in countries like Greece.
And do you envision because people are trading down or because your product has improved?
No, I don't think it's that simple as consumers are trading down. I think we've touched upon this many times before. We have we're very consistent and we have been since we are continuously what we do when we continue to expand and the customer appreciates what we do. I think that's as simple as that.
But specifically looking at the Q2 and maybe at the end part of the Q2, I think we as we said, we have a good customer offering in all markets. And but as Niall said, it has been much more unfavorable weather in the northern parts of Europe, Scandinavia, Northern Europe, Central Europe and southern parts they have had favorable weather. So that's of course affecting our turnover.
And this is also affected in the market statistics that you've seen from Germany and Sweden where Sweden in May was down 9%, I think, and Germany was down 5% or something. And we outperformed the markets.
Okay. That's fair enough. The second question, if you can give any comment on if you do have the data on the average basket value differential between a customer at an H and M store, a cost store and another store, what would be you think the how much on average would a normal customer spend more I guess on or not on costs and other stores versus H and M?
Well, as you know, we prefer not to go into details such as customer basket size or ASP etcetera. But of course, both costs and stories, they have the same more or less the same business idea which is fashion quality at best price in a sustainable way, but of course in a higher price level price range. So that means that price baskets typically should be higher.
Okay. But I guess volume should be lower. So would you think that at least the value of the basket will be higher than H and M?
Well, that's just what I said the value for basket per yes, it should be high. Absolutely.
Okay. Okay. Thank you. Okay. Thanks.
Thank you. And your next question comes from Jamie Merriman. Please go ahead.
Thanks very much. You talked about the strong reception from your e commerce offers as you've launched them in new markets. And I'm just wondering, have those launches caused you to reconsider your store expansion plans at all, either reducing the number of stores that you're opening or changing that kind of store, maybe not opening as many small stores and focusing more on flagship stores? Thanks.
It's true that e commerce is growing, but we see potential to continue to grow both in the physical stores and at the same time on e commerce. So we think that that can be the situation for many years to come that we have a lot of expansion still in existing markets and on new markets when it comes to physical stores. So we are doing the both and seeing a huge potential in both channels.
Okay. And so no type even to the no change even to the type of store that you open given e commerce growth?
No. We are on the opposite. Sometimes we are looking into broadening our offer existing offers in both channels, both in the e commerce channel, but also in physical stores. We have added H and M Sports, extended shoes. Now we are launching the beauty line.
So we also extended the existing stores space, if it's possible.
Okay. Thanks.
Thank you. And your next question comes from Dana Telsey. Please go ahead.
Good morning, everyone. Can you please give a little bit of an update on omni channel initiatives, where you stand there? And then as you open more H and Ms globally, how do you think of backfilling in with secondary concepts in the different markets? Thank you.
Right. Regarding omni channel, I think Jurgen touched upon this before. We are investing a lot and we are adding and improving. And as well at the same time as we are expanding into new markets, we are also improving the customer offering online, customer experience. And we've had, for example, return in stores in many countries now.
We have the scan and buy function in many countries. We have a loyalty scheme. We have broadened the assortments etcetera, etcetera. So a lot of things going on and a lot of things happening. Regarding your other question, we are launching the other brands, expanding them at a faster speed in percentage than H and M.
It's primarily Kos and Other Stores this year, but we're also looking to speed up Monki going forward and weekday. And as you know, we have launched Kos and other stores in the U. S. And we are very happy with that. And of course, this year, as I mentioned, there will be at least 4 new markets for costs and we're very excited about that.
Thank you. Welcome.
Thank you. Your next question comes from Adam Cochran. Please go ahead.
Good afternoon, guys.
I
was going to try a slightly different concept. Maybe I'll ask 2 questions and you can choose which one you answer. Firstly, I noticed that in Russia you increased some of your prices. Was that following on from seeing competitors increase their prices largely due to the FX issues? That's the first one.
And then secondly, you just mentioned following on from that last question about the growth in the other concept. What proportion of sales is coming through the H and M brand now? And of the stores opening this year, how many of them are H and M compared to the other concepts please?
Right. Starting with Russia. I mean the whole market has increased or adjusted prices to the collapse of the ruble. So of course, we continuously monitor pricing and competitors and sourcing and it's a natural part. So that's nothing new.
That happens all the time not just when currencies move as quickly as they're done at the moment. So nothing new about that. And regarding the other question, there is I think in the report we state how many stores we break it down per brand. And that gives you an idea about the expansion. And I don't see any dramatic changes going forward.
Okay. At what stage roughly what percentage of sales would they contribute to the group now?
The vast majority of the sales that is of course H and M, but we're very happy with the other brands and they are we're seeing great potential for each other.
Okay. Thank you.
Thank you. And our next question is a follow-up from Rebecca McKellen. Please go ahead.
Yes. Hi. It's Rebecca again. I was just wondering whether you could quantify what you mean by very negative in terms of the impact on the external factors on average unit costs in terms of what we might expect for the gross margin in the second half and into twenty
16? Again, let me remind you that we will not give any guidance on gross margin. This is a very as you know, very competitive industry and there is no patents or anything that we can keep. So this is something we keep to ourselves. And for us, it's always about having the best customer offering and the gross margin is a result of that.
Okay. Thank you. And secondly, would you expect higher volume of garments into the summer sales given the sort of levels of inventory at the end of the second quarter?
As we said, the stocking trade level is on a good level at the end of Q2. And what the reduction levels will be when ending Q3, we have to come back to because it's still over 2 months to go. So that we will come back to in connection with Q3 report.
But you're asking about the quantity, right?
Yes. The volumes of yes, the volume of products burning into the tail.
If we
don't break it out. All
right. Okay. Thank you.
Thank you. And your next question comes from Fraser Ramses. Please go ahead.
Thanks. Good afternoon. Just wanted to ask about the inventory position. If we take the local currency sales increase to 27%, I think you said that a big piece comes from obviously expansion and also inventory for the new online markets. But also a big piece is clearly the U.
S. Dollar. Given your sort of speed of inventory turn, isn't it sensible to think that the bit that relates to the U. S. Dollar is really what's going to impact your P and L in the next quarter?
Yes. Of course, what's in the stock in trading Q2, so of course that will come through the P and L when we are selling garments. So you will see the effect in Q3. That's true.
Right. So if I've got 27% local currency inventory increase and this is my analysis and obviously not to your guidance, I understand that. If let's say 15% of that relates to expansion and some of your new online markets then we would be looking at a 12% cost headwind in the P and L in the coming quarter. Obviously, all else equal, which it never is, obviously, prices move and that kind of thing. But is that a fair way to think about the inventory number we're looking
at? As we have many times said, we don't want to elaborate and go into more details when it comes to how the composition and what's exactly the impact on different factors. But we are happy with the level and the composition and there is a huge U. S. Dollar impact on destocking trade.
And that will, of course, be released through the P and L during the next Q3.
Thanks. That's very helpful. Thank you.
Thank you. And we have a follow-up question from Charlie Muir Sands. Please go ahead.
Yes. Thanks. On the news wise this morning, there was a comment that the that you guys are looking at maybe launching another new banner in 2017. Could you elaborate on what was said this morning? And also on the existing other banners, can you confirm that returns are similar to the rollout of H and M concept?
Again, one question at a time. The first rumor you referred to was a comment from the CEO made this morning regarding our new business department that are looking into new things all the time. And yes, there are some concrete things that we are looking into. But I don't think you mentioned 2017, he said going
forward. Okay. Yes, sorry. So the second question was, so for the rollout of the other concepts like stories and costs, can you confirm that the margins, the return on capital profile or however you appraise the economics of those is comparable to the rollout of the H and M concepts?
Well, we don't we choose not to comment profitability per concept brand or market. And of course, initially when you launch a brand, there's a lot of costs connected to that and margins are not where we want them to be in the long term. So of course but I mean we see great opportunities for and potential for all of the brands. But more than that, we don't want to comment the profitability.
Okay. Thank you.
Thank you. Your next question comes again from Paul Stegas. Please go ahead.
Yes, guys. Hi. Just back to the gross margin, maybe trying to slice it one other way and get a bit more information. Was there any hedging benefit in the gross margin move in the second quarter? And given you've got reasonably short hedging periods, would it be fair to assume then through Q3 and Q4, you should at the end of Q4 broadly have annualized the current euro dollar or dollar SEK rate?
Or would you be still expecting further gross margin impact next year all else being equal?
The first question regarding hedging gains, what could you specify?
Well, I'm just wondering if there were still you still had some hedges which are rolling off in the Q2 that would have benefited at all your inventory or your COGS and protected you in terms of the gross margin. Obviously, as that then rolls out or rolls off, you don't have that positive impact in Q3, Q4. I'm just trying to get a sense of when this whole the fall in the euro Swedish krona relative to the dollar will fully annualize in your gross margins?
Of course, there's always a mix of the inventories going from Q2 to Q3, etcetera. But the negative impact from the U. S. Dollar in Q3 and Q4, it's much more negative than for those garments that we bought for Q2. And when it comes to Q1, next year 2016, we haven't started to buy the products at this stage.
But if the U. S. Dollar will be on this level, it's most probably will cause a headwind when it comes to negative impact on our purchasing prices also for Q1.
Okay. That's clear. Thank you.
Thank you. And your next question comes from Richard Jaff. Please go ahead.
Thanks very much. Two questions again, one at a time. Could you talk about the pervasiveness of the loyalty program? How low it's been adopted? How many more markets can be rolled out?
And perhaps how large it is either qualitatively or quantitatively? And then if you could talk briefly about the Southern Hemisphere and some of the unique challenges you've been able to overcome in expanding down there? Thank you.
Okay. First question regarding loyalty scheme. As I said, we launched it we started to launch it end of last year and we so far only have it in 2 markets, this new version of loyalty scheme. But and we are very happy so far. But I don't I can't give you any more details at this moment going forward.
But of course, this is something we believe a lot in and we want to roll out the plan is to roll it out in the rest of the group. Okay? And the next question was regarding Southern Hemisphere. And we have now a strong bridgehead in the Southern Hemisphere. We have stores as you know in South America, Australia and we're very excited about the launch coming up in South Africa.
And so we see a we have now a process how to handle the reverse seasonality and obviously it works well. So now it's just to scale it up.
Thank you. And your next question comes from Stefan Billings. Please go ahead.
Thank you. On the gross margin, could you please quantify what very negative means versus just negative? Thanks.
A lot of questions regarding gross margin. Again, we won't be able to give you any more flavor than what we have said already. I'm sorry.
All right. Thanks.
Thank you very much. And there are no further questions at this time. Please continue.
Okay. If there are no more questions, I'd like to thank you all very much for participating in this conference call and welcome back for the Q3 results on the 24th September.
Goodbye.
Thank you
very much. That does conclude our conference for today. Thank you for participating and you are now free to disconnect.