Good morning, everyone, to Lyko's quarter report. My name is Tom Thörnblom, and I'm heading up Investor Relations and Communications here at Lyko. Today, we will have a short presentation here at our head office in Stockholm from Rickard Lyko, our CEO, followed by a presentation of the numbers by Ylva Norlén, our CFO. After the presentation, we will have time for questions. We have quite a lot of our analysts here in the room, so we will start with them. Then we will open up for questions from people on the web. With that said, I will also mention that this call will be recorded and will be shared on Quartr after the call. I leave the floor to Rickard Lyko.
Thank you, Tom.
Welcome, everyone, joining in. It's our most important quarter, and we were delivering. But before we get into what's happening in the quarter, I was just stating that we are still aiming to be the starting point of beauty, and that is something we have been working for quite some time now. I think that is also why we're standing here and are able to handle this quarter in a better way than we have done previously. That is because a lot of brands want to join force with us, because we can be the starting point where the customer is coming in looking for what they want before they have decided. I think that's our position that we're trying to build.
In that position is to be the beauty ecosystem, to really try to make something in between the customer and the brand. We're aiming to deliver a value for the customer, but also for the brand, to be a brand builder for the brand. They are seeing that they are getting value from their brand out of investment in our platform and our ecosystem. Sales-wise, we met quite tough numbers, and it's our biggest quarter, but we were able to handle that. We're also seeing that the profitability is really increasing a lot because we are scaling on our organization, but also that we are getting our margins better.
That is also a lot to the mix of the products that we are able to handle better, but also the position that we have been building and kept on building for quite some time in skincare and makeup that also keeps on growing. We keep on investing in our marketing and building the awareness, and we are also seeing, if we look into the whole year, that they are also delivering those numbers. We're seeing the brand awareness keep on increasing, and we have seen that for quite some time in Norway, Sweden, but now we are also taking a lot of steps in Finland.
A lot of times, this used to be the best way to look into the future where we are heading, because we are knowing if our brand awareness is going up, because we are working with products that you are using up. So, the next time you're thinking about adding your products, you are thinking about those brands that you are having top of mind, and there is where we're trying to be. Right now, we are in that position in Sweden and Norway, but going for that in Finland. What is building this is also we are investing in brand building and marketing, but also we're doing a lot of other stuff in this that we call the ecosystem, where we're seeing a lot of brands joining force with us and driving a lot of events and so on. We have kept doing that.
I'm just going to give you a short example of what we have done here in Sweden, because we are a trendy brand, we are also attracting other players that want to join and want to deliver their brands at our platform.
[Foreign language].
This kind of event is nothing that pays off in the short term. It is something that pays off in the long term in the position of the brand. That is something we believe in and believe to keep on investing in. We also know that we can do that, and we are also doing that with our own brands, which is also an important part of this brand building part, because we are seeing our uniqueness when we're going outside of Sweden and going outside of Nordics. We need those kinds of products to have a unique selling point, but also to help us with the profitability over time, because the margins of those kinds of brands are very stable.
We are doing this in Sweden, and the event you saw was from Sweden, but we are also doing this in Norway as an example. Here also, we are joining force with one of the biggest profiles in Norway, and we are together creating a new brand called PLY Skin, where we are having ownership of 50%, and the influencer has 50%. What we are doing, which is quite interesting with this kind of brands, is that we are taking it from an idea where we are also producing it, delivering, building the platform, building the e-commerce, handling all the logistics, and what they are focusing on delivering how to get the brand out. We are seeing that we can use the whole ecosystem and our platform to help to create those kinds of products and uniqueness.
This is really important for us to have those unique products on those markets and having something unique to talk about. Another of those things that we are doing here, we're doing in Norway and Finland as well, but also in this local market is our Lyko Professional, where we have launched our e-commerce for our professional partners, which is hairdressers. There we are seeing Headon, which is becoming the oldest [Foreign language] here in Sweden, and they are having seven salons and 70 hairdressers, and they are changing to our professional coloring in all our salons.
We have professional coloring, which is really showing the proof that we are knowing our industry and that we are keeping on investing, being a professional hair partner to hairdressers and joining force together with hairdressers, where we saw a couple of years ago, we were the big competitor that you didn't want to hear about, where they are now seeing us as a partner where we can join and help them drive business together with us. Here in Sweden, we have also launched the biggest skincare brand in Sweden. Yeah, we know that our colleagues in the business, another player has also launched that, but we want to do it in our way. I'm just going to give you a short video in how that looks when we're launching ACO. We did similar in Bergen, and we are keeping investing in our stores.
The plan we have just communicated is that we open up another store in Finland this year. We will see if we open any more, but now we are preparing to be prepared to open in a bigger manner next year. We still believe a lot in those stores, and we are really seeing that they are adding value, building the brand awareness. If we look into the brand awareness in Bergen as a region, it is really going fast there. We're seeing that it's really helping us in the total business, but as a stunt also driving the awareness and driving our business, because all our stores are profitable standalone as well. Something we keep on investing in is the Lyko community, where we have the platform that we are seeing that they keep on developing.
That is also really a unique point of ours when we are talking to brands that we are having this community, and we have a lot of people joining into the app and creating this community that also delivers unique data points to all our products. This quarter was the really tough quarter to be able to handle the volume and the growth inside of this warehouse. We did a lot to the Lyko GLAM, which is our own software, where we needed to change to that software to be able to join into the new Van derl ande system, where we have another system that we are operating now. We're really seeing that that system is also delivering, because we were delivering more than the system we were able to do.
Together with our personnel in the warehouse that had been there for quite some time and knowing our business in and out, we were able to handle that. Now we're really looking forward to going into the new automation coming up this summer. That was everything for now. Coming back to the question later, and welcome up, Ylva.
I will dive into the results, and we'll do so quite enjoyably, starting with the sales. The net sales in the quarter grew by 15.6%. Just to point out that the grounds from previous years, Q4, were very high at 24%. We are super proud to present the first quarter in Lyko history with more than SEK 1 billion in net sales. As Rickard already mentioned, we believe that this was a very successful strategy and also execution during the quarter commercially.
We had a certain positive effect from Q3 with the Christmas calendar selling that we mentioned in the Q3 report. All in all, we finalized the fiscal year 2024 with SEK 3.6 billion in sales, which corresponds to a growth of 16.6%. On the gross margin side, we were significantly up in the quarter, 45.2% versus 43% previous year, Q4. The main underlying reasons here are really a well-orchestrated commercial offer, hard work from our marketing, purchasing, and sales teams on long-term effort there. We managed to secure more supplier support compared to the year before. Also the growth of our own brands and this profitability is coming through here. With this quarter, we really curbed the previous downward trend in the margin, and we're super pleased to end up on a full-year basis level to the year before.
On the cost side, we were on the other external costs for the first time below 20%. This is, of course, related to it being a high-volume quarter, but we also see that we have some scalability here, especially in flight and in marketing. On the personnel cost side, it's the same. We had more or less the same staffing arrangements as the previous quarter four in the warehouse. On the group function side, we have grown slightly. But since this is a high-volume quarter, the share of sales is going down. On to the EBIT level. Here, of course, we're super proud that we've been able to grow the EBIT level with more than 250% in this quarter versus last year. We deliver SEK 77 million and a 7% margin, which is all-time high for us.
All in all for the year, it's SEK 117.4 million , corresponding to a margin of 3.3%. If we dive into the segments and start with the Nordics, by far our biggest segment, we continue strongly here. It's a growth of 17.4% in the quarter, and that's on grounds of 23.2%. Very high grounds. We can really see that the omni model continues successfully in the Nordics. Both stores and online deliver really well. We have a few happenings in the quarter, Drottninggatan store turning one, and also we open in Bergen in October. Concluding fiscal year 2024 for the Nordics, we have 18.2% growth, and this is now almost 93% share of sales for the company. Coming into the profit side, here we take a significant leap as well, 73% up versus the year before. Solid contribution again from both online and retail stores.
Just to point out, we haven't changed anything in the segments. We have added on the cost side, country managers for Sweden, Finland, Norway, and Denmark. That was done during spring 2024. Looking at Europe here, as we've explained in previous quarters, we have changed our strategy during the year and tried to focus on finding a really profitable model for the long term. In the quarter, we lost SEK 9 million in selling, corresponding to 20% versus the year before. Across the year, we conclude at SEK 132 million, losing SEK 9 million in sales from the year before. However, if we look at the profit side, this is now the fourth quarter in a row when we are decreasing our losses in the European markets. Our new strategy is looking really promising for the future.
We have also been able to add quite critical new brands to these markets during the quarter. We would also like to have a little bit of spotlight on the other operations where we currently report the selling from our Lyko Production and Lyko Professional side. Here we exclude all the selling that goes through Lyko consumer channels. This is the selling where we produce, manufacture goods for other companies and also handle logistics, as well as the hair salon selling and exports. On the cost side, we here have the cost of the organization for production and professional, but also the own brands team. That's why it looks like we have quite a high loss on the EBIT side.
Here we will get on to a little bit more detail in a second, but we have decided, or during the quarter, we finalized the legal merger of our two production entities and also decided that we will consolidate the production units. We will close the unit in Tyresö during this quarter and consolidate all volumes and ramp it up in Gothenburg. This incurs one-off costs in Q4 of SEK 4.6 million. Since we haven't had a lot of one-off costs previously, we want to just detail what it looks like. For the full year 2024, we've had one-off costs of SEK 7.3 million. One and a half we announced in Q3 that was related to the merger of production. Then we have yet another SEK 5.8 million in Q4. Split by cost type, this is almost half and half personnel and other costs.
If we look at what segments they land in, almost all 6.1 is in other operations, majority being related to these changes in the production side. Yes, and then lastly, as Rickard also mentioned, we are on track in Vansbro with the extension project, which is a great feeling. We will have plus 150% capacity there in Q3 2025. Just for details, we have been paying rent for the new building since the beginning of 2024. The term loan plan is unchanged. We showed this graph in the previous quarter as well. We now have SEK 218 million drawn from the term loan, added SEK 28.8 million in the quarter. The majority of the investment is still ahead of us.
We have flexible interest rates on the term loan, and we have been getting quite a lot of questions now on amortization, and that will start in Q2 2026 with almost SEK 14 million per quarter. On the stock level side, we were more or less level to Q4 2023. This is, of course, relating to the constrained capacity in Vansbro. We have been trying or succeeding also in selling more with less stock. We have a stock-to-sales ratio of 14.4% versus 16.6% in the year before. That was everything we had prepared. Opening up for questions.
Thank you so much, Ylva. Victor was here first. Victor from Carnegie, please.
Thank you, Tom, and Rickard and Ylva. Thank you for the presentation. Congrats on a strong quarter. The margin in Q4, that's my first topic.
It was the strongest since Q3 2016. Actually, Rickard, you're strongest since you became the CEO. You were also much, much smaller back then. Seems to be driven by both gross margins and a lower marketing spend as a % of sales. I'm wondering a bit, how sustainable would you say these two KPIs are? For instance, I have a thought that since your Vansbro Fulfillment Center, it's close to max capacity currently, that perhaps in Q4 you chose to focus a bit more on margins rather than sales growth in Q4. Is there any truth to this?
Yeah, we needed to focus on not broaden the assortment, but I would say we still went out for a big assortment. I would say it's more about the position that we have been building in those categories where we have been very small in the past.
Because in the past, why we had higher margins was because we had a strong position in haircare. Now we're starting to take that in skincare and makeup as well. It's always a mix. We have talked about that the last two years when the margin went down, we talked about the mix. When it's going up, it's still the same thing, the mix, but our position is strengthening as well. You never know which will be the next trending brand. Also underlying, we are building our position with our own brands as well. With such a solid foundation for the margins, we will not be as affected. We are also knowing that our margin is much higher in the stores. The stores had a bigger quarter as well.
As you mentioned, Ylva, last quarter we spoke about the timing effects for the Christmas calendars benefiting Q4 rather than Q3. Could you tell us a bit more about the effects in Q4 for this sales and margin-wise?
Yeah, we won't disclose more than we did back then. It has an effect, but not a material one on the quarter. Certainly pointing it out since we did point it out back then as well.
Okay. A final question from me. I can go back in line. I was curious about your view on increased competition from the online pharmacy players. I've spoken to many of them, and they all mentioned category expansion and the beauty segment as an area for them to grow in. What are your thoughts?
I mean, a lot of those players that play in a lot of categories, we have seen they have done that for quite some time. I think now we have proven it's not as easy to break into this category. You can do it in some sense, but it's really hard to get in. I mean, there are two big players in the market in the Nordics, which have a stronghold in the beauty segment. I think it's quite hard to get into that when you're doing everything else. We haven't seen any changes in that. I think rather what we have seen is that they are not as focused as they were two years back.
Thank you.
Thank you for that. We begin with continue with Benjamin Wahlstedt from ABG Sundal Collier.
Perfect. Thank you. I will follow on the previous question on the gross margin.
Is there any chance you could give us an approximate gross margin bridge? It's quite a big improvement. Both we and the market are wondering how much should we extrapolate here.
I think there are quite a few parts contributing, as we've already mentioned. It's been long-term work from the purchasing, marketing, and sales departments together with suppliers. This is the highest interest quarter of the year when it comes to our category. That collaboration plays a big part. The own brands growing as a share is another explanation. There is a bit of a positive effect in the quarter as well. Then the product mix, as Rickard has also been mentioning. All in all, that's about it. I totally agree.
I think if you look back again to the other quarters, what we have talked about, why the margin has went down, now it's similar when it's going up. It's a lot about the mix and how it looks geographically, where we have the volumes in the countries and so on. But also the position, because I mean, the margins are really steady in the retail where we are choosing which kind of brands we want to sell. That is also what we're seeing now online, that we are able, because of the position, we can set a little bit more what are we selling. We are not just out there in the market. We can also affect it.
Thank you very much.
In the past few years, you've gone from, I guess, more of a challenger to the largest online beauty retailer in Sweden, at least. During that journey, you've been able to co-finance both marketing investments and also product campaigns by suppliers to an increasing degree. My question is, is there a way to put any figures on that? What's left from these two sort of margin buckets looking two, three years from now?
I think why we are able to do that is because we have invested a lot in branding, but also organization-wise to building that platform. Because it's really hard to handle, to be able to take those brands and take them into our ecosystem and take it out needs a lot organization-wise. We have done that for quite some time.
I think what we will see, hopefully going forward, is not less investment, it's more investment, because we are getting more traffic and we have more things to sell at our platform, because that is where they are buying it. I don't really see why we shouldn't keep on continuing and keep on growing that part. Because what they are also seeing is that it pays off. I think we are in a win-win position. It's not that we are squeezing our suppliers. It is that we are joining force.
Any way you could give a figure on what share of your marketing budget is sort of co-financed? No, no, it's nothing that we will speculate in. All right. Final one for me then. You talked about the PLY brand.
I guess you could call this an own brand, but regardless, is there a difference between the PLY brand, which you co-own with an influencer in terms of profitability, compared to, say, Waterclouds, which you own 100% yourself?
What is getting left in that company where we are splitting it? But also, what we are getting into that collaboration is that we need to invest less in talking about the brands, because you're getting that for free through a strong influencer and so on. So there is the same. I think the profitability is good, but also that we are doing everything is helping that for sure. But then it's more about getting it, growing the brand, because the margins are enough to share. It's more about getting the volumes. We will see.
I mean, we have just started, but I also think for us it's important that we are in the position that we get those questions and are able to do those collaborations. Because we know that will also help the rest of the categories for other brands as well.
Perfect. Those were all my questions. Thank you very much.
We'll pass the mic to Daniel Schmidt, Danske Bank.
Thank you, Tom. Just coming back to the European business, I think you said that you were securing critical brands that helped profitability, I guess, to still losing money. How do you see the European business for your sake going into 2025? Is it your ambition to be break-even in a couple of quarters, or is it going to take longer?
The focus right now has been to be able to cover the real cost, not the fixed variable cost, sorry, lost the word. That's what we are seeing, because the year before we saw when we are increasing revenue, we are increasing losses. Now when we are increasing revenue, we are decreasing the losses. That is what we will be doing going forward. Then it's a question about when are we able to take the whole of the fixed cost. Right now there's some personnel and some office, but otherwise we're seeing that it is scaling. I think we will be doing that, but when we're having the breaking point, I cannot exactly tell, but it will keep on going that going forward.
When you mentioned critical brands, what do you mean? Do you want to highlight?
I mean, it is brands that we, just to get them on platform, they keep on selling. What we have seen is that we were having some of those that we need to draw back because the supplier didn't want to support it. Now we're getting some of those back. We're getting the right brand selling to the right margins. I mean, we are in a position in those countries where we are really dependent on the right brands. We are that in a big sense here as well, but even more in those markets.
Why are you getting them back if you lost them? Can you pinpoint why?
I think in the beginning, I mean, we have big players that are knocking doors on those suppliers. But then after discussion, we can show what we can deliver to the brands.
Because that's the same story in Poland and in Germany and Netherlands and Austria, as it is in the Nordics, that we are standing for something new. We are reaching out to a younger consumer. We are talking in a different way. Some of those brands like that, and they want to be a part of that. They're seeing we can add some value in that market for those. Then they are jumping on again. But a lot of those processes are taking time. I mean, a lot of we are fast, but a lot of those big companies are not as fast. We need to take those discussions. Then two years later, we are live again with it. But I mean, it's also helping that we are building the strong position here in the Nordics. They're believing us going forward. Okay.
Just also then coming back to the gross margin, do you really feel that this is the inflection point for the gross margin? Or do you sense that you were sort of extra lucky on the mix side in the quarter? Could that shift as we go into the coming quarters dramatically?
I think the best way to look at it is in the segment in the Nordics. It's been quite stable. I think it will keep on being quite stable. It will vary depending on the mix in some quarter. But I would say the underlying growth will keep on going in the right direction, but also together with our own brands.
Thank you.
Thank you for that. Then we go to Magnus Råman, Kepler Cheuvreux .
Thank you very much. We'll be coming back to Europe again here then.
Firstly, I can say also congratulations. Of course, most numbers here are clearly positive. But as it relates to Europe, I guess you've been making, as you explained, a sort of strategic change here. If the first strategy was to ramp sales quickly and through scale, reach profitability upon that, now you have a different strategy. I mean, what I'm trying to get at here is, could this possibly be the first step of you opting out of the European market? I mean, what's your patience on the operating losses or negative margin? Would you be able to see that from several years out, or maybe then take another decision?
I mean, when you're able to handle the flexible cost, and then you can always choose to take away the fixed cost, because the fixed cost in these terms is just personal and office.
I mean, opting out will be taking away the local management that are building the brand for the long run. Because we are doing a lot in those countries, a lot of events and so on, that is not paying off in the short term, is building the brand in the long term. But I mean, if we take that away, we can be profitable. I would say it's more about, are we able to invest in those fixed costs to build it in the long run? And if we are not, we will take away the fixed cost, but we can still be in the country. Because as long as we keep on operating that, and that's what we see in Austria, where we have no personnel, we're just selling, there we can drive around and have profitability easy. That is the position.
If we are opting out, that will mean that we are closing management-wise and office, but we don't need to close the country to be profitable.
Thank you. I think that was a very clarifying and a good answer. You touched upon then staff cost locally here then in the European markets. But if we look at staff cost broader in the group, I know that you have ramped your organization with national management in the Nordics and so on. That has brought on sort of a negative leverage on staff cost earlier. But in this quarter, you're flat year- on- year. Do you think we could continue on this sort of positive trend, i.e., seeing actually leverage on staff cost on the group basis going forward?
Definitely. I mean, we have been building an organization for quite some years now.
Now we're at the point where we're seeing we're having the right organization to be able to scale. So, definitely. As we grow, there will always be some more management, but not at the scale we have been doing.
That's also great and really clarifying, not just jumping onto the next operating cost line and the marketing cost. It was touched upon here by a colleague of mine as a question of if you were sort of pulling back on traffic generation just because you're clogged in Vansbro. Looking at it from a broader perspective, when you're building the brand and reducing sort of driving organic growth through traffic generation, paid such, I mean, you have 180 basis points in this quarter contribution to your EBIT margin from declining marketing to sales, but you're still on an absolute level 9%.
That's quite a high, at least if you think of a broader sort of retail perspective, rather high figure. So, I ask the same question on that line. Do you see a positive trend on the marketing to sales going forward from this 9%?
There I would say we will not see a positive trend, hopefully, because we want to keep on investing. I think when you're comparing us to other retailers, both that we are in a growth strategy position, but also that 80% is online. I think we will keep on investing in those markets as we saw Norway and Sweden starting to get to a good point where we can lower it in percent compared to turnover. But in the rest, we want to invest in the future.
Great. That's also really clear. I have just one for Ylva also to clarify maybe.
I mean, it's a lot of very strong numbers all across here. But on the operating cash flow side, it was softer. I guess it's mainly driven by accounts payable. But perhaps you could elaborate and clarify a little bit if we're going to view this as sort of one of driven effects.
Yes. So, the Q4 this year was not entirely comparable to the year before due to the capacity constraints in the warehouse. We had to start to build the stock for Black Friday earlier in Q3. At the same time, we also had a big Club Week campaign and also Christmas calendar selling, so causing stress on both in and outbound capacity. So, in that sense, we had quite a high outgoing accounts payable from Q3, which affects the cash flow now in Q4.
We also saw on the receivable side, there were less banking days between Christmas and New Year's, also having an effect in that end.
Great. Thank you.
Then we have the next question from Alexander Ripe, Pareto Securities.
Thank you. Thank you for taking my question. It's just a follow-up on the backlog that we touched upon. Is it possible to give more details on the underlying growth? Because I calculated that the days that were backlogged from Q3 represented about SEK 51 million, which means that the underlying growth in Q4 is about 10%. Does that sound correct?
It sounds a tad high, but yeah, not commenting more than that.
That backlog is also high, more high gross margin profile because it's a calendar.
Yes. A comment was on the backlog.
Yeah. Okay. Perfect. Yeah. That was all from me.
Do we have any more?
Do we have any more questions in the room? We open up and see if we have someone online. I saw a hand earlier. No one else? No hands, what I could see. We will say thank you so much for listening in today. Our next report is the 25th of April. So, we're looking forward to present that. Thank you all for listening in today. Have a great day.