Good morning everyone, and welcome to the Lyko Group quarterly report for the first quarter of 2026. Today we will have a presentation from Rickard Lyko and our CFO, Ylva Norlén. After the presentation, there will be time for questions, so please raise your hand after the presentation and we will let you in. The call will be recorded and will be published on Quartr Group app and on our webpage. With that said, I leave the floor to Rickard Lyko.
Profitability were prioritized in the quarter and we continue challenging market, I mean, we have set a clear direction. I think also action in execution, I mean, we have launched a cost-saving program and doing good progress in that one, and for setting a more efficient organization. We also see that the logistics is working very well, and we are in full swing with automation and it perform. We also build, I mean, a strong foundation for future growth through the community and our own brands. Now we have set more focusing on the Nordic, but I think the long-term plan is still intact in growing outside of the Nordics.
We were reducing sales by 4.8% in the quarter due to somewhat less overlay from the Q4 because of fast delivery, but also some campaigns that we moved into Q2 as planned, but also that it were a challenging market and we are also seeing we're losing some sales outside of Sweden because Sweden is still growing in the quarter. The gross margins are back to normal level with 44.1%. I think that's the highest margin than we had than the Q4 2024. We saw also that operation is strengthening. We think also we're seeing that our Waterclouds own brands is now also the biggest in our own brands portfolio in the quarter, but also the third largest brand in total when we are including business to business as well.
Totally, own brands is about 40%, up with SEK 75 million in the quarter and 8.5% of the total share in the quarter. Logistics and the investment in the warehouse up in Vansbro is completed and is full operated. Now we don't really have any big investment looking forward. This was one of our biggest investment ever in the company, and we're seeing that they'll keep on performing. The cost saving program we have started. See if I can change the picture as well. There we go. We say that we will save about SEK 100 million in rolling 12 numbers, and we're seeing that that's in progress as planned. We will have ended all the initiative, what it means with the white-collar in next quarter.
We will continue. Let me see. I have a problem with changing here. Now we see. Going forward, I mean, it is still focusing on delivering the result with better cost control and with a stable margin. We also see that the average order value are up in normal level. We knew that went down in Q4, but we expect that to keep on improving, and that's also what we're seeing in the beginning of this quarter. We see a temporary slow pace in Europe, and I think that's also to make sure we see that we have the right foundation to keep on growing in Europe, and then we continue to prioritize profit. We opened Kalmar last week, last weekend. That was our best opening ever so far in no matter how we're measuring it.
I think that also showing the, I mean, the strengthening in the brand as we're building and also that we're seeing now that people are in some sense going back to physical stores. I think it's super clear for us that we need to have more present in the physical form. We're also seeing that that is working, but also helping the online part of the business because I think the response in the whole Kalmar region was really great under that opening. We're seeing that the channels are helping each other. Our communities is keep on growing, and we are also launching now that we are paying creators for the content that they put on the platform, and we have also now done that internally.
People working internally in our stores and at our office when they on their spare time doing content, talk about beauty and publishing that in our community, we will also pay them per views. This is something that's truly unique, I think. We haven't seen any other companies doing something similar, and this is also building something truly unique to our customers around the content of the products. We're seeing that our suppliers also truly understand the value that that's creating around the beauty products. We talked about our own products, and we're seeing that we have launched in the quarter as well, a new brand called Gleeze, and that is our own brand that we have created in-house. We are also seeing that that is performing well as a start.
That's also helping a lot because this is a product that we are launching in the lower I would say price positions, but with good margins. If you look into the brand awareness, it has kept on increasing. We knew that we have a good I mean good improvement in the Q4, but we see that keeps on continuing in Q1. Historically wise, when you look into these numbers, this used to be the best indicator of how the sales will look going forward. I think the increasing here as well, both in Sweden and in Finland, really set the foundation to keep on growing in the market. I will hand over to Ylva.
Hello, everyone. My name is Ylva Norlén. I'm the CFO here at Lyko Group, and I will take you through the financial results of the first quarter, 2026. Starting with net sales of the group, this was an unusual quarter. We decreased the sales by 4.8%, taking us to SEK 875 million. There was a slight negative effect in the quarter, so in local currencies, the decrease was 3.4%. This was due to intense campaign pressure in the market, and it was also paired with a couple of campaigns that we have moved into the second quarter this year compared to last year. We can also see that Sweden performed well during the quarter and that the sales decrease is mainly attributed to the markets outside of Sweden.
Looking into the gross margin, as Rickard was already onto, we deliver a really strong gross margin in the quarter, the highest one we've seen for since Q4 2024. This was mainly attributed to strong price discipline and also to higher supplier contributions. When we look at the OpEx side, we, on the other external cost side of things, deliver a good ratio here to sales, 19.9%. We see that the marketing and freight costs are the main contributors to this decrease. Here we also have SEK 800 ,000 as a one-off cost relating to the office closures of Germany, Netherlands, and Denmark. On the personnel side of things, as expected, this is up.
It's now 18.8% of sales, but this is due to the SEK 21 million restructuring cost that we see in the quarter related to the cost savings program. More on that later. If we exclude the one-off costs, this ratio would have been 16.5%. A few more details on the cost saving program, and just to recap what the objective was. We have the ambition to save SEK 100 million over a rolling 12 period from February to January next year. The majority of these cost savings are planned to come from a reduction in organization, especially on the white- collar side. We are aiming or remodeling a new organizational structure and also a new operating model in line with this. We estimated that the one-off cost for the program would be SEK 24 million.
If we now look at where we are in terms of this project, we are on track to deliver the SEK 100 million. We have had 49 colleagues leaving us in Q1 so far. The status right now is that we are in union negotiations for the next wave, which is taking place now in Q2. The aim of the organizational program is to be ready with that during this quarter. The most guiding principle in the new design has been centralization and less complexity, and I will come on to that in the segmentation part. We see now that the one-off cost for the program is SEK 20 million, SEK 22 million, and this is attributed to both the colleagues that have left us in Q1 and will leave us in Q2. As devil's in the details, we also typically share this split of one-off costs.
Here you can see both 2025 and 2026 so far by quarter in the left-hand graph and then by cost type in the right-hand graph. At the moment, if we add together 2025 and 2026, we have one-off costs of more than SEK 40 million, which is of course quite unusual for us as a group. Looking into the profitability of Q1, this was a clear decrease from the year before. We delivered SEK 4 million, and it corresponds to a margin of 0.4%. However, if we exclude the one-off costs that were anticipated also, this would then be an EBIT corresponding to SEK 25 million and a 2.9% margin, quite close to the Q1 of 2025.
We also announced a new segmentation from this quarter on, and this is new for 2026 and of course related to the centralized operating model that we are now measuring against. This is now one operating segment that we will call retail. It comprises of all online sales or all store sales and also the B2B sales and in all markets. Apart from retail, we also have group and other, which comprises of all the group function costs such as HR, finance, purchasing, but now also own brands organization, and it's the sales of external production and 3PL. We have added on page 22 in the quarterly report more detail on this, so you can also track back three years quarter by quarter to aid analysis.
Now, looking into the segment, we have SEK 856 million of our sales in the retail segment, and this corresponded to a decrease of 5.7% for the quarter. Profitability was also down in the quarter from SEK 91 million last year to SEK 72 million this year, and corresponds to a margin of 8.5%. If we look at the group functions and other, here we have the sales of the overcapacity in production and logistics, and it was SEK 19 million this year compared to SEK 10 million last year. On the cost side or EBIT side, it was SEK -69 million, of which SEK 17 million is related to the one-off costs. Lastly, a few words on investments and cash flow. As you have already heard, the automation project is now finalized.
We took the last investments in Q1 for this project, and now since March, we have started to depreciate the assets. Looking into the past few years, we have had high levels from investments due to this, but in Q1 2026, we had investments of SEK 16 million, and our CapEx prognosis for the year is around SEK 70 million. We will spend roughly half of this on the new stores, and the remainder is connected to automation and IT systems. Quite a low sort of CapEx agenda going forward, and we will have big focus on the de-leveraging and also on return on investments. We opened two stores during Q2, and we have still a big appetite to open more stores going forward.
If we look at the inventory side and stock levels, we see that compared to Q4, where we left the year with SEK 634 million in stock, we have now normalized and are back to a good level and also improved stock to sales ratios. With that, I hand over to you, Tom.
Thank you, Ylva. Yes. It's time for questions. Please raise your hand and I will try to give the word out. First, let us see here, we have Max Olsson, external.
Good morning. This is Max Olsson at ABG calling in on behalf of Benjamin Wahlstedt. I have a few questions. You state that you've moved certain campaigns from Q1 into Q2. Could you quantify the revenue impact in Q1 or say anything on the level of growth you expect in Q2 when these marketing campaigns go live?
Yes. Just compared to last year, we estimate that those campaigns are roughly SEK 25 million.
Okay. Thank you. We were also wondering about what you think about the development of your market share in Q1.
I think the market share, it's hard to say how the market in total have went, but I mean, probably Sweden and probably Nordics, we have increased.
Okay. Operating cash flow was SEK -484 million versus SEK +95 million last year, driven by large decline in accounts payable. Is this to be considered normalization from an unusually high Q4 payables balance only, or is it reflecting an underlying change in supplier payment terms as well?
We have managed to improve our supplier agreements or payment terms in many cases or in most cases, I would say. We also left 2024 Q4 with an unusually high stock level. As we communicated in February, we had the opportunity to buy at quite advantageous prices. We had very high stock levels going into 2026. With that, of course, also high accounts payables.
Okay, I understand. Connected to the previous question, net debt ex leasing has more than doubled to SEK 811 million from SEK 355 million a year ago. On our calculations, your net debt to EBITDA is just above about seven times. What do you think about this observation broadly, and could you say anything at all in terms of covenants or when you will be required to raise additional capital? Yeah.
I mean, first of all, I want to stress that we have not taken any additional financial debt apart from what we communicated previously. We had one last invoice related to the automation project in the quarter and that was the last small piece on the term loan. Other than that, the net debt is related to our cash position and accounts payable balances. When it comes to our finance agreements, we released the PM on the 31st of March. We have reached a new bank agreement extending our RCFs with our banks, and we don't usually comment on the sort of financial conditions or so. We will stick to that.
Okay. I understand. A couple more. You're temporarily pausing European expansion to focus on the Nordics profitability. Could you clarify what temporary means here? Is there a specific EBIT margin or leverage threshold that would trigger you going in again?
We haven't communicated that, and I will not comment exactly how we will do that. I mean, we are looking into how the market are performing and when the timing is right for us. Right now we see that it's better to pause it a little bit. With that said, I mean, we are still operating all those countries. We don't invest as much right now.
I have more of a philosophical question maybe. You're making some rather significant changes to how you run the company now. At the same time, you're making reporting somewhat less transparent with the new segment reporting structure, which makes it also harder to assess how well these changes work. Will we not be able to follow up on the halting European expansion, for example? Do you have any thoughts around that?
I mean, it reflects how we are operating the company, and I think it will be more clear. As you say, you will not see exactly what the European market will perform shortly. I mean, at the same time, the other segments are so much bigger. I think right now, it doesn't make sense. That's why we do the change we do.
Yeah. Then I have my last one here. Regarding bookkeeping, do you expect further one-offs in Q2 related to the cost savings program? Also, what is a reasonable estimate for run rate quarterly D&A from here?
We believe that the SEK 22 million that we took up now in Q1 will cover the needs from the cost savings program. Then again, we don't know if there might be just small one-offs or something. If that occurs, we will communicate that clearly, but not according to our forecasts.
Okay. Yeah. That's all for me. Thank you very much.
Thank you for the questions. Do we have any more questions? We have Daniel Schmidt from Danske Bank. Welcome.
Yes. Good morning, guys. Just a question on the savings program. The SEK 100 million that you're targeting, what do you feel is sort of the net saving coming out of that? Or is that a net saving that you're targeting?
Yes, absolutely. I would say, of course, it depends a little bit on the cost category, as quite many of the costs are cost of sales related. In general, of course, when it comes to the organization part, that will remain. The plan is to go into 2027 with that full saving. When it comes to the other OpEx cost, we will have to make decisions as we come closer to next year.
'Cause I'm just thinking you're opening two stores as well, in April, and I guess that adds 20-25 people to the equation.
You mean the store employees?
Yeah, I just mean from a total cost saving plan when it comes to personnel, 'cause that's the only sort of clear tangible cost saving that you've laid out. You're letting 70 people go. So far, it's 49. You're also adding, I guess, 20 people in retail. The net effect is likely to be less than SEK 100 million. That's what I'm trying to get at.
The cost savings program is also only on the white- collar side. We have also made reductions on the blue collar side in logistics already. When it comes to store employees, we measure that as a cost of sales and the stores are doing really well, and we anticipate them to be generating good profits during this year. We try to keep the white and blue- collar parts separate in this program.
Yeah. I think I'm just trying to get at that ratio that you have spending SEK 22 million and getting SEK 100 million back is very unusual. It's basically no company has been able historically to deliver that. That's why I'm asking sort of for more tangible pieces to the puzzle apart from letting 70 people go, what else is gonna give you SEK 100 million? Of course, this is then, I guess, excluding that you're adding people in other parts of the organization.
Yeah. Apart from the organizational savings, the main savings for this 12-month period that we're communicating so far comes from marketing, logistics, freight, and then a variety of other OpEx categories.
Yeah, you can't give any specifics in terms of logistics, for instance, what is the tangible saving there, and what's really behind it?
Yeah, I think we are still in the program and working out the details, so we will bring this question with us to the next communication and then try to clarify even more then.
Okay. Maybe on the gross margin, I guess the gross margin is partly up on the back of you campaigning less in the quarter. Will that be sort of reversed a bit in Q2 then?
I mean, we will see, depending on the quarter and how the mix of the campaigns look like, but also when we are increasing stores and also increasing the sales in the Nordic market. It's also helping the margins going up and that in the combination with own brands. I mean, it can definitely move, and we have more bigger campaigns in the Q2, but if we're measuring that to the Q2 last year, it will similar pattern, I think.
Okay. Maybe on the debt, coming back to that, you had SEK 3 million in cash and SEK 800 million in debt. What sort of revolving credit do you have still to go? With SEK 800 million in net debt, you're at six times net debt EBITDA. If you have bank covenants, I assume you've breached those, or do you don't have any bank covenants maybe?
We have not been in breach of any bank agreements, and that's the comment that we can give. I mean, when it comes to the, I think this comment is something we usually do at these press conferences. The 31st of March is one date out of all the days in the year, and that was the position on that particular date. It looks a little bit different every day of the year when it comes to our buying and the payment patterns.
Sure. Sort of what access to capital did you have at that particular date, and what extra sort of headroom do you have?
Yes, it's not a response that we have prepared for today, but I think we have communicated what financial allowances we have in our banking agreements in terms of RCFs and term loans. That should be public information.
Okay, I can look at that. This may be sort of when you reported in mid-February, you said that sales so far in Q1 was according to plan. Of course, we don't know what you planned for exactly, but I don't assume you planned for declining sales. These campaign activities were also planned. What happened in the second half of Q1 in terms of market? Did it sort of? Was it a big shift, basically?
I haven't seen any big shift, but it definitely varies in between, I mean, campaigns and so on and the sales. I mean, in terms of a few percent ups or downs, that's a range in how it moves depending on how the sales is going, and it did start off better, and then it went a little bit slower in the rest of the quarter. I think it will go back to normal in some sense of that.
Okay. Given that you said you gained market share in the quarter in the Nordics, you did see sort of a quite negative market for the first time in a long time then maybe.
I mean, we don't have a clear number of how the markets are operating. That's just when we are talking with suppliers and look at the market in total. We know that we took market share, at least in Sweden and probably in Norway, and then it's harder to tell.
Okay. Thank you. That's all for me.
Let's see. Do we have any more questions from the room? I can't see any more hands. With that said, we probably thank you all for coming together today. We hope to see you all at our shareholder meeting, the 19th of May and the next quarter report in July. Thank you so much for today.
Thank you.
Thank you.