Q3 Report 2018/19 13 March 2019 Lotta Lyrå, President & CEO and Pär Christiansen, CFO
Agenda • Business update • Financial development • Events after reporting period • Summary, going forward and Q&A
Retail in change – Christmas 2018, pace increasing • Rapidly changing landscape • Customer behaviour is changing • Tough competition for share of customers ’ wallet • Challenging the cost structure is key to profitable growth 3
Q3 2018/19 in brief • Organic growth 4%. Growing both in stores and online in a challenging market climate • Growth better than market, but lower than internal target, affects profitability for the current year • Improving underlying operating profit, stable gross margin • Inventory levels reduced • Full focus on lower costs – important steps in Q3 • On track with growth initiatives in the ongoing transition 4
Growing in both stores and online in a tough market Sales in Q3 • Well prepared for Christmas MSEK − Attractive customer offerings 2 915 − Increased digital capacity 2 746 2 695 2 482 − More and better online delivery options 2 375 • Organic sales up 4%. Better than market, lower than internal target • Sustaining gross margin at 40.4% (40.8) • Improving underlying results − Underlying EBIT 363 MSEK (359) Q3 Q3 Q3 Q3 Q3 14/15 15/16 16/17 17/18 18/19 5
Online growth initiatives produce results MSEK Clas 337 Online sales growth: Ohlson 295 51% Q3 2018/19 222 51% first nine months 2018/19 181 148 122 ”Market trend” FY FY FY FY FY Q1-Q3 13/14 14/15 15/16 16/17 17/18 18/19 6
Black Week to Christmas – online performance 2018 vs 2017 Organic search: Conversion rate: Visitors: +22% +42% +23% improved SEO optimisation Online sales 18 vs 17: Transactions: +56% +74% Healthy growth even with last Black Friday being strong 7
Breakthrough for Click & Collect in December* Top Click & Collect stores: Share of online sales: - Drottninggatan, Stockholm - Jumbo, Vantaa 30% - Täby - Alingsås Online shoppers buys more. Average Transaction Value 38,000 Click&Collect: +82% Click&Collect orders in total (vs in stores) *Collect in Store available until 14 December. 8
CO100+ UPDATE
Strategy defined in CO100+ action programme …to achieve Clas Ohlson’s financial targets …focusing on strategic initiatives… Average annual organic sales growth of 5% Cost savings initiatives during the current five 200-250 MSEK year period More efficient organisation More optimised assortment Indirect purchasing, sourcing and An action programme… logistics more systemised Growth initiatives Operating margin of 1-2% of the underlying operating Sales per customer increases 6-8% from FY20/21 margin invested in sales growth and Sales per square meter increases and onward cost savings initiatives during Sales online to double every FY18/19 and FY19/20 other year 10
Focus on implementation – Cost savings initiatives totalling 200-250 MSEK More efficient organisation More optimised assortment More systemisation Organisational review to More optimised assortment Significant cost savings reduce costs and create a within indirect purchasing Efforts to reduce COGS more efficient organisation Implement supply chain sCORE - an enabler for optimised for all channels significant efficiency measures 11
Focus on implementation – Growth initiatives for continued 5% organic growth Double sales online Increase sales per sqm Increase sales per customer every other year Optimisation within existing Moving up the value chain Broadened online offering contractual framework Increase cross-selling Increased capacity and improved New store formats being tested capabilities – digital and delivery In-store solutions for guidance More optimised assortment Click & Collect break through in Offer online guidance December Increase own brands’ share of sales Clas Fixare – launched in Strategic cooperation with MatHem sCORE enables customer centric Stockholm 26 November expanded operations 12
Focus on implementation – New market strategy outside the Nordics • Focus on online outside the Nordics • Closing of store network in the UK and Germany according to plan • Total cost for closure 210 MSEK 42 90 • To be completed during 2018/19 96 • Positive contribution to P&L of 6 approximately 75 MSEK with full effect after 4 Q2 2019/20 By reducing complexity we can increase focus on creating continued profitable growth in the Nordics, growing online in line with target and adapting our cost base to a more competitive level 13
Strategy implementation effect on EBIT FY 2018/19 New market strategy outside Operating margin CO100+ According to plan the Nordics Investing 1-2% of the underlying operating margin One-off reservation for closing According to plan store network in UK and Germany Operating margin of Cost savings of approx. 3% for 210 MSEK as non-recurring 200-250 MSEK not yet materialised cost in Q3 2018/19 FY18/19 and According to plan 4-6% for FY 19/20 Full effect from 2020/21 Positive effect approximately 75 MSEK when store network is Growth initiatives closed Sales growth in line with target 14
FINANCIAL DEVELOPMENT
Sales Q3 • Q3 sales increased by 6% to 2,915 MSEK MSEK +6% • Growth in both stores and online 2 915 2 746 2 695 • Significant growth in online sales – up by 51% 2 482 2 375 • Organic sales up 4%, LFL up 2% • 14 additional stores net compared to Q3 last year (11) Q3 Q3 Q3 Q3 Q3 14/15 15/16 16/17 17/18 18/19 16
Sales trend per market Sweden Finland Norway Outside Nordic countries* +6% MSEK MNOK MEUR MSEK 1 056 1 127 1 177 1 194 1 264 1 025 1 094 1 126 0% 956 36 36 886 33 31 28 5% 122 120 93 92 88 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3 Q3* Q3* Q3* 14/15 15/16 16/17 17/18 18/19 14/15 15/16 16/17 17/18 18/19 14/15 15/16 16/17 17/18 18/19 14/15 15/16 16/17 17/18 18/19 *Impacted by store optimisation in UK 17
Sales Q1-Q3 • Sales up by 8% to 7,030 MSEK MSEK +8% • Online sales up by 51% 7 030 • LFL sales up 2% 6 528 6 415 6 098 5 831 • Organic sales up 5% • 9 additional stores net compared to end of period last year (8) Q1-Q3 Q1-Q3 Q1-Q3 Q1-Q3 Q1-Q3 14/15 15/16 16/17 17/18 18/19 18
Gross margin Q3 • Gross margin maintained at 40.4% (40.8) % -0.4 pp • Positive effects from strong NOK, FX-hedges 44,2 43,7 41,8 40,4 40,8 and weaker purchasing currency • Impacted by commercial intiatives and increased sourcing costs Q3 Q3 Q3 Q3 Q3 14/15 15/16 16/17 17/18 18/19 19
Share of selling expenses Q3 • Share of selling expenses 27.4% up 1.7 pp. % according to plan − CO100+ programme +1.7 pp − Commercial activities, marketing and brand 27,4 27,3 building 26,3 25,7 25,4 Q3 Q3 Q3 Q3 Q3 14/15 15/16 16/17 17/18 18/19 20
Administrative expenses Q3 • Administrative expenses decreased MSEK compared to previous year and amounted -2.3 to 62 MSEK (65) 64,7 62,4 51,3 48,8 49,0 Q3 Q3 Q3 Q3 Q3 14/15 15/16 16/17 17/18 18/19 21
Profit Q3 • Operating profit 105 MSEK (349) MSEK − Operating margin 3.6% • Non-recurring costs, costs for action 390 382 *359 363* programme CO100+ and closing of stores in 350 UK/Germany totalling 260 MSEK (10) • *Underlying EBIT 363 MSEK (359) − Underlying EBIT margin 12.4% 260 349 • Earnings per share 1.24 SEK (4.28) 105 Q3 Q3 Q3 Q3 Q3 14/15 15/16 16/17 17/18 18/19 22
Profit Q1-Q3 • Operating profit 171 MSEK (574) MSEK − Operating margin 2.4% 633 604 599* 592 • Costs totalling 380 MSEK (25) relating to 549* non-recurring costs, action programme CO100+, sCORE and closing of stores in UK/Germany 380 • *Underlying EBIT 549 MSEK (599) 574 − Underlying EBIT margin 7.8% • Earnings per share was 2.11 SEK (7.02) 171 Q1-Q3 Q1-Q3 Q1-Q3 Q1-Q3 Q1-Q3 14/15 15/16 16/17 17/18 18/19 23
Investments • Total investments 174 MSEK (422) MSEK 422* • New stores and refurbishments 41 MSEK (67) • IT systems 88 MSEK (89) 198 192 174 147 Q1-Q3 Q1-Q3 Q1-Q3 Q1-Q3 Q1-Q3 *Including the acquisition of MatHem of 224 MSEK. 14/15 15/16 16/17 17/18 18/19 24
Financial position • Positive cash flow from operating activities Inventory MSEK -362 in Q3 of 728 MSEK (585) MSEK -188 2 345 MSEK • Inventory 1,983 MSEK (1,880) 2 068 2 038 • Cash flow after investments and financing 1 983 1 937 1 880 activities of 70 MSEK (-40) • Net cash of 185 MSEK (584, net cash) • Approved credit facilities of 750 MSEK Q2 Q3 Q4 Q1 Q2 Q3 17/18 17/18 17/18 18/19 18/19 18/19 25
Events after reporting period
February sales • Sales 545 MSEK, up 5% MSEK • Organic sales up 2% • LFL sales unchanged • Online sales up 47% 545 518 511 • 13 additional stores net compared 495 478 to end of February last year (12) Feb Feb Feb Feb Feb 14/15 15/16 16/17 17/18 18/19 27
SUMMARY Q3 AND GOING FORWARD •
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