Release Date: July 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Net revenue grew by 8.8% to SEK314.1 million.
- Profit after tax increased to SEK26.7 million.
- Lowest return rate since the strategic initiative began, at 31.3%.
- Five consecutive profitable quarters.
- Strong cash position with SEK220 million and no short-term credit utilized.
Negative Points
- Conversion rate decreased year-on-year despite increased traffic.
- Higher marketing costs compared to last year, impacting profitability.
- Increased administration and IT costs.
- Sales growth primarily driven by flagship store, which is a small part of the business.
- Ongoing need for significant IT infrastructure investments.
Q & A Highlights
Q: Now that your flagship store has been open for about a year, how would you sum up the store's importance and its financial impact on the business?
A: (Helena Karlinder-Ãstlundh, CEO) While the store is a small part of our revenue, it has been strategically significant. We've learned a lot about our customer base, received early reads on our assortments, and hosted many events and launches. The customer response has been incredible.
Q: How do you assess that your tax deferral will impact profitability going forward?
A: (Niklas Lingblom, CFO) We manage our tax deferral on an ongoing basis, and the outstanding tax deferrals have decreased by about SEK11 million compared to last year. The main effect is on cash flow, with some impact on net results from interest rates.
Q: Can you outline the main drivers and magnitude of impact in the Q2 gross margin bridge compared to Q2 last year?
A: (Niklas Lingblom, CFO) The main positive drivers were a higher full price share, less campaign-driven revenue, a higher share of own brands, and a small positive impact from currency effects.
Q: From the context of a marked year-on-year increase in share of sales from private labels, can you explain why the return rates are so much lower?
A: (Helena Karlinder-Ãstlundh, CEO) We've worked intensively on our assortments, particularly our own brand assortments, and on reducing return rates. The lower return rates and increased own label sales indicate that our customers really like our products and assortments.
Q: Can you elaborate on the main drivers behind the significant improvements in operating cash flow from the working capital release in Q2?
A: (Niklas Lingblom, CFO) The strong cash flow was driven by improved operating profit, a lower level of inventory due to refined assortments and higher sell-through, and increased account payables.
Q: Q2 records the first quarter with net sales growth since Q4 2021. How do you plan for growth from here on in light of your strategic decision to lower your net sales in order to prioritize profitable volumes?
A: (Helena Karlinder-Ãstlundh, CEO) We aim to build a profitable core that we can grow. We will continue to focus on maintaining and improving profitability while targeting growth, taking each quarter one by one.
Q: Is 31% return rate the final milestone or how low do you think is possible?
A: (Niklas Lingblom, CFO) We are pleased with the low return rate and will continue to focus on keeping it down. The structural changes from our initiatives have shown good results, and this will remain an ongoing focus.
Q: Could you elaborate on what the new IT systems hopefully will result in and why you think it's so important?
A: (Helena Karlinder-Ãstlundh, CEO) As an e-commerce business, our IT infrastructure is crucial. The new systems will allow for more flexibility in how our teams work and mold the customer offer, improving the overall customer experience.
Q: Do you believe that you are in growth mode now and going forward?
A: (Helena Karlinder-Ãstlundh, CEO) Every business aims to be profitable and grow, and so does Nelly. We have come a long way and will continue to work hard on areas with potential for improvement. Tune in to future presentations to see our progress.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
