Release Date: July 12, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Improved profitability despite a weak market, with an EBITA margin of 8.8%, higher than last year and pre-pandemic levels.
- Significant reduction in net debt by 29%, down to SEK480 million by the end of the quarter.
- Strong cash flow from operations and optimized inventory management.
- High customer satisfaction and efficient store operations, contributing to a better ramp-up during the high season.
- Successful purchasing efforts and optimized product assortment leading to a high gross margin of 33.6%.
Negative Points
- Net sales declined by 5.5% compared to the previous year, reflecting continued market weakness.
- Weaker demand for larger renovation projects, which take longer to initiate.
- Increased depreciation due to more leased stores and write-downs of associated companies.
- High seasonality in sales, requiring significant operational adjustments between seasons.
- Potential future impact on gross margin if demand for higher-ticket, lower-margin items increases.
Q & A Highlights
Q: Can you share insights on consumer behavior trends, particularly regarding transaction volumes and consumer confidence?
A: We observe significant differences in demand between categories. Smaller project products are performing well, while larger renovation projects lag. Consumer behavior is returning to pre-pandemic patterns, both in store visits and the split between e-commerce and physical stores. (Karl Sandlund, CEO)
Q: How have ongoing assortment efficiency improvements impacted your inventory ratio?
A: We've optimized inventory by adjusting assortments and inventory levels. While absolute inventory is down, service levels have improved. The inventory turnover rate will depend on future sales development, but maintaining a capital-efficient inventory is a key focus. (Karl Sandlund, CEO)
Q: What factors contributed to the gross margin improvement, and can you quantify their relative importance?
A: The improvement is due to several factors: successful purchasing, cash discounts, optimized assortment, and a favorable product mix. While I can't provide an exact split, all these elements collectively contributed to the margin increase. (Karl Sandlund, CEO)
Q: Can you explain the nature of the cash discounts from suppliers?
A: These discounts are not volume-driven but are based on early payments. They help reduce our costs without affecting the pricing of products. (Helena Nathhorst, CFO)
Q: How do you view the trajectory towards achieving your EBITA margin target of 7%?
A: We are focusing on strengthening our balance sheet and improving profitability. While we don't provide specific forecasts, our goal is to continuously improve and reach our targets as soon as possible. (Karl Sandlund, CEO)
Q: Will the cost improvements you've made be sustainable if market volumes rebound?
A: Many cost reductions are due to increased efficiency and smarter working methods. While some costs will rise with higher volumes, we aim to leverage scale effects and maintain efficiency. (Karl Sandlund, CEO)
Q: How will a potential recovery in larger renovation projects impact your gross margin?
A: Larger renovation projects typically have slightly lower margins than smaller items. However, our focus on purchasing and assortment optimization will help mitigate any margin dilution. (Karl Sandlund, CEO)
Q: Can you comment on the market temperature and consumer activity in early July?
A: It's too early to provide a detailed outlook. We are still in the early stages of the peak season, and we will have a clearer picture after Q3. (Karl Sandlund, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
