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Welcome to the Matas Q3 Interim Report for 2022/2023. [Operator Instructions] This call is being recorded.
I'll now hand it over to the speakers. Please begin.
Thank you, operator, and welcome, everyone, for -- to the call covering the third quarter, the Christmas quarter of our financial year. I'm joined by Per Madsen, our CFO. I will go through the overall numbers and give you some comments on what lies beneath the overall numbers, then I will hand over to Per to go through the highlights of the financial results, and then we will open up for Q&A.
Overall, I just want to remind you of the backdrop for this quarter and 2 items in particular. First of all, Matas was one of those companies who truly benefited from the COVID era who really got a boost from the COVID era. So we were up against 2 years of high growth in the Christmas quarter. At the same time, 2022 was perhaps the most disruptive year for retail in general that we've seen for a long time with a combination of high inflation, low consumer confidence, supply chain issues, rising energy prices. So a lot of pressure on the industry overall.
Despite that, we are delivering good results. We are delivering, as you know, already growth in the Christmas quarter, but also a small but not insignificant improvement in our profitability. So 1.3% growth and EBITDA margin of 21.2% against 20.6% of last year before special items. And I'll remind you that we had a tax special item same quarter of last year and a doubling of our free cash flow something that Per will return to. I think the most significant part about these numbers is that growth is driven by an increase in the number of transactions. And we consider that to be really healthy growth. It's not driven by -- primarily by price inflation or fewer customers making bigger baskets. This is more customers coming to the stores and to online and happier customers as well actually.
So what we're seeing in the quarter is really progress on our strategy, and we're seeing another quarter proof that our strategy to expand our assortment is actually working and delivering results. 66 new brands released during the quarter. That's more than 130 new brands on matas.dk year-to-date. We launched 2 new web shops in Sweden and Norway. I'll get back to that. But even more importantly, we saw growth in our online channel of around 15% in a market that we consider to be flat, if not declining. So connected retail, something I will get back to in a minute.
We had an innovation in our way of delivering to the customer that we think will be significant going forward. And for Germany, we will be available in more than 200 stores at the outset of the year, we had hoped for 75, but we're seeing demand from our retail partners beyond what we have thought. It's still a small business. It's -- we're still in trial era and learning mode, but still a good sign that our German retail partners, they want more of what we're bringing. We also issued a tender. We have, as you know, postponed our -- the building of our Matas Logistics Center due to the overheating of the construction market. Now we are seeing an opening, a softening of the construction market, much more capacity out there, so we have sent out a tender so that we can evaluate whether this is the right time and how and when to build the Matas Logistics Center.
I want to do a few deep dives. The first of them is an innovation that we saw in the quarter and that really made a difference to our customer experience. It's pick-in-store. So what happens is the customer places an order online, we match that order up against our assortment and inventory in the stores. If we see a match, we send a notification to the store saying, here's an order, can you pick this for us, one of our beauty advisers will respond and say, yes, I can pick it. And when she's picked it, she will send an SMS or the system will send a text or mail to the customer saying it's ready for you. So the customer experience is you place an order and within 1 hour, it's ready for pickup in your local store. Very delightful experience for customers, very delightful experience for our colleagues in the stores. They're really happy to get a happy customer down to the store.
And for us, from an economic point of view, this is the most efficient way of delivering or fulfilling an online order to the customer. So something that is hard to copy if you are not an omnichannel retailer. 15% of Black Week orders, we were able to fulfill in that way. So that actually takes away some of the capacity constraints that we have in these peak trading periods. So an innovation that we didn't have hope for when we started out, but now we think it's going to be a significant part of our future.
Second of all, we got this boost from COVID. I believe and we believe as we told you when we launched the new strategy, Growing Matas Group, that if we did nothing, then we would probably be in a situation where we would see our sales reverting somehow to the level of where they were before COVID. But instead, we decided to embark on a strategy to expand our assortment with new categories and new products and new brands that you will not find in our physical stores. And we work on this very systematically. We entered a couple of categories.
Just recently, we entered sports equipment that is light sports equipment for home use and nutrition, something that we saw an interest in during COVID, people buying all kinds of training gear from Matas. So we have a license to play in that market. The online market about DKK 650 million, Matas has a 2% share of that market. So another example of an area where we offer to the consumer brands, products, categories that are not in the physical stores.
Finally, and even though it is a small step in financial terms, then it is mentally a big step for Matas to now be present in Norway and Sweden with the 2 web shops. They are run entirely on the margins of what we do in Denmark logistically, technically, commercially. So it -- this is not building 2 new companies in new markets. This is run on the margins of our Danish business, but of course, with local adaptation and local customer services and local partners to make sure that we fulfill fast and precisely. Very early days. It's all about learning.
If we have a license to play in those markets, what do customers appreciate, what do they like about Matas, 20% of Norwegians and Swiss actually know Matas from visiting Denmark and have a positive impression of Matas. So right now, we're in that phase of just discovering, learning, seeing how customers respond at the moment of truth. But we're happy with the execution of the launch. It's not what we used to call a beta launch. So it wasn't really finished. This is done. This is a really well-executed good shopping experiences, orders placed, orders fulfilled, satisfied customers, members to Club Matas coming in from Norway and Sweden. And we will, of course, keep you updated on this new venture.
So with that, I conclude my deep dives, and I'll hand over to Per to cover the financial results.
Thank you, Gregers. So let me take you through a few slides on our results for the third quarter. Starting out with the overall numbers in terms of revenue, as Gregers already alluded to 1.3% growth for the quarter and a 45. -- 44.5% margin, in line with the long-term margins that we are seeing in our business. Costs slightly up, of course, fueling some of the initiatives we have on assortment expansion and also our venture in Norway and Sweden, of course.
Overall, margin are 0.6% up compared to last year. And then as you already saw and mentioned in the beginning, we more than doubled our cash flow in this quarter. And that is primarily driven by some timing effects, especially around our accounts payable, roughly DKK 100 million coming from that, but also good movements in a lot of other areas. If we compare to last year, you basically see a lot of the impact from coming out of the COVID and some of the payments that was postponed and paid when we compare to last year, which we, of course, don't pay this year.
Slightly lower CapEx also helps that. So overall, DKK 540 million (sic) [ DKK 541.2 million ] of free cash flow for the first 9 months of this year. Another key element to that is, of course, our management of our inventories, and we continue to focus on managing that. And as you can see for the third quarter, this is then the third quarter in a row comparing year-on-year that we're now down below 22% in third quarter in terms of share compared to the last 12 months of revenues. And that needs to be seen also in conjunction with the fact that we are launching a new assortment. And even with the incremental inventories of new assortment, we still managed to keep our inventories on a good movement and as I said, trending downwards for the third consecutive years.
Yes. And I will hand over. Thank you.
And I will just reiterate our guidance with one slide position. We maintain our guidance of 1% to 3% growth for the financial year and EBITDA margin between 17% and 18%. But now we're saying it's going to reach in the upper end of that range, and we maintain our CapEx guidance of DKK 225 million to DKK 250 million.
So with that, we conclude our presentation, and we are happy to take any questions. So over to you, operator.
[Operator Instructions] The first question will be from the line of Poul Jessen from Danske Bank.
Yes. I have a few ones. Let's start by Matas Norway and Sweden. I think when you just have the strategy a year or 2 back, then the international expansion was not part of it, now it is. I was just thinking, what are your ambitions? What kind of positioning are you heading for? Is it copy of the Danish strategy or is it also will more price leading as many clients go to online due to lower prices when you don't have a physical network to combine it with? So what's the strategic ambitions on those 2 markets?
Yes. So just to go back to the strategy, what we said is that we will test whether Matas has a role to play outside of Denmark. It is not part of our long-term financial guidance. So it's not necessary for us to succeed outside of Denmark to reach our long-term financial guidance, but we are testing. And the German -- the German venture is about products into Germany to see if our own brands has a life outside of Denmark. And for the online business, what we're doing is basically taking the competence and the position that we have achieved in Denmark over the last 5 years where Matas has become the second most visited web shop in Denmark with a very, very high customer satisfaction based on having unique assortment, based on having advantages if you're a club member, based on having efficient and fast fulfillment, based on being competitive through a campaign-driven commercial model.
And all those features combined with the values that Matas has in terms of product safety, in terms of how we run our business, those values actually start to [ matter ] online as well. That's what we're seeing. So online used to be just a game of assortment, price and delivery, now it's much more nuanced to what the customer is looking for. So our approach, and it would be, I think stretching it to call it a strategy by now. But our approach right now is to have a presence in Norway and in Sweden, learn what the customers respond to, how they react.
Do they like the assortment that we bring to the market, which is different from our competitors? Do they like the way we promote? Do they like being members of Club Matas? Do we fulfill to the extent that they expect? We learn, we test, and if there is potential, then, of course, we can do more. And by the way, this is -- we're not the only ones pursuing this strategy. Of course, there is a lot of players that have a Nordic presence. And I think for us as a company to also have that presence if something happens in the market to be ready to be out there in front of the consumer, I think that from a just a tactical point of view is a valuable part of running Matas. So for now, this is not something impacting our expectations for the financial year. It is not part of our long-term guidance. It is just learning being present, seeing if there is a space for us in the Nordic region.
That's what I expected also. But are you planning to give the full assortment to Norway, Sweden to open up for that because I was counting brands seeing that you have a 1/4 or something of what you have in Denmark in, for instance, Sweden and Norway. So are you planning to give the full assortment to be available in those markets?
Yes, we can do that. There are some regulatory issues about a few products that we won't be able to sell across cross-borders. But in theory, we could bring the entire assortment to the Swedish and Norwegian markets. We started out with what we think is a compelling assortment to demonstrate that we have everything you need as a beauty consumer or well-being consumer, but also we have focused on bringing assortment that is different from what our Swedish and Norway's -- Norwegian colleagues bring to the market.
So right now, testing, learning, figuring out is there a position for us, tracking, as we always do, customer satisfaction, measuring up against whoever else is out there to see do we have something that is compelling that we can build on for the future.
What's the shipping time for a client in Oslo or Stockholm? Is that the same as if they were in August?
Few days. Yes. Very north, it might be 3 days, but I think the northern part of Sweden and Norway, they're used to not having a same-day delivery.
Okay. And then...
But we think it's enough to -- it's fast enough to be competitive.
Okay. And then you addressed the categories within fitness and health. I was just wondering, I'm just checking the prices with [indiscernible], what's your ambitions, is that people shopping there should just pick it up or do you want to be price competitive on these products as well, because today, you...
So -- yes. So for all new assortment that we introduced, we find our way of being competitive, whether it's impulse buying, whether it's some of the club advantages that we can provide to our club members. We are a company whose value proposition is about advice, convenience, easy return. You can get your presence wrapped, all kinds of value-added items. And I think that's our core belief that, that is Matas. That is what people expect from Matas.
And then, of course, we are also merchants. So we are competitive or we figure out how to be price competitive using our campaign model and using a campaign model that is supported by the data that we have from the club. So this is not a -- it's not a discount Matas as such. This is having a range and then figuring out how to be competitive.
Okay. And then on the logistics center, I know that now you've started tender process, but I was just wondering in case that you get most likely response for somebody who wants to build it. When from a more practical point of view, would it be possible to start building? Will it take 9 months a year or what kind of perspective should we look for?
That's -- it's part of the tender. And I think the good news, if you will, which might not be news to you, we are not in a hurry. We have capacity with the setup that we have right now. We have capacity to reach our long-term financial guidance. We have capacity to do the assortment expansions within that time frame that we want to do. However, for the long-term, we believe that it is important for us to be automated and to have more capacity to deliver faster.
So we are firm in our commitment that we will build the Matas Logistics Center, but we are -- we want to be -- make a smart investment and make it at the right time with the right partner. So we are not in any kind of hurry. It's a bad bargaining position to be in as you know.
Okay. And last question for Per, cash flow, net working capital, one thing that private equity is good at, I'm not sure background is working capital. I was just thinking what your lessons learned from coming into Matas? Is there much to be done here or is it efficiently run?
Good question. I think after being here 6 months and working capital, there's always something to be gained. I just want to say in this quarter, particularly, this is not about me putting in a special focus on working capital. It is more timing between the quarters. So -- but if you think on a long-term basis, there will be opportunities also in improving our working capital.
Okay.
And it actually probably becomes a bit easier with having only one location being only online. It actually is more -- you can be more efficient about your working capital than if you have to have the inventory in [ 260 ] stores, of course.
The next question will be from the line of Mads Quistgaard from Carnegie.
Yes. And congrats with the strong results. I have a number of questions, and I will take them one by one. So the first one, in the second quarter, you mentioned a cost reduction program without quantifying the effect. I cannot find any comments about this in this quarter. So what is the status on this program and how big is it?
[ We did a ] cost reduction program in Q2, we finalized the program. We didn't give out specific numbers, but this, of course, was a reaction to the turn of the sentiment around where the market is going and how demand forecast what they're looking like. So this was basically an exercise to take out some risk and take out some costs on some of the projects that we might not have the same kind of confidence and also running some efficiency measures. And frankly, this is something that we have been doing for the last 5 years. We expect it to be clearly part of our future to always run these optimization projects both in HQ, but also in the stores and for our logistics centers.
Okay. Perfect. In the same quarter, you also mentioned signs of customers trading down and coming back spending towards the end of the month. What have you sort of seen to date, similar trends? So...
For the Christmas quarter, we saw, I would say, a normalization during the quarter. So October started out, we were a bit on our heels. And I think retail as such was very much on its heels in October against 2 consecutive Octobers, the last 2 years that were just spectacular for different reasons. So -- and then, of course, consumer confidence, energy prices played a big role in customer behavior. Over the quarter, we saw what I would call a normalization. We didn't see these big differences between country and city. We saw, as you can tell from the numbers, we've seen it's Mass Beauty driving the growth, but we have also been promoting Mass Beauty and putting our Stripes center forward in the stores because we know that's what customers want, if money is a bit tight.
So I would say had we not been reading newspapers and listening to economists' predictions in the Christmas weeks, we would not have known that there was a looming recession or a consumer crisis. It was -- it looked very much the way it used to do in terms of mix of business and geographies and channels. And of course, we even were presently surprised to see January [ 23 ] being the biggest January [ 23 ] we have ever seen.
Okay. Can you comment a bit about volume and price growth? So how much have Matas raised prices year-to-date? And also what are you seeing in terms of price pressure from your current suppliers?
Yes. So the beauty industry, wellbeing industries and overall has not been as affected by supply chain hiccups. It has not been as affected by raw materials price increases. So -- and frankly, the brands have been more long-term about passing on cost increases to retailers and on -- ultimately on to consumers. So what we have strived to do over the last year is really to say if the consumers pays a little more, if we take a bit of a cut and try to find efficiencies and our suppliers do the same, then maybe we can work within what we call price moderation. So we have seen some products with price increases above and beyond what they would usually be, but we have also seen a lot of products where prices haven't really moved.
The growth is a mix of volume and volume changes toward Mass Beauty and some pricing effects, but nothing, I mean nowhere near what we're hearing in other retail categories. And I think that is part of why customer satisfaction, why trust in the brand and why trading is very stable. I think it's -- you don't get that kind of discourse around this category that you've had around food and energy for just to mention 2.
Perfect. And my last question here. I know you're not guiding for the coming year, but maybe can you comment a bit about salary inflation? I'm just trying to figure out the potential impact from the outcome of the collective agreements in Denmark. So what are you currently expecting for next year? And yes, what could be the outcome, both of the positive and the negative side?
[ Mads ], I can't add anything new to what you read about or hear about, it's surprisingly silent actually from the parties negotiating right now. You can discuss whether that's a good sign or a bad sign. But I think everybody is expecting to be salary increases to be beyond what they usually are. Our response to that, we have increased investments in technology that makes the lives and routines of our store colleagues easier to pave the way for efficiencies.
And we're doing the same at HQ looking at processes that we can automate, processes that we can shorten, things that we don't want to do in the same way, things that we can outsource to suppliers. So for us, I think it's been an advantage knowing that there has -- this wage inflation goes has been running around the hallways for some time now. So we are actively taking steps to prepare for that to mitigate whatever is coming.
As there are no more questions, I will now hand it back to the speakers for any closing remarks.
Thank you so much for joining the call, and thank you, operator. With this, we finish the [ queue ], the Q&A and the call for the third quarter, the Christmas quarter. Thank you very much.