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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Okay. Yes, so please make sure that you bring the ECO filler and goodie bags with you afterwards. We will also have the drawing today. You will actually be able to get the Wilfa Classic coffee machine. You could, of course, go out and buy it at [ Yanya ] for NOK 14.95 or something, but -- or could you buy it at a special price. I think, it's NOK 5.99 or NOK 4.99 this week at Europris. Regular price, NOK 6.99. So it's your choice. But 2 of you will be lucky. You don't have to buy it. You can actually win it. I think that the gentleman on the first row here has to draw the lucky winner. No, I don't see. Okay, what is it?
H 47.
H 47. Wooh! See that? Fantastic. Coffee for -- okay. And there's one more go, and I think I am this time hopefully will not win, so you could draw.
Risky.
Risky.
H 39.
H 39. Who is this? Ole? No? H 39. Oh, wow. Okay. Another one. Yes? Sleeping. Okay, another draw.
H 36.
H 36. This is coffee guys. I'll say. Third time lucky.
Okay. Okay. H 58.
H 58. There we go, yes. Gentlemen, there you are. Okay. Very good. So yes, to the presentation. First of all, as I said, welcome. The results, overall, the message is that of, obviously, on the back of it, we're not happy with the figures, both in terms of sales growth and the result growth -- growth in results. But it's tough times in retail. I think that I'm at the same time very, very proud of the staff and the people at Europris. I think that in tough times, it's an opportunity to really show what we're made of. I think that the spirit of the company shows some promising signs in terms of the dedication of the staff, the energy in the company, and I think, that will eventually also come through to the results. So we will see. But in the quarter, third quarter, we had roughly 6% increase in sales, that is in group revenues, including franchise takeovers. Total retail sales, which is all stores in the chain, 2.8%, which is obviously well above the market, but still sort of slightly below or on par with the market on like-for-like. We are a seasonal concept, so obviously when the seasons are not there, we are more affected than the other concepts. Gross margin improved quite significantly, mainly due to very positive stock-taking that Espen will come back to, but even if they are just for that, it was roughly stable margins versus last year. OpEx increased by NOK 14 million following a one-off timing of the accounting of distribution cost. Espen will also come back to that. But if you look at beyond that, the costs are under control, and we have a sort of good development on costs. Net profit was slightly down due to unrealized foreign exchange currency losses.If we look at the retail sales, as I said, it was marginally, like-for-like it was marginally below the market growth. But also in this -- keep also in mind that when you see the figures in this quarter that we have 1 less sales days, so they are slightly lower. We have 1 more sales day in the fourth quarter. I'm not going to stand here and complain about the weather. So weather comes up and down, and eventually, it will level out. But obviously, in parts of the quarter, we were affected by it, but it will come back. We saw, in certain categories, that they had a very good sales growth in this quarter, mainly due to the summer sales period where we had a lot of focus on consumables so we did good in personal care and laundry and cleaning. And as we talked about last year, some of the focus in this third quarter, this year, has been this centralized control and spacing of volumes. I will say that had a very positive sort of effect even though we cannot see all of it in the figures here, so we are continuing with that work and even stepping it up. So it's a positive feedback from that kind of work. These are the growth figures. We are beating the market on total growth, still sort of in the market there, but not more sort of stable on like-for-like versus the market. And as I said, what we had a focus on instead basically to make sure that we own the best-selling spaces in the store, that we have the best products. And in between seasons, it's very important to have daily consumable products there. And I can say that in this quarter, from sort of mid-August and on [indiscernible] when we're sort of back to work again, back from holiday, we had a very sort of good implementation of those -- the way we presented ourselves in those central spaces. So very, very sort of positive early signs. Coffee, you have all tasted. As you can see on the display over here, we have a huge range of coffee, both our own private label, but also brands. I think as I said that there's very few places where you can find that kind of selection in Norway actually. And I think, obviously, at very great prices, and very often also, we have great campaigns on these products. So it's a category that we've been doing well. We are also in this area trying to increase the every day sales, not just on campaigns, and this category, of course, are part of that efforts to make sure that coffee is more visible in the stores, also when they're not on campaigns.We talked about last time that we launched our e-commerce sales. We'll talk more about that in the Capital Markets Day. Obviously, the majority of the volumes at the moment is click and collect, which is you pick up in the store. That's, I guess, for all the retailers but also especially for us, now that we are in the early days of home delivery. And we have opened 7 stores so far this year, and we have 2 more stores to go, Nannestad, we opened last week, and then we're opening [indiscernible] in December, on the 6th of December, that makes it 9 new stores this year, and then we closed 1 new store close to Nannestad, which means that we have net 8 new stores this year. We have 12 stores signed next year, a couple of them are due to have some municipals holding regulation, so they might not come in '19, they might come in '20. But overall, as we said before, we are only, only, opening new stores if we see that they are profitable and that they meet the strict criteria that we have for new stores. And every year, we go back and we audit whether those all stores actually met the targets they said in the business case. And so far, the results are good on new stores. Therefore, we open new stores when we get good deals from the landlords. Of course, well, this maybe also see that many other retailers here that then everyone else is starting to go out of retail location or some. The discount variety retail sector is still growing, and they get a lot of interesting opportunities. Last time, we presented the cooperation with ÖoB. It's far too early to come back with some results in savings, but I just wanted to reiterate that if you ask me today whether this is a good move from a strategic point of view, I would say that I'm even more sure today than I was 3 months, 4 months ago when we announced it. I think it's a very, very good move, and the cooperation has started well. It's a very good cultural match between ÖoB and Europris. So we have been starting to first joint meetings, the first meeting with the suppliers, both here in the Europe and in China. So it's very good progress on the cooperation, both with ÖoB, but also with the Tokmanni that we are putting a lot of effort also into the cooperation with Tokmanni and to include more volumes to buy together with Tokmanni. So good progress on the activity side. And with that, I'm going to hand over to Espen, who will take us through the financials.
[Foreign Language] Should be in English, actually? Let's do that. Starting off with the gross margin. The margin in the quarter was 43.6% compared to 42.1% last year. In the stores, we do the annual stock-taking in the third quarter. And during the year, in the stores, we report a calculated gross margin. So any calculation differences, they are recorded at the time of the stock-taking. And this year, we had some calculation differences. In total, they amounted to NOK 30 million. Of which, now NOK 24 million relates to previous quarters. So basically, for the Q4 last year, Q1 and Q2 this year, and the remaining relates to the third quarter this year. The stock-taking calculation difference is basically [ origins ] from shrinkage reduction program we have introduced in 54 stores. We have done a quite intense follow up on shrinkage due to high shrinkage numbers historically, and we see very good results from that. They have reduced the shrinkage by NOK 13 million compared to last year. In addition to this, we have a one-off effect following the sugar tax increase from last year. We estimate that to be NOK 5 million, little bit conservative in the first quarter, but we ended up with a total NOK 12 million from that. And that, of course, belongs to the first quarter this year. So the effect in the third quarter was NOK 12 million, and minus the NOK 5 million we accrued in the first quarter. So net effect NOK 7 million that we will need to move back to the first quarter. In addition to this, we have the one-off effect from franchise takeovers of NOK 2 million. And adjusting for the one-off from the stock-taking and the franchise takeover, the gross margin for the quarter was 42% compared to 42.2% last year, so slightly down. Looking at year-to-date numbers, the margin is 43% this year, up from 42% last year. Looking at operating expenses, in percent of revenue, that was 34.8% in the third quarter, up from 32.9% last year. The operating expenses this quarter has been increased by NOK 14 million, following a timing effect of transportation cost. This is basically us being a little bit too late for booking of invoices and also the supplier being too late with issuing invoices, so we ended up with a backlog that was detected during the quarter. This NOK 14 million, of that, NOK 8 million relates to 2017 and the remaining NOK 6 million to the previous months this year. So it's a mistake, not good that it happens, but we have corrected and now we are on track when it comes to booking or transportation costs. In the third quarter, we always do a check on the performance-based pay for management, which is linked to the development in the share price, and that has been adjusted by NOK 10 million this quarter, same as last year. So reducing the operating expenses by NOK 10 million in the quarter, which is the same as we did in the third quarter last year. If we look at operating expenses, on adjusted for the extra freight cost in this quarter, it was up by 8.6%, while the number of directly operated stores increased by 9.5%. Year-to-date, operating expenses in percent of revenue is 33.8%, up from 32.6% last year. EBITDA, of course, also affected by the stock-taking and the freight cost. In total, EBITDA was NOK 119 million, up from NOK 117 million last year. Year-to-date, we have EBITDA of NOK 363 million, up from NOK 356 million last year. On the cash flow, as you remember, we have the significant inventory build down during the third quarter last year that has not repeated. We're very happy with that because we now have very good stock in the stores. In addition to that, we have also started building Christmas early. As you can see on Paul, he has his Christmas sweater, so we made sure that we have the Christmas goods on time this year, earlier than before, so we can really supply and build up the important season in the store. So we built up the inventory a little bit earlier. That's also impacted the cash flow in the quarter. After the second quarter, we initiated a share buyback program of 2 million shares. That was completed during the third quarter. And we, in total, we spent NOK 43 million buying those 2 million shares. That's also included in the cash flow of the third quarter. I think it's time to summarize. You have a mic, Paul?
Yes. Okay, so basically, we still believe in continued growth, both in revenue and in results. So no changing that. We think we are in a strong position as I said, with this cooperation with ÖoB and Tokmanni, and we believe even more that this is an important strategic move long term. And we also initiated, as we announced earlier this morning, a further share buyback program of up to 2.5 million shares that can be done, used in the transaction with ÖoB or for other purposes. And as we have told you before, we are starting a transformation from a pure physical retailer to a true omnichannel retailer. We are -- we had launched our sort of both click and collect and home delivery e-commerce service, and we are stepping up our ECRM program. We'll talk more about that when we have the Capital Markets Day. But very good opportunity, I think, for all retailers to get customer traffic. We think it's important. And still, we have a healthy pipeline of new stores. We are not going to open any store that we don't believe it will be profitable and that we believe will meet our strict criteria. We will audit all new stores every year, and we'll make sure that they actually stay disciplined. But as long as they are profitable and the audit show that they are meeting that expectations, we will be unwise not to open stores. And of course, this is not just us, this is the entire discount variety retail sector that is still growing in Norway, in Europe, in U.K., in the U.S. We have 1 store closure in the fourth quarter, that's already closed, and we basically just opened a new store in the vicinity at Nannestad. And we have completed 1 franchise takeover in October 1, and we have 2 to 3 more expected this year. This is a natural transition as more and more franchise stores are up for modernization, and some people stay on and some people don't. So we expect this trend to continue. So with that, I think, we'll -- some of you asked me before, about this shirt. Last year, we actually had a little bit shirt with less quality, but only for the staff. This year, we have improved the quality, and we are also offering it to customers because a lot of customer started complaining that they couldn't buy this shirt. So now you all know that you can buy this for your wife or your husband as a perfect Christmas gift only at NOK 2.49 and only at Europris. It's a special design by our own graphic designers. So okay, with that, we'll open up for questions.
Can you just repeat the questions on the mic?
I will. Well, okay. Yes, questions? Just ask them out loud and I'll repeat them.
You say that you have 12 stores or 19 and beyond, of which 3 are subject to regulations. Does that mean that we should expect 9 stores at least for 2019?
It's -- the question was that we can expect 9 stores for 2019 since we have 12 stores and 3 subject to zoning regulations?
I don't have a mic.
I have mine. This is going to be difficult. No, you shouldn't expect 9 next year. We have the stores are for '19 and beyond. So some of them might come later. So we don't give a specific number for next year. We -- I will expect it to be somewhere between 6 and 10. But that is -- let's wait and see when they get approved, and they might be also [ cumbersome ] that they [ can ] open on a shorter notice.
Keep in mind, it's still 1 year -- 15 months until the end of '19.
I think honestly that the pipeline we have now is actually very strong for the time of the year around. So it's in.
Just a follow-up question on that, on the store portfolio [indiscernible], you expect that the stores you will open in '19 to be evenly distributed throughout the year? Or do you expect it to be back-end, front-end loaded? Is it possible to give some comments on that?
The question is we expect the stores next year to be front or backloaded or evenly distributed throughout the year. And I would say that we expect it to be evenly distributed throughout the year. Question?
[Foreign Language]
The question was, first of all, that we see that e-commerce is an alternative to or as a complement to all retail, and we are -- you're following us on Instagram, that I hope everyone else is doing too. It's a good channel for inspiration, and the question is whether we can actually do direct sales on Instagram? We have sort of said that at the moment, start with the big important things, start with the sales through your own e-commerce sites, we think that is more money and more volumes. We see that the biggest volumes are mostly, as I said, on click and collect, more than 90% is still on click and collect. So we believe that that's more important in the first phase. We will obviously at any point in time evaluate more. We use Instagram as an inspiration for the customers. So we see that customers look at Instagram more to get inspired and then they come to stores or go to the website. But actually, the majority of people looking at our Instagram site is going to the physical stores. They get inspired on Instagram, like you, and then they come to the stores. But Instagram is one of those channels that we see is growing quite a lot, especially in the home and interior sector, obviously. Yes?
Can you please comment on the training so far in Q4, in October? Has it normalized as you commented about the last part of Q3?
As we said every year, we know that the most important days in the fourth quarter is still to come. Basically it's today. Holloween is a small season, but this day today is going to be big. And then the most important period is from mid-end of November and to the rest of the year. So I think, it's an okay start, but it's far too early to be positive or exuberant in any way.
And then in some portions, you have commented on the performance of the different vintages. Is there anything you would like to comment on the 2017 or so far in 2018 vintages?
Mostly we do that when we do the annual because the majority of sales and the majority of the results are in the fourth quarter. So we think it's better to comment on that in the next time.
Okay. And then what about IFRS 16. Do you plan to provide us with the pro forma figures before the start of 2019?
The question was about IFRS 16. I'll leave it to Espen.
Yes, we will provide numbers on that, and we will do that on the Capital Market Day, on the 5th of December, then we will give you some numbers on how that implementation will affect the balance sheet and the profits for Europris.
Just one question on the gross margin. It was -- underlying, it was down 0.2 percentage points year-over-year versus a small increase in the first half. I know that the decline is very limited, but despite that, could you share some thoughts about why the gross margin is down 0.2 percentage points in Q3?
I think that, first of all, I think in the first half, we did some deliberate things that we talked about last time where we actually, in the mix of the campaigns, where we saw that when we evaluated to '17 that we were giving away too much margin and not getting enough sales for it basically. So that was a deliberate choice in the first half. Q3 is more sort of normalized. And the campaign share is more normalized, slightly up. Campaign margin in the quarter is stable. So I think, it's 0.2% or something is roughly the same level.[Foreign Language]
There's a couple of questions here from Nikolai Ibsen. First of all, we want to congratulate with the new sweater, Pål. And can you talk a bit about the profit per store? How many stores are running at levels that you perceive as an nonsatisfactory? 9 stores year-to-date and how are those performing and contributing to profitability? Would you say that your marginal return on capital on new store is below, at or above the company's average store? You talked about timing on freight, and then it's the first question. Do you want to answer the store question, first?
Yes, we'll try to answer that. That was a long question.
Yes, there's more to come.
I think it's too early comment on the 2018 vintage when it comes to performance because we need to see a full year operation in order to really see how the stores have different seasonality. Some stores are peaking during summer, some are peaking during winters. So we need to see a full year in order to evaluate the stores. So we cannot comment on new stores more specific until we have a full year of operation. When it comes to unprofitable stores, we have a tail of some unprofitable stores. I believe it was 17 stores last year, Trina, that was unprofitable on EBIDTDA on group level. And we are following up those stores for some of them, it's relocation issues, and for others, it's, of course, management issues. So we need to work on follow up on the profitability of those stores. So we continue to do that as we've always done. What we're happy to see is that all the stores that were negative in 2016, we actually improved in 2017. 3 of them went into green numbers, so we see positive results of what we're doing, but it takes time.
And the majority of the stores are very profitable.
And then the next one. You talk about timing on freight. How is freight developing on comparable numbers as part of revenue COGS?
As a part of revenue or COGS?
The revenue COGS/COGS?
Revenue.
Relative.
It's stable compared to last year, but of course, we will need to adjust the last year numbers with the NOK 8 million, and the freight cost should be in line with last year. There are no changes to the pricing nor to the method of freight compared to last year.
And the last question from Nikolai. Lastly, could you buy back shares? You buy back shares. Do you think your shares have better return prospects than new stores?
I don't think we should comment on that.
Then we have 1 question from Janserik Jansen. Have you assessed the effect of new store openings in nearby and already-existing stores thinking of negative like-for-like?
Yes. For every new store, I mean, we do the business case for a new store. We actually look at what is the effect of the surrounding stores. So that's part of the business case we make. We don't open a store if it makes another store unprofitable. We'd look at the total effect in that market. And as I said, we go back every year and we audit whether this cannibalization effect is actually taking place and how much it is compared to what we estimated. So it's a very diligent process for opening new stores and looking at the cannibalization too.
And some questions from Ole Martin Westgaard, DNB. What is the main reason for the early shipment of seasonal goods this year? When do you expect inventory to stabilize? And what is a normalized level?
The reason for the earlier shipment is basically that we, last year, we said that we were not happy with how we utilized the space in the stores during the midseason. So now we have planned it a little bit better, how we build up the season for Christmas. That means we need to have the goods in a little bit earlier in order to ship it in the best ways so we get best operation and best presentation of the stores throughout also the midseason and the peak season. So that's why we did it that way.
And one last question from Ole Martin. On your like-for-like, in the quarter, what was the mix between volume and price?
In the quarter, it was more -- it was a negative like-for-like in the quarter. It was volume-driven, not that much on price. Okay.
Just a short follow up on the inventory situation. Can you say that you are happy with your current inventory level? Or do you expect that to move further down?
The question was are we happy with our current inventory level?
And the answer is yes, in the stores. I believe the inventory is more balanced and correct than it was last year now. And when it comes to timings of goods coming into the central warehouse, that will vary from season to season and how we manage to get the flow. I think we could have a potential of not having all the seasonal goods delivered preseason that we could have some delivered during the season as well. So there could be potential to make that a little bit better, but when it comes to the store levels, we are satisfied with the level.
How do you consider changes in your competitive landscape? I mean there's been tough news about competitor's plans to open new stores and to ramp up operations in Norway, do you feel any change in the competitive pressure?
The question was do we feel any change in the competitive pressure? I think that as we said earlier, I think we are opening new stores. I think actually, probably we are the most opening most new stores. The entire discount variety retail sector is still growing. I think you should expect that it's going to continue growing. In some markets, it will be slightly higher competition. But as we said before, our customers primarily doesn't choose between Europris and some other player in the discount variety retail sectors. They go both places. So yes, there is, of course, more discount variety retail stores coming up in the market. Overall, that is slightly increasing competitive pressure. But this not 1-to-1, head-to-head competition in the same as you see in other markets like sports or grocery sector or other areas.Petter?
Just 1 question for me. The increased purchasing power you get from ÖoB and Tokmanni, should we expect any small impact from that in Q4? Or is it a second half 2019 issue?
You should not expect it in Q4. I think, as I said before, also, the most important -- now we're at a level where we're doing a lot of activities, and I think it's a very important phase because if you want to make foundation or a house, you need to make sure that the foundation is strong and tight. And as I said, I'm extremely happy about the way we work together from a cultural fit, but also from the way we work together in a recooperation. And I'm also very happy with the kind of rejuvenation of our cooperation with Tokmanni. We've seen new areas where we can cooperate with them. I think that's the most important. And at some point, we'll give more visibility on the effect. But I think, you also think with this competition, we also need to make sure that we invest in the market and in the prices. So that's also some net-net. It's always the market who decides -- market prices who decides where we get. Okay, so thank you for coming. Make sure that you get this goodie bags. And as I said, this is a Christmas gift of 2018. Thank you.