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Welcome to the Clas Ohlson Q4 2017/'18 Call. [Operator Instructions]I'll now hand the floor to our host, CEO, Lotta Lyrå; and CFO, Göran Melin. Please begin your meeting.
Thank you very much, operator. And going directly to the next slide, which is the agenda. I will kick off with a business update, and then we will move to financial development part, followed by events after period end, and then we will finalize with the summary and a Q&A.Going to the next slide, business update; and immediately to the next slide, new strategy for growth in a new time. As we know, retail is undergoing changes, and this is due to changes in customer behavior. This also impact the market conditions that we see daily. And this comes both from an increasingly challenging competitive landscape, impacting traffic to our stores, but not -- both within our own segments, but also the general competition for our consumers' wallet. In addition, customers are becoming increasingly skilled at picking the best offers, and this also impacts market conditions. Therefore, to secure a long-term sustainable profitability, it is important to apply new approaches and address the cost structure.So both delivering to customer expectations and addressing our cost structure and efficiency is the base for the new Clas Ohlson strategy that was presented in May, aiming to deliver profitable growth in the long term. The starting point for this strategy was our strong brand, our current business, the broad customer base we have built, and through that, our financial strength. The fourth quarter is the first quarter in our transition. And we -- as we have already signaled, this transition will require investments in the short term to create conditions for long-term competitive in the market -- competitiveness in the market as well as profitable growth.I'll then go to the next slide, Q4 development. During this quarter, an important focus has been to develop the customer base, both delivering traffic to our stores, but also increasing online traffic and sales. This has led to a solid sales development in this changing landscape that we live in, and we deliver a Q4 sales increase of 7%, a like-for-like increase during the quarter of 3% and a significant growth in online traffic and online sales amounting to 48%. This has been possible through substantial commercial activities, including both marketing spend, but also ensuring a competitive price position towards our consumers, meaning margin investment. Earnings during the quarter are, therefore, impacted by several factors. First of all, our gross margin, which, in itself, is impacted by 3 things: currency, commercial investments as well as other effects that Göran will come back to. The earnings have also been impacted by one-off costs. This leads to, that's the Q4 earnings are minus SEK 106 million, and this includes the nonrecurring costs of SEK 45 million.I will then move on into the business update and starting by recapping the strategic framework and goals. We have geared our strategy towards 2 business objectives. The first one aims at building a big, loyal customer base, and that is about our perception in the market. We want to be perceived as being passionate about simplifying lives in all kinds of homes. Through that customer base and that loyalty, we will drive growth and be able to deliver profitability and, thereby, shareholder value.I then go to the next slide, new financial targets and framework. What are we then specifically aiming at achieving? We have 2 main financial goals. The first one is to deliver an average annual sales growth of 5% during the coming 5 years. The second one is to deliver an operating margin at 6% to 8% within the next 5 years. These 2 goals shall be achieved within a financial framework constituted by 2 main parameters: one, the capital structure measured as net debt to EBITDA to be kept lower than 2x; and the second one, that we keep our dividend policy intact.I then go to the next slide, which is about the short-term implications that we see. In this context, I would like to recap that we already communicated short-term implications of delivering the strategy. We will invest 1% to 2% of the underlying margin. And we will, during the coming 2 years, have the ambition to maintain the dividend at the same level as last year in absolute terms. The investment in underlying operating margin is primarily commercial investments and activities to continue to build the customer base. It also includes strategic initiatives that require extra resources and new capabilities.I then will update shortly about activities that we have done during the quarter in each of our strategic building blocks, starting with unique customer offer. We see that it is important for us to -- sorry, I have now moved on to the next slide, a complete solution to be uniquely positioned. Sorry about that. We see this as critical for us to be competitive in the long run, and especially the combination of product and guidance will differentiate us to a broad set of customers in all our markets.Today, I would like to touch upon a couple of important launches in this area, starting with new products that have been launched. We have had a quite intense taste during the spring launching a new set of products. We have focused on outdoor activities. First of all, we have launched a second collection within workwear. The first one was very successful and delivered to our expectations. The same thing goes to now an extended solar cell range that have been successful over a coming -- a number of years, and we now continue on that route. An important part of the assortment going forward is the electrical bikes range where we have taken in a new bike assortment but also a broad range of accessories. In addition, we are, in a couple of weeks, launching a concept called Make & play, which is targeted towards outdoor activities and creativity outdoors for our younger customers.I now go to the next slide, which is introducing Clas Ohlson Limited Edition. Further on the product side, developing our own brand is a key area going forward. And in line with this, we have, during the last week, launched Clas Ohlson Limited Edition. This is a tribute to our founder in the year where we celebrate our 100-year anniversary. It is a selected range of everyday products that has a little bit of an exclusive twist to highlight our anniversary. And all products are designed by our own design team in Insjön. They are also selected to represent the bestsellers and consumer favorites throughout the years. And as mentioned, it was launched June 2.I then go into the next slide, which is cooperation with Telenor. This is an example of working with partners to broaden the offer to bring a more complete offer with also more guidance to our customers. We kicked off this pilot partnership in March in 6 selected stores in Sweden. The evaluation of the pilots have just been concluded, and we can see significant synergies in sales in our own multimedia assortment in the stores where we have piloted this partnership. So we will continue to build further on this as a step towards offering a more complete solution in one of our product area.I now go to the next building block and the next slide called outstanding customer service. The store network is a string that we will continue to optimize and, thereby, develop. And together with the online presence we have, it will create unique accessibility for our customers.Naturally, using our stores as a part of the logistics setup in Clas Ohlson through click & collect as well as feeder stores, it will also impact the future role of the store. All in all, we will develop new formats to complement the existing but also as a way to improve sales per square meter. One of our important focus areas right now is to optimize the store network. And I am now at slide optimizing size and location of existing store network. We treat any break option or renewal of a contract as an opportunity for renegotiation as if it was signing a new store. This could be in terms of reducing space, increasing the flexibility of our terms or changing the ramp. We have many stores continuously under renewal, and we are using these opportunities to improve our efficiency.I now go to the next slide, new store formats being tested. We are also, as part of this work, testing new store formats. And here are some examples of some of the smaller stores that we will launch over the coming weeks and months. First out is a pop-up store in Oslo, which will be completely focused on our home range. We then have a number of other stores, lab stores in Stockholm and in Helsinki -- in Finland, sorry, and Helsinki that will be targeting other parts of our assortments, and that will also have a different mix of products and service in the store.I now go to the next slide, short-term online actions, ready for Christmas. Another important part of the outstanding customer service is our online channel. And we are working, on a daily basis now, to take convenience online to the next level. And these are some examples of things that we are working on to be ready already for Black Friday and the Christmas trade, which is our most important commercial sales period of the year. This includes making the whole shopping journey online much more straightforward, from search to payment, and these activities are specifically targeted towards improving the mobile experience. Another important part of this work is to increase the options for delivery for our customers so that one can choose how to get the online purchase delivered. This includes click & collect, but also several last mile delivery options enabled through a feeder store setup. I now go to the next slide, which is implementing click & collect. In February, we implemented click & collect in Norway. And we will, over the coming months, implement click & collect during -- in the other remaining markets. Click & collect is an important way to improve convenience, but it is also an important way to do that in a cost-efficient way for us and, therefore, for our customers. I now go to the next slide, which is an update around the cooperation with MatHem.se in Sweden. We have intensively worked during the spring to get this strategic collaboration with MatHem out to our customers. It has 2 different dimensions. One is that a selected part of our product range is being offered through MatHem's platform. The second part is the customers who buy e-com at ClasOhlson.com will be able to choose to have products delivered through MatHem.The first customer order was received on March 27, and we have then have a successful pilot process. And we can, today, say that already during the pilot phase, which has taken place completely without marketing or highlighting any Clas Ohlson product or commercial activity, the sales of the 106 piloted products are already on par with sales of the same product on clasohlson.com in Sweden. Next week, we do a full-scale launch of 700 products. This means that these products will be delivered to customers shopping on MatHem.se from Stockholm, Gothenburg or Malmö. I now go to the next slide, which is smartness and simplicity. This is a key area for us to secure that we can invest also in the future commercially in a market while being profitable.I now go to the slide implementation of sCORE. We have, during the last 4 weeks, implemented the main release of the sCORE program that has been worked on for a number of years. sCORE delivers critical capabilities for the future Clas Ohlson, especially in the area of ensuring that we can tailor the assortment per store in a better way and also have a sales and operational planning that improves both for our customers, but also makes the operation more efficient. In totality, sCORE, the way it's scoped, will mean an investment of SEK 500 million. The e-com part has been moved to the development of the new digital platform and is part of the future strategy.I now go to the next slide, which is developing more efficient operations. An important action that we have taken during the quarter is that we have started to work with the support of data science, what is usually called big data and algorithm. We use these tools to steer investments and commercial decisions in a more precise way. This has just been kicked off, and the big effects are yet to come. But what it means is that we can be more effective in our promotion investments at the same time optimizing our margin in a different way. We have also introduced something that we call category reset, where we work through the assortment to optimize the customer offer as well as how it is merchandised in the store. We will also use these tools to review and optimize the overall commercial process in Clas Ohlson.That sums up the business update, and I will now hand over to Göran for the financial development.
Thank you, Lotta. Going into the numbers, we start with our fourth quarter covering the period 1st of February to end of April.Next slide, 25. In the quarter, we have had a sales growth of 7% in SEK. Sweden and Norway, up 6%; Finland, up 12%; and outside Nordic countries, up 5%. In local currencies, sales was up 6%, like-for-like growth was 3% and the online sales increased by 48%. And there are 5 more stores net in the network compared to end of period last year.Next slide, 26. Divided by country in local currencies, we see a rather solid sales growth in our home markets, with Sweden and Norway, up 6%; Finland, up 5%; and outside Nordic sales, up 1%.Next slide, 27. Our gross margin is down 5.3 percentage points. The gross margin was negatively affected, to equal extent, by primarily 3 factors of different natures: first, exchange rate differences; secondly, increased commercial investments; and third, other effects. I will now briefly comment on those on the next slide, 28. The first one, exchange rate effects, is due to delays in inventory and currency hedges in NOK and also as stronger U.S. dollar, affected also by revaluation of accounts payables. Second, increased commercial investments, related to margin investments to drive sales and effects of an increasing online share. And the third part is increased sourcing costs, stock taking differences and IT implementation costs.Next slide, 29. The share of selling expenses increased by 1.4 percentage points to 39.7%. The share was negatively affected by the strategic initiatives initiated, approximately SEK 25 million being an allocation of costs as part of the strategic plan that has been brought forward 1 quarter. The share was positively affected by reduced costs in the U.K. and increased sales in comparable units, which was counteracted by increased commercial investments and higher costs in Germany.Next slide, 30. Administrative expenses were impacted by approximately SEK 10 million as a result of the 100 More Years strategic review. The expected administrative expenses would increase with approximately SEK 10 million per quarter for the upcoming 2 quarters related to strategic review and launch.Next, Slide 31. This adds up to an operating profit of minus SEK 106 million in the fourth quarter. The profit is affected by one-off costs and costs related to strategy implementation: SEK 10 million related to strategic review and launch, SEK 25 million is related to strategic initiatives and SEK 10 million is related to new business systems and optimization of the store network in the U.K. The operating margin is minus 6.3%, and earnings per share is minus SEK 1.36.Next slide, 32. We now move into the financial year 2017/'18 in totality, covering the period 1st of May 2017 to end of April 2018.Next, Slide 33. During the period, sales growth was 3% in SEK. Sweden, up 2%; Norway, up 3%; Finland, up 9%; and outside Nordic countries, a decrease of 10%. In local currencies, sales increased by 3%, like-for-like growth was flat and online sales increased by 33%. Now there are 13 more stores in the network compared to end of period last year.Next slide, 34. Operating profit amounted to SEK 468 million for the financial year. The profit is affected by one-off costs and costs related to strategic implementation: SEK 5 million, a donation to the Clas Ohlson Foundation, SEK 30 million related to strategic review and launch, SEK 25 million related to strategic initiatives, and SEK 10 million related to new business systems and optimization of the store network in the U.K. Operating margin amounted to 5.7%, and earnings per share amounted to SEK 5.66.Next slide, 35. Total investments are SEK 497 million, of which MatHem investment of SEK 224 million, including transaction costs; new stores and refurbishments, SEK 82 million; and new IT systems, SEK 124 million.Next slide, 36. We have a strong financial position and a strong cash flow of SEK 373 million and show the continuity of the supply chain. An inventory increase have been planned ahead of implementing the inventory module in the new IT platform named sCORE. Cash flow after investments and financing activities are minus SEK 514 million as a result of the investment in the MatHem shares and also the inventory buildup. And we have a net cash position of SEK 116 million.Next slide, 37. The Board of Directors proposed to the Annual General Meeting in September a dividend of SEK 6.25 a share, the same level as last year. This is equivalent to 115% of net profit and in line with our dividend policy.Next slide, 38. That concludes the financial year 2017/'18. So let's move into our May sales.Next slide, 39. Sales in May are up 7% in SEK. And divided by country, sales development is flat in Sweden; in Norway, up 13%; in Finland, up 12%; and outside Nordics is up 10%. In local currency, sales increased by 4%, and like-for-like growth is 1%. Online sales increased with 24%, and there are 14 more stores in the network compared to end of period last year.Now that concludes the financial part. So back to you, Lotta.
Thank you, Göran. Now we come to the summary, and I would just quickly like to summarize the financial year 2017/'18 on the next slide.Overall, we had solid sales development during the year, ending up with a like-for-like flat during the year. This was enabled through the significant commercial investments, and they play an important role both in the short term delivering this result, but also in the long term to continue to build the competitiveness of Clas Ohlson and making sure that our customers come to us for their shopping.We have invested a lot of energy and resources in the development of our new strategy and also began the implementation. And we aim to use the fantastic starting point that we have in our current business, our customers and the underlying financial strengths and earnings to invest in the future.There are new initiatives to come, building on the existing business to further develop our customer offering, meeting and our sales channels, and some examples of this, we have given already today. And this will continue going forward.And that concludes the presentation part. So we are ready for questions. So back to you, operator.
[Operator Instructions] Our first question comes from the line of Magnus Råman of Handelsbanken.
If I start with the gross margin, you speak about 1/3 related to commercial investments in the quarter here, and that's almost 2 percentage points of margin. If we look at 2018/'19 that we just started, you have guided for investments of 1 to 2 percentage points. Should we expect your commercial investments to remain at the pace that we've seen in this quarter? Because that would imply that all of the room that you've created for yourself will be on the gross margin and none on OpEx. Can you specify, please?
Hey, Magnus, it's Lotta here. The guidance we have given regarding investment of underlying margin of 1% to 2% is -- covers the totality. And the reason that it's possible is what I just mentioned in my presentation that we have initiated to work with new methods and the data science in a different way, where we will also be able to optimize promotion, drive growth, but at the same time also optimize our margin.
Okay. And then just the final third other effects, if you can give some more comments on sourcing costs here. Do you see that increase being recurring or is it more a one-off effect? And then IT implementation costs, also, if you can speak a little bit what's your view of those going forward.
We can start with the IT implementation costs. Now that is, as Lotta described, we are now -- we have launched our new release or the big part of the new IT system, affecting also the distribution center. And because of that, we have also made preparations to mitigate the risks and, therefore, the costs are a bit higher in this quarter compared to previous quarters, and that is not a cost going forward. On the other hand, looking at the transportation cost, we see an increased cost. If you remember a year ago, we had a conflict in the harbor of Gothenburg. And as an effect of that, we are now taking a large extent of our incoming goods through the Port of Gävle instead of the Port of Gothenburg. That means a higher level of security for us that we have 2 entry points going with the goods into Sweden mostly from Asia, but that also means a little bit of higher costs also going forward.
Okay. On your operating margin guidance, I mean, I guess this is, of course, an annual guidance and not a 5-year average guidance. But the range, of course, is rather wide at 4% to 7%. But just to clarify here, you view this as an annual guidance. And given that you've talked about investing 1 to 2 percentage points margin in the 2 first years, the bottom end of the range is 4%, so you're not seeing that you could be front-end loaded to the extent that you would undershoot the target in a single year? Just to clarify that.
Yes, sure. Now the target -- the financial target is to reach an operating margin between 6% to 8% during the period. And then we have signaled that during the year we are in now and the next year, we will invest 1% to 2% of that margin in achieving the transformation. So this means then that you could say that the range during these 2 years are 4% to 6%.
And our next question comes from the line of Stellan Hellström of Nordea.
I would like to come back to the guidance of 1% to 2% of sales being invested, just to understand that a little bit more. I mean, in this quarter, it seems that it's more than 4 points of sales being invested. So am I right to understand that you will -- this will be a lower number in the ahead due[ to help ] to efficiency gains and cost savings?
Yes, Stellan, it means that the 1% to 2% of investment in underlying margin will cover both commercial investments and other OpEx impacts that we will have. And as I mentioned before, that will be enabled through -- that we will also work on the cost side. And we have implemented new tools and analytical methods to be even more sharp in our promotions to optimize both sales and margin.
And when would you expect to see the positive effects of this?
I think that will come during the year. But in all changed process, it will probably be more during -- towards the end of the year than in the beginning.
All right. Just finally, also on the investments in -- or the commercial activities and the investments in price. I mean, how do you ensure that this really builds the loyalty that you want with the customers? And then, I mean, maybe there's a risk here that this leads to more opportunistic customer buying.
Yes. And there, I think the balance between the commercial activities that we are doing and, at the same time, working on more strategically on loyalty, for example, the platform that we will have initiated now to build up is important, so to say. And that's also one of the reasons why, short term, we see a lot of financial investments because we are trying to act both in the market in the short term to make sure that the customer doesn't go to learn to shop elsewhere and, at the same time, we are investing in the long-term buildup of our competitiveness. So that is how we are trying to address it.
And our next question comes from the line of Nick Fhärm of SEB.
So can I ask you a question like this? You've obviously taken a decision to drive sales through price investments. And someone earlier alert to export [ learned to reach ]maybe 1.5 to 2.5 percentage points in this quarter. For the full year, you have 0 like-for-like. And in this [ couple of ] quarter, you reported around 3% like-for-like. And I was just wondering, do you think sort of these numbers, what we should expect going forward as well, i.e., if you invest, say, a couple of percentage points on margins, you expect to get around 3% like-for-like back? Or are there other driving factors there, including everything from weather to calendar to what it may be? Could you elaborate a bit on the sensitivities here between investments on the one hand and resulting like-for-likes on the other hand, please?
Yes, Nicklas, of course. I think I dare to say that we would not have achieved a flat like-for-like had we not invested commercially because we have, during the year, and I think especially in Sweden and Norway, had a development of the commercial climate that is a little bit different. And as I said before, it's not only the competition within our own sectors, it's also the competition for the wallet in general. And we have all spoken to colleagues in the other retailers in the countries, and I think everyone feels the same thing. So a flat like-for-like was achieved by being commercially aggressive, otherwise, it would not have been achieved. I think that, that is an important starting point. Then going forward, the way to change the ratio that you are pointing at, i.e., the ratio of achieved like-for-like versus invested gross margin, is again through the analytical tools that we have during the quarter started to learn and use. And I believe that we will have a different balance by applying this. And we can already see signs of that in some of the tests that we are doing.
And could I also argue -- sorry, could I also ask you on the online sales development? I think it would be fair to say that it's slightly light growth in the context of you doubling online sales every second [ year ] going forward. And I was just wondering if you could give us a general feel for your online trading. Has there been any particular difficulties in this -- now I'm talking about May, sorry, any particular things that you would like to mention, or this is where we are right now?
Yes, I think if I take it from another dimension, to start with, Sweden is a little bit slower during May, and that is a conscious decision because we have saved the commercial ammunition for June when we celebrate our birthday. And of course, the sales pace in Sweden, in general, impacts also online. So that, I think, is one of the things that is important to have in the back of your head. Then the second thing is that we have also checked this with online players that with the quite extreme weather that have been, people can't spend less time behind their screens. And of course, that impacts. Otherwise, we don't see any social patterns or things that stand out.
Right, wonderful. So also confirming then that celebrating your anniversary, we probably imply your significant higher efforts to drive online sales in June as opposed to in May. Is that correct?
Yes, it's part of the agenda, of course, all the time.
Yes. And then finally, sorry for -- if I'm being too detailed now. But could we just walk through the sort of nonrecurring items? Because I think you said a lot earlier in this call that all in all, it's around SEK 45 million in nonrecurring items. But the way I understand it is that you charged a SEK 10 million in administrative costs, which is part of the total of SEK 60 million in consultancy fees, right, to the Q4s?
If we -- I should walk you through them again here. What we have is that we have SEK 10 million for the strategic review and launch, and that is booked as administrative expenses.
Yes. And Göran, there would be SEK 20 million more going forward, right, in Q1 and then Q2? Yes?
Yes. Yes, but also in Q4. Yes. And then SEK 10 million more of those in Q1 and Q2. And then we have the SEK 25 million that we have said is, I want to say, pre-launch or expenses for the strategic implementation, we are doing SEK 25 million in Q4.
Exactly. But those are nonrecurring costs, right?
Look, I mean, the nonrecurring, the SEK 25 million is the start of the strategic initiatives, and we will continue to work with the strategic initiatives for the coming 2 years. So from that part, it's not nonrecurring. It's recurring in that part of implementing the strategies. Maybe you...
Yes, maybe I can add. The SEK 25 million, had they not taken place in Q4, they had taken place in Q1 this year.
I understand. I understand. Okay.
Yes. And then I would just like to comment on the label of it, that it's not consultancy costs. That is not what's in this sort of -- but that's not only what's in here because this includes launch, for example, of the strategy to a lot of people. It includes a lot of research, which is not consultancy-based effects, because I see it sometimes that there is a misunderstanding that all of this is consulting money, but that is not true.
I understand. And finally, Lotta and Göran, perhaps, what exactly is the costs relating to optimizing the U.K. store network? Is that releasing a lease cost or what are they relating to, please?
Yes, that is correct. I mean, as you remember 2 years ago, we made a provision of SEK 107 million to enter 7 stores in the U.K. And now we're in the last part of that, and now we have terminated the contracts, meaning that we also had around SEK 4 million as an extra cost, and that is brought into the Q4.
And we have a question from the line of Magnus Råman of Handelsbanken.
Then I can follow up on the inventory position then that you're talking of, of the [ decided ] inventory build ahead of the sCORE rollout. Can you give us a feeling of where inventory will go after this rollout is finalized and the timing of such?
I mean, the answer to that is the level of inventory will more normalize. Then to remember, we have an increased number of stores compared to last year. That is pushing inventory a bit up. But the extra inventory that we have planned for now and also done to mitigate the risk with the sCORE implementation, that will more come back to normal when it's sold through in the normal channels. But it will be a couple of months and a quarter going forward with higher inventory levels as an effect of this. But that was what we thought was the right thing to do to mitigate the risk with the implementation, so we will not lose sales if anything happened with the delivery capability.
Great. Would you care to make a rough assumption of what you would calculate being the release after this periods of a few months or a quarter?
Do you mean of the inventory level?
Yes, the release to cash flow from low -- normal [ level of ] inventories?
No, we'll not make a prognosis of that at the moment, but we will come back with the newer levels presenting in Q1.
Yes, definitely. Then on Telenor, can you give us a rough estimate of the multimedia category share of total revenues in Clas Ohlson? And then also, does Telenor sell other products? Perhaps I should have been in the store to check this up, but do they sell other products than mobile phones, for example, like accessories from their own proprietary sales?
No, they sell their subscription models and so on in our stores. And then that is sort of a package together with our multimedia assortment.
But they do sell handsets, right, the hardware handsets?
Yes, yes, yes.
I think so, yes.
Yes. But they do not sell headsets or other accessories?
No.
No.
Our next question comes from the line of Niklas Ekman of Carnegie.
Most of my questions have been asked. But a couple of more here. Just we talked in the beginning here of the presentation, you talked about cost reductions, and you mentioned again here the 50 stores that are up for renegotiation over the next 2 years. [ Could you care ] if you could elaborate a bit here on what kind of cost reductions do you see? And I know these 50 stores, I think you've said before you're not looking at really closing stores, but more downsizing and then moving stores. Can you give some examples here what we can expect in terms of lowering cost and changes to your store network?
Yes. Actually, hey, Niklas, the way we have thought about that is that the 1% to 2% that we are investing over the coming 2 years shall be offset by cost improvement in many different areas. So that's the thought of what you should expect in a way through improvement in terms of square meter cost then and other costs that we have. So it's part of that. But I can say that, in general, we are very -- I would say, we have taken on a quite aggressive and active approach now in relation to landlords and also stores that are nonperforming and searched for alternatives. And as I think I also explained in the Capital Markets Day that we're very hands-on in this issue. If we don't sign the right relocation, we go for 1 more year prolongation, and we continue the search. So we are using a combination of renegotiation, improving flexibility and then constantly on to the agenda of every single store. That is how we are working with it.
Okay. But you don't have a specific target for downsizing stores, that 20 of these stores should have a lower store space or something like that?
We have internal targets for this. And I think, also, what we mentioned, the development of sales per square meter is sort of one way of looking at it.
Okay, good. And then I was curious, you talked about competition for wallet, and this is something we've heard from other retailers as well. But I was curious where -- what specifically, what -- where are people shifting their spending? If you have any examples, that would be just interesting to hear you elaborate on that.
Yes, no, I think the starting point is sort of the number of commercial offers that people get in general these days, no matter which business it's coming from, whether it's from the electronics or clothing or sports or whether -- the commercial level in general is extremely high. And then, I mean, this is the climate without Amazon having for real come in, as an example. So -- and that's why we feel that it's not an option to sort of be out of that. We have to be in that to make sure that the consumer continues to spend money on what we offer and also come to us. And then we have to build a cost model that enables us to have that activity level. That is a little bit how we look at it because we don't believe that this will go away. If you look at other markets where -- which have gone through similar processes, the main thing that happens is that the margin comes under pressure, and working on the cost structure is the way to win. So that is a little bit how we look at it.
So it's predominantly online retailers, but it's not necessarily in DIY. You mean, an online retailer in apparel can indirectly take sales from Clas Ohlson as well. Is that what you're implying?
Yes. And also, I think the people have a wallet. And we -- it's also how you impact people to spend their money. People also have a choice. So that's why for -- if you take, for example, the sports business, the commercial intensity there is extreme. So that -- I mean, if we don't need that, people spend their money on that instead of other things in their wallet. So it's also more of a general fight for the wallet climate.
Okay, that makes a lot of sense. And then just to clarify, when you said that the SEK 25 million in extra cost in this quarter was -- kind of moved from Q1 to Q4, but you're still saying that these costs, they will be recurring in the next 2 years, but not specifically in Q1. Is that the way to interpret this? And you will have significantly higher costs also in 2018/'19 and '19/'20, but not specifically in Q1. Is that what you meant with that comment?
What we meant with the comment is that the SEK 25 million, I mean, going in Q1 now, we started implementing the strategies a bit earlier, meaning that those SEK 25 million ended up in Q4 this year. But the strategy work that we are doing, implementing the new strategies that we have guided on will impact our margin with 1 to 2 percentage points. And this -- all these activities are included in that guidance. That is how you should read it. So it's not so much a question of recurring or non-concurring. I mean, it's part of the strategy we're going forward as included in the 1% to 2%.
[Operator Instructions] And we have a couple of follow-up questions coming through. The first is from Magnus Råman of Handelsbanken.
On the MatHem cooperation, you mentioned 700 products for rollout now. Can you give us a feeling of how large share of that -- of those -- is it representing to your total assortment? So what share is that 700 products of your total assortments? And also, have you -- with these 700 products, have you [ covered ] the consumables that you've turned to roll out on the MatHem platform or is there more to come?
I think this 700 represents what we -- I mean, first of all, we have 15,000 SKUs in totality in Clas Ohlson, so you can put the 700 in relation to that. And these 700 are the ones that we have identified that fit with the consumer journey that people have when -- and mindset when shopping at MatHem. And naturally, that is consumables at your own, too, but also other things connected to life at home. And you will see in the commercial campaigns that are coming during the summer now that it's very much connected to food preparation, social activities and so on, things that you probably connect food to in one way or another. So that is the short term. And as I've said in the presentation, we have seen a very -- without any commercial support really, these products are now selling on par at MatHem on the -- comparing with our own website then covering whole of Sweden, while MatHem only covers 50%. So we are happy with this development.
But if I understand you right, I should assume that those 700 relating to your 15,000 SKUs is approximately the same as the revenue share. So essentially, it's around 5% of your total product assortment. And thereby, if you have a run rate of around SEK 100 million sales quarterly in the online channel today, the MatHem sales is only a mere SEK 5 million in run rate or something.
But through that, you should also add that we aim to use MatHem in other ways, for example, as a last mile provider, but also we are looking into the possibilities of cross-stocking other products. So it could be that on top of this 700, you could also buy a more -- even bigger part of the assortment but through another logistical setup in the next step. So we don't -- I wouldn't limit the thinking to the 700 only in relation to online sales.
And the next question comes from the line of Nick Fhärm of SEB.
Just a few follow-up questions very quickly. So could you -- I understand now that basically, the cost for sourcing is mainly relating then to transportation and distribution. You mentioned using 2 harbors, and I guess that will be sort of a recurring cost in the near future as well. But my question is more about, could you give us a quick update on the sourcing markets in local currency upstream, please?
The sourcing market in local currency, I mean, we are -- from Europe, we, of course, buy a lot of things in SEK and in euro. And the main purchasing currency in the -- from us, not 100%, but almost, is in U.S. dollars, buying from Asia.
Yes. But are you sort of -- are you benefiting from -- is it still a buyer's market? Or are things changing with the sort of increasing prices for cost of goods, again, in local currency, which is it?
I mean, looking into the purchasing prices and -- so we are not, I mean, going through those in details. But as you know, you can look around, you see price increases in some of the commodities and so on, and you have other things working in the other direction.
Okay. So would it be fair to say that's fairly unchanged net-net, and the main impact in this result at least is from transportation and distribution? Is that correct?
Yes.
Well, if you're commenting Q4, yes, that is correct.
Yes. And finally, I don't know exactly what you mean with the stock checking comment here on the inventory. Is that shrinkage or is it any other effects, again, in the gross margin, please?
Yes, in the gross margin, the stock-taking effect is, I mean, we do provision each month during the year for -- as a reserve for the stock-taking differences that occur when we are doing the stock-taking mainly in the stores. And the effect when the year ends, sometimes, you can have a small positive or a negative effect on the gross margin. This time, it was a little bit higher. It was not a cost increase. It was more like we had a positive effect from last year. But we had no effect nor positive or negative in Q4 this year. So it's a year-on-year comparison.
[Operator Instructions] As there are no further questions at this time, I'll hand back to our speakers for the closing comments.
Yes, we say thank you from our side and wish you a nice summer.