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Good morning, and welcome to this presentation of the Q4 and year-end '18-'19 report. My name is Lotta Lyrå. I'm the CEO and President of Clas Ohlson. And I will do this presentation together with our CFO, Pär Christiansen.It is now approximately a year since we launched our new strategy and to highlight that, we'll, following this presentation, have a session, we call Retail Views where we share our latest insights and some more details around some of the strategic initiatives we are pursuing. There will be a short pause between this presentation and the Retail Views session, where we will turn off the connection and take a quick pause and then you can reconnect.So most welcome to both this presentation and Retail Views.With this Q4 report, we closed the first year of the Clas Ohlson 100+ program. We are on track with our action program, and we're working with a lot of energy, both in delivering on our growth initiatives and our cost saving initiatives. We're also closing the stores in U.K. and Germany and that is also proceeding according to plan.With Q4, we delivered a full year in line with the guidance we have given, achieving an operating margin of 3.5% and an underlying operating margin of 5.7%.The agenda for this presentation is that I will take you through a quick business update. I will then hand over to Pär, who will take you through the financial development and some events after the reporting period. We will then do a summary and a Q&A together with Nicklas Fhärm from SEB.So starting off with Q4 a little bit in brief. During the quarter, we grew organically with 2% and total sales were 4%. The gross margin increased to 38.2%. All in all, this led to an improvement, both in the reporting operating result and the underlying operating result. We have during the quarter had a lot of focus on delivering some of the cost initiatives we are pursuing as part of the Clas Ohlson 100+ program and reached important milestones, and I will come back to this in a minute.The Clas Ohlson 100+ program has a very clear purpose and that is to create preconditions for Clas Ohlson to be long term -- drive long-term profitable growth. We achieved this by implementing a number of growth initiatives and a number of cost-saving initiatives. And in these initiatives, we are investing 1% to 2% of the underlying operating result during '18-'19 and '19-'20.The cost-saving initiatives shall in total deliver SEK 200 million to SEK 250 million and during the quarter, we have reached 2 important milestones in this work. The first one is that the first phase of the organizational review has been implemented. In total, the organizational review that we are doing will impact 150 to 200 full-time employees. During the first phase and this quarter, 65 full-time employees have been impacted.The second important milestone is that we have reached the end of the first phase of the reduction of indirect costs. We have achieved a saving of SEK 70 million. This will start to materialize already during '19-'20 and fully materialize during '20-'21. There are, of course, other important cost initiatives ongoing, one of them being the reduction of purchase prices. Secondly, our growth initiatives, they aim at increasing sales per square meter, increased sales per customer and our billing sales online.During the quarter, one of the most important focuses in this area has been to continue the optimization of our assortment. We are systematically addressing product category by product category, and I would like to give a couple of examples. The first one comes from the electrical installation range. In this product category, we have cut the assortment in half and still managed to maintain sales. By doing this, we can use the space that has been freed up by reducing the range for other products with higher sales per square meter. Another example is the change we have done in mobile and audio, where we have reduced our product range with 7%. We have changed our merchandising setup and sales solutions and achieved a growth of 12%. We have at the same time renegotiated purchase prices of these products in order to achieve a better gross margin. This type of work we are now doing for each product category of the Clas Ohlson assortment.I will now turn to the store network. We have during the quarter continued the process of closing our stores in U.K. and Germany. All stores in Germany are now closed. In the U.K., we have 2 more stores to be closed and the last one will be closed before the beginning of September. The cost for this closure is SEK 210 million and has been part of the '18-'19 financials. The P&L contribution of SEK 75 million will start to materialize after the second quarter in '19-'20 once the last store in the U.K. has been closed.In total, Clas Ohlson now has 232 stores. 95% of our sales happen in these 232 stores. It's, therefore, very natural that we spend a lot of effort on optimizing, both commercially and operational-wise, our stores. We see that during the last years the preconditions for operating retailing in stores have dramatically changed. This is due to competition becoming global, traffic patterns impacted by different new shopping behaviors but also that customers require a different shopping experience. This means that our stores are becoming increasingly both hubs for distribution, but also a place to go for real qualified service as well as convenience. The initiatives we are doing to increase sales per square meter are essential in order to ensure that the sales channel continues to be competitive and profitable.We also see that there is a structural problem that needs to be addressed and that is the fact that retailing in the Nordics is becoming increasingly exposed to global competition and profit margins are going down. So far, we have not seen that this has impacted landlord behavior when it comes to conditions for rental premises. We have now initiated a major review that aims at changing that.We will in this review include all our leases in the Nordics, and we aim to address the structural problem of actually adapting to the new conditions of retailing in stores. And we believe that this is crucial in order for both retailers and landlords to be successful going forward.If I then turn to online. During '18-'19, online in Clas Ohlson grew with 47%. This is in line with the ambition of 50% growth that we have set out for ourselves. This is due to a number of important initiatives that we have implemented connected to both the digital experience on ClasOhlson.com, but also the introduction of new customer-friendly delivery options.During the coming year, we will, of course, continue this journey. To create preconditions for further improving the online experience, we will during the coming 6 months do a major upgrade of the back-end of ClasOhlson.com. This will help us and create preconditions for making bigger changes, such as improving the responsiveness of our site to the benefit of the many Clas Ohlson mobile shoppers. The cost for this upgrade is part of the already communicated 1% to 2% investment of the underlying operating margin.With that, I will hand over to Pär for the financial development.
Thank you, Lotta. I will start to talk about the fourth quarter and then talk about the full year results.Looking at sales in the fourth quarter, we saw increase of 4% organically, up 2%. Like-for-like, the sales was flat. Online, as Lotta said before, was increasing by 33%. We saw growth in Sweden and a flat growth in Norway. Finland, we had a small decrease. And as announced, we are closing the stores in U.K. and Germany, which will affect in lower sales volume.The gross margin for the quarter increased 1.5% units to 38.2%. The major positive effect came from improved campaign profitability, a stronger NOK and the positive effects from FX hedges. On the negative side, we saw impact from the stronger purchasing currency dollar and also a somewhat increased sourcing cost.The selling expenses was flattish compared to last year, increased by 0.1%, and the major impact came from our CO100+ program in that part.Administrative expenses fell to SEK 51 million and that is in line with our plan to overall reduce cost over time.The profit for the fourth quarter came in to minus SEK 77 million versus SEK 106 million last year. If we deduct the SEK 25 million for the one-offs and the CO100+ program, we ended with an underlying result of minus SEK 52 million, which is better than the SEK 61 million underlying result we had previous year.Looking at the full year result. Sales was up in all markets and also up in all channels, which is important. So we grow both online and in stores. Organic sales was up 4%, like-for-like was up 1% and online up 47%.The operating profit for the year was SEK 94 million, and we had SEK 405 million of nonrecurring costs, costs related to the action program and the closing of the stores in U.K. and Germany. If you deduct that, you end up with an underlying result of SEK 497 million, which means underlying operating margin of 5.7%. We ended the operating margin, excluding the U.K., Germany of 3.5%, which is in line with the guided around 3% that we had talked about in the third quarter.The investments totaled to SEK 211 million compared to last year. We had a major investment in MatHem. We had investment both in the physical stores, but also in IT system for the year.We still have a very strong financial position. We have positive cash flow of SEK 312 million for the year. We have a inventory level now of SEK 1.987 million (sic) [ SEK 1.987 billion ], which is less than last year. Net debt is SEK 178 million compared to net cash position the previous year.For the dividend, we have, from the Board, a proposal of SEK 6.25 per share, and we also will propose to have it distributed 2 times, one in September and another one in January, to support and improve the cash flow.Thank you. Handing over to Lotta. No? I will take this one. Sorry.May sales. May sales was up 6%, organic sales was up 5% and like-for-like 5%. So very strong month. Online grew with 26%, and we had added 1 store compared to last year.Now I will hand it over to Lotta.
Thank you, Pär. So to summarize the year, we have a year where we managed to grow, both in our stores and online, and at the same time, we are moving ahead with a lot of high energy in the Clas Ohlson 100+ program. All in all, we delivered an operating margin of 3.5%, which as Pär said, is in line with the guidance we gave connected to the Q3 report.Going forward then, we will continue to push ahead with the plan we have set out. A lot of focus will go into improving the uniqueness of our customer offer. We will continue to do initiatives to grow online as well as optimizing stores and a very important priority is to fully conclude the cost initiatives that we have started up during the year '19 and '20.All in all, we are fully committed to deliver an operating margin of 6% to 8% from '20-'21 and onwards, and we will take the measures needed in order to achieve that.And with that, I will invite Nicklas.
Good morning, everybody. My name is Nicklas Fhärm. I'm working for SEB Equities as a analyst. Thank you for inviting me this morning. I will be moderating the session, so just raise your hands, but let me start, perhaps.So when we last met here after Q3 results, you were guiding implicitly for results around SEK 100 million losses in this quarter and obviously, this morning, results came in a bit better. And I was just wondering to the extent the factors are in your hands to control, what were the main explanations that sort of explains the difference between the previous guidance and the outcome in Q4 results this morning?
I think it's -- what we have seen during Q4 is increasingly better sales in combination with better margins. And together with a very strict cost control, we managed to overperform in relation to guidance a little bit.
So it's not really sort of a major decision to shift around cost spent in the -- within the strategic investment program or something like that?
No. That was one of the reasons why we decided to give the guidance in relation to Q3 that we believe it's right to stick to the plan and take the measures needed now to improve in order to create preconditions for long-term profitable growth. So that is not the reason.
A follow-up question. I mean, as promised, the Board of Directors propose an unchanged dividend per share this morning. And I would be just very interested to hear your thoughts on the dividend payout as such. And also if you can share some commentary on the discussions, because, obviously, there is always different options when it comes to handing out money to shareholders or investing them in future growth.
If I start and then you can fill in. When we met a year ago and had the presentation of the strategy, one of the important parts of the starting point was the strong financial position of Clas Ohlson. And what we said then was that we would use that strong position in order to both invest in the future through the program and invest underlying operating margin and at the same time have an ambition to maintain the dividend level at SEK 6.25. So that is the background, and I think that has been very much the discussion now as well. Please feel free to add.
But, of course, you can add that the underlying factors is that we stick to our plan and we stick to our analysis that this will be the way going forward. And if we will have a different view on the future, of course, we have to consider that. So this is a strong signal of our plan as well, I would say.
I believe it is. I believe it is. Final question from me before we open up for the floor. I was just wondering if you could give us some quick guidance on CapEx and perhaps also working capital development for this fiscal year, please.
I think we said already in the Capital Markets Day 1 year ago that we will try to keep the investments on the same level as in the past. And also what we said was that a lot of these investments will move a little bit from the stores into the systems and the online channels and also in the back-end and this is also what we think for the future.
So fairly unchanged CapEx...
Yes. Yes.
And when it comes to inventory levels or working cap...
I think we are now...
Obviously, improving in the quarter today...
Yes. I think, we are looking at as part of all these things that Lotta is mentioning, overseeing the assortment, overseeing the store, we are trying to increase the velocity of products in our company, which over time will decrease the inventory. Of course, it also needs quite accurate sales forecast because we don't want to miss sales with lack of inventory. So it's a balance, but over time, we're expecting the inventory to go down as part of our program.
Wonderful. Where to start? Where to start? Who's next? Niklas?
Yes. Niklas Ekman here from Carnegie. I want to -- a question on your store network. I see now that you have 3 planned store openings and you mentioned here in the presentation the -- a bit of a problem with landlords having not adjusted rental costs. Can you elaborate a little bit on what your plans are regarding store closures? Or how you are going to address this besides negotiations? Are looking at decreasing store space? Are you looking at significant store closures? Or what measures are you expecting here to address the mismatch in rental costs?
I think we have adopted a different tonality in our negotiations all the way from when we start to look into a potential store, all the way through the life cycle towards when we have leases ending and how we handle that. And I can say that today, we are actually resigning from contracts, if the conditions are not good enough and handling that situation. So I think we are much tougher now than we were 18 months ago. It's a big difference. So I think that's an important part of this as well to look at all of this with completely new glasses. And then, it's -- I think, it's fair to say that it's quite polarized because a couple of the stores that we have in the pipe now, this is about increasing the density of Clas Ohlson in the biggest cities in the Nordics and that we see has a big potential and where we have done that, it's very successful. And then we have at the other end of the scale, a number of cases or cities where we are, of course, questioning, is there room for 2 Clas Ohlson stores here or should it be 1? And that we are tackling city by city. So that is how we are working with it. So it's very -- it's a lot of both end, I would say, and applying [ Foreign Language ], whatever that is called in English, for real in this area.
But what could that mean in terms of numbers? Are you looking at a significant number of store closures in the next 12, 18 months?
I think it depends on also what will happen in some of these negotiations. It has to be -- each store has to be profitable. That is the basic assumption and then there are lot of levers to work with. It's the actual operation of the store, it's how we commercialize it, it's the rent and so on. But the acceptance for nonprofitability is 0, I would say.
Okay. Another question is regarding the transformational program and the costs this year 100+. What kind of costs are you expecting in the coming year? And how those will play out during the different quarters? Is it going to be front-loaded and with lower costs towards the end?
I think, as Lotta mentioned before, there will be other parts of the organizational changes and that will come in different phases dependent on how we reach the agreements also with unions. And also how -- the dialogue with the different organization parts will handle it. So that will probably come in buckets. And then also, as Lotta said, we will invest in the back-end, both in the e-com channel, the store, the systems around that, but also in the back end for logistics. So I guess, some of them will be rather linear and some of them will come in buckets dependent on when we reach different agreements with that. So -- yes.
And then at the same time, maybe to add, as I mentioned, the SEK 70 million for example that we have reached in terms of savings' level for indirect costs, that will start to materialize as well. So there are 2 effects here during the coming year.
And can you just say if there are any material cost reductions that you've seen already here in Q4?
I would say no. None of the ones that have been mentioned. Not when it comes to the organization part and not when it comes to the indirect part. No.
And just coming back to Niklas' second question there -- or first question. For the record, how much strategic cost did you actually charge the P&Ls within this fiscal year ending April? And what do you actually expect roughly to be charging your P&L within this fiscal year, please?
We mentioned in the report and also in the presentation a number of SEK 180 million as that part and -- I mean, the guidance is still to invest 1% to 2%. But as Lotta says, we will also [ need ] some savings by the end. So dependent on if you see the gross or net number, but staying around 1% to 2%.
Okay. Yes. Next question. Magnus, please.
Magnus Råman, Handelsbanken. I can just come back firstly to the rent reductions. Have you looked at leading examples from other countries that might have come a longer route on this progression? And so do you have an idea of what potential rent reductions could be, perhaps not commenting specifically for you as Clas Ohlson but rather for the industry?
I think we have an ambition, of course, internal with this initiative that we are in the startup phase of now. I will not communicate exactly what that ambition is, but it's a substantial change that needs to happen. And I think it's important. It's not only the actual rent level, but it's also flexibility in terms and other things that need to come into play. So it's a total, I would say, it's a new look of rental agreements that we are aiming at.
I believe, historically, when you've had the questions about potential store closures in the Nordics, you've mentioned that all stores are still contributing positively to group profitability. Has that picture changed somewhat? Is that also why you have identified some stores where you would need to see a reduction in rents or otherwise there is no reason to keep them in business?
No. I would say that -- I mean, had we had a lot of stores that were not contributing, we would have had to initiate a store closure program. But given the situation we have right now, we see it's more beneficial to actually look city by city and optimize that situation. And then I think it's important to say that Clas Ohlson is the sum of the 232 stores and then e-com. Each store needs to deliver 6% to 8%. I mean, it's a sort of -- it's a portfolio thinking. So I think, it's more that you can be positively contributing, but if you're not reaching 6% to 8%, it's still an issue because we need everyone to be there. So it's more that thinking that has led to that we need to initiate this review. And then I would like to emphasize, I think, it is a structural problem.
All right. And then on indirect costs that were also mentioned, you talk about here reaching now SEK 70 million in savings. I think, you historically have talked about SEK 1 billion of total spend. Do you see potential for additional savings? Or do you deem that you have reached what you've aimed for here?
I don't think one ever reaches the full potential of things, and I did say it's the first phase. So I think what we want to be clear on this that we have come a good way on the SEK 200 million to SEK 250 million by reaching this first step. But there is always more.
But you mentioned that 1/3 of these SEK 200 million to SEK 250 million is the indirect savings that you plan for this year. So the annual saving of SEK 70 million should be what we should expect in that part of potential savings for this fiscal year.
Fully from '20-'21 and the reason for that is that the new contracts are valid once the first order against those contracts start to happen and that can happen a little bit into the year because we might have a [ stock of working close ] or whatever it is. So it's not completely 100%.
Thank you. All right. Let's break and listen with the operator if we have any questions from the conference call, please. Operator?
[Operator Instructions] No questions registered on the telephone line. So back to you.
All right. Thank you, operator. Let me -- yes, Andreas.
Andreas Lundberg with ABG. Just a short one first. I know it's a short period of time, but could you give some comments on the strong like for like in May? That's my first question.
Yes. It was a good month. No. It was a good month. And I think it's commercially well related to sort of what the season is about. So it's a commercial, I would say, good plan that has materialized. So that is the background, I would say. And it's very much across the board, but, of course, most significant in Sweden.
But do you think it's traffic mostly to the stores or is it the price mix component that obviously drove gross margins forward?
No. I would say that it's mainly a combination of -- it's traffic, but it's also increasing visit. So it's a little bit of both end.
And no specific campaign driving?
I mean, we have campaigns scheduled for spring and early summer and so on. And I think what we have seen is that we have targeted the right things in that campaign. That's the background to it.
And on the gross margin in the fourth quarter, obviously, it was up 150 bps year-on-year. I think in Q4 last year, you saw a drop of 500 bps versus the prior year or FY '17. I think you also said that maybe 1/3 of that loss was onetime in nature, if I remember correctly. So could you give more color on actually what drove the margin? I mean, did you get any year-on-year help from perhaps some negative one-offs the prior year or what was it?
I think the major part that drove the 1.5% units was the commercial part, the campaigns. And if you look at the currency and the other parts, they were quite neutral as a block. And I mean, we have different types of annual closings every year and that together with the currency balanced, so I guess, that 1% -- 1.5% comes from a better commercial plan and better campaigning.
And is that something you think is sustainable?
I think over time, as part of our program we're working quite hard on being better in promotions and having better commercial plans that increased the gross margin. And of course, we also want to balance sales and the gross margins, especially in the e-com channel where it's quite sensitive for campaigns. You sell a lot, but also the margin goes down. So we're getting better and better to balance that. And on the cost side, there will come a lot of positive effects on the COGS side from all these negotiations we are doing, both from the categories at project, but also in normal negotiations. The only red flag is, of course, the strong U.S. dollar, and of course, we look at the market, especially in Sweden and see how will others and we do to increase pricing to offset the cost of sourcing. So I guess that will also be something that we need to consider over time.
Lastly, these 1 to 2 percentage points investments for this fiscal year. That excludes potential savings, correct?
Yes, that is the cost side of it.
Yes.
All right. Let's go to back to Magnus. Please go ahead.
Yes. Just a follow-up on current trading. You mentioned May sales here being strong number, but when we look into June now, should we -- May and June, perhaps also look at both months, should we consider that you had quite a different trading period last year, when, I believe, May was quite weak with 1% like-for-like sales due to you preparing for your 100 years celebration and then June was very strong at 9% like-for-like sales? So could we expect the same trend that we saw in May here and June? Or is it likely that there will be slightly worse outcome on a very challenging comp in June?
I will not give any forecast on the June sales, but I think, it's reflecting back, of course, the first calendar -- half of the calendar year last year was very much about the 100-year celebration. So I would say, this impacted also the sales level in Q4, because we started off the 100-year celebration with very successful campaigns already in March last year. And then of course, the birthday in June is -- was, of course, the highlight. Of course, this whole 6-month period we are impacted by the fact that we had a lot of commercial investments during those 6-months. But I will not comment specifically on June.
All right. I believe I did a little bit myself perhaps, but -- then just finally also on cost savings. The strategic cost savings that you plan that you outlined here on SEK 200 million to SEK 250 million. Should we expect the store closure savings to come on top of those since the planned savings were not sort of -- the store closures were not when you made the initial...
I think you should see it as a whole. I mean, we for this year -- we're talking about 4% to 6% margin and next year 6% to 8%. And of course, as Lotta says, the negotiations on store closures is only if we can't reach that. So it's not -- it's part of that package. The other cost savings is to reach the 6% to 8% over time. Hopefully, I hope that we will reach good negotiations with landlords so we can keep a lot of stores and grow together. I mean, that will be the best solution for everyone that will keep the growth and that would keep positive momentum. But if that will not materialize, we need to take the measures, so.
Profitability ahead of top line?
Yes. We have promised 6% to 8%, and we are committed to that.
Just to follow up. I think this is the third attempt I admit, but -- so if your plan goes through in terms of stores. How many stores will you have ending fiscal 2019? Let's just assume that you come out in the better end with the landlords and your plan is actually being executed on, how many stores will you have?
236.
Excellent. All right...
And it's in the report, Nicklas.
Okay. Of course, it is. Of course, it is. And now it's in the air as well.
Yes.
All right. Any more questions from the floor. Perhaps it's time to wrap it up. I have maybe 1 or 2 more questions. I was just thinking, you just, towards the end of last year, launched a Clas Fixare service. And we haven't been discussing that for some time and I was just a little bit curious to understand how the services business model will be maybe rolled out during this year basically. We're starting from 0, right? So could you give us an idea of the plan for this, please?
Yes. We started very small in this area. As we all know, with a couple of neighborhoods almost in Stockholm on the 26th of November, and then we have scaled it in the Stockholm area. And when we start to look now at some initial conclusions, we see that we have a net promoter score at 80. So we have very happy customers. So it's clear that this addition in terms of offering for Clas Ohlson, and I think it maybe even to the market, is very, very positively received. And we are actually, as we speak, looking into how to scale, where to scale and at what pace. So we'll have to come back with more details, but that is where we are in the process right now.
And let me see now. I had one more really, really good question, but I forgot it. Can I come back?
Absolutely.
Okay. Unless, there's any more questions from the audience, yes. Andreas.
Can you give any teaser over the next session, your retail insights? What's the key insight you found?
Absolutely. What we will do is that we will update on some trends that we see in the retail industry right now, are impacting the retail industry, and it's Patrick Finch, our Insight Manager, that will do that presentation. And then there is a second part where we will more in-depth talk about some of the initiatives, including Clas Fixare, including MatHem as well as the project we have where we go through the assortment and that will be done by our Manager in Sweden, Fredrik Uhrbom. So that's a little bit of the content.
All right. What an excellent bridge to that presentation then. I think I will hand back the word to you. Thank you for having me, and good luck.
Thank you. And that finalizes this part of this morning. So we will now close this part of the morning, the Q4 and year-end report presentation. We will take a quick pause and be back in 10 minutes -- 5 to 10 minutes, so there is time for a coffee and then just reconnect. Thank you.