Clas Ohlson AB (publ) (OHCB.F) Q2 FY2026 Earnings Call Transcript & Summary

Welcome to the Clas Ohlson Q2 2025-2026 Report Presentation. Operator Instructions] Now I will hand the conference over to CEO, Kristofer Tonström and CFO, Pernilla Walfridsson. Please go ahead.

Good morning, and welcome to the Clas Ohlson's Q2 report presentation. My name is Kristofer Tonström and I'm CEO, and I'm here with Pernilla Walfridsson, CFO. So we'll today cover a business update, financial development for the quarter and then moving to events after the reporting period, then we'll summarize and then move into Q&A. So starting with highlighting the second quarter. Overall, we continue to moving forward with fast pace and have seen strong both profit and sales growth in the quarter. So the second quarter came in at SEK 3 billion, which was an organic growth of 9% and the operating profit for the quarter came in at SEK 410 million, which then translates into an operating margin of 13.6%. And in absolute terms, it's up a bit more than 30% versus last year. When it comes to our online sales on the B2C side, we see continued strong sales growth in the quarter, and I'll come back to that in a second. Also from a financial position point of view, we have seen -- we do have a solid financial position and also a cash flow that is up in the first half versus a year ago. Earnings per share amounted to SEK 4.85 versus SEK 3.63 last year. We've also reported the sales numbers for November today, and we'll come back to those in a second. But overall, we continue to see organic growth and it amounted to 6% in the -- during this month. Then moving into the business update. Our strategic framework remains the same, and we are very much continuing to strengthen our competitive advantages and investing in our assortment brand and the customer meeting and doing everything to leverage this. We do have a differentiation strategy where we focus on our 5 distinct product niches where we want to be very strong. We also continue to do everything to become competitive across all parts of the organization and ensure that we do have the cost and efficiency that is in line also with discount competitors. And our vision is to generate a strong free cash flow that we can then reinvest into our ABC. Then looking at the strategy execution for the second quarter. And at the top, we have the 3 growth drivers that we're focusing on. And at the bottom, we have the enablers. So starting with the first growth driver, which is assortment related. And here, an ambition is to have a relevant assortment all year around the prioritized niches. We have kept up a very high pace in terms of assortment renewal, and we have launched a lot of new products during the quarter, and we continue to see strong performance across all the 5 niches. On the profitable and growing online business, the strong development continues. Looking purely at the clasohlson.com e-com, we grew actually 20% during the quarter. So continued high growth there. I'll also come back to the acquisitions that we have done in the events after the reporting period, but we are obviously increasing our online footprint via those two recent acquisitions. Looking at the store network. We continue to build out, but also operate the store network that we have. And it's encouraging to see continued strong like-for-like development in the quarter. And also, in terms of store openings, we opened three new stores during the quarter and the high customer satisfaction remains and I'll also come back to that. When it comes to customer communication, Club Clas is an important priority for us. And during the quarter, we reached 6 million members. And we also continue to do -- we continue to invest in digital marketing and performance marketing to fuel growth, and we'll come back to that as well. When it comes to the competitive cost base, here, we continue to work relentlessly on making the organization competitive across all parts of the business. And we also announced after the quarter ended a long-term investment in our logistics, and I'll also come back to that at the end. When it comes to sustainability and organization, also here, the acquisition of Reservdelaronline is a clear statement that we're also moving forward when it comes to the more circular business model of also being a spare part destination, and we'll talk a bit more about that later on as well. Looking at the key things that we -- when we track our ABC, we continuously follow the product reviews that we get from our customers. And as always, we have a very high amount of reviews coming in. And we are consistently at high levels when it comes to the customers' satisfaction with our products. This is an important priority. When it comes to the affordability, also here, we are very competitive, and our customers really view Clas Ohlson as an affordable choice with the right products at the right price. Customer satisfaction remains at high level. and our Net Promoter Score during the quarter came in at 57. Then looking at the 5 niches. This is an important priority for us. We do focus on those 5 niches, and we want to become best across each five. Looking at the quarter, we have seen growth across all parts of -- all 5 niches actually. And at the bottom, you also see the priority on spare parts, which we continue to also focus on. So with that, I'll hand over to Pernilla to take us through the financial development.

Thank you, Kristofer, and good morning, everyone. It has been an eventful autumn, and I'm pleased to guide you through the strong financials of the second quarter. Looking at sales in the second quarter, total sales were up 7% and organic sales were up 9%. 7% of the increase relates to like-for-like growth and 2% relates to expansion of our store network Online sales grew by 8% in total. But as previously mentioned, business-to-consumer sales grew significantly more, at the same time as business-to-business online sales still is heavily impacted by the weak U.S. dollar. For the 6-month period, the growth figures are similar to the quarter with organic growth of 9% and total sales growth of 7%. Sales per market follow a similar pattern as in the last quarter with extraordinary organic growth in Norway, continued strong sales in Sweden and positive development in Finland despite the relatively tough market. Also when it comes to macro trends impacting our business, we see a similar development as in the past quarter. Transportation costs remain at reasonable levels. Purchasing price and production capacity are favorable at the moment. The weak sales currency NOK continued to have an imitative negative impact. The U.S. dollar remains more favorable than the average for the last couple of years. As I mentioned, input costs are favorable right now. And together with positive mix effect relating to price and product, we see a big improvement in gross margin by 2.6% to 48.7%. Please also note that as per the last quarter, the gross margin reflects our new reporting methods to the nature of expense method. Income statement shows a strong increase in operating profit at SEK 410 million and EBIT margin of 13.6%. The increase in personnel expenses relates to higher volume in our logistical chain, wage increases and new stores. The other external expenses also increased in the quarter, mainly due to increased investment in marketing. The EPS for the quarter was SEK 4.85, an increase from SEK 3.63 last year's Q2. As for the inventory, we see the usual build up for the third quarter sales period, which includes the Christmas sales. Compared to last year, we are on the same level despite new stores and more products, thanks to higher efficiency, lower purchasing cadences and higher sales. Cash flow for the first half of the year improved versus last year. Cash flow from operating activities totaled SEK 552 million, an improvement of SEK 530 million last year. Free cash flow for the first 6 months amounted to SEK 202 million compared with SEK 176 million last year, which is explained by higher operating result and change in working capital relating to accounts payable. Net debt to EBITDA, excluding IFRS 16, was minus 0.7, so we maintained a net cash position. And with that, I hand back the presentation to Kristofer.

Thank you, Pernilla. So now we will move into the events after the reporting period. And I'll start by talking a little bit about the acquisitions that we have announced and also the logistics investment and then moving into the sales numbers for November. So starting with the two acquisitions. We do this to -- we announced this a couple of weeks ago, and we do this to further strengthen our presence across our prioritized niches. Specifically, when it comes to the acquisition of Phonelife and Teknikmagasinet, it's a way for us to further strengthen within the connect and enjoy your home niche and both via a bigger assortment and a stronger online presence. And the acquisition of Reservdelaronline is a way for us to further strengthen our presence across the spare parts. So looking a little bit more into the details of those 2 companies. Both companies are strong online retailers that have grown profitably for many years. And the first one, Phonelife Teknikmagasinet has been around over the last 12 years and has been built with a very big focus on accessories to mobile phones. We do see this category as growing. Consumers buy less and less new mobile devices, but the accessories market is growing significantly, and we've seen that on the Clas Ohlson side as well. Phonelife, 2 years ago, we acquired the brand, the Teknikmagasinet, and since then, have seen the growth pick up further. They offer 26,000 products in tech and tech accessories across the Nordics and also some additional European markets. The second company, Reservdelaronline has also been built specifically as an online retailer since 2017. And they are very focused on the niche -- spare part niche across garden machinery, et cetera. And today, they carry more than 8,000 spare parts in their own distribution center, but they also have access to more than 100,000 spare parts across the range. So strong brands partner with Reservdelaronline, and it's a good addition to the focus that Clas Ohlson has both across Garden machinery, but also when it comes to complementing with very relevant spare parts. And then I'll hand over to Pernilla to talk a little bit about the transaction overviews for both of those acquisitions.

This is structurally similar for the total transactions. We have acquired 72% now, and we'll buy the remaining 30% after 3 years. Both transactions are financed through our balance sheet, cash payment. Beginning with Phonelife, the transaction values Phonelife at SEK 184 million, including an estimated earn-out for the period September to December 2025, with estimated sales of SEK 207 million for 2025 and EBITDA of SEK 18.4 million. Here the EBITDA multiple is 10x. We expect the transaction to be earnings accretive from day 1. When it comes to the Reservdelaronline, the transaction values Reservdelaronline at SEK 45 million on a cash and debt basis. Looking at yearly EBITDA multiple, this correspond to 6x based on forecast net sales of SEK 59 million and EBITDA of SEK 7.5 million for 2025. Also, this transaction is fully financed with existing cash and is expected to be earnings accretive immediately. With that, I ask you, Kristofer, to take over and comment on November sales.

Thank you, Pernilla. So just on -- to conclude on the acquisitions, it's also -- these are add-on acquisitions to the Spares Group that Clas Ohlson acquired 2 years ago. So we were going to run these companies as part of the Spares Group moving forward and thereby also get scale across the online businesses. So before moving into November, I also wanted to comment on the long-term logistics investment that we announced 2 weeks ago. So here, the Board has made a decision to invest between SEK 400 million and SEK 450 million in our current distribution center in Insjön and we do this to secure capacity for the future. We have seen significant growth over the last few years, and we want to increase our capacity and both extend the building and make it bigger, but also invest in a higher degree of automation within the DC. And the ambition is to increase capacity with 15% to 20% but also to get efficiencies across the value chain. We have kicked this project off and the plan is to get going during the spring around March timings and we want to be ready with the rebuilds in the second half of '27. And the payback that we expect is that this will be fully -- full paid back within 4 years, which shows that we will get efficiencies out of this investment. And the investment itself will mainly impact the year '27 -- '26, '27. Also this investment is financed with our existing cash. So with that, I'll move into the November sales development. So today, we also announced November and here, we saw sales amounting to approximately SEK 1.4 billion, which is up 6% organically versus last year. And it's -- as you can see on the graph here, it's also following a few strong years of organic growth. Looking across the markets, Sweden and Norway grew 6% and 5%, respectively. And it's also encouraging to see the second month in a row now where Finland grows 10% organically. For the other markets, mainly related to the spares B2B side, we -- as for the previous months, we have seen a decline on this business, and here it's 27%. During the month, the store network increased or the store network is 6 stores higher than it was in November last year. So with that, we'll summarize and then move into Q&A. So first of all, we do know that we're playing in a big, attractive and growing market. So the addressable market for Clas Ohlson across the 5 niches amounts to SEK 340 billion, and it's growing. That means that we have a market share of a bit more than 3% today. So we definitely see more growth to be had moving forward across the 3 markets. We have strong brand awareness. And looking at the prioritized Club Clas membership club, we have approximately 1/4 of the population today being members with Clas Ohlson. So looking ahead, there's a clear path to continue value creating. We are well positioned across the product niches with a big, attractive market. We do focus on the needs-driven assortment, and we consistently deliver very high customer satisfaction. We also have the central store locations that we continue to invest in to further roll out new stores but also improve the -- improve the ones we have. We also have a full-scale e-commerce that's profitable, and we are also becoming more and more effective when it comes to marketing. And finally, we do have a strong financial position, and we focus on increasing earnings per share over time. So with that, we will move into Q&A.

[Operator Instructions] The next question comes from Niklas Ekman from DNB Carnegie.

A couple of questions from my end. Can I start with the current trading? Because you say, on the one hand, you talked about a strong start to Christmas sales, but I've seen an interview here, you also complained a little bit about warm weather. Is one referring to November and the other one is referring to December? Or how would you just elaborate a little bit more on those comments?

Absolutely. So strong start to Christmas, for sure. So the Christmas assortment and sales leading up to Christmas is increasing significantly. When it comes to the other comment relates more to products related to heating, et cetera and it was prompted by a question whether the warm weather impacts us. So across those categories, sales is much lower, but it's by far compensated by the strong Christmas sales.

Okay. But is there any notable difference in your growth in November versus December? Or is that reading too much into it?

No. I think the key thing is I was relating all these comments to November. So across November, Christmas, the Christmas assortment, so string lights, Christmas trees, et cetera, we see strong growth, but also in November, obviously, weather-related products did not see a strong pickup given the warm climate across the 3 countries right now.

Okay. Very clear. Turning to margins. You had a tailwind here from lower input costs, but I assume that these will be a lot stronger going into Q3 and Q4 based on the lagging effects from a weaker U.S. dollar and lower transportation costs. And on the other hand, you're also facing much tougher comparisons on the gross margins. So how would you kind of weigh these effects when you look at margin outlook for H2?

Yes. So starting with the quarter, obviously, the gross margin improvement comes from, as Pernilla talked about, input cost obviously, so lower purchasing prices. And then second, there's also a bit of a mix effect given that the business-to-business business is slightly lower. We have seen the sales there, that has a mix effect given that the margins on business-to-business is lower. That said, obviously, in the quarter, the exchange rate effects were slightly negative. So despite a favorable U.S. dollar, it was offset by the Norwegian krona. So looking ahead into the spring, it's important to remember the exposure to the Norwegian kroner. We need to move into April 2026 to start seeing a similar level of the Norwegian krone to where it is today. So the comparison -- comparables on the Norwegian krone remains fairly high in the next few months, whereas, of course, the U.S. dollar improvement is gradually going to -- or is already starting to help us. But we have an immediate effect of the high amount of sales in Norway, and that is offset by the dollar. But still a bit too early to say when that balance will start to become favorable from the dollar, but it's important to look at the Norwegian krone comparables also for the spring.

Okay. Very clear. Can I also ask -- I mean you now have almost SEK 1 billion in net cash, excluding lease obligations. How would you view the split here given that you now made 3 acquisitions in the past a little more than 2 years? How would your preference look for -- regarding future M&A or potentially increasing the yield to shareholders?

So obviously, it's clear that we want to continue to distribute at least half of EPS to our shareholders. That's a critical priority, of course, moving forward. Then the recent acquisitions is -- we obviously do that because we expect that also to be a strong return on that investment. And the acquisitions, the 3 we have done over the last few years are obviously companies that we believe strategically will complement Clas Ohlson, and there will also be a strong and good return on that investment. So we always are open to look at opportunities. There are very few companies out there that meet those criteria. Now we have found 3, but looking forward, obviously, the priority is to continue to invest in the base business, our ABC, distribute cash too via the dividend. And then if there are opportunities, we will consider them. But it's not a -- yes, so I think that's the comment.

The next question comes from Erik Sandstedt from Kepler.

Couple of questions. Could you share some additional details on the marketing spend in the quarter? Is the year-over-year increase more pronounced than we saw in Q1, for example? And to what extent have elevated marketing sort of been supporting the strong sales in recent months?

So overall, when it comes to marketing, we have talked about this a few -- for a few quarters now. And what we do is we work with dynamic performance marketing, which means basically that we buy traffic when we do see a strong return on that spend. So we do not limit it in the month. We actually buy traffic when we see that it's profitable to do so. And that spend needs to be obviously delivering a return. So in this quarter, it was slightly higher, and we have seen over a few quarters that the marketing spend has been slightly higher. That also relates to overall growth, but also we have seen over the last year how the Clas Ohlson e-com business has been significantly growing. As I said before, during the quarter, we saw 20% growth on e-com. So obviously, the performance marketing is a driver of that. It's also important to remember that none of these costs are structural. It's basically something we decided to do when there is profitable traffic to be had but we can also equally turn it off if there's no traffic to -- that we judge would deliver a return. So we will continue working like that as long as it's the right type of investment to do.

Yes. And a follow-up on that in terms of marketing and how you drive the business. What investments are you making in agentic commerce? And how do you see that developing and maybe put that a little bit in perspective of sort of more traditional SEO marketing and so forth?

So overall, when it comes to marketing, looking at Clas Ohlson overall, we obviously have a very strong brand and the store presence for us is a key thing. We're building the brand by being very close to our customers. So the store is a big marketing vehicle. Then when it comes to the more bought marketing, we are mainly focusing on digital marketing and also we're leveraging the Club Clas membership club, where we communicate to customers that actually want to be communicated to. So when it comes to agentic commerce, obviously, it's still early days. We are working closely with Google, and we are doing both investments, I mean, internally to strengthen SEO, et cetera, but when it comes to the more agentic commerce, it's still a bit too early to conclude what impact that will have. But we are working closely with Google and understanding how we can improve and become even more data-driven there.

Yes. Interesting. Just a few final sort of financial questions. I know that depreciation is down year-over-year in the quarter. Is this primarily a reflection of the previous write-downs of IT systems? Or is there anything else explaining that?

This is just -- I mean, we invest on an ongoing basis. And then we have all the investments that are fully written off. So this is just nothing special, just an ordinary part of our business.

And the write-downs were not....

Yes, so this is more on [indiscernible].

Yes. But I mean, is it fair to assume that depreciation will continue to be lower year-over-year. Now obviously, you will invest in the distribution center and so forth, but the rest of the business is growing but not depreciation. So I'm a bit curious whether that relates primarily to lower IT platform base, basically.

Well, it's not just not connected to that. It's more things are fully written off and then we add on new investments.

Okay. Fair enough. Fair enough. And then just finally for me, two quick questions relating to the acquisitions that you've done now of Phonelife and Reservdelaronline. Can I just confirm that this will be excluded from organic sales growth for the coming 12 months?

Yes.

Yes. And also in terms of how you account for it, you bought 70%, right? So will you consolidate the whole business and then report a minority interest? Or how will you account for the acquisition?

Exactly. Yes.

There are no more phone questions at this time. So I hand the conference back to the speakers for any written questions and closing comments.

Yes, we do have one written question from Magnus Roman SP One Markets. He's wondering how much of the year-over-year gross margin increase was explained by changes in reporting method?

We have changed our reporting from Q1 '25-'26 to nature of expense method. So up until Q4 '24, '25, costs related to handling and distribution product that is in stores and at HQ have been included in cost of goods sold. But from Q1 '25-'26, these costs are allocated to personnel expenses, other external expenses, depreciation, amortization of intangible assets, and you will find recalculated data on our website regarding these, so you can see the change that we have done between the lines. This change has no impact on net sales and operating thus there are no impact on our financial targets.

Thank you, Pernilla. We don't have any more written questions, but I do see that there's someone queuing up in the teleconference. So we'll hand back to the Telecom Conference.

The next question comes from Andreas Lundberg from SEB.

On the competitive landscape, I mean, given that you have had the great performance now for quite some time. Do you see any changes how competition is behaving? And also can you mention a little bit about campaigning in general terms and whether companies are taking use of the weaker dollar?

So overall, when it comes to the competitive activity, we haven't seen any big changes. What we saw across, obviously, Black Week, as always, when it comes to Black Week and Black month, et cetera, there are lot of offers out there, but we don't have any consolidated data, whether that was more or less than last year, but of course, as always we've seen a lot of focus on that month. And so in general, no big shifts that we observed from competitive behavior. When it comes to the U.S. dollar, as you say, rightly so, the U.S. dollar will start to have a positive effect or has already started to across the market that are exposed. So here, of course, we do track pricing across all our categories on a daily basis, and we have dynamically with our pricing and so they are always competitive. But so far, we haven't noticed any big changes to pricing in general but we're following that.

The next question comes from Niklas Ekman from DNB Carnegie.

Just a quick follow-up also. I note when you talk about this DC expansion, you talked about a capacity increase of 15% to 20%. But I also note that your sales have grown almost 40% in the last 3 years. So will this capacity increase of 15% to 20% will be enough? Or will you have to follow this up with additional investments over the next, say, 2 to 3 years?

No. So the capacity that we're investing in now are -- is what we believe we need also moving forward. So it's a combination, obviously, of a bigger building and then more automation to get efficiency across the value chain. We're obviously managing the volumes and the growth we have seen within the existing DC. So there is -- so this is to become both more effective and higher capacity. But the investment is done in a way where we believe that is going to support us also in the next few years.

There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

Okay. Thank you very much for calling in this morning, and we will see all of you again when we report our third quarter in March. So thank you very much.