Fiskars Oyj Abp (FSKRS) Earnings Call Transcript & Summary

Hello, and welcome to Fiskars Group's Q3 results webcast. I'm Noora Huttula from Fiskars Group's Investor Relations, and I'm here with our President and CEO, Nathalie Ahlstrom; and CFO, Jussi Siitonen. We have a slightly different program from usual. Nathalie will give a brief summary about that in just a moment. After that, Jussi will take you through the Q3 highlights, and then Nathalie will give a strategic update. We will then have time for your questions, and you can already type in your questions in the chat during the presentations. Nathalie, please go ahead.

Thank you, Noora, and welcome, everybody, to this call today. There's a lot of happening in Fiskars Group at the moment, so happy to talk about that. But first, a few glance on the quarter and the key messages. We had another solid quarter in Q3 despite the challenging market conditions. We improved our profitability despite volumes decreasing. And yet again, all-time high gross margin in Q3, driven by very good work in our supply chain. Our strategic growth fundamentals continue to deliver, and we're at the final leg of delivering our transformation. And we have today come out also saying that we now are completing the brands first approach to drive speed and impact -- really drive speed and impact and the full potential of the businesses. And we are separating the business areas into 2 different operational independent companies. And we keep our guidance for 2024 unchanged. That means that our comparable EBIT is expected to be slightly above 2023 level. So that's the key messages for today. As Noora was alluding, we have a slightly different agenda today. We'll start with Q3. Jussi will walk through Q3, the solid Q3 that we just reported, and then I'll talk about the strategic update followed then by a Q&A. But, over to you, Jussi.

Thank you, Nathalie, and hello, everyone. As already mentioned, we had another solid quarter here. We improved profitability [ with ] -- despite the lower volumes. Out top line reported net sales, i.e., including also Georg Jensen now for Q3, we were up 6.1%. Organically, we were down 7.3%. More importantly, we succeeded to improve both profit and profitability, especially now in Q3 versus last year. Our EBIT went up EUR 6.4 million to EUR 24.3 million and EBIT margin over 2 percentage point up to 9.5%. When it comes to businesses, and I'll walk you through them a bit later, on EBIT, EBITDA was down, Fiskars was up versus last year. And then this other segment was back to normal level versus last year. The main driver for this improvement, or main drivers for this improvement were gross margin improvement. So we succeeded on a quarterly basis, improved gross margin to 48.1% from last year's 47.2%. Also on a year-to-date basis, we were 1.7 points up versus last year at level of 48.5%. Free cash flow was down due to net working capital phasing, and I'll get back to that also later. And our comparable earnings per share was EUR 0.01 up to EUR 0.16. And of course, cash flow per share -- or cash earnings per share was at breakeven level, reflecting cash flow. When it comes to Q3 comparable EBIT, as I said, it improved to this [ EUR 40 million ] -- EUR 24.3 million. If you take a more analytical view and then move to year-to-date EBIT bridge here, we succeeded to secure our performance -- secure year-to-date EBIT through strong performance management. And let me walk you through how it actually went. We started the second half EUR 10 million behind last year. Now in Q3, we succeeded to catch up EUR 6 million out of that. So on a year-to-date basis, we are EUR 4.1 million behind last year. But when we open that up more in detail, you can see here that the saving actions we have put in place in 2023, also this year, continue driving those savings. [ They ] delivered over EUR 30 million EBIT improvement there, which was then practically fully offset by lower volumes. Then also depreciation and amortization, mainly our historical investments in digital and IT took down the profitability. Georg Jensen, EUR 3.9 million contribution to our year-to-date EBIT there, bearing in mind that typically, the first 9 months of Georg Jensen in the past has been at breakeven or even loss-making, like it was in 2023. So this shows that we have succeeded to significantly improve performance in Georg Jensen. Then more on BAs. So Vita. Vita was up 16.5% there, including Georg Jensen, 10.1% down organically. And then on EBIT, EBIT was down EUR 4.2 million due to those low volumes, which were partially offset by the savings what we have achieved also in Vita business. Some highlights there. Both Royal Copenhagen and Moomin delivered a strong growth in Q3, and that [ just ] so especially when it comes to Moomin Arabia that we have strong momentum in that business. On Fiskars BA, top line was down 4.9% comparable basis, 4.5% reported. U.S., which is the biggest market for Fiskars BA -- [ roughly ] half of our Fiskars BA business is in U.S.A. U.S.A. was down due to the softness in sell-out. On the other hand, Germany and Nordics, and especially Germany there, we don't see any strong improvement there when it comes to consumer sentiment. So we succeeded to grow strongly in Germany due to the actions we have put in place, more distribution, more categories and the likes. All the commercial [ excellence ] actions have been in place, both in Nordics and Germany to improve top line. In Fiskars BA, we succeeded to improve EBIT by EUR 2.5 million, and the drivers were both improving gross margin and SG&A savings there in Fiskars BA. Moving from P&L to [ then ] cash flow. As I mentioned, our free cash flow in Q3 was negative of EUR 16.9 million. This is mainly due to phasing of trade payables, the phasing coming from both end of Q3 -- both from Q2 to Q3 and then also what we paid now in Q3 instead of Q4. So this is very much this kind of phasing [ issue ] now between the quarters. When it comes to net debt-EBITDA, it was slightly up to 2.8x, the target being this 2.5 or lower. This 2.8 is now ahead of our seasonally strongest cash flow quarter. So the historical pattern of our cash flow is that typically Q4 is the strongest, and therefore, we assume that we also get net debt-EBITDA back to the more targeted level now in Q4. Cash conversion is still at a healthy level. When it comes to our financial targets, the 4 targets there from net sales growth, profitability, cash flow and balance sheet, we can continue saying what we have said in many times, that those enablers, cash flow and balance sheet, remain healthy level, strong level even when it comes to cash flow conversion on rolling 12 months basis. So they can enable the future investments what we have in growth. EBIT margin, 9.1% on rolling 12 months basis. I would say it's not bad, but it's going a bit [ wrong ] directions there, very much reflecting the challenging operating environment there and low volumes. What you can see also here when we talk about organic net sales, which was down 4.4% on rolling 12 months basis. Then about those saving programs. So we announced 2 programs last year. We started one in January and then September. When it comes to SG&A, part of those saving plans, the SG&A part is now completed. The actions are implemented. We still enjoy and benefit from those programs also in Q4. But this kind of incremental improvement when it comes to SG&A efficiency, start gradually declining. When it comes to supply chain actions, there we still have to deliver, and then we can see that Q4 and also 2025 the programs continue delivering profitability improvement. The new structure Nathalie will walk you through more in detail a bit later. With this new structure, they are further enabling savings there throughout simplification. We expect that additional annual run rate of those cost saving plans is approximately EUR 12 million, starting already in 2025. So majority of the savings should be in our -- in year 2025 numbers, the rest being in 2026. The expected one-off relating to this organizational change is now EUR 8 million, and that will be recorded during the transition period until first quarter 2026. When it comes to the model itself, the decentralized structure will also improve flexibility and speed of executions, which is not yet visible in all those numbers. Having said that, giving back to you, Nathalie.

Thank you, Jussi. So, as said, that's Q3, another solid quarter, improving profitability despite lower volumes. And now I'm going to give you a strategic update where the business is heading. I'm first going to talk about the market and also the rationale why we are doing now the split into the 2 operationally independent companies. And starting by looking at what does Fiskars and Vita look like. They are 2 distinct different businesses, and they have a good performance despite the current soft market. If I start with Fiskars, Fiskars is a market leader in its own categories. Fiskars is very innovation-driven. We have over the years won more than 64 Red Dot Design awards. That's quite an achievement. And here in my hand I also have a upcoming launch of a water bottle from Fiskars. So that's more tactical products for the innovation side. Our sales primarily, and you see from the chart, 97% is through big box players, third-party retailers, the likes of Walmart, Home Depot, Lowe's and so on. Our key customers are the #1, #2, #3 players in the big countries: [ Bauhaus ]; Amazon and so on. And U.S. is clearly the largest country for Fiskars. So that's Fiskars. Then, when we look at Vita, Vita has a unique portfolio of luxury and premium lifestyle brands. Vita is known for its creative design and Vita sales is also in our own hands. It's direct-to-consumer led [ where ] half of the net sales is in our own channels, our own stores. We have today more than 450 stores globally and online, so direct-to-consumer led. Vita also has much higher gross margins also by the nature of the direct-to-consumer business. And Vita is a clear market leader, for example, in China in tableware. Today, already the share of luxury net sales in Vita is 65% of the totality. So we have Fiskars innovation-driven together with big box players globally. We have Vita direct-to-consumer driven, a lot of luxury of the net sales. So 2 distinct different businesses. And the group focuses on rigorous performance management, fund and allocation, where do we invest to drive growth, profitability and cash. Then a few words about China. There's a lot of discussion about China now and where is the market going. And this is from what we are seeing. We see that China market continues to be attractive despite the uncertainty we are [ seeing ] at the moment. Already in the half -- first half we saw that traffic in the key luxury shopping malls was substantially down, double-digit down. We see that customers are more price sensitive and they're also cautious buyers when they are doing luxury purchases. So it takes longer time for the decision. The good government stimulus packages that came in October, we still don't see the impact in the consumer goods in our field. What is going to be a big event is the Double 11, that's already started now and has been extended in the China market into 1 month instead of being only 11th of November. And then in December, we start -- and the market starts to prepare for the Chinese New Year in January. So that's the uncertain market at the moment in China. The long-term structural opportunity in China remains attractive. Today, roughly 22% to 24% of the whole luxury consumption in the world is in China, and that's foreseen to grow to 35% to 40% of the global consumption of luxury by 2030. So huge structural continued growth of luxury in China. We also see that the middle class and affluent consumer population will increase to 80 million by 2030. So a big booming, growing market in the long-term. And we -- in Vita, we have strong fundamentals in place. We are benefiting from the brand desire. Wedgwood is clearly #1 in its category in China. And we started with Wedgwood and now we are accelerating a broader portfolio. Royal Copenhagen we introduced to the market 2021, and that's growing, and now following the acquisition of Georg Jensen. We are accelerating also Georg Jensen in China. So we have brands in our portfolio that we can take to China. China -- Our business in China is totally direct-to-consumer led. We have more than 50 own stores in China, and these stores in a strong combination with omnichannel interaction with the e-com that we are having. So it's a direct-to-consumer led omnichannel interaction. How we operate in China is also a direct -- China-first approach. We have product innovation. We have product design, unique pieces that are made for China, for the consumer in China and also how we communicate, how we market, how we interact with WeChat and so on. That's all designed for the local consumer in China. And making this all possible is, of course, our strong, strong -- very strong local Chinese team. China for us in Fiskars Group is a Vita country only. So it's Vita that we have there. And for Vita, it's a top 5 country. Despite the uncertainties in the Chinese market, we've been able to drive a year-to-date growth of 3% in China. So good long-term prospects in China. Then looking at the world's biggest consumer goods market, U.S., there's been headwinds. But at the same time we see that our own platform is increasingly strong. In our categories, there's been low consumer confidence despite the strong economic fundamentals in the U.S. We see that customers -- our big box customers, our wholesale department and department stores, they are more prudent and there's a new normal. When we talk about the prudency, Black Friday now in November is going to be very crucial. Our big customers are looking how is the consumer sentiment, how is the traffic for Black Friday, before they then replenish for the holiday season. Of course, the first fill up of the shelves have happened already before Black Friday now. But then Black Friday is very [ determinantal ] how the whole holiday season will go. We also say when we talk about the new normal, and that's how we are now just assuming this is a new normal, is that customers continue to be very strict on inventory and cash management. For BA Fiskars, our big box players, our DIY customers, they are cautious with their own communicated outlooks. For BA Vita, we see that U.S. is really a market with -- driven by affluence and a strong gifting culture, a totally different gifting culture that we see, for example, in Europe despite the headwinds. Then, how are we performing as a company? Our platform is becoming increasingly strong. Fiskars brand is clearly the #1 market leader in the U.S. in its categories, a market share of between 20% to 40%, depending on the category. Vita is strong with its heritage brands, for example, Waterford. Also thanks to -- for the Irish heritage in the U.S. All of our brands have a premium positioning, driven by innovation and brand desire. And our relationships [ to ] the key accounts, the key customers are deepening and continue to be stronger, also driven by innovation that we are bringing for the future. There's still a lot of potential for us in the U.S. Even though it's our biggest market for whole of Fiskars Group, there's still a lot of runway because there's a lot of distribution points, we can still go to a lot of breadth and depth in how we can grow. For Fiskars Group, U.S. for Fiskars brand or Fiskars BA, it's the biggest country. And for Vita it's also biggest -- fourth biggest country for Vita. So China booming, second largest consumer goods market in the world, U.S., the biggest one and very important for us in Fiskars Group. As you know, we've had challenges since the macroeconomics changed in the U.S. for a while and year-to-date growth is only minus 8%, so not where we want it to be, but we are focusing on the fundamentals to ensure it's strong when the market in our categories picks up. So then -- this is more the short-term. Then looking at the long-term, what's the prospect for Fiskars Group and the brands where we are playing. And if we're looking at the long-term dynamics and why we are attractive long-term, it's all about the powerful brands. Consumers are driven by powerful brands, and they're willing to spend more and buy more of powerful brands. Also, design and innovation is crucial. We see that innovative companies create [ 3 times ] -- 3x more value than peers who are not innovative. So full focus on innovation and design. Direct-to-consumer, that's already 50% of Vita, is also important. This is Vita specific because in the direct-to-consumer channel, you can talk about your own story, the experience, the heritage, the uniqueness of the brand. Luxury, despite the uncertainty at the moment, especially driven by China, will remain attractive long-term with a CAGR of 6% to 8%. That's also Vita specific. And sustainability, that goes across all the board. It's at the core of the DNA of Fiskars Group. Sustainability is key for our strategy, and we know that consumers are concerned about sustainability, and we are there to make their choices easier on sustainability. So this is the current market trends in China, U.S. and also the long-term dynamics behind Fiskars and Vita. Then looking at our strategy. We have been really systematic since we started our transformation in 2021 to systematically execute our strategy and continue to transform the company. We have the transformation levers that are making the company stronger. I will soon show it. We've also sharpened our portfolio logic with clear roles for each brand, clear investment logic. And we've seen that our operating model has been evolving and now we are completing the brand-first approach. So this has been a systematic journey since 2021. Looking at the transformation levers that are delivering. Here, you see the journey we've been on. If we start with the gross margin, and Jussi already mentioned that the gross margin improvement quarter-by-quarter has been significant. And here, you see the trajectory since we started in late 2020. This is driven by channel mix, product mix, like I said, innovation, and also by supply chain -- the great work supply chain is doing to drive cost down. So we made our foundation much stronger with this fantastic development of the gross margin, and [ we'll ] continue to evolve. We are not going to stop here. When we started in 2021, we also said we want to focus on direct-to-consumer because that's a future place for consumers in Vita. And we see today that 50% of the net sales in Vita is direct-to-consumer led. So also there we've focused and we are delivering and making Vita stronger for the future, more future-proof. China, I already spoke about, we've tripled the net sales over a few years and the CAGR now is roughly 50%. That's pretty good. And if we look at the LTM figures, it's a 5% growth. So China has been very good for us. We've focused a lot on it, and it's delivering. U.S. has been the challenge, and we'll continue to focus on U.S. because the opportunity in U.S. is so big, and we know the fundamentals we now have in place are strong. So when the market recovers in our categories, we are in a good position. So the transformation journey we started in 2021 really has made our brands, our business much stronger for the future. Then looking at the portfolio roles. This we launched last year in November in the Capital Markets Day, where we said that we have clear roles for each brand. We have clear investment logic. And what we are doing with this investment and resource allocation logic, we want to enhance value. We want to make the big brands bigger. We want to surround the consumer with category expansion like we do -- that we do in all brands. And for the Vita brands, we want to command a high-end positioning and also expand direct-to-consumer. We have our brands we call Accelerate, the 3 large luxury brands, where we've overinvest to drive the growth. So we overinvest in Wedgwood, Georg Jensen, Royal Copenhagen to drive the growth faster. For Fiskars, that's a huge brand, our biggest brand. We have now a very good strategy in place and want to unlock the potential by having a detailed strategy for the different categories, the different countries to unlock the growth potential of Fiskars. Maximize potential brands are the brands that are already performing well, already delivering and where we say this is like a helicopter, the better you do, the more -- faster you can invest yourself back into the business. Having launched this portfolio logic last year, we already see impact. And we see -- for example, when we look at Vita here on the right side in the corner, we've seen that the share of luxury net sales in the Vita portfolio has substantially increased and is today 65% LTM of our net sales in Vita. So also the portfolio logic, the focus on investment is driving value. It's not only the transformation levers, portfolio logic that we are doing. We've also focused on M&A. M&A is now part of toolbox and M&A will continue to be an important value driver for us going forward. As you know, we purchased Georg Jensen 1st of October last year. So 1 year ago we purchased Georg Jensen. And I think that's a good way of showing how we are reshaping our portfolio with systematic and disciplined approach to M&A. So Georg Jensen is a good case example. When we identify and acquire potential targets, we really look at the strategic fit. Then in the case of Georg Jensen, it was also gave us the expansion opportunity into jewelry. After closing the deal last October, we have had no surprises in post-closing. And we've gotten on board complementary capabilities and culture. So very good strategic fit. We were also, with the systematic approach, able to acquire Georg Jensen at an attractive valuation. Our EV/EBITDA multiple with cost synergies was 4.7. So quite attractive acquisition. And we also reported negative transaction goodwill. So that's how we identify and acquire. When we integrate, we focus on driving the performance of the business case we have in place. And the purchase of Georg Jensen was very well received by key customers. And we've been in a business-as-usual mode already since July. So we did the integration in 9 months. That's pretty fast. The only remaining thing is still IT integration. So we are on track with synergy realization. We have said that we are driving EUR 18 million of synergies out of the Georg Jensen acquisition. [ And ] Jussi was previously in his year-to-date EBIT bridge showing the EBIT coming already now from Georg Jensen, which is quite a big swing from when they previously year-to-date would have been making breakeven or negative figures, already now making positive, driven by the synergies. And 75% of the synergies are in implementation. And we've also reduced -- that was very quick in the beginning of the acquisition, 10% net of the head count, both from Georg Jensen and Vita side. So now we are business as usual, fully operational. There's a lot of complementary strengths from both of us. We [ seen ] a lot more streamlined structure with improved clarity on the portfolio, on the brand, where we want to play on the strategy. We've gotten on board a lot of fantastic talent and also been able for our own Vita and Fiskars Group talents to offer new leadership opportunities. So the business is in better shape now, and this, I think, is a good example of our M&A toolbox that we have in place. So then coming back to our journey of going towards brand-first. We are today completing -- or we are announcing today that we are completing our brands-first approach. And that means that we are separating the business areas into 2 independent companies. If I walk you through the evolution since 2021, and I said this has been very focused on how we've done the transformation of the company, we started as quite a heavy matrix organization, quite functionally led, quite centrally led. Already last year in November in the Capital Markets Day 2023 we said that we are focusing on end-to-end accountability for the BAs, Fiskars and Vita, and they are fully owners of the business with P&L accountability and then only have scalable platforms that support. And today we've announced that we are completing this brand-first approach. And why brand-first? This is what's relevant for consumers. This is really the DNA of a brand company who wants to be innovative, who wants to drive design to be a brands-first, to be relevant for the consumers and our fantastic customers as well. So we are splitting now the remaining functions into Fiskars -- the new company, Fiskars; the new company, Vita. These new operational independent companies will be run by their own CEOs. We will have a narrow layer of group business services, less than 3% of our head count, who will drive efficiencies in certain IT and certain finance services. And then we have the group that's focused on portfolio management, fund allocation and driving growth through the fund allocations and also driving performance. That's a very lean group, less than 1% of net sales. So this is now what we are doing in completing our brands-first approach. The benefits of this is it's really speed and agility to drive impact. We will have end-to-end the CEOs of these [ own ] companies, Vita and Fiskars. They will have full control of their business. They are the owners of the business. So it's ownership culture also here. They will have the flexibility and the speed to manage their own company, what's right for their brands in their local markets. There's also dedication. We are going to accelerate the different growth opportunities. And as I showed in the beginning, Vita and Fiskars are very different businesses. They have different growth opportunities. Their full growth potential is different and also the investment needs are different. So in this way, we are [ deaveraging ], we are dedicating so that they can be much faster and deliver value and impact. Also, it will be much more transparent what's the performance of Vita, what's the performance of Fiskars. We will have much more precise targets and the capital allocation from the group's side. And this will then be the operationally independent legal entities, which will enable us also then in the future to have structural optionality. I want to give you an example of commercially how does this already work, because we have one example in Fiskars Group. We have many examples, but I'll give you one example. One example of this brand-first approach where we have seen it winning is already Moomin Arabia. Moomin Arabia has really been already operating, I would say, the last 2, 3 years as a brands-first, quite the own stand-alone team who've been giving the mandate to run, as a portfolio role says, maximize potential. And with this mindset, this autonomy that they've had and full P&L accountability, they've been able to drive category expansion fast. A few years ago, Moomin Arabia was only ceramics, or mainly ceramics. Today, already 20% of the net sales is textiles. So the category expansion has been really turbocharged by having a brands-first mentality. We've also been able to expand the channel expansion, expand distribution. And as an example, we've opened 8 new Moomin Arabia brand stores only in this year, year-to-date, both in the Nordics and then in Japan. And also the country expansion has been much faster with the brands-first mentality, where we see that Moomin Arabia has been growing with Barnes & Noble in the U.S. And we see that already today Moomin Arabia net sales more than 50% is in international sales. So with the brands-first and with the clear building blocks, we see that the dedicated independent team has been able to deliver [ with ] this speed, good impact. And we'll continue to do this now in the setup with Fiskars and Vita. Moomin Arabia's CAGR in the last years has been 11%, quite impressive figures from the team. So it shows that we have really good growth pockets, growth engines within Fiskars Group. And then to wrap up the key messages. Q3, another solid quarter in a tough market. We were able to improve the profitability despite the lower volumes and had a all-time high gross margin in Q3. Our transformation levers are delivering and are making us much stronger for the future, and we have the final leg. Therefore, today, we have announced that we have a brands-first approach to deliver speed and impact to the businesses that they can grow where they deserve to grow. And we are separating the business areas into 2 operationally independent companies with their own CEOs. And then the guidance for the year remains unchanged. We see the comparable EBIT will be slightly above last year's level. And still on guidance, as said, it's unchanged and the assumptions behind the guidance is [ we ] continue to see uncertainty in the market. Macroeconomic continues to be challenging. We see wage inflation has already for a longer time been elevated. At the same time, what Jussi also showed in the very good year-to-date bridge, you see that the savings that we've done through the completed programs, they are delivering. And also further cost efficiencies to improve the operations is delivering in -- to [ deliver ] Q4. Following the acquisition of Georg Jensen, we see that our group EBIT has significantly shifted to the end of the year to Q4. And that's now -- really relevant now in 2024. And during this period, the Vita's volumes are expected to play a significant role. And we also expect that they are going to be around the levels of last year. But this seasonal pattern is very important [ and ] the Vita volumes for Q4. And with that, let's go for the Q&A.

Thank you, Nathalie and Jussi. So we do already have quite a few questions, but you can keep them coming as we go. I think first we could tackle the news of today. Maybe Nathalie, you can start. We touched on this in the presentation, but perhaps a bit more color. So you are separating business areas into independent operations. Should we read this as higher P&L responsibilities within the current business areas? Is business development run independently going forward?

Yes. Business development for Fiskars and Vita is independently in their own companies, driven by their own CEOs, yes, and also their full potential strategy is there. What we then do from a group point of view, we are focusing on portfolio management. We are portfolio managers of the companies we own in Fiskars Group, and we're also the ones who allocate funds. So in that sense, we can drive growth in both Vita and Fiskars.

Great. And then perhaps a bit more on the practical side, also, Nathalie. So given that Fiskars and Vita are already quite independent, what will be the practical change in the plan announced today? Will they build also separate logistics and warehouse, for example?

It's a good -- what's a practical impact -- So what we are doing, and you saw that on one of the slides, when we are now moving the functions into BA Vita and BA Fiskars, and we are having areas where we are sharing logistics, for example. We will not separate them, but we will then -- Vita or Fiskars will sell that service to their sister company. So of course, not doing unnecessary dis-synergies, that doesn't make sense. But it's not costs that are allocated. It's really that then the other business can decide, I want to buy that service from my sister company.

Great. And then perhaps one more on the topic. So how will the organization change enable EUR 12 million cost cuts given there was little overlap to begin with, with Fiskars and Vita? Or is this more general cost cutting?

On these cost savings, it really comes to this that, for the brands, what do the brands really need to grow? And what are things that maybe in the past have been more from an overall Fiskars Group level where we have been trying to do both for both. So this comes from simplified -- and thinking about what are the needs of the businesses. And you saw also when I talked about what is Fiskars and Vita, they are very different. Fiskars has huge, huge customers by country. Vita is direct-to-consumer. So now when we deaverage how we operate, that's when we find the savings.

Great. And then perhaps moving to Q3, and maybe Jussi, you can take this. So inventories were up year-over-year. What is the reason for higher inventories?

Of course, it's bearing in mind the last year when we succeeded to cut inventories significantly. So this is kind of natural bounce back also partially for that one. On a longer-term basis, we continue driving down the inventory levels. So I would call this -- more like this kind of, because of a very good comparative type of topic.

Great. And then regarding maybe for Nathalie, also Q3, why do you think the sales in the U.S. deteriorated sequentially in Q3?

In Q3, it really comes also when we look at -- if I start with Fiskars. Now going forward, we are also -- always going to be very specific, this is Fiskars, this is Vita. With Fiskars, when we look at our big box players in the U.S., they have also [ come ] out with a weaker outlook for the full year. And it talks about the consumer behavior in DIY segment. So that's on the Fiskars side. Then on the Vita side, which is more luxury, we see that -- and also driven more by our luxury department stores in the U.S., there also we see that the traffic is down and the consumer sentiment is down in the categories and the kind of products that we are selling now in this market environment.

So then moving on to sort of M&A and Georg Jensen topics. Perhaps first a bit more general question to Nathalie. So you stated that now M&A is a part of the toolbox. Does this mean that your view and appetite for M&A has now changed compared to what you've communicated before?

I reiterate what I've communicated before. Like Jussi showed our financial targets where we said that our net debt/EBITDA, our target is below 2.5. We are not there yet. But Jussi also said that we are coming into a strong cash flow season in Q4. So we -- first we need to get the net debt/EBITDA to our target level, and then we'll start to use our toolbox. But we are very systematic. We want to ensure that we identify and acquire the right targets, so not to rush.