Matas A/S (MATAS) Earnings Call Transcript & Summary

[indiscernible] Report Q1 2026-'27. Today's call is being recorded. If you have any objections, please disconnect at this time. [Operator Instructions] I will now hand the call to your speaker, Group CEO, Mette Uglebjerg; and Group CFO, Per Johannesen Madsen. Mette, you may now begin.

Good morning, everyone, and welcome to our Q1 investor call. Today, we have 2 important messages. First and foremost, we are delivering growth in Q1, keeping our guidance, and we are launching a new operating model. Please take notice of the forward-looking -- the disclaimer for the forward-looking statement. In the agenda for today, we have 3 topics. First and foremost, I will walk you through high level our Q1 results and double-click on our new Nordic operating model. I'll hand it over to Per, who will give a little bit more briefly into the details around -- behind the numbers, and then we open up for a Q&A session in the end. I'm a bit more than 100 days into this role. And what is really clear to me is that we have a very, very strong foundation. We have strong brands, a lot of capable team members, and we have lots of potential across the Nordics. In terms of Q1, we are delivering 3.4% growth in the quarter, currency neutral, supported by a strong performance in Matas up by 5.6%, currency neutral. Online -- no, before I get to that, sorry, KICKS, KICKS is down by 0.3%. And obviously, we are not satisfied with that performance. We'll double-click a little bit more on that later in the presentation. We are also delivering strong performance on online, almost up by 10% and our in-house brands grew by 9%, which is a great testimony to some of the things we do, the brands, how it resonates with the consumer, but also about our omni model. Our EBITDA margin for the period is 12.2%. And there's 2 reasons for us not hitting our target here. First and foremost, we see a decline, a dip in our gross margin in the KICKS market. Half of that is driven by an inventory write-down. And then we have adjusted for prices to become more relevant for the consumer. And then we are investing in sales and traffic on marketing. We'll double-click a little bit on that a little bit later. What is really important to me is to say that the strategy remains unchanged. But to accelerate that strategy and move with greater speed and agility, we are launching a new Nordic operating model. So, we are going from a banner-led model to a country-led model with strong country managers close to the markets, close to our customers. and at the same time, some very strong group functions. I'll double-click on this a little bit later, but this will also impact the -- our cost base and the annual run rate will have DKK 45 million to DKK 50 million in savings from '27 to '28. The guidance for the year, they are maintained. We keep our guidance. We have paid out dividend DKK 2 per share. We also launched today launched a share buyback program of up to DKK 100 million, and we'll also talk more about that a little bit later. This slide is very much giving a detailed view of the quarter per banner. And you see the differences. You can recognize some of the numbers from the previous slide. But what you also see here is the gross profit in KICKS, 2 challenges there, the write-down in inventory and the investment we do in order to become more relevant for our customers. What it also tells me is within our family, we have a very strong performance within our Matas banner, but it also says something about the potential we have across the market, and that is exactly what we want to do with our new operating model, have some of these best practices travel across our business with greater speed. Our 6 strategic priorities remain the same. And there are some -- I just want to give you a couple of highlights for the year. In-house brands, I said that, growth 9%, really, really strong. And what is really great to see is that Matas Striber, which all Danes know, is now the top brand for hair in Norway and Finland. And this is a really good example when I talk about the operating model on how some of these best practices can travel across our business. So, a really good example of that. We are also working on becoming more relevant for even more customers. Part of that is also launching new categories and new products at new price points. And the wellness category is a really good example of that, where we have introduced in Q1, everyday care, everything from cotton pads to sleep relaxation, et cetera. So a lot of new products has been launched. We also introduced Chanel in Sweden. So we now have Chanel in all our key markets. Our membership club, we have 6 million members continue to be a really strong asset for us and a really strong growth generation and combine the omni, so our online universe with our physical stores, really strong assets for us. Our -- if we look at our synergies, we continue to be on track on our synergies. And our automated logistics centers are really strong as well, and we continue to see continuous improvement there. And we are on business case or ahead of business case depending on which. So really, really good performance. We are also launching the new Nordic model, and I'll get back to that really shortly, but this is really -- it's part of the strategy, and it's about making us more agile and deliver with greater pace in the different market. But let's move on to the next slide. And what you actually see here is how we set ourselves up. We want to simplify to grow, and there's 2 important dimension here. First and foremost, we want to have a more sharp, more coherent customer value proposition. And that comes from an insight on our consumers. We know from consumer insights that our customers are actually more alike than they are different. So we can take our customer value proposition and move that closer to each other. So we have like a coherent one customer value proposition across our markets. And that gives us opportunity to take out scale and harvest some of the synergies across our group. At the same time, we want to have a more simple market-led model with a focus on every single market. We want to win in every single market. So those 2 in combination will set us up so we can harvest synergies and be much more efficient. I just want to mention that we'll get back later in the year with a strategy refresh, where we're also going to launch our long-term financial ambition. But let's get back to the operating model. So just to give you a little bit of context. So on the left side of the slide, you see the model we have today, which is a banner-led model. And we are moving to the right side with a country-led model. So the rationale is that, well, since we joined forces, we have had this model. So we have basically had the KICKS operating for the 3 KICKS market and Matas operating for the Matas market. And that has been natural and that has been great, but we can also see that there are more potential across our group. So we -- now we are moving towards the markets, getting closer to our customers in each market with dedicated focus on local execution, but also dedicated focus on winning in that market, P&L responsibility, both for our stores, but also for our online business. At the same time, we're going to have some very strong group functions with shared capabilities and where we harvest synergies. There's no need to invent the wheel more than once, and that's the idea behind very strong group functions. I mentioned the annual run rate savings around DKK 45 million to DKK 50 million. But let me introduce for that, and we are setting ourselves for like a Nordic operating model. I've also launched a new Nordic ELT team, and here comes the team. So Per and I, we will continue to be the Executive Committee. I'm glad to have my partner in crime here. But as you can also see on the slide, we have 3 very strong country managers. We have Stefan, who is today the country manager in Denmark. He will continue in his role, and he is really steady hand on the wheel. Then we have a new hire, Helena Karlinder, who is joining our family. Helena has today a position as CEO for Nelly company, online fashion industry, where she's done a transformation, turnaround of the business, but also been really driving a lot of in-house brands. She has a long track record also within the industry, where she used to work for MECCA in Australia. So she comes in with a fresh view and -- but also cross-border perspective and industry experience, but also experience from online and [ our ] stores. Then we have Erik, who will continue in his role in Norway, but we lift him up to the ELT team. So that is an example of Erik handling the Norwegian business being close to the market, and Erik is also really a steady hand on the driving wheel. I just want to mention that Helena is also going to have the responsibility for Finland. Then we have Brian Gøbel on category and merchandising. That role is changing. Brian today has the responsibility for our logistics tender and has introduced that and make that a huge success. Many of you may not know that he also have a long track record for -- within category management, huge experience also with in-house brands, and I'm looking forward to have him as part of my team. David Heeroma is within our team today, but David is going to have a new role. He's going to be responsible for Digital, Tech & AI Transformation. We are now at a stage with our digital business where it makes sense to merge that with our tech business to get greater speed, but also greater -- take some of the opportunities we have and scale that across our business. David have a long track record for -- within digital and tech, but also had previously the role on operation within our organization. Then there's a new hire with Tonje Gulbrandsen Jensen. Tonje is today acting CEO for Matas. She brings more than 20 years of senior leadership roles. front-end transformation, integration, people focus. She does a lot of integration. She also previously had a role in Circle K, being responsible for all people in Europe and done a lot of integration and done a lot of culture work. And so I'm looking forward to have Tonje as part of the team. As you can see, that's a vacant position. Appointment is in process, but we are also scaling up a new team focusing on marketing and customer as a strong group function. This team represents -- as you can see, we put the flags up here. It's a Nordic organization. We want to win in the Nordics. That's also why it makes sense to have a Nordic ELT team. That makes sense. It starts with us. So the conversation we're going to have is with the different culture background and the different learnings we have from the different markets. As you might also notice, there's 2 names that is not on the list, and that's because Carola and Alice, their role has changed and Carola and Alice has decided to leave the company. I want to give them a sincere -- a big thank you for their huge contribution to the integration of KICKS and all the wins we have had over the years and wish them all the best. I think this team is a good testimony of what we are trying to do, a very diverse team with both the continuity from the team with Per, Brian, Stefan, Erik and David, but also some new hires with some fresh blood into the family and -- but also with international background working across borders, both online stores, different geographies, different culture background. We are a Nordic company, and we're going to have a Nordic team. And with that, I think I'm going to hand it over to you, Per.

Thank you, Mette. And I will take you through the results of Q1 for this year. But before I do that, I just want to -- I know we're going to get a lot of questions in terms of what does it mean launching the new operating model. So let me just share some numbers. First, we previously communicated that we had synergies for this year of DKK 50 million, and we are looking at DKK 50 million plus coming in this year. It's from a timing perspective, more towards the second half of the year. So that's going to come in as we progress this year. In terms of the new operating model, we're looking at special items in the range of DKK 70 million to DKK 105 million, basically reflecting the implementation and the severance pay, saying goodbye to colleagues. We also expect that, that would generate roughly around DKK 50 million of savings in this year and then the run rate that Mette already talked about, the DKK 45 million to DKK 50 million coming in next year. And just to reemphasize, again, we will host a strategy refresh and present the new long-term financial ambitions later in this year, and we'll be back in terms of timing and agenda and so forth. But this was just before going into the numbers, so you have a clear view on the impact of launching the new operating model. But turning to Q1, as already mentioned, growing 3.4% currency neutral with a strong growth in Matas and also others growing above 10% and others is, as you know, our Firtal business and Web Sundhed, which is 2 online businesses. So strong growth from their end as well. And then KICKS slightly below last year. [Technical Difficulty] Okay. Well, sorry, we had a little bit of technical glitch, but we're back, I hope. From a channel perspective, again, as already said, stores pretty much in line with last year, the growth coming from our online business and then wholesale in this quarter has a positive and that is a little bit with timing, but still a strong business as we move forward also in our wholesale business. And then I think one of the big questions for this quarter has really been around our gross margin. So let me just try and take you through that. Matas, slightly below last year. It's predominantly linked to the mix we have between online and stores, but not a big change in terms of our gross margin. When we look at KICKS, this is where we have the big deviations, and this is also where we see the shortfall. Half of the shortfall is coming from the write-down, actually slightly more than half of the reduction in our margin is coming from the inventory write-down, which is a little bit of a technical exercise. Every time we have products with sales for more than 2 years, we do a provision for that. And this is what hitting us in this quarter. Last year, it was divided throughout the quarters. This year, it's predominantly in this quarter, and it's not something we expect to see in the following quarters. And that, of course, when we look at the overall business, that is, of course, impacting the overall gross margin for this quarter. Gross profit in our other business, which is Firtal and Web Sundhed is slightly down. And there, we're basically investing in growth, especially in Web Sundhed, which is getting a very strong momentum at the moment at a slightly lower margin due to the product mix, but still a very healthy business growing in the right direction. And that then ends up with the total numbers, as we already talked about and a gross profit, which is in line with last year. Moving into the cost. And I think we have some good news here, especially around our staff cost. As you can see, as a percentage of revenues, we are almost down 0.5 point. And that is a reflection of the continuation of the strong performance of our logistics centers, where we basically continue to see improvements, both in the Matas Logistics Center, but also in our KICKS logistics center outside [indiscernible]. So from that perspective, as Mette already alluded to, we are delivering according to the plan and in some instances, actually beyond our expectations. So we're very confident with that. Then also, of course, another big thing is our salary percentage in stores. And of course, we are working very diligent with that as we progress throughout the year. So overall, from a cost perspective on people, we're very pleased with the development in this quarter, whilst also we are investing actually in capabilities in AI and now launching the Nordic operating model. In terms of other external costs, this is where we see the increase, and that is linked to 2 things. Of course, our online business drives costs, as you know, in terms of shipping, our faster deliveries. But when we grow the online business 10%, it will impact our other external costs as we're used to from all other quarters. The big difference compared -- at least compared to last year is our investments in marketing, our investment in our consumers, and that has increased in this quarter. Some of it is also linked into the fact that we have very high growth in Matas on our online business and the search of getting that high growth, of course, also impact our investments. But overall, this is investment in our consumers and also in driving the growth also in this quarter, but also as we move forward. And then I just want to say there's a little bit of timing when you have these quarters, as you remember, last year, we had the big fragrance campaign in KICKs. This year, we actually did that in March, as you recall from our Q4 reporting. And when you do those changes, you also see some of the changes in our investments. So that's also reflected in this quarter. And then just summarizing, an EBITDA for this quarter at 12.2%, as Mette already alluded to, of course, driven by 2 factors, and that is the decline in gross profit, predominantly to the inventory write-down, but also to the changes in product mix, channels mix and some of the initiatives we made in the market to become more relevant. And then investment in marketing, again, investment in growth as we move forward. And then just moving into a few things on our balance sheet. Inventories, as you'll see, inventories is increasing a little bit as a percentage of sales. We are moving in the right direction. And when I come back in the next slide in terms of our working capital, we're also improving that compared to where we closed last year. But this is, of course, a focus as we move forward. And as we always do in second quarter, and this is just to be upfront with that, we always have the higher inventories end of second quarter, we will also have this year as we get ready for the very important quarter, third quarter, but just to mention that. But if you look at the numbers, slightly lower numbers here compared to the sales, and that is what our focus is around. Moving into our working capital, and this is always a difficult comparison to the year before because it always impacts based upon what's your opening balance, what's your closing balance. So, what I've shared here is basically what are the movements that we have in this quarter compared to where we closed last financial year. So, we're getting DKK 220 million from our operations. As you saw, that was down compared to last year, so slightly less than last year. Our working capital this quarter is improving. And we, as I said earlier, also in Q4 that we have a focus on our working capital. We continue to focus on that. And then we have investment as planned around DKK 100 million. And with adjusting for the special items, we have a free cash flow in this quarter of roughly DKK 150 million. Compared to last year, that's different because we had very high movements, especially on working capital due to the closing of the previous financial year. In terms of the guidance, in terms of CapEx, we still expect that to be around the 4.5%. And as you recall, that's due to the incremental investments we are doing in our electronic shelf labeling, which will be hitting the markets fairly soon. But this also impacts our gearing. So when we closed this quarter, we're reporting 3.4%. The plan is still to reduce our gearing level throughout the year. And as mentioned earlier, we've launched a share buyback today of DKK 100 million. That has an impact of [ 0.1 ] for the gearing. So it's not a huge impact on the gearing. Our focus is still to end the year within the gearing range between 2% to 3%. And let me just close off before we go into Q&A, and that's the financial guidance. We're keeping the guidance for the year. So revenue growth around 2% to 6%, EBITDA margin, 14% to 14.5% and then our CapEx investment. In terms of the EBITDA margin, I just want to point out that you're looking at a 12.2% for the first quarter. But as I mentioned earlier, a lot of the incoming synergies, as we talked about last year and some of the comps that we are meeting is beneficial for the performance in the year to go. And that's also why we feel very confident that we will hit our EBITDA margin for the year. And with that, I think we'll hand over for Q&A.

[Operator Instructions] Our first question comes from the line of Amina Ashraf from Danske Bank. [Operator Instructions] In the meantime, we will go to the next question from Mads Quistgaard from DNB Carnegie.

I have a few. I'll take them one by one. So first, coming back to the special items and the cost savings. For me, DKK 70 million to DKK 105 million in special items seems like a quite significant number. I know that you explained by fewer layers and fewer roles, but can you be more specific on the moving parts here? And then on the cost savings, so the DKK 60 million to DKK 65 million in total cost savings for the next year and the years to come, is that a net or gross number? That will be my first question.

The special items, DKK 70 million to DKK 105 million, I think the reason why we have a wide range is this is to do with people also, and we are going through that process that we are launching today. And this is predominantly to severance [ space ] as we progress throughout the -- moving into the new operating model. In terms of the savings, when you look at that for next year, the DKK 45 million to DKK 50 million, that is also predominantly savings and salary costs. Of course, there's a little bit of additional costs when you reduce your headcount. Not everybody needs a PC and less a little bit of -- a little bit of everything basically. But predominantly, we're talking about salary savings as we progress into next year. And this is, of course, from a, you can say, a headquarter perspective or the central people supporting the full organization, but also includes the different banner organizations and so forth.

Okay. It was more like whether you see it as a net or a gross number like when you gave the synergies, you were pretty -- all right, but it was a gross number, you might invest some again in the business. Should we expect the same from the savings here?

Yes. I think what you should look at, Mads, is that the savings we have from doing the new operating model will be around the DKK 45 million to DKK 50 million. Then, of course, running the business, we'll have to make a lot of commercial choices. We'll have to drive the business as needed. It's very difficult right now to predict where we are in '27, '28, where the market is, where the consumers are and their view, we don't know exactly how we are from a competition perspective. And we'll make all the commercial decisions needed to drive our business forward. But net, you can say, or from doing the new operating model, we'll get savings around the DKK 45 million to DKK 50 million.

Okay. Makes sense. Then let me put 2 questions together here. So, 2 quarters with negative like-for-like growth in Matas, what are you thinking about here? And then on prices, again, a quarter with negative impact on gross margin in KICKS due to prices. How much is needed for the future? When are we sort of in a place where are you completed with price adjustments for KICKS?

Yes. So, a couple of comments here, Mads, and thank you for your questions. So, on the development in our growth here and how we have seen that over a couple of quarters, what I think is really important here to -- the starting point is the position we have. and the assortment range or the mix we have. 75% is still high-end beauty. We have an environment which is very uncertain and that, of course, impacts the consumer and the consumer behavior. So that is -- and fierce competition, et cetera, which is not making it easier. So, it is definitely some headwinds here. Having said that, that is why we are also working on becoming more for more people, becoming more relevant in even more occasions. And that's why we are broadening out our categories, broadening out our assortment, broadening out having much more price points. That's the introduction of wellness, sun care, et cetera. Now we are introducing the new Nordic operating model, and that is an accelerating for our strategy to become even more -- be even more relevant for even more customers. So that is why we are doing that. So, we have more speed, more agility. I'm not going to give you any promise on when we are there because what my focus is what we can control, and that will always be my focus. And then obviously, there's a world around us, nobody can predict. So I'm sure you can follow me on that. So I'm not going to give you any promise on that. But I can say, I would love to have the improvement today than to tomorrow. So that is our going in, and that's also why we are doing this change.

My question was more like you have 260 stores in Matas Denmark, right? You have 2 quarters with negative like-for-like growth, pretty strong online growth. So, net-net on a group and Matas pretty strong. But my question is more, how do you think about the future for the stores in Denmark, 2 quarters with negative like-for-like growth?

Sorry.

We expect closures or...

Yes. No. So thank you for the question. I thought you were talking about KICKS. The sound is breaking up a little bit here. So let me talk about the Matas here. So, I think it's important when you look at our numbers, you need to look at it from a holistic perspective. So, we are an omni business. You can see we are growing with great speed on our e-commerce side. What we know is a lot of our customers are going to our stores, browsing, getting advice, et cetera, they are going back and then they are ordering online, might pick it up in the stores, 50% of our customers pick it up in the stores. So that's why you cannot look isolated on our stores or isolated on our online business. You need to look at it from an omni perspective. We are very satisfied with our footprint. So, we are not closing and won't close any stores. Of course, we do adjustments. We just recently opened a new store in Nordhavn. So -- but it is -- you need to look at it from a holistic perspective.

And also, Mads, just in our stores, as always, and I think we talked about this a couple of times, we do not lose money in any of our stores. All our stores are profitable. And as long as they are profitable, we'll continue to have the stores. And having a store in a certain area will also positively impact our e-com business. We have data confirming that. So, I think, as Mette said, we're looking at it from a holistic perspective, having stores that will start turning into a negative, of course, we'll do the proper actions on that, which is not the case today.

But that's part of ongoing business.

Yes.

And Mads, just a data point. So, 50% of our customers go to our stores, pick up the products, but 25% of the customers who pick it up also buy something else. And that is actually a super good proof point of the very efficient omni model we have and where the 2 different areas support each other and where we actually gain more sales. But thank you for your question.

Our next question comes from the line of Amina Ashraf from Danske Bank.

I would like to firstly -- I'd like to focus on the momentum in Sweden actually. So, if we take the KICKS CC growth or decline of 0.3% CC year-over-year and looking at the Q1 last year where we had high comparables because of Skincity, because of the perfume campaign that was also scheduled in Q1 that didn't take place in last Q1, if we adjust to these changes, what is the adjusted CC growth in KICKS approximately?

I think, Amina, if we look at the first 6 months of calendar year is another way to look at it, and you might want to look at those 2 quarters combined, you will see a growth in KICKS of around 5%. And then there's a little bit of currency in that, of course, and you need to adjust for that. But overall, we see a growth in the combined first 6 months of this year, and that then removes the timing of the fragrance campaign as you were referring to.

Okay. But that's pretty much in line with what I expected to happen in Sweden and it's very good to clarify the distinction of the momentum in Sweden. I know you comment on continued strong competition in Sweden, and this is also expected given the intensity of the online peers and the discounts in Sweden. But do you see more rational behavior from your peers in Sweden despite the continued strong competition? I mean you've been able to grow 5%, as you say, in the first 6 months. If you look at the momentum, last Q2, you reported negative 1.4%. Q3, it went to negative 4%. In Q4 came the perfume campaign and now you're reporting negative 0.3%. There's a clear improvement in the momentum. So, can you comment a little bit on the competition dynamics? Is it becoming more rational?

I think -- I mean, it's maybe a little too early to say that as we saw some of our competitors without reporting for their quarters, they were themselves referencing the fact that they were looking at a more -- a better pricing going forward and being a little bit more disciplined in terms of what they were doing. And of course, as we progress into the next couple of quarters, we will see that in bigger context and also when we hit the very important quarter of third quarter and see if we get behaviors, which is more disciplined compared to what we saw last year. Where we are right now, there is some very early signs, but let me put it this way, it's too early to basically conclude on that. But if it continues into the next couple of quarters, I think we will be in a better shape.

Promising.

Yes.

Okay. Good to hear. If I then jump to Denmark, and I see the development on the gross margin, I would actually like to talk a little bit about the competition because recently, the focus has been on Sweden for the right reason. It is a challenging market, and Denmark has more or less, if I may say, has been the cash cow for the group. Right now, I see -- I know this is going to come in next quarter, but there was a pop-up for rhode, a supplier of beauty that is owned by Hailey Bieber. And there was a queue of 16 hours as far as [indiscernible] social media, people queuing up to buy things they can basically buy online. There has been another brand that is a Swedish brand called CAIA opening a sister store in Denmark. Is the competition dynamic changing in Denmark? Or how do you look at the changes in the market?

I think -- I mean, these are -- I think it's, of course, things that is happening in the market, which we are following very closely. The impact of these in the context of the full market is maybe not so big as the headlines it's getting. Having said that, it's, of course, something that we are following very closely and are well aware of and we take into account in terms of how we go to market and how we do our plans. And you can say, is that changing? I think it's entrants coming in, and we see that occasionally, and we see that actually almost every year. But it is new players.

I mean on the full side of the cup, right, or what we can say on the positive side, if people line up for 16 hours for a beauty brand, it just shows how strong the market -- the demand for beauty products is in the market. And if you say competition isn't intensifying, there could be an upside for that in the future. So fair. But if I then shift from Sweden and Denmark to Norway being more country focused as your new strategy, I hope in the future or it sounds like it's going to be. If we talk a little bit about Norway, your peers have been commenting -- your Swedish peers have been commenting on significant potential in Norway. And I know you've been focused in Norway for a while. Can you maybe tell us a little bit about KICKS' performance in Norway?