Speaker #1: Eldal, I'm CEO of the company, and joining me on stage today you will see CFO Stina Byre, who will present the financial details. And after the presentation, we will host a Q&A session, and that will be managed by Officer Trine Englokken.
Speaker #1: We will start with questions from the live audience here in Oslo today, and then we will take questions from the web. Those of you who are online, please feel free to type in your questions as we speak.
Speaker #1: Before we get started, I would like to thank Nordea for hosting today's presentation, and also for arranging the Investor Meetings we have later today.
Speaker #1: Europris is a discount retailer operating the Europris store concept in Norway and ØB in Sweden, and in addition we have the online companies Lekekassen and Strikkemekka, mainly operating in Norway but also into the Scandinavian countries.
Speaker #1: Both Europris and ØB operate seasonal concepts, and in the third quarter of this summer season has been challenging, which resulted in a third quarter that was below our own expectations.
Speaker #1: In addition, we had some issues with our campaign program, which fell short of the expectations we had. When we look at the numbers, total sales in the quarter ended at 3.5 billion, which is a reduction of 1.6% from last year, but up 0.6% in constant currency.
Speaker #1: And despite an increased gross margin, the EBIT ended at 244 million, which is a reduction of around 5% from last year. When we look at the first 9 months, total sales was 10.5 billion, that's an increase of 1.9%, and 3.1 in constant currency, the gross margin has increased.
Speaker #1: And that resulted in an EBIT of 710 million, which is an increase of 10% from last year. I started to talk about the season, and of course timing summer impacts the seasonal concept, like Europris, and this year we had an early start of the summer season, compared to a late summer last year, and that impacts sales in the quarter.
Speaker #1: This year we had good sales for the summer seasonal goods in the second quarter, while the sales was moved to the third quarter last year.
Speaker #1: Year to date, the figures are of course comparable, and overall we are very satisfied with the summer season we have delivered. We met our sales targets, and we have a healthy inventory at the end of the season.
Speaker #1: The Norwegian consumers, and also the Swedish ones, they remain very price conscious, and private labels and campaigns are key sales drivers in the quarter.
Speaker #1: But despite hard campaign sales, the overall campaign program fell short of the expectations we had, and we have taken some corrective actions. And the Europris concept is based on low prices, seasons, and campaigns.
Speaker #1: And all these three elements are important drivers of traffic to our physical stores. And the position we have on low prices is undisputed, and with this high sales of private labels, that demonstrates that we are very relevant for the consumers and drive traffic.
Speaker #1: But when the season comes short, we should have had a stronger campaign program to compensate for the lost traffic due to a bad season.
Speaker #1: And the campaign program was simply not robust enough to drive traffic during the season, and we should have had a broader range of traffic driving initiatives to ensure that the customer football was still there despite a slower summer season.
Speaker #1: We were simply too dependent on the summer seasonal goods in our campaign program and should have had a broader program to attract more traffic and be relevant when the summer was difficult.
Speaker #1: But the good thing is, of course, that Europris is a relevant concept for the price-conscious consumers. And we offer value for money, and growth is driven by the campaigns, and the private labels.
Speaker #1: And even though we see real wage growth in Norway, this year, the consumers have become more price-conscious, and you might say that perception beats reality, because the statistically the consumers are better off than before.
Speaker #1: Yet they feel that everything has become more expensive, and we see that in the way they shop in our stores, they choose campaigns, they choose the low price points, and especially they choose the private label products.
Speaker #1: And higher share of private labels is not only driving sales, but it's also important for increasing the gross margin. If you go some years back and look back to 2020, the share of private label sales in Europris was 40%.
Speaker #1: Now in 2026, that has increased to 48%, and that is also a very significant key factor for the good increase we have seen in the gross margin for the company over this period.
Speaker #1: We're not only working with the products, we're also working with the store portfolio, and we opened one new store in the quarter, we relocated and expanded three stores, but we also closed one store.
Speaker #1: And the board has approved another eight openings for 2026 and beyond, of which four are subject to planning approvals locally. If we move to Sweden, the turnaround program continues at full speed, and one of the most important things is to harmonize the assortment and try to position ØB as a relevant destination for non-food products and also for the seasonal products.
Speaker #1: And the Swedish consumers, they really welcome the upgraded non-food range we have introduced in the stores. And that delivered 9% sales growth in the quarter, and 10% for the first 9 months.
Speaker #1: And the share of non-food is now increased by 2 percentage points, up to 28% so far this year. And a stronger non-food offering in Sweden is crucial to attract new customer groups, and increase longer-term profitability.
Speaker #1: So it's a key activity in the turnaround plan we have for Sweden. But despite the positive development we've seen on the non-food goods, we are not satisfied with the development in Sweden in the third quarter.
Speaker #1: The timing of summer and the campaign program, of course, also had negative effects in Sweden, and I think that we actually got a larger hit in Sweden because we are not there in the robust market position as we are in Norway.
Speaker #1: In Norway, we are market leaders, and we can live with the weak campaign, the customers know us and come anyway, but in Sweden we have to fight harder for the consumers as we are a challenger in the market.
Speaker #1: And I think that the hit was bigger in Sweden than in Norway on the campaign issues we had, and also the seasonal issues. Another key element in the turnaround plan in Sweden is to remodel the stores and make it a more attractive and nicer shopping experience for the customers.
Speaker #1: And during the third quarter, we have remodeled another 10 stores, bringing now the total of remodeled stores to 38 by the end of the quarter.
Speaker #1: We have planned to upgrade another 10 stores in the fourth quarter for them are already done today, and we will then have 48 upgraded stores at the end of the year.
Speaker #1: The remaining store portfolio will be upgraded next year, with some exceptions. There will be around 5 to 10 stores that will not be remodeled due to the fact that they are potential relocation candidates, or we have issues with negotiations with the landlords.
Speaker #1: So we're not investing if you're not going to stay. So basically, there will be a handful that is not remodeled at the end. Now we are approaching the fourth quarter, and honestly, that will be a test for ØB.
Speaker #1: This is the first time we have a fully harmonized assortment for seasonal importance Christmas season across Norway and Sweden. And we will do some extra marketing activities, you know, we will go broader into the market and communicate that ØB has something new to offer for Christmas this year, and we are expecting that, you know, this test must position ØB as a stronger seasonal destination in the markets.
Speaker #1: But of course, we have more Christmases to come, you know, we have 26 is the first year, we are the full aligned assortment, then we will test more in 27, and of course, we are up for exams in 28.
Speaker #1: But it's going to be a test for ØB to really position themselves and deliver in the fourth quarter. So we are raising the bar and saying that we have to do better seasonal performance in the fourth quarter, and what we saw in the third.
Speaker #1: Regarding the store portfolio, we will do a broader full-scale national marketing by the marketing activities next year when we have upgraded most of the store portfolio.
Speaker #1: The ØB turnaround plans stays firm, our ambition is to lift sales to 5 billion, and also with an EBIT margin of 5% in 2028, and it's built on these three key drivers you have been talking about all time.
Speaker #1: And you know, they come also in a natural sequence. First, it's about harmonizing the categories and do joint sourcing. That is more or less done.
Speaker #1: And then it's about strengthening the execution across the value chain. And then we talk about doing the same campaign structure, that is almost done, it's about doing the same seasonal experience, and that we have the full-scale test now in the fourth quarter.
Speaker #1: And lately, it's about improving the customer experience, and that is remodeling the stores and there we are basically halfway into the project. So we are making good progress despite that we see that the results we deliver now in the third quarter did not meet neither your expectations or our own expectations.
Speaker #1: With that, I will leave it to Stina to present the financial details.
Speaker #2: Thank you, Espen. Sales for segment Norway in the third quarter was 2.5 billion, slightly above last year. Europris is a seasonal concept, meaning that good seasons attract more footfall to stores.
Speaker #2: And while a seasonal need may trigger a store visit, customers also feel their basket with other items when they come to shop. And this year, as summer came early, the corresponding footfall and sales fell in June, while last year, as summer came later, this fell in July.
Speaker #2: And this was a timing effect, and looking at the first 9 months, the summer season and overall sales performance was good. And the Europris chain showed growth higher than the broad variety retail index.
Speaker #2: And we still see price-conscious consumers. And private labels and campaigns had sales growth both in the third quarter and for the first 9 months.
Speaker #2: That said, the campaigns drew less footfall than expected, in the third quarter and corrective measures have been initiated. The sales development for the Pure Play companies was impacted by lower sales outside of Norway.
Speaker #2: On the 1st of July, the EU introduced a customs duty. On imports from non-EU countries, which negatively impacts profitability on these sales. And our Pure Players have done a tremendous job with mitigating measures.
Speaker #2: Strikkemekka has expanded its already existing warehouse operations in Sweden, and expects to be fully stocked in the beginning of next year. For Lekekassen, it is more complicated.
Speaker #2: But measures on what product to offer pricing, campaigns, freight terms, etc., have been implemented and will be further worked on. And while the P&L impact for the group is more limited, this is a clear competitive disadvantage for our Pure Players.
Speaker #2: With a negative impact on sales and profit. The gross margin for the segment showed strong improvement in the quarter at 45.8%. This is an uplift of 1.5 percentage points excluding unrealized currency.
Speaker #2: OPEX grew moderately and EBIT was 294 million, just above last year. And while EBIT was largely in line with last year, in the third quarter, the segment delivered an EBIT growth of close to 5% for the first 9 months, following sales growth combined with improved gross margin.
Speaker #2: Sales increased by 4% to 7.5 billion, with Europris demonstrating its relevance through higher footfall and a volume-driven uplift in the basket. The gross margin improved somewhat, while the OPEX was negatively impacted by the combined effect of volume-driven sales growth with high wage growth and increased distribution costs.
Speaker #2: And all in all, this accumulated into an EBIT of 867 million and improvement of 4.7%. Sales for segment Sweden in the third quarter was not 1 billion.
Speaker #2: A reported decline of 6.1%, but an increase of 1.3% in local currency. 10 stores were under remodeling during parts of the quarter, negatively impacting footfall and sales in the period of temporary closure.
Speaker #2: An important part of the turnaround is succeeding with the harmonized non-food range. And it is evident that customers appreciate the upgraded assortment as these sales increased by 9%.
Speaker #2: And the gross margin improved by 1.2 percentage points excluding unrealized currency. And in local currency, the OPEX increased by 9.7%, significantly impacted by the store remodelings.
Speaker #2: The EBIT loss grew to not 50 million. For the first 9 months, sales were 3 billion. Down 3% on a reported basis, but up 0.9% in local currency.
Speaker #2: Remodeling and temporary closure of 34 stores had a negative impact on footfall and sales. But we do see overall better performance on key KPIs for the remodeled stores.
Speaker #2: Non-food sales increased also for the first 9 months, and the gross margin improved by 2.2 percentage points excluding unrealized currency. OPEX was impacted by the store remodelings this year, and the segment had an EBIT loss of 157 million, an improvement of 29 million, compared to last year's loss.
Speaker #2: Summing up the third quarter for the group, sales were 3.5 billion, slightly up versus last year in constant currency. And while the sales development was below expectations in the quarter, the gross margin showed significant improvement.
Speaker #2: But costs related to the remodeling program weighed down the results, and EBIT was 12 million below last year. For the first 9 months, sales reached 10.5 billion, an increase of 3.1% in local in constant currency.
Speaker #2: And the gross margin improved and despite headwind on the OPEX, EBIT increased by 10.6% to 710 million. Earnings per share were 2.31 NOK, up 8.1%.
Speaker #2: Cash flow from operating activities for the first 9 months was 900 million, a significant improvement from last year. And this was from year-on-year improvement in the change from inventory as last year included a planned inventory build-up.
Speaker #2: And from timing of accounts payable between the years. Higher CAPEX was from the store remodeling program in Sweden, in addition to category upgrades and investments at the central logistics center in Norway.
Speaker #2: All in all, net cash increased by 54 million, and the group has a solid financial position with cash and liquidity reserves of 2.5 billion.
Speaker #2: And then Espen will take you through the outlook.
Speaker #1: Thank you, Stina. When we look at the market, and especially the macroeconomics affecting our customers, we see that the interest rates hike we had in Norway in September was not expected a year ago, and we also see that the policy rate path has been revised upwards in both Norway and Sweden.
Speaker #1: And how this will affect the consumers is a little bit difficult to say. We said earlier that perception beats reality. We see that they are acting more price conscious, which should be positive for a concept like Europris.
Speaker #1: And we also know that it's expected to be a real wage growth in both Norway and Sweden in 2026, and also 2027. So up until now, I think that the retail market is, you know, dealing with these issues quite well, and it seems like they are still, you know, growth in the overall retail markets.
Speaker #1: But we believe that the consumers will remain price conscious, and that concepts with clear priorities on price will be among the winners. And I think that we are well positioned in this market.
Speaker #1: But more importantly, and short term, we are well stocked and prepared for the important Christmas season. We have received all the goods, and now it's just to do Halloween this weekend, and then it will be Christmas in all stores from next week.
Speaker #1: Then we are having the Black Weeks, or Black Month, and then, of course, the important Christmas sales season in December. So, you know, the biggest sales days are ahead of us, and we are looking forward, and we are well prepared for the final sales seasons of the year.
Speaker #1: And with that, I will actually invite Stina back on stage, and we will do the Q&A. And Trine, we will start with questions from the live audience.
Speaker #3: Brage. Excuse me. Brage from Nordea. Regarding the campaign issues, could you go a bit further into detail what happened and what measures you are taking in order to correct them in the future?
Speaker #3: And also regarding private label developments, what particular categories do you see positive developments in?
Speaker #1: Yeah. On the campaign program, we fell short basically of having a broad enough offering. We were too dependent on seasonal goods to drive traffic to stores, and when the season was not there, we should have had a broader campaign offering in the weekly marketing leaflet to ensure that we had, you know, other offers that were attractive for the customers of they came to our stores.
Speaker #1: So it was basic that we were too dependent on the summer issues. And we should have had a broader offering. And I think that we should, you know, work to have that regardless of the season.
Speaker #1: So we are, you know, pulling all these strings to drive traffic. You know, the low prices we have with the private labels, the season will always be there.
Speaker #1: If it comes late or early, it doesn't really matter. But we should have campaign program that, you know, supports sales regardless of how the season develops.
Speaker #1: So that is basically it was not broad enough to attract customers. And regarding the private labels, that is basically across more or less all categories that we see positive development.
Speaker #1: We see that the consumers are attending more and more to test the private labels. I think that, you know, it's value for money, and that it shouldn't pay more than they have to for a product.
Speaker #1: So I think it's the smart consumers that are really trying to test our private labels. But I don't think it's only about Europris. I think you see the same development in all the store concepts as well.
Speaker #2: Let me go to questions on the web. Douglas Enochson. How much higher are the gross margins on private label products in Sweden against food and consumables?
Speaker #1: We are never disclosed the exact difference, and I don't think we will do that today either. But it's a significant difference. And of course, you have on consumables, you have the lower margins on non-food, you have on average higher margin.
Speaker #1: And non-food is, of course, dominated by the private label products. So you have a significant higher percentage of gross margin on the private label products.
Speaker #2: And how are the stores remodeled in 2026 performing compared with the non-remodeled stores? And are they reproducing the sales and gross profit improvements seen in the four pilot stores?
Speaker #1: They are performing the remodeled stores are performing better than the stores that are not remodeled. And that is on both sales and on margins.
Speaker #1: But we see a better performance on the margin than we do on the sales side. So we still see that, you know, remodeling the stores drives sales.
Speaker #1: We see a slight increase both in traffic, but a bigger increase in the basket. But we still need the big marketing push to attract new customers also into these stores.
Speaker #1: So, you know, remodeling itself is not enough to reach our targets. We still need to do marketing and attract new customers into the store.
Speaker #1: So the outperforming better, but overperformance is more significant on the gross margin due to a different, you know, basket in the stores than it is on sales itself.
Speaker #2: And the last question from Douglas Enochson. For Europe, how much of the remaining improvement towards your 2028 profitability ambition depends on gross margin gains from assortment and sourcing versus operating leverage?
Speaker #2: And the end of the refurbishment-related costs.
Speaker #1: The biggest part of the improvement should come from increased gross profit. The operating leverage is not that much. The OPEX cost in Sweden are quite trimmed, so it's not there we should make the savings.
Speaker #1: This is about changing the sales mix, but also about attracting new customers and driving the sales up. So it should be an uplift in sales.
Speaker #1: At a higher gross margin.
Speaker #2: Håkon Fuglu. Thank you for taking my questions. Can you break down the gross margin development by FX, campaign share, and product mix, both in Norway and Sweden?
Speaker #4: Well, the unrealized impact from currency changes that we have disclosed in the report, apart from that, we don't give a granular split on how the gross margin develops.
Speaker #4: But obviously, it helps with a good product mix from private labels and we're also working smart to increase the margin where we see potential for that.
Speaker #2: Do you restate Q2 comment on that Europe will deliver slightly better EBIT for the second half, 2026, year on year?
Speaker #1: I have to admit that I was negatively surprised by the result we saw in Europe in the third quarter. But of course, I will repeat it.
Speaker #1: And I raised the bar for the fourth quarter, saying that, you know, it's important to make a seasonal position in Sweden. And that we have to demonstrate in the fourth quarter.
Speaker #1: But of course, we are starting off on the wrong foot with the third quarter we delivered in Sweden, which was a miss, not only compared to what was expected in the market, but also compared to the expectations we had ourselves.
Speaker #2: And how did the market perform in October, both in Norway and Sweden?
Speaker #1: We're not going to comment on the fourth quarter results. That will come later on. And as I said, you know, the big seasons are still ahead of us, and the most important sales days of the fourth quarter are all still ahead of us.
Speaker #1: So let's wait and see until we have the numbers reported in January.
Speaker #2: Ole Martin Vestgård. Norway first. What was the mix on like-for-like between volume and price?
Speaker #4: We have in the quarter the like-for-like traffic was slightly negative, and there was a compensated by an uplift in the basket. And looking at the figures for the first nine months, as this was also timing impact, as we have said, the seasons and the campaigns attract footfall.
Speaker #4: So looking at the first or the first nine months, then the growth is driven by traffic and also volume-driven lift in the basket.
Speaker #2: What are the private label share and the consumable shares of sales in Norway in Q3 compared with Q3 last year?
Speaker #4: It has increased. It's around 48%, both for the third quarter and for the first nine months. Up around 2 percentage points compared to last year.
Speaker #4: So it's a good development for our private labels.
Speaker #2: How are purchasing prices developing, including currency and freight, and what do you expect for the gross margin going forward?
Speaker #1: Yeah, I think that's a good question. I have recently been to China, and what I expect there is what we can see is that, you know, it's the same thing as our customers are telling us.
Speaker #1: Everything has become more expensive. And especially oil-related products, which is used in as a raw material in many products, also affects the distribution costs.
Speaker #1: We have to outsource. It's a mix. I don't think things are going to be less expensive. The currency is, of course, moving in the right direction based on that we are buying in used dollars and selling in NOK.
Speaker #1: So that has been a positive development. But that is not the competitive advantage. That is the same thing for all retailers. And it's basically taken out in the price competition.
Speaker #1: So we see that is also a price competition in the market, and that currency is not really impacting that.
Speaker #2: And for Sweden, what drove the 2.1% like-for-like growth at Europe footfall versus basket and non-food versus consumables?
Speaker #4: Well, we have a decline in footfall in Sweden. So it's all basket-driven. And in the basket, it is the mix, of the products with the higher share of non-food, which also has a higher share of private label in it.
Speaker #4: So it's a basket mix game.
Speaker #2: And what was the consumable share at Europe in Q3 compared with last year, and how much lower is it in the upgraded store than in the legacy stores?
Speaker #4: The consumable share is 72% in Sweden. And it has been an increase as we commented in the report of 2 percentage points. And sorry, the latter part of the question.
Speaker #2: And how much lower is it in the upgraded stores than in the legacy stores?
Speaker #4: It's not significantly changed. It is somewhat changed. We see that the basket growth and is better. So they take more of the higher valued items with them.
Speaker #4: But it's not a significant difference in the share.
Speaker #2: And also he asks, how are the upgraded stores performing against the legacy stores on like-for-like growth, gross margin, and consumable shares of sales?
Speaker #4: I think we have broadly covered it, but they are performing better. And we would like to see that they perform also even better as Espen has commented on.
Speaker #4: And that is issues we are addressing and working on how we can attract traffic in an even better way than we have demonstrated in the third quarter.
Speaker #2: And the last one from Ole Martin Vestgård here. Are the upgrade costs per store in line with your earlier guidance on about SEC 2.1 million EBITDA impact and SEC 2.5 million capex per store?
Speaker #4: I think what we guided on in the opex was around 1.1. Per store. And then the capex over 2.5 per store. And we're roughly in line with those figures.
Speaker #4: There can be some timing differences between the quarters, but overall, roughly in line.
Speaker #2: And Petter Nyström, ABGC. Norway delivers a strong gross margin at 45.8% in Q3, up 1.2 percentage point. Have you been focused too focused on improving margins at expense of sales growth?
Speaker #2: And have you balanced the two going forward?
Speaker #1: We have not been too focused on increasing margin compared to what driving sales. So it was basically the miss on sales was that the campaign program didn't cover, you know, the goods that should support when the summer was not there.
Speaker #1: So I think we have done deliberate and good work on the gross margin during the quarter. We have balanced the campaigns. We have tried to position, you know, goods in the stores to sell upsell on the right products that gives you margin.
Speaker #1: And we have also increased the sales of private labels. So it's been a good, you know, retail craftsmanship to drive the margin up. And not that it has come on the expense of the sales.
Speaker #1: You know, if you ask us, you know, every day, seven days a week, we would always say that we want to have higher sales.
Speaker #1: That's, you know, the driver in retail and that's what we live for in the stores.
Speaker #2: And there was also a volume-driven uplift in the basket. So it shows that customers still picked more items when they came. You mentioned increased marketing activity in Sweden during Christmas.
Speaker #2: Should we expect higher opex growth in Q4 compared to the year-to-date trend?
Speaker #1: Yeah, Stina, I'm not sure if I can really answer that.
Speaker #2: Yeah, I think we will have higher opex. We have three 10 remodelings also in the fourth quarter, and there will be some higher marketing, but exactly the figure that we will come back to.
Speaker #2: But higher opex than last year, that's for sure. And another question from Douglas Enochson. Tokmani is also improving dollar stores through assortment changes, joint sourcing, and store development.
Speaker #2: What will differentiate Europe as both programs progress, and could stronger competition force you to reinvest purchasing savings into lower prices rather than higher margins?
Speaker #1: I think it's a very good and valid question. I think it's the same thing that we see here in Norway. You know, it's a lot of various variety retailers concept in the market, and everything everyone has their own speciality.
Speaker #1: And Europe's and Europe's positioning ourselves, you know, with low prices and, you know, a unique mix of consumables and non-food. Well, all the concepts are focusing more on handyman concepts, you know, more gardening products, or more a treasure hunt philosophy.
Speaker #1: So I think, you know, all these concepts have found their own pace. Europe's and Europe will be this, you know, unique mixture of campaigns, seasons, and the mix of consumables and non-food.
Speaker #1: And regarding purchase power, you know, of course, you know, consolidating volumes between Europe's and Europe is a key factor of getting better purchase prices.
Speaker #1: And we are also consolidating volumes into trying to make, you know, big items bigger. I don't mean that, you know, we should make the bottles or something like that bigger, but it's getting more volume on the same SKUs that is also driving efficiency in the stores and also driving leverage when we do negotiations with the buyers.
Speaker #1: And we want to have good quality on what we sell. It should be value for money. And if that means we have to reinvest some of the purchasing savings we make into an increased product quality, we will do that.
Speaker #1: But if it's necessary, we will use that saving to increase the margin. So it's a tactical game. And I think that everyone in the market needs to play it the way they want.
Speaker #2: And another question from Håkon Fugle. Did the 15th store refurbishment in Q2 impact the Q3 results in some way for Europe?
Speaker #4: Well, I'm not sure if I completely understand the question, but if you're talking about opex, that can have some timing differences. But also, the upgraded stores do perform a bit better than the non-upgraded.
Speaker #4: So overall, that also impacts positively. Into the quarter. But then the stores that you do close, also have a negative drag. So it's a bit difficult question.
Speaker #4: And I'm not sure I got it, but feel free to ask us again email Trina, and we'll try again.
Speaker #2: And that was the last question. So thank you, Espen and Stina.
