Q2 2026 Puuilo Oyj Earnings Call
Speaker #1: results presentation. I am Juha Saarela, CEO of Puuilo, and, with me is Puuilo's CFO, Annu Weymarn.
Speaker #2: Good morning, everybody.
Speaker #1: we will go through the key results for Q2, which was from May to July, as well as the results for the first half of the financial year, and after this presentation you can ask questions by calling the line.
Speaker #1: here is the agenda for today's presentation. First, I will present the key figures and the events of Q2, and the first half of this financial year.
Speaker #1: And following that, Annu will provide more detailed overview of the financial development during the same periods. And the third item on the agenda covers the outlook for the current financial year including the forecast range for both net sales and adjusted EBITDA.
Speaker #1: And then we will move on to point 4, which is a reminder on our current strategy and long-term financial targets. And as I mentioned, we have reserved time for questions at the end.
Speaker #1: let's look at Q2 first. Our second quarter is from May to end of July, and here are the key results. net sales for the quarter were approximately 1503 million euros, increasing by nearly 13% compared to the same period last year.
Speaker #1: like for like growth, it was over 6%, which is clearly stronger than the comparison period last year. customer traffic continued to increase in both old and new stores, and it was once again the most important driver of growth.
Speaker #1: We also saw a slight increase in average basket size. Then gross margin, it increased over, to over 39%, and improved by 1 percentage point compared to the same period last year.
Speaker #1: Especially the significant increase in the share of the private label sales had a positive effect on gross margin. adjusted EBITDA was nearly 34 million euros, which is approximately 22% of net sales.
Speaker #1: Compared to the same period last year, adjusted EBITDA increased by almost 20% or 5.6 million euros. And then earnings per share were 30 cents compared to the 25 cents in the comparison period.
Speaker #1: We continue to expand according to our plans, and during the quarter we opened a new store in Espoo, Espoonlahti. At the same time, our Vantaa virkamies store was relocated to Vantaa Tammisto.
Speaker #1: And at the end of the quarter, we had a 59 stores compared to the 54, 54 last year. And as part of executing our strategy, we continue our internationalization and preparations for entering the Swedish market.
Speaker #1: The preparations for our first pilot stores are progressing according to plan. The first store will be opened in Örebro, by the end of this year, and the second one in Sundsvall during early next year.
Speaker #1: all in all, it was a good quarter. And then let's look at the first half of the year, which covers period from February to July.
Speaker #1: net sales were 257 million euros, and increased by 32 million euros or over 14% compared to the same period last year. LFL growth was nearly 7%.
Speaker #1: Growth continued to come mainly from increasing customer traffic, which we saw in both old and new stores. We also saw a slight increase in average basket size compared to the comparison period last year.
Speaker #1: gross margin, it increased to over 39%, and improved by 1.4 percentage points compared to the comparison period. This is mainly this was mainly driven by a significant increase in the share of private label sales.
Speaker #1: adjusted EBITDA increased by approximately 28%, and was 50 million euros, corresponding to nearly 20% of net sales. EBITDA increased by 11 million euros, and relative profit relative profitability improved by over 2 percentage points.
Speaker #1: And earnings per share were 44 cents compared to 33 cents in the comparison period. overall, the first half of the year was good. Customers continued to pay close attention to today's spending, and this is still visible in purchasing behavior.
Speaker #1: However, customer traffic at a Puuilo continues to grow, and that is the most important measure of how well our assessment pricing and overall concept are performing.
Speaker #1: We are continued to grow, and again, market share despite an increasingly competitive market invironment. We are now seeing some early signs of improving economics conditions, which is of course a positive thing for us.
Speaker #1: The first half of the year was strong. And we have good reasons to expect a favorable second half of this financial year as well.
Speaker #1: We continue our profitable growth with confidence. Good. Now is Annu your turn, please.
Speaker #2: Thank you, Juha. And first we will take a look at the net sales, development in Q2 and in H1. first, on the left-hand side, chart, we can see that the net sales for second quarter was 153 million euros, and they increased approximately 13% in total.
Speaker #2: In like for likes, stores, net sales grew by about 6%. This increase, mainly originates from customer traffic, but now we also saw a slight increase in the average basket size.
Speaker #2: Customer traffic increased with 12% in all stores and by 5% in like for like stores. Then, chart on the right shows the net size, net sales development in H1.
Speaker #2: Cumulative net sales were 257 million euros, and with the increase, of 14% compared to last year. Like for like growth was almost 7%. Also in H1, increase in customer traffic explains the main part of the sales development, but also average basket size grew slightly.
Speaker #2: And these figures include one new store in Q2 and three new stores in first half year. This, positive, development in customer traffic, is a very, very important sign for us that our concept works well.
Speaker #2: We also saw, slight increase in basket size, and, which tells us that the market invironment is improving. I can say that we are very pleased with the development of the net sales.
Speaker #2: Next, we will move on to gross margin. And here again, we will start with Q, two figures on the left. in Q2, gross margin was a bit above 30, 9%, and it increased by 1% compared to year ago.
Speaker #2: And this change mainly originates from the increase in the share of private label sales. The chart on the right side shows the cumulative figures, and there we had the same gross margin as in Q2.
Speaker #2: That is 39.2%. And there we had an increase of 1.4 percentage points compared to last year. And here the change originates, from the increase in the share of private label sales, but also from the change in sales mix.
Speaker #2: In Q2, sales of private label products grew by 19%, and in H1 the development was, plus 23%. So gross margin development has remained strong.
Speaker #2: And we are very pleased with the continued improvement. And next we will take a look at the profitability. Development in, Q2 can be seen on the left chart where the adjusted EBITDA was almost 34 million euros, with increase of 6, 5.6 million or almost 20% compared to last year.
Speaker #2: In relative terms, the profitability was 22%. compared to last year's a bit below 21%. This means that the relative profitability has increased from a year ago.
Speaker #2: Adjusted operating expenses in relative terms, terms, were slightly lower than last year. Then H1 figures. On the right, adjusted EBITDA was about 50 million euros with increase of 28% compared to year ago.
Speaker #2: And it, it grew by 11 million euros. Relative profitability was 19.5%, and it grew by more than 2% points. And also in H1, adjusted operating expenses in relative terms were lower than a year ago.
Speaker #2: The reason behind the improved profitability are the familiar ones, good sales development, positive gross margin development, and good cost, good, cost control that is typical for Puuilo.
Speaker #2: To summarize the first half of the financial year, our business model continues to scale well. All metrics earnings metrics were at good level, and developed in right direction.
Speaker #2: Next let's move on to inventories. This chart shows the inventory levels, over the last three comparable periods. At the end of July, this year, inventories were about 130 million euros, and it increased by 10 million euros compared to last year.
Speaker #2: The inventory increase originates from, our growth. We have opened, five new stores during past 12 months. And, those inventory figures also include private label products, for stores that we will open after the end of reporting period.
Speaker #2: So that has also affected inventory levels. So we can say that this inventory growth is, an investment in, in growth. We have also, increased the volume of private label products, and that has also had an effect on inventory levels.
Speaker #2: As you can see in the chart, our inventory turnover has improved and this is something that is in line with our targets. To summarize this, inventories have grown, but in a controlled way, and they are consistent with our network expansion.
Speaker #2: It's also worth noting that there is natural variation between quarters and years. So movements during a single period should not be overread. And next we will take a look at our cash flow.
Speaker #2: Our cash flow was very strong. On the left, you can see the cash flow, operating free cash flow in Q2. And that was a bit over 43 million euros.
Speaker #2: And it increased by 5 million euros compared to a year ago. The chart on the right, shows the, operating free cash flow in H1, and it was, 60 million euros.
Speaker #2: and the increase was, 8.6 million euros. Cash flow has now improved for three years in a row, both on quarterly basis and also cumulatively.
Speaker #2: And this is something that tells us, that our growth is healthy. cash flow was supported by the same factors, both in Q2 and in H1.
Speaker #2: And those are, good sales growth, improved profitability, and positive change in working capital. Strong, cash flow gives us financial flexibility. We are able to execute our strategy and expand our store network, both here in Finland and also in Sweden.
Speaker #2: And this can be made through internally generated funds. At the same time, we are able to distribute profits to our shareholders, in line with our target.
Speaker #2: Which is paying out at least 80% of net profit. And next financial position. The strong cash flow shown on the previous slide is directly reflected in the balance sheet.
Speaker #2: in the first chart, where you can see net debt to adjusted EBITDA ratio, there we can see that the ratio has improved in, in two years from 1.3 to 1.1 this July.
Speaker #2: And this is in line with our long-term target, where the ratio is less than 2.5. At the same time, we have grown by 13 stores in two years period.
Speaker #2: So we can see that the growth has not become at the expense of the balance sheet. The middle chart, shows the net debt at net debt, to adjusted EBITDA excluding the impact of IFRS 16, meaning lease liabilities, and there the ratio stood at 0.2 at the end of July.
Speaker #2: It has also improved from two years ago. And on the right, cash and cash equivalence, they were more than 51 million euros at the end of July.
Speaker #2: At the same time, bank loans were approximately 70 million euros. This means that net debt excluding the impact of IFRS 16 was 18 million euros.
Speaker #2: This means that the company's net debt is relatively low, and our financial position is strong. Next, we will have a summary of the figures.
Speaker #2: We already went through in more detail. And to summarize, this second quarter, the quarter was very strong in terms of both, growth and profitability.
Speaker #2: The quality of growth was good, as it was supported both increasing customer traffic and improving gross margin. The development of earnings, cash flow, and balance sheet shows that we are able to grow in a controlled and profitable way.
Speaker #2: This means that our strategy is progressing according to plan. And next, Juha will go through the updated outlook for the current financial year.
Speaker #1: Thank you, Anna. Yeah, then the outlook for, for this financial year. as unknowns on 1st of this month, we have revised our guidance for this financial year.
Speaker #1: We forecast that net sales will grow and be between 495 to 515 million euros. We also expect adjusted EBITDA to be between 87 to 97 million euros.
Speaker #1: Like for likestore net sales growth is, in, in the first half of the, of the year has exceeded expectations. And in addition, profitability has been supported by positive gross margin development and disciplined cost control.
Speaker #1: Therefore, we have increased our guidance for both net sales and adjusted EBITDA compared to our previous guidance. There are uncertainties related to the outlook, including changes in consumer purchasing power and consumer behavior.
Speaker #1: In addition, geopolitical crises and international tensions may have direct or indirect effect on inflation, interest rates, product availability, and product prices, which could in turn affect both sales and profitability.
Speaker #1: And lastly, the outlook includes the budgeted setup expenses for Puuilo's international expansion, which we expect to remain at approximately 1 million euros and in line with our previous estimate.
Speaker #1: Good. And then reminder about our strategy and our financial targets. The six key elements of our strategy are the first one, opening new stores and continuing our expansion in Finland.
Speaker #1: Our target for this period is to reach over 90 stores nationwide. Then entering the international market, starting with the pilot in Sweden. third one, continuing like for like sales growth, where is still significant potential.
Speaker #1: then strengthening our current position by increasing private label sales and being one of the most cost-efficient operators in the industry. fifth, providing an omnichannel customer experience.
Speaker #1: A shopping experience that is easy, affordable, and fast is a key factor for both current and potential customers. And then sustainability work and its development.
Speaker #1: We call this theme as responsible retailer, which covers the key elements of our sustainability efforts. And working towards these six objectives will support us in achieving our long-term financial targets and they are presented in the lower half of this page.
Speaker #1: our sales growth target is to achieve average of over 10%. By the end of the strategy period, we aim to exceed 800 million euros in net sales.
Speaker #1: In terms of profitability, our target is to reach an adjusted EBITDA margin over 17%, corresponding to more than 136 million euros in adjusted EBITDA.
Speaker #1: And then we aim to distribute at least 80% of company's net results to the result to share, shareholders. And regarding net debt, our target is to keep the ratio of the net debt to adjusted EBITDA below 2.5 times.
Speaker #1: The figures for the first half of the year show that we are making good progress towards these targets. 10 expansion in Finland, this year we have opened stores in Hollola, Jyväskylä, Vaajakoski, and Espoo, Espoonlahti.
Speaker #1: Also, we have relocated our store in Vantaa, Virkamiestu, Vantaa, Tammisto. During reminder of the year, there will be five store openings. New stores Lahti, Holma, and Kangasala will open their doors on 17th of this month.
Speaker #1: Store in Raasepori opens during autumn and Kurikka and Turku near the end of this year. for the next financial year, we have already unknown set store openings in Ylivieska and Jämsä.
Speaker #1: In addition, our Kajaani store will relocate to new premises during the summer 27. And our Jyväskylä, Seppälä store will move to the new premises during next year.
Speaker #1: And we will provide updates on other new stores openings in due course. The ramp up of new stores has followed the same pattern as in our previous openings and has been in line with our expectations.
Speaker #1: Growth is therefore continuing according to plan. And then let's move on to our expansion in Sweden. as we have communicated before, we are preparing for international expansion in the Sweden alongside our continued growth in Finland.
Speaker #1: All preparations are progressing according to plan. We have already unknown set our first two pilot stores. The first store in Örebro, will open towards the end of this year and the second one in Sundsvall during early 27.
Speaker #1: And we will provide updates on other store openings in due course. We will continue to update this on our progress as we reach the next milestones in the pilot phase.
Speaker #1: there grejer rätt. Good. Thank you. And now we move on to questions. So moderator, please open the line.
Speaker #2: If you wish to ask a question, please dial pound key five on your telephone keypad to enter the queue. If you wish to withdraw your question, please dial pound key six on your telephone keypad.
Speaker #2: The next question comes from Maria Wikstrom from Seb. Please go ahead. Maria Wikstrom, your line is now unmuted. Please go ahead.
Speaker #3: Sorry about that. This is Maria from SCB. I had it unmuted. I have a few questions I wanted to touch first on the gross margin development, your gross margin 200 basis points in Q2.
Speaker #3: Supported by the higher private label sales. Is that the level that we should expect for the for the for the remaining quarters of the year, or is there some seasonality what comes to the private label share between the quarters?
Speaker #4: Thank you. Maria for the question. Well, our as we went through our our increase in gross margin, that is mainly based based on share of private label increase in share of private label sales.
Speaker #4: In total sales, and there we expect that our our solid performance will will continue. So we are not expecting anything that would dramatically change change our gross margin.
Speaker #4: But at the same time, our business is growing and also we are working on our private label products and in in past year that has also increased our gross margin.
Speaker #4: There may be some variation between between quarters, but you should always look at the long term trend in also in our gross margin.
Speaker #3: Thank you. And then I wanted to touch on the the current trading environment. Given that the Finnish consumer confidence figure was the highest year to date in August, so have you do you see the sales trend continuing similar to from the Q2, or how do you see the improving consumer confidence impacting your trading environment?
Speaker #1: Thank you, Maria. Our concept works very well in the in the and the tougher economic situations and environments and if we look our last year's performance when the consumer confidence has been very low, we have gained a new customers and and and get a better profitable.
Speaker #1: But now consumer confidence is in highest level in let's say three years. It is not that not not not very good, but anyway it is a bit higher we can get a benefit of this situation.
Speaker #1: Also it is a very difficult to say how much, but anyway that kind of situation will is supporting activations and and purchase purchasing in in in consumers so this situation is good and we are waiting for that there will be that a bit better situation and higher consumer confidence in near future.
Speaker #1: But but yes, this situation support our growth and our our gross margin and profitable development.
Speaker #3: Thank you. And then finally maybe a little bit on on the expected inventory levels. Now when you are expanding to Sweden, so what kind of a inventory setup I mean you are you will be doing in in Sweden.
Speaker #3: So should we expect the inventories to come come up somewhat follow the follow the expansion to Sweden that you would then build up inventory for your own private labels or how should we how should we view the inventories I mean going forward?
Speaker #1: We are going to Sweden with the same concept with same assortment. So it means practically it means that that Swedish new stores in Sweden will be or quite a similar than in Finland.
Speaker #1: So there are no we don't expect that there are there are coming the dramatic dramatic or significant inventory values as I said that they will be similar stores with the similar inventory values than in Finland.
Speaker #4: And if I may add there we are going to going to Sweden with the same logistics model as we are using using here in Finland.
Speaker #4: So in that perspective we are not going to for for example we are not going to have a centralized warehouse in separately in in Sweden.
Speaker #4: So they are kind of similar stores that we are we have here in Finland. Also in in Sweden.
Speaker #3: Thank you. I have no further questions at this point.
Speaker #2: The next question comes from Mika Ihamaki from DNB Carnegie. Please go ahead.
Speaker #5: Hi, this is Mika Ihamaki from DNB Carnegie. We had a yesterday a major. Announcement in Finland for data center build. And this of course suggests the prolonged period of construction activity and it should be largely supportive for economic outlook overall.
Speaker #5: Although Puuilo is predominantly a consumer focused rather than a B2B distributor, but you have categories such as tools, work accessories, safety equipment, etc. in your offering.
Speaker #5: Do you expect these investments to provide a tangible sales tailwind for Puuilo over the coming years is my first question.
Speaker #1: Yes, we saw very nice news from from northern part of Finland and and I I think that it will support the demand in that part of of Finland and of course in some extent to the B2B business.
Speaker #1: But but but our business and and business model is based for the consumer consumer business and and and not based about that. But let's say that of course we can get a bit benefit of of those investments which are coming so so let's say by that way.
Speaker #5: Thanks. And then based on strong like for like sales development in in the first half. Can you just talk us through the performance between the months May, June, July flag if whether there were any meaningful differences between those months and and for them is it fair to assume that Q3 has continued with a similar positive momentum?
Speaker #4: Well, to begin with sales in Q3 we are not commenting that on this stage but and as before we are not commenting on special or separate months movements but I can tell you that much that there hasn't been any major events or any one-offs that has increased our sales but our sales increase has has been broad based.
Speaker #5: Thank you. And then lastly given your visibility into the second half what specific cost item. Items are you assuming. Based in the second half that weren't already present in the sort of Q2 run rate?
Speaker #4: Yes. We are expecting the costs to be at the similar level of course there will be salary in increases according to according to union agreement but we have faced those also in in previous years so we are not expecting to have any any dramatic change there.
Speaker #4: And in other costs of course there is always a pressure for cost increases but we are not expecting any dramatic changes there either.
Speaker #5: Okay. That's all from my side. Thank you very much.
Speaker #2: As a reminder if you wish to ask a question please dial #Q5 on your telephone keypad. The next question comes from Svante Krokfors from Nordea.
Speaker #2: Please go ahead.
Speaker #1: Yes. Good morning. Thank you. For the presentation couple of questions left. First one regarding the the average basket size has started to grow slightly.
Speaker #1: Is there can you tell if there's are are consumers already moving to higher price point products or or what at is the main main explanation behind the increase in in basket size?
Speaker #1: Thank you. Typically we see when basket size is decreasing or or developing developing mean increasing it means that customers buy more items when they shop in our stores.
Speaker #1: This is the typical effect how it works. Of course there may be may can be some effect for from the the bit more expensive products but but so far we see that the customers are buying more products than before.
Speaker #1: Okay. Thank you. And and regarding private labels which grew 19%. And obviously the share of prior label is growing. Which categories do you say growth in in in your private label assortment?
Speaker #1: That that this development has been quite broad based we don't comment that where it's mainly coming but let's say that we are increasing private labels almost all our key categories and that is why private label share is broad based.
Speaker #1: Thanks. And and your I mean your online share is is relatively small of your sales but it it has been growing quite nicely now.
Speaker #1: Have you made some some efforts or or what are the or what is the explanation behind the accelerating online sales growth? It is growing growing alongside our sales growth.
Speaker #1: Online store is very important part of our concept and and and it is some kind of new way how the customers when they are shopping or looking for the products and availability prices so in in same time it is very important the marketing channel but same time time it is very important part of our concept we are waiting for that the online business will grow with our total sales growth but like for like sales growth but but we are not expecting that it will grow the dramatically faster or to be to the very important part of our our or share of our sales.
Speaker #1: Thanks. And then on the Swedish expansion I think I know what your slogan will be there. Det är grejer det. But is there any any major differences in how you're going to implement your marketing in in Sweden compared to to Finland?
Speaker #1: It is too early to say say but but we will concept is we have we have differentiators here in Finland and of course we try to create the the same kind of same same same like same differenti differentiators to Sweden but so at the moment I can't comment anymore.
Speaker #1: We are creating our marketing concept and and we will we will publish then then in in in when when we are open when we open through a store.
Speaker #1: Okay. Looking forward to to that. Thank you. That's all from me.
Speaker #2: There are no more questions at this time. So I hand the conference back to the speakers.
Speaker #1: Good. Thank you for the questions. And joining us today. I would like to thank our customers for the trust in Puuilo. Customer traffic is an honest measure and it is continued growth is the best feedback we can reserve.
Speaker #1: We've we have had a busy spring and summer. And at times there has been more work than than people available to do it. Therefore I would like to give special thanks to all Puuilo employees for their flexibility commitment and hard work.
Speaker #1: Our next report the Q3 business review will be published on 10th of December. Thank you for your attention and I wish you all a very pleasant autumn.
