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Introduction & Market Context
Nelly Group AB (NELLY) presented its first quarter 2025 results on April 24, showcasing strong performance in what the company described as "historically the most challenging quarter." The Swedish fashion retailer reported significant growth in both revenue and profitability, continuing its positive momentum from 2024.
The company’s stock has reflected this strong performance, delivering a 160.9% return over the past year according to market data. Following the earnings announcement, Nelly’s stock rose 4.79%, though it has since retreated slightly to 40.79, down 1.57% in recent trading.
Quarterly Performance Highlights
Nelly Group reported net revenue of 247.8 million SEK for Q1 2025, representing an 11.5% increase compared to 222.2 million SEK in the same period last year. More impressively, operating profit surged to 19.9 million SEK from just 1.4 million SEK in Q1 2024, resulting in an operating margin expansion to 8.0% from 0.6%.
As shown in the following chart of quarterly revenue growth:
The company has now achieved eight consecutive profitable quarters, with the last four also showing net revenue growth. This consistent performance demonstrates Nelly’s successful transformation from a struggling online retailer to a profitable fashion business with a more sustainable business model.
The income statement reveals significant improvements across key metrics:
Detailed Financial Analysis
A key driver of Nelly’s improved profitability has been the expansion of gross margin to 51.6% in Q1 2025, up from 49.1% in Q1 2024 and continuing a positive trend since Q1 2023. This improvement stems from a strategic shift toward own-brand products and more disciplined inventory management.
As illustrated in the following chart showing gross margin evolution:
The company has successfully increased its own brand share to 50.1% in Q1 2025, compared to 39.9% in Q1 2024 and just 36% in Q1 2023. This strategic pivot has been particularly strong in jeans and tops categories, which feature prominently in Nelly’s Stockholm flagship store.
The growth in own brand share is visualized in this chart:
Operational efficiency has also contributed significantly to Nelly’s improved profitability. The company has reduced its return rate to 24.8% in Q1 2025 from 33.4% in Q1 2024 and 38% in Q1 2023, citing a stronger assortment, cross-functional strategy, and positive impact from its physical store.
The following chart demonstrates this consistent improvement in return rates:
Warehousing and distribution costs have decreased to 12.2% of net revenue in Q1 2025, down from 14.6% in Q1 2024 and 18% in Q1 2023, reflecting continuous operational improvements and optimization of the distribution network.
This cost efficiency trend is illustrated here:
Strategic Initiatives
Nelly Group’s presentation highlighted several strategic initiatives driving its improved performance. The company has focused on elevating the customer experience through evolving its own brands, launching new brands, and creating unique collaborations. The Stockholm flagship store has played a central role in this strategy, serving as both a retail outlet and a venue for events that strengthen brand engagement.
Marketing efficiency has improved, with marketing costs at 9.9% of net revenue in Q1 2025 compared to 9.6% in Q1 2024. Despite this modest increase, the company reported growth in traffic, orders, new customers, and active customers, with improvements in both organic and paid channels.
Looking forward, Nelly plans to bring the handling of returns in-house and complete the remainder of its IT systems changes, which should further enhance operational efficiency and customer experience.
Forward-Looking Statements
The consistent improvement in Nelly Group’s financial performance is reflected in its trailing twelve-month operating profit, which has grown to 112 million SEK with an 8% operating margin in Q1 2025, compared to 46 million SEK and a 3% margin a year earlier.
As shown in this chart of sustained growth in operating profit:
The company’s cash flow from operations has also shown remarkable improvement, reaching 106 million SEK in Q1 2025 compared to -5 million SEK in Q1 2024 and -54 million SEK in Q1 2023. This strengthened cash position provides Nelly with greater flexibility for future investments and growth initiatives.
CEO Helena Karlinder-Östlundh emphasized the importance of customer experience as the key driver of growth, while highlighting the strategic mix of Nelly’s own brands with external brands as crucial to the company’s success. CFO Niklas Lingblom noted the continued increase in operating profit and operating margin on a rolling twelve-month basis, underscoring the company’s consistent financial improvement.
While Nelly Group’s presentation focused on positive developments, potential challenges include supply chain disruptions, market saturation in key categories, macroeconomic pressures, increased competition, and dependence on successful brand launches and customer retention strategies to sustain growth.
Nevertheless, with eight consecutive profitable quarters and continued operational improvements, Nelly Group appears well-positioned to maintain its positive trajectory through 2025 and beyond.
Full presentation:
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