Earnings call transcript: Boozt AB Q2 2025 sees revenue decline, stock dips

Boozt AB reported a 3% year-over-year decline in revenue for Q2 2025, totaling SEK 1.8 billion. Despite a challenging retail environment, Boozt’s free cash flow more than doubled to SEK 186 million. The company’s stock fell by 2.28% in pre-market trading, reflecting investor concerns over the revenue drop and adjusted EBIT margin decrease. According to InvestingPro analysis, the company appears undervalued at current levels, with a strong financial health rating and perfect Piotroski Score of 9, suggesting robust operational efficiency. The company’s strategic focus on AI initiatives and multi-category customer engagement was highlighted as a potential growth driver.

Key Takeaways

• Revenue for Q2 2025 fell by 3% year-over-year to SEK 1.8 billion.
• Free cash flow more than doubled, reaching SEK 186 million.
• The stock price dropped 2.28% in pre-market trading.
• AI-driven initiatives and customer engagement strategies are in focus.
• Full-year revenue growth guidance remains between 0% and 6%.

Company Performance

Boozt AB’s performance in Q2 2025 was marked by a slight decline in revenue, attributed to a challenging retail environment, particularly in Denmark. Despite this, the company has shown resilience with a significant increase in free cash flow, suggesting strong operational efficiency. The company’s strategic initiatives, including AI-driven content and personalized customer recommendations, aim to bolster multi-category customer engagement.

Financial Highlights

• Revenue: SEK 1.8 billion, a 3% decline year-over-year
• Adjusted EBIT Margin: 3.4%, down 1.5 percentage points
• Free Cash Flow: SEK 186 million, more than doubled from last year
• Share Buyback: SEK 94 million in Q2, totaling SEK 109 million of a SEK 200 million program

Outlook & Guidance

Boozt AB has maintained its full-year revenue growth guidance between 0% and 6%, with an adjusted EBIT margin expected to be between 4.5% and 5.5%. The company plans to defer capacity expansion by 1-2 years and reduce marketing spend in the second half of the year. Free cash flow is projected to be at least SEK 500 million for 2025. InvestingPro data reveals the company operates with a moderate debt level (Debt/Equity: 0.31) and has demonstrated strong historical growth with a 5-year revenue CAGR of 19%.

Executive Commentary

CEO Hermann Haraldsen emphasized the company’s return to growth, albeit modest, and highlighted the strong inventory position. He noted, "We are back to growth, even though it’s a modest growth," and reassured investors about the company’s inventory levels, stating, "Our inventory position is actually quite good."

Risks and Challenges

• Retail Environment: Continued challenges in the retail sector, particularly in Denmark, could impact future revenue.
• Consumer Spending: Decreases in consumer spending on clothing and shoes may affect sales.
• Competition: Although competition from ultra-fast fashion players hasn’t intensified, it remains a potential threat.
• Economic Conditions: Nordic consumer confidence is improving, but economic uncertainties could pose risks.
• Currency Fluctuations: The company reported no immediate benefits from USD currency fluctuations, which could affect profitability.

Boozt AB’s strategic focus on innovation and customer engagement, coupled with cost management, positions it for potential recovery and growth, despite current market challenges.

Full transcript - Boozt AB (BOOZT) Q2 2025:

Conference Operator: And Now I will hand the conference over to CEO, Hermann Haraldsen and CFO, Sandra Gad. Please go ahead.

Hermann Haraldsen, CEO: Thank you, and good morning all, and welcome to our Q2 twenty twenty five call. Let’s turn to the first slide. I think it’s fair to say that the first half of the year has been challenging due to quite difficult margin. Despite this, our revenue for the first six months was slightly positive in local currency. While this is below our long term ambitions, we are satisfied with the performance given the strong consumer headwinds, particularly in Denmark.

Looking at Q2, it was flat in local currency, but with a 3% currency headwind. Our reported revenue declined by 3% to SEK1.8 billion. This is broadly in line with what we anticipated when we updated our guidance in April with the variation that May was significantly worse than we expected and June was stronger than anticipated. In the quarter, BoostLED continued its strong performance with revenue growing by 14% or 17% in local currency. The strong growth is a direct result of our inventory clearance strategy.

As we have said earlier, our inventory going into the springsummer season was too high. So we have used to manage our stock levels effectively mitigating inventory risk and keeping our offering fresh. As was intended when we launched Boostlet, this channel now is providing its value as a crucial part of our business model. In contrast, boost.com saw a revenue decline of 6% or 3% in local currency. While this was impacted by a muted demand for fashion, sales were also affected by our strategy to limit promotional activity on bus.com to protect our brand value.

We believe this is the right decision to preserve the long term health of the boost.com brand, even though it affects us short term in a difficult market. Our profitability or adjusted EBIT margin for the quarter was 3.4%, down 1.5 percentage points from last year. The decline was primarily driven by two factors: a lower gross margin due to the clearance sales at Boostlet and a higher marketing cost ratio. The increase in marketing was a result of a planned higher spend in marketing, mainly focusing on the non fashion categories. However, with consumers holding back on spending, we did not get the expected returns on those investments in the short term.

Partially offsetting the decline in margin, we saw a continuous solid trend in our operational costs with significant improvements in both fulfillment and admin. These ratios improved by close to 2.5 percentage points combined compared with last year. A highlight for the quarter was our strong free cash flow, which more than doubled to SEK186 million, up from SEK90 million last year. The improvement was the result of our disciplined inventory management as well as the repayment of the wrongfully paid customs in Norway related to 2022 to 2024. The strong cash position our commitment to shareholders as we repurchased SEK 94,000,000 worth of shares in the quarter.

In total, we have now already repurchased shares for SEK 109,000,000 of the SEK 200,000,000 program initiated in April. We are on track to return Edo shareholders from the Danish listing proceeds. To meet this commitment, the Board has initiated the process to increase the current share buyback program from SEK 200,000,000 to SEK 300,000,000. Finally, our financial guidance for 2020 remains unchanged. We expect net revenue growth of 0% to 6% and an adjusted EBIT margin of 4.5% to 5.5%.

With the addition that we now also guide for a free cash flow of at least 500,000,000 in 2025. I’ll more detail on the outlook at the end of the presentation. Now turn, please, to next slide. We normally do not provide a detailed breakdown of the monthly performance. But given the big swings we have seen in trading, we believe it is important to highlight how sales have developed on a month by month basis during the quarter.

As you can see from the slide, after a relatively stable Q1, sales started to decline in April and reached a low point during May. The weak performance should be seen in the light of a challenging trading environment, where very low consumer confidence as well as a cold May in the region impacted consumer demand. However, with consumers’ confidence starting to see some optimism, trading in June improved significantly with revenue increasing with double digits for the month. This was driven by all categories women’s fashion. This positive trend at the end of the quarter gives us confidence as we move into the second half of the year.

Next slide, please. We are strategically fueling our business for future growth by three key areas. Hiring AI and inspiration and curation. First, let’s talk about our people. We have made new high profile recruitments in our buying and merchandise teams to significantly strengthen our organization.

The move of our headquarters to Copenhagen has been instrumental in attracting very experienced and talented buyers and merchandisers. They bring strong fashion backgrounds and valuable industry relationships that will complement our data driven approach in a powerful way. Second, we are making API across all parts of a value chain. We are leveraging AI to generate content for banners, campaign images, and also product descriptions, which allows us to scale our creative output. We’re also building AI assistance to support our technical engineering, financial tasks as well as customer service teams making our operations more efficient.

Crucially, we can now deliver highly personalized recommendations to our customers. Based on the order and behavioral data, we can do it more efficiently and with greater precision. Finally, it’s inspiration and curation. All these initiatives, particularly those driven by AI, are designed to increase customer loyalty through tailored content. By offering product descriptions through better curations and styling tips, we are confident that we can make the shopping experience more engaging and inspirational for our customers.

To further support the business, we’re also enhancing our engagement and focusing more on social media. These strategic initiatives are all focused on making us more agile and responsibly equipped to succeed in a rapidly changing market. We are confident that these actions are the right steps to build a strong foundation for our future growth. Please turn to the next slide. Going back to the performance in the quarter, we continue to see an improvement in the share of our customers who buy from more than one category in boost.com.

As most of you know, moving customers to buy from more categories is a key priority for us. Customers buying from more than one category are more loyal, and they buy exponentially more customers buying from just one. In the last twelve months, 53% of customers bought from more than one category, which is an increase from 51% in the same period last year. As mentioned in the beginning, we have invested in Offline Media to increase the awareness of the non fashion categories. It has had some effects as the but it has not been as effective as we had hoped for.

With this, I will hand over to Sandra for a more detailed run through of the numbers for the second quarter. Please, Sandra.

Sandra Gad, CFO: Thank you. So let’s start with a look at our revenue for the quarter. Revenue declined 3%, and it was flat in currency. The decline was driven by Denmark, which was down 8% or four percent in local currency, while Sweden continues to perform above par, delivering 4% growth in the quarter. Looking outside of The Nordics, revenue was down by 3%.

While The Baltics are still performing well for us, Germany and The Netherlands saw a decline. This is mainly because we’re holding back on marketing here as we remain focused on being profitable on every single order in these countries. The gross margin was 39.1% in the quarter and down 2.7 percentage points compared to last year. This was mainly driven by the gross margin on Boostlet, where we are clearing inventory at higher discounts. Additionally, the gross margin was impacted by currency, resulting in a headwind of close to one percentage point.

The adjusted EBIT margin was 3.5%, down from 4.9%. This was largely driven lower gross margin as well as the increased marketing spend in the quarter. These negative impacts were partially offset by continued solid progression in fulfillment costs as well as administrative costs, which I will come back to in a minute. Turning to our two platforms. Boost.com saw a revenue decline of 6% for the quarter, which translates to a 3% decline in local currency.

While the difficult market conditions had an impact, it’s also important to note that our strategy of maintaining a more premium pricing on boost.com, which we do to protect our brand equity, is likely impacting short term sales in the current environment. Despite this, we onboarded close to 200,000 new customers on boost.com. However, as consumers remain hesitant to spend across The Nordics, we also see that they’re buying on average less frequently. The number of active customers in the last twelve months was flat compared to last year, while the average order value increased 2% to DKK $9.34. In The Nordics, boost.com revenue was down 6% or 3% in local currency, and this was driven by a 10% decline in Denmark, which translates to a negative 5% in local currency, while Sweden was down 3% in the quarter.

Consumer confidence in The Nordics continued to decline in the quarter, though we’ve seen a slight improvement towards the end, and especially in Sweden, which was also reflected in the strong performance in June. Sales outside of The Nordics declined 8%. As mentioned earlier, this was impacted by lower sales, mainly in Germany and The Netherlands. The adjusted EBIT margin for boost.com declined 0.8 percentage points to 3%. The decline was mainly driven by lower gross margin impacted by currency as well as a higher marketing spend.

This was partially offset by the increased efficiency in fulfillment and distribution supported by the transfer sales that we introduced in 2024. Additionally, margins were positively impacted by Boost no longer being subject to customs payments in Norway as well as the staff reduction. If we move on to Boostlet, revenue increased 14%, supported by the ongoing clearance sales introduced last year. In the quarter, we successfully continued to clear out all the products from prior seasons to keep our inventory fresh. This has been well received by customers, particularly in Sweden, where sales increased 30%.

Active customers during the last twelve months increased 19% to more than 1,000,000, while the average order value increased 2% to DKK $9.33. This was achieved despite the lower prices offered on Boostlet and was due to an increase in number of items per basket. The adjusted EBIT margin for the quarter was 1.9%, down from 5.9% last year, and the decline was mainly due to the current clearance sales on the site. So if we move to the cost ratios. Starting with fulfillment, we’re very pleased to see the continued good development in our fulfillment cost ratio, which was down to 10.5% for the quarter compared to 11.4% last year.

This is a direct result of the operational efficiencies that we’ve been working on. The transfer cells we installed last year are now fully up to speed and combined with better distribution deals, they are generating meaningful savings for our business. Our marketing cost ratio increased to 11.5% from 10.8% last year, and there are two main reasons for this. First, we continued, as Hermann mentioned, with the planned off line marketing spend to build awareness for our non fashion category. The second reason is that we did not see the expected return on these investments due to the challenging environment, and particularly with women holding back on spending, also somewhat impacting other categories.

We do not plan to spend the same level on off line marketing in the second half. If we admin and other costs, the ratio continues to improve and decreased by 1.5 percentage points to 9.7. This improvement was driven by two significant factors. First, our administrative costs benefited from no longer having to pay customs in Norway. The other major driver was the positive effects of the restructuring that we completed in February, which reduced our permanent positions by approximately 10%.

We’re very pleased with the increased efficiency that this has delivered. This is now projected to have a positive impact on our adjusted EBIT margin of up to zero point an increase from our earlier projection of around 0.3 percentage points. Our depreciation cost ratio increased to 4.1 from 3.6%, and this was also due to two factors: the new depreciation costs associated with the lease of a new bulk store home and the installation of the transfer cells at the fulfillment center last year. These are strategic investments, and we expect to grow into these costs as our business expands. Finally, it is worth noting that costs related to share based payments resulted in a positive adjustment this quarter.

This was due to lower share price and lower projected performance than initially anticipated. Consequently, the non adjusted EBIT margin for the quarter increased to 5.8% from 4.2% last year. The next slide, please. Cash development. So we ended the quarter with net working capital of NOK 1,300,000,000.0, corresponding to 15.5% of revenue.

And this is to be compared to 12.2% last year. The increase was mainly related to a decline in accounts payables, which was primarily due to reduced inbound deliveries during the second quarter. Inbound deliveries are anticipated to pick up during Q3 ahead of the autumnwinter season. Inventories, they are on par with last year, but significantly down compared to the last couple of quarters, supported by the ongoing clearance sales on Brucelet. OpEx was slightly down compared with last year, which up million euros the quarter versus €48,000,000 last year.

The decline was mainly related to intangible investments. Investments in tangible assets was at €12,000,000 and among other things relates to investments at the fulfillment center for a new semiautomatic system for garments on hangars, which will increase productivity even further. Free cash flow in the quarter was million compared to DKK90 million last year. The improved cash flow was mainly due to the effective inventory clearance during the quarter as well as more cautious buying behavior given the difficult trading conditions. Furthermore, cash flow was positively impacted by the repayment of customs duties, which were incorrectly paid in Norway in 2022 to 2024.

These two factors were partially offset by a decline in our accounts payable. Our net cash position was DKK 75,000,000 at the end of the quarter, down from SEK $297,000,000 last year. And our cash position continues to be impacted by our share buyback program. In the last twelve months, we repurchased own shares for SEK $292,000,000. So this ends the financial overview.

So back to you, Herman.

Hermann Haraldsen, CEO: Thank you, Sandra. Yes, our performance is changing. Our guidance in April has been broadly in line with our expectations. We were clear then that we did not foresee trading improvement until the second half of the year. Although June saw a significant improvement, this was preceded by a weaker than expected May.

Looking forward, with sales now returning to growth, we remain confident in our current guidance for the full year. So the guidance remains unchanged with 0% to 6% growth revenue growth and an adjusted EBIT margin of 4.5% to 5.5%. This indicates that we need to achieve between 011% growth in the second half of the year. While this is a broad range, it also illustrates the continued uncertainties we are facing. Additionally, of course, it’s worth noting that the for the second half of the year are higher what we faced in the first half of the year.

Currency remains a headwind. However, with a slightly weaker SEK, the top line headwind is now down to 2% from 3% in April. The margin headwind is slightly lower as well, also up to around one percentage point. Our capital expenditure guidance also remains the same with 150,000,000 to 170,000,000 to be spent in 2025. One thing to mention though though is that we are slightly postponing our capacity expansion plans.

This is partly due to significant improvements in operational efficiency and better than expected utilization of our existing capacity, but of course also a result of the lower than expected growth we’ve seen since communicating the plan in April. This means that you should not expect us to spend around DKK 500,000,000 from 2025 to 2027, but rather that these investments will be deferred by one to two years. Finally, as mentioned initially, we are now being a bit more firm on our cash flow, driven mostly by the positive development in our inventory position and supported by the clearance on BOOSTED, we now expect to generate a free cash flow of at least SEK 500,000,000 in 2025. This compares to around showing a significant improvement. So yes, this concludes the presentation.

And I would like to hand over to the operator for questions,

Conference Operator: The next question comes from Nicholas from Eckman. Please go ahead.

Nicholas, Analyst, Eckman: Thank you. Can I start with a question here on current trading? And I know you don’t usually comment on this, but given the huge variations we’ve seen here in April, May and then June, it’s just difficult to see what which of these were a one off. Can you say anything about the start of q three, whether we should look at June or if we maybe should look at the entire q two as as an indication? That’s my first question.

Yeah.

Hermann Haraldsen, CEO: Yeah. Good morning, Nicholas. Yeah. It’s a good question. Yeah.

As you said, normally, we don’t provide the current trading. And and also, you know, July and August are kind of a leftover from from the spring summer sales. But I can tell you that that we’re back to growth even though it’s a modest growth, but we’re back to growth. And, of course, it’s supporting the guidance for the second half.

Nicholas, Analyst, Eckman: Very good. Thank you. And the guidance here, as you said, it’s also a pretty wide range. And if I just look at sales in H1, it does seem that the at least the upper end of that guidance is more optimistic, and it seems to be pointing more towards the lower end of your guidance and then a little bit the same on margins if you adjust for import duties. Is that do you share that view, or or is it the easy comps that that make you more optimistic about the possibility of reaching the mid to high end?

Hermann Haraldsen, CEO: It’s I think it’s a combination of of of easy comps, better stock alignment, and and probably a more optimism that we see going forward as a revenue size. On the cost side, we’re actually very, very well in control of the cost. So I think the midpoint is a good bet, but definitely not the lower point of the guidance on EBIT.

Nicholas, Analyst, Eckman: Very clear. And just to clarify as well, because last year’s earnings were, of course, impacted by these import duties, the Norwegian import duties. Can you confirm that your underlying margin in Q2 was in the range of 5.6%? And also, I think that in Q3, your margin was should have been around one percentage point higher, around 4.3%. Am I getting the math right on that?

Hermann Haraldsen, CEO: So you’re referring to the last year’s margin. Right?

Sandra Gad, CFO: Yeah. We don’t really get your question. Can you elaborate where

Nicholas, Analyst, Eckman: I’m looking at the underlying margin if you adjust for Norwegian import duties, which you did pay in q one to q three, and then they were kind of repaid in q four. So the underlying margin was that 5.6% in q two and around 4.3% in q three.

Sandra Gad, CFO: Well, we have a tailwind. If we look at this quarter, we have a tailwind from the customs of 0.7 percentage points. And full year, it’s around 0.5 ish, something like that.

Nicholas, Analyst, Eckman: And for q three, was the margin would have been around one percentage point higher excluding these import duties. Is that correct?

Sandra Gad, CFO: That sounds a bit much, but I don’t remember q three number from last year right now. But

Nicholas, Analyst, Eckman: No. Let’s Maybe maybe we can come back on that.

Sandra Gad, CFO: Maybe we can come back on that. That’s no problem.

Nicholas, Analyst, Eckman: Yeah. Okay. Fine final question to you, Sander. How how much longer are you staying? And and and, also, I’d like to take opportunity to thank you for your contribution over all these years.

Sandra Gad, CFO: Oh, thank you. That’s very nice of you. Well, actually, I’m I’m gonna have a few days off here, but that today is my last day at the office.

Nicholas, Analyst, Eckman: I’m sorry. I was breaking up here a little bit. But

Sandra Gad, CFO: Oh, sorry.

Nicholas, Analyst, Eckman: Thank thank you so much. Yeah. Thank you so much for taking my questions.

Hermann Haraldsen, CEO: The

Conference Operator: next question comes from Benjamin Wallstadt from ABGSC. Please go ahead.

Benjamin Wallstadt, Analyst, ABGSC: Good morning. First of all, was wondering about your guidance. As you point out in the presentation as well, since the Q1 report FX rates have sort of been moving your way again. And I was wondering how and if this was taken into account when deciding on the guidance commentary in this report? Or if it was taken into account when deciding on whether or not to change the guidance in this report?

Sandra Gad, CFO: Well, we think that’s too early to say, obviously, but we’re we think that when we provided the guidance, change that room, like, covers it. But obviously, if it continues down, then we will be more specific in Q3. But for now, we keep it as it is.

Benjamin Wallstadt, Analyst, ABGSC: Perfect. I was also wondering about the ongoing, perhaps, inventory clearances. In the beginning of the year, you noted that you expected an H1 inventory clearance through Boostlet. We’ve seen signs in reported figures. And I was wondering if you could give us any additional flavor on the quality of the current inventory.

And what are your sort of your thoughts about the need for further clearances into Q3, please?

Hermann Haraldsen, CEO: As you see, our inventory now is in line with last year. So we actually have been managed to clear that. Inventory position is actually quite good. We still are a bit spring summer on on Boostlet, and we’ll continue to do that. But but, of course, the focus now is to have have the right inventory on on on boostlet.

And as as we said right in the report is that, especially, the women’s category has been has been muted less stresses, and and that has been corrected for the fall. So I think that we have already now and within deliveries that are coming into the warehouse, we have a quite good inventory position. We are at least now, we no longer have too much inventory.

Daniel Schmidt, Analyst, Danske: No longer have too

Benjamin Wallstadt, Analyst, ABGSC: much inventory. Promising. Final question from me. You have changed your commentary around expected admin ratio savings from the headcount reduction to now be 50 basis points as opposed to 30 basis Could you talk a bit more about this decision, please?

Hermann Haraldsen, CEO: Yeah. We can just see the effect of of our savings. And and when you do restructurings, you, of course you know, some of it is redundancies. Some of it where you need to kind of replace people with with with with some kind of other types of people or other levels. But we’ve seen that then it’s less than expected.

So so so the effects of our rightsizing have been higher than expected and which is quite encouraging because our our operation costs are very much in control. And and we believe that we are kind of quite a good fit company.

Benjamin Wallstadt, Analyst, ABGSC: Perfect. That’s all I had for now. Thank you.

Hermann Haraldsen, CEO: Okay. No. Thanks very much. The

Conference Operator: next question comes from Daniel Schmidt from Danske. Please go ahead.

Daniel Schmidt, Analyst, Danske: Yes. Good morning, guys. A couple of questions from me. And I think you answered most of them already, but I think you, Sandra, pointed to the fact that you will be less pronounced going forward when it comes to offline marketing and non fashion categories for the second half of this year. Is that going to be neutralized by increased marketing when it comes to fashion related items?

Or how should we view that statement?

Hermann Haraldsen, CEO: Marketing cost ratio was too high in the quarter. So so the business is still 10% and below for kind of long term, and and the market cost ratio of 11.5% was was was too high and was due to our our marketing campaign. And part of it, of course, you know, it ran in May, which where where consumers were holding back, and partly was basically our our concept was not good enough. So so so we we are back on the drawing board. And, of course, you know, our plan is still to increase the awareness of the category categories, which because we believe it is very strong.

And I think the best proof of the category is now how the contributors that are basket size has actually got slightly up in an environment where item part price and fashion has gone down, clearance and bootlegs. So, actually, you know, so this only encourages us to to focus in more than kind of forgetting the women’s because it’s still the women that are driving the purchases in other categories. And if women come into the site to shop for themselves, they typically add to a basket of other categories. So a long answer, Daniel, to a Sorry. Yeah.

Daniel Schmidt, Analyst, Danske: Yeah. I think I heard you breaking up a little bit actually during the call, so maybe I missed some of it. But did you say that you aim to get to rather a 10% ratio for the full year on marketing? Is that what you said?

Hermann Haraldsen, CEO: Not for the full year, but but kind of normally, we aim for 10%, and and 11.5% is too high. So, obviously, now it should be it should be low considerably lower than it was in the quarter in the first half. Okay.

Daniel Schmidt, Analyst, Danske: Okay. Did I hear you correctly? Okay. And then you did update the savings ratio, the savings amount when it comes to the staff cuts and you upped it. What do you see in fulfillment, which was quite sort of a significant improvement in Q2?

Is there any sort of is there anything to say about that for the second half? Is that surprising you on the upside? Or is that more in line with what you’ve been guiding for?

Hermann Haraldsen, CEO: Fulfillment is really, really delivering as we had hoped for. Our investments in automation and consolidation have really, really paid off. As you know, we’ve been focusing on kind of improvement in fulfillment basically since 2019 and very much so. I think it’s paying off. We are moving in the right direction.

The aim is still to get improvements in fulfillment cost ratio also in distribution, but I think that kind of I’m not guiding for the second half of improvement, but I think that we’re on a really good track and are very much in control of our supply chain. But, of course, when growth is is weaker, it’s easier to kind of calibrate. So that’s why I kind of we use this kind of a slight growth post to to to make sure that everything works in the warehouse, which it does.

Johan Fred, Analyst, SEB: Okay.

Daniel Schmidt, Analyst, Danske: My interpretation is that you’re happy, but it’s a bit too early to say that this is going to have a significantly higher impact than what you already have guided for. But so far, so good at least.

Hermann Haraldsen, CEO: Far, so good. Yes. Yep.

Daniel Schmidt, Analyst, Danske: Alright. I think sort of just also maybe just coming back to the inventory clearance. And you said that you didn’t have any more excess inventory, but you also said that you are still maybe it sounded like you were a bit aggressive in July and August, but to get to a position where you need don’t need to be more aggressive anymore as you get into the August or back to school or whatever. Is that the right interpretation?

Hermann Haraldsen, CEO: Yes. We came into the year with too high prior season inventory, and that has been cleared. So which is good. Obviously, sales in Q2 were less than expected. So for the springsummer inventories, they might they would be slightly elevated, and we will continue to to clear that on on boosted.

But other other than that, so there’s no noise from old inventory. So we can focus on the autumn winter twenty five, which is a very good thing for a retailer that that you then don’t have a mountain of of inventory behind you. So and that’s why it’s quite it’s actually quite encouraged to see that our inventory now is on par with last year, same period last year. We are quite happy with the inventory position, which is also why we can guide a cash conversion that is as high as it is.

Daniel Schmidt, Analyst, Danske: Okay. Good. Thank you. That’s all for me and Sandro again. Wish you good luck in your new position.

That’s going to work out great, I think. And thanks for all the collaborations that we’ve had, and talk to you in the coming quarter, Herman.

Hermann Haraldsen, CEO: Thank you, Daniel.

Conference Operator: The next question comes from Johan Fred from SEB. Please go ahead.

Johan Fred, Analyst, SEB: Good morning, guys. Johan Fred here from SEB. Thank you for taking my questions. I just have a few follow ups from the on the previous quarter. Firstly, on on Nicolas’ question on on current trading.

You mentioned that April and May were soft, but trading improved in June, with growth returning across most categories except women’s fashion. Do you mind elaborating just a little bit on what drove the recovery in June? Was this weather driven? And what’s the improvement widespread throughout all regions? Any color there would be much appreciated.

Thank you.

Hermann Haraldsen, CEO: Yeah. Yeah. Of course, weather contributed a lot to the recovery in June because May was was was quite cold. Also, we we saw also that that consumer confidence across the region seems to be going up. So so even though women were still were buying less than than we would have expected, they also were kind of increasing the buy.

So it was a a combination of of of consumer confidence and and whether we believe. Of course, going into the third quarter, we don’t see a double digit growth again, but we are still seeing a modest growth, but still a growth, which is why we are confident that we can deliver on the guidance for the second half.

Johan Fred, Analyst, SEB: Thank you. And any difference between the different regions or geographies?

Hermann Haraldsen, CEO: Denmark is still kind of holding back, being probably more depressed than other Nordic countries. Sweden is actually doing quite quite well. And we’re happy with that. And and and Finland is also slightly lacking. So it’s it’s kind of yeah.

It’s it’s it’s it’s going in in waves, but we can see that in general, it’s consumer confidence seems to be picking up, which which gives us confidence that that we might be getting out of this low consumer confidence stump if we’ve been in for a while.

Johan Fred, Analyst, SEB: Got it. Very clear. Thank you. And the second one, if I may, on marketing spend. You state that marketing to sales ratio in H2 will be considerably lower than in H1.

Any chance that you could quantify the decrease in H2, I. E, how big of a step down can we expect?

Hermann Haraldsen, CEO: It will be low. I I don’t wanna quantify kind of how much will be lower. And, of course, you know, the the the category offline marketing has been put on hold, and and the increase compared to last year of of 0.7 percentage points was only due to our our offline marketing that we did for the categories, etcetera. So so it will be lower. But, of course, you know, we are still building the brand.

And and and if we see opportunities and we still are seeing a good profitability, we might still do some marketing, but we will just spend what is needed to deliver on what we are expecting for the second half. So I don’t want to kind of quantify that it would be an x or y amount, but it will be lower than in the first half.

Johan Fred, Analyst, SEB: I hear you. I hear you. Thank you so much for taking the time and answering my questions.

Hermann Haraldsen, CEO: Oh, thank you. Welcome.

Conference Operator: The next question comes from Eric Sandstedt from Kepler Cheuvreux. Please go ahead.

Eric Sandstedt, Analyst, Kepler Cheuvreux: Thanks. Hi. Two questions on the market environment In terms of competition, have you seen any changes from the ultra fast fashion players during the quarter? I think

Hermann Haraldsen, CEO: it’s as intense it has been as it has over the last year or two. We’ve seen some numbers lately from Denmark say seeing that some of these ultra fast fashion players are losing ground, mainly Chinese. But we’re not seeing a more intense competition of of course, if if the decline, especially in women’s dresses, is because they are buying cheaper and more kind of Instagram or TikTok friendly dresses. But we don’t really see a more intense competition. I believe that it’s to a high degree kind of driven by consumers holding back, which also kind of which which is supported by the numbers of, you know, the credit card use from the banks that are showing that that the spend on clothing and shoes in The Nordics has been down in the second quarter.

Eric Sandstedt, Analyst, Kepler Cheuvreux: Okay. Thanks. Great. And also in terms of inventory levels on the market overall, so to speak, in The Nordics, Do you sense that inventory levels are starting to normalize also for other retailers, or is it still sort of excess inventory out there that has to be cleared, also putting pressure on you?

Hermann Haraldsen, CEO: Yeah. A lot of inventory has been cleared during the first half. My impression is that retailers have probably been going more cautiously into the second half. So I’m not anticipating that there will be a kind of gross margin pressure due to inventory in the second half. I think that kind of we are all we’re not expecting a worse consumer environment.

And and, of course, all hoping for that that it will improve, and maybe the talks in Alaska might change something for the better. So but but we’re not we’re not assuming it will be worse. And and if anything, there are signs that consumers are becoming more optimistic for a good reason, actually. So

Eric Sandstedt, Analyst, Kepler Cheuvreux: Yeah. Thanks. And then in terms of your buying costs, do you get any benefit at all from the fact that the dollar, the US dollar has been weak versus the Nordic currencies sort of versus the same period last year. I guess you don’t buy a lot directly into in into US dollar terms, but indirectly, do you see any deflationary trends there in terms of sourcing costs?

Hermann Haraldsen, CEO: We don’t buy anything directly. So anything from The US, and and so we are a third party retailer. So we buy from from the brands. And, typically, now, for instance, we have been buying for the springsummer twenty six season. We don’t benefit directly from of the dollars.

So so so we’re not seeing kind of any advantage. Of course, you know, if if this will continue, of course, you know, that might give an advantage as as as the branch might be more inclined to to give you better prices or or something like something like that. But but we don’t kind of we don’t see the the immediate effects. I think we’re more much more affected by increases in freight costs, etcetera, because that’s kind of a direct cost, and the fact is quite a lot. So so but we don’t we have have not seen any any real changes in in in our based on the fluctuations in the US dollars.

And then also the other way, you know, if they would come and say, you know, the dollar is up, we say, yeah, but it’s kind of that’s your problem. Right? So so so that’s why, you know, it’s it’s it’s I think, it’s a more long term thing. If if it’s a if it’s a structural thing, of and then then, of course, that dynamics will will change.

Eric Sandstedt, Analyst, Kepler Cheuvreux: Yeah. No. Thanks for clarifying. And then just finally, I know this is is a difficult one, but relating to the share based payments, as you mentioned, it was actually a positive one off for a change here. Any I mean, could you could you say anything about how how to think about this line?

Hermann Haraldsen, CEO: Yeah. I think I think the the share based payment, of course, is it shows that the program works. If we don’t deliver on on growth and long term profitability, the share based payment basically goes away. So so so this is just a reflection of of of a payout. And and then there are social costs associated with with the with with the payments.

And when the share price goes down, then, of course, the costs are lower. But but this big amount just reflects that the likelihood would, of course, targets set out in in ’22 and ’23 and ’24, they are kind of it’s just much lower. So I think this I think, actually, it’s it’s a proof that it actually works, the the share based payment program. So we only get share based payment if we deliver targets.

Conference Operator: The next question comes from Benjamin Wallstadt from ABGSC. Please go ahead.

Benjamin Wallstadt, Analyst, ABGSC: Hello again. Quick follow-up on Johan’s question. The line was breaking up a little bit. Did you say the reason for the higher marketing ratio year on year was fully due to the now post offline marketing, please?

Daniel Schmidt, Analyst, Danske: Sorry. I did not Oh, yeah. Yeah.

Benjamin Wallstadt, Analyst, ABGSC: Break out again. Did

Hermann Haraldsen, CEO: Okay. The answer is yes.

Benjamin Wallstadt, Analyst, ABGSC: Perfect. Perfect. Thank you very much.

Conference Operator: There are no more questions at this time. So I hand the conference back to the speakers for any closing comments.

Hermann Haraldsen, CEO: Look for participating in our Q2 call for this quarter. Thank you for good questions. And also, this is Sandro’s last day, and I also would like to thank Sandro, and thank you guys for being a very good aspiring partner to Sandro and myself during the last many years. Thank you very much, and I guess I’ll see you in the in the coming weeks. Thank you.

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