Earnings call transcript: Musti Group reports strong Q2 2025 growth, stock rises

Musti Group delivered solid financial results in Q2 2025, showcasing a 17% increase in total sales and a marginal improvement in its gross margin. These positive outcomes have contributed to a 1.49% rise in the company’s stock price, reflecting investor confidence in its growth trajectory. According to InvestingPro data, the company maintains a healthy gross profit margin of 43.28% and shows promising growth potential, with analysts expecting net income growth this year. The company’s strategic expansion in the Baltics and focus on operational efficiency are key drivers behind its robust performance.

Key Takeaways

• Musti Group’s total sales grew by 17% year-over-year.
• The company’s gross margin improved to 43.8%.
• Operating cash flow turned positive, reaching 11.4 million SEK.
• Expansion efforts in the Baltics and increased online sales contributed to growth.
• Stock price increased by 1.49% following the earnings announcement.

Company Performance

Musti Group has demonstrated strong performance in the second quarter of 2025, with significant growth in total sales and an improvement in its gross margin. The company has successfully expanded its footprint in the Baltics through the acquisition of PetCity, and its focus on exclusive product sales has bolstered its market position. Despite slower growth in Sweden, the company has made notable gains in Norway and Finland, where growth rates reached 12% and 8%, respectively.

Financial Highlights

• Revenue: 121.7 million SEK, a 17% increase year-over-year.
• Gross margin: 43.8%, up from 43.3% last year.
• Adjusted EBITDA: 12.9 million SEK, slightly up from 12.5 million SEK.
• Operating cash flow: 11.4 million SEK, compared to a negative flow of 3.3 million SEK last year.

Market Reaction

Following the announcement of its Q2 2025 results, Musti Group’s stock price rose by 1.49%, reflecting positive investor sentiment. Trading at 24.08 USD, the stock currently sits near its 52-week low of 22.46 USD, potentially presenting an opportunity for investors. InvestingPro analysis indicates the stock generally trades with low price volatility, with a beta of 0.74. The market’s positive reaction is likely driven by the company’s robust sales growth and strategic expansion initiatives, supported by analyst consensus recommendations.

Outlook & Guidance

Musti Group’s strategy focuses on expanding its store presence, enhancing its online platform, and growing its veterinary clinics and spas. The company is also considering geographical expansion into markets such as Portugal and Spain. With a goal to replicate Finland’s performance levels in other markets, Musti aims to continue its growth trajectory while improving operational efficiency. The company’s Financial Health Score from InvestingPro is rated as "FAIR," with particularly strong scores in cash flow management (2.29) and profitability (2.2), suggesting solid fundamentals to support its expansion plans.

Executive Commentary

• "We are growing much faster than everyone else in our countries," stated David, highlighting the company’s competitive edge in the Nordic region.
• "We need to now really switch focus on to profitable growth," added Robert, emphasizing the shift towards sustainable financial performance.
• "The most important for us is that the next acquisition is a really good one," David noted, indicating the company’s strategic approach to expansion.

Risks and Challenges

• Slower growth in Sweden compared to other Nordic markets could impact overall performance.
• Integration challenges with new acquisitions, such as PetCity, may arise.
• The competitive market environment, with growth estimated at only 2-4%, could pose challenges.
• Potential supply chain disruptions could affect product availability and sales.
• Economic uncertainties in target expansion markets like Portugal and Spain.

Q&A

During the earnings call, analysts inquired about the differences in market dynamics across countries and the company’s strategy for future geographical expansion. Musti Group’s leadership provided insights into stable input costs and detailed their approach to growing their spa and veterinary clinic operations.

Full transcript - Musti Group (MUSTI) Q2 2025:

David, Senior Executive/CEO: Hi, everyone. So we’re waiting for just exactly the presentation. So, yeah, let’s let’s start. So here today, me and Robert, as always, presenting the half year report second quarter. So you can let’s start with the first slide, Robert.

So we just want to set the scene a bit where we are now. So as we know, we are the kind of the only pan Nordic omnichannel player. And I think it’s evident now that we are growing quite fast, but we saw in the numbers that we’ll also go through. But so currently, we have four zero three stores, 30 vet clinics, 149 spas, and 23% of the sales is online. And the latest of the companies that has been coming in and the new geographical areas, as we know, is Baltics with PetCity.

But with that, we’re also, of course, growing heavily in the other three markets: Sweden, Norway and Finland. So going fast, taking market share, and I think that maybe is the key thing that we want to comment during this quarter. So if we move to the next slide, we can look a bit more into the details. And as I said, fantastic growth. So 17% growth.

Last year, was 0.7%. This is including Baltics. So if you exclude the Baltics, it’s 8.5% growth. So all three countries are performing well. Sweden, a bit slower, but anyhow, good gross margin.

When we look at the three countries separately, you can see that Finland had 8% growth versus last year, minus seven Sweden, 1% growth versus last year, minus one But with that said, I would like to point out that we had a better gross margin. And Norway, a stunning 12% versus last year, 6%. So all the countries is performing really well. And also interesting to see that online like for like sales, 4.9% versus last year’s 6.6%. So the stores is actually performing better at this point than online from a growth perspective.

So really, really positive. It’s evident that we are gaining market share, taking market share. And also, when we look at the growth in the market, which we believe is around 2% to 4%, and the data that we are having, it’s evident that we are absolutely taking market share. And with a gross margin, that also means increasing. So we took some bold decisions a couple of quarters ago, where we did some extra investments in price, campaigning, marketing and so on, so we could get the growth back.

And, and now it’s, obvious that that is bearing fruit. But in this quarter, we have been approving our gross margin, so 43.8% versus last year, 43.843.3%. But also, we are able to increase our own, an exclusive product share of sales versus last year. So we are taking down, campaign pressure a bit, and we are also able to increase the share of sales on our own brands. So really, really positive on that part.

And when you look at the numbers here on new customers, it’s not including Baltics. So when you add the Baltics, it’s, of course, much better numbers, but we don’t have the data fully yet because it’s not 100% integrated. Operating cash flow, 11,400,000.0 versus last year, three point minus 3,300,000 is also a very positive number. If it’s one thing that we want to point out want to do better is, of course, the adjusted profitability EBITDA. So 12.9% versus last year, 12.5% here.

We know that we can do better, and we have also taken some investments in the quarter for the further growth further down the road. So there are investments here that is impacting. But anyhow, we need to be able to get more out of the machine, which we are confident that we are going to, going forward. So I think, overall, very, very positive quarter. The most important thing is that we are growing much faster than everyone else, which we’re doing in countries.

So with that, I hand over to Robert to go through the details a bit more.

Robert, CFO/Senior Executive: Thanks, David. So starting with sales. As David said, 70% growth now up to a 121,700,000, driven by all markets. Very happy to see that we actually, throughout the the kind of a group, are are growing. And and that’s basically now the first really strong quarter after after kind of waiting to see kind of the the better better kind of a light in the tunnel.

And and and now we really see that that the investments that we have have made during the last quarter really start to bear fruit. Year to date sales is now 241,700,000.0 corresponding to a growth of 14.3%. And and our last twelve months sales is now 475,000,000, getting closer to 1 a half of a billion now. So very happy with the with the, growth overall. I’ll going to the segments then later.

Gross margin also increased. It actually was driven by by mainly kind of a pro favorable, sales mix. Our own niche share increased. Also, we sold the integrate the kind of discretionary product sales increase, which have a better gross margin. We also comparing to the same quarter last year, we had actually kind of now more efficient campaigning even though we pushed pushed on on on growth.

And these were they’re they’re contributing positively to this impact. Some small effects positive as well. However, of course, we still are not not on the same level that’s where we were in 2223. So we have still a lot to do also on on the gross margin side. And then group adjusted EBITDA increased now to 12,900,000.0 from 12 point two, slight improvement.

Of course, when we have growth, we are able to kind of also kind of utilize the scalability we we have in the group, but also now we have made investments, taking in cost that are kind of a for taking in for building the the kind of a future growth and also making sure that we are we are kind of take taking market share on a long term basis, and these are are then impacting the negative to the profitability. FX didn’t have any significant impact on the adjusted EBITDA level. So, yeah. And now the year to date, the adjusted EBITDA is 25,700,000.0. Then moving into the segments, starting with Finland.

Finland sales increased by 6% to SEK 47,700,000.0. Actually, our like for like growth was higher, 8.4. Total growth was lower due to the fact that we closed a couple of stores during the quarter. And so so here, I mean, in in the market where we are have the highest market share, we are very happy to be able to actually increase like for like sales by 8.4%. So so very strong strong situation.

I’m happy to see also that it’s, to a large extent, driven by the stores. Then adjusted EBITDA also slightly increased. But as David already said, here, we have much more to do. We need to now we are focused on growth. We need to now really switch focus on to profitable growth to make sure that we we can increase our efficiency.

And we have a a number of of things where we see that we can we can kind of increase efficiency in the group, which which then, of course, will be a focus point going forward. Yes. Then Sweden, here, sales increased by 7.8% up to 45.4, partly driven by FX, partly driven by by the fact that we have have opened newly opened stores that are kind of contributing more and more due to the fact that they are still in the ramp up phase, like for like increase was 0.5% in in this quarter. Also, the adjusted EBITDA increased here from 7,000,000 to 7,400,000.0, driven by the fact that we actually, in Sweden, had a had profitable better gross margin and then then kind of a on top of that, the sales growth actually contributed through the scalability. In the store network, one a third party store was acquired and three directly opens the operator store were were kind of opened during the quarter.

And then Norway Norway continued to to show a very strong momentum. Sales now growth now actually increased up to 16.9%, which was mainly driven by a a huge a very strong kind of a like for like sales of 12.3% and then then then the kind of opening of of new stores. And actually here, the FX, rate didn’t have any significant impact, in fact, slightly negative impact. Also, EBITDA increased from 3,800,000.0 to 4,600,000.0 driven by the strong growth. We had actually some operating leverage in the scalability in the store network and then stable gross margin.

And here, we opened three directly operated stores during the quarter. And then finally, new markets, which consist of the Petcity business that we acquired in late last year. Sales in the quarter increased compared to pre to to q one to the previous quarter, now was 8,800,000. And and also the profitability adjusted EBITDA level increased from 0.5 to 0.8 in this quarter. However, it’s important to understand that this acquisition is still in the integration phase.

We are progressing good in that and according to plan, but still we have some some parts left to to finalize that then. And once we have done that, we then will will focus more on increasing market share and and and developing the store network. Then moving on to financial position. Cash flow from operations, landed at 11,400,000.0. Last year, was actually minus 3,300,000.0 but that was impacted hugely by nonrecurring items.

This year, they were clearly lower. Also, last year, we had a negative net working capital movement. Now this year, that was more or less stable, which meant that a higher impact of the EBITDA actually flow through to the cash flow. Net debt amounted to 196,000,000, consisting of 112,000,000 interesting bearing loans and commercial papers and 95,000,000 leasing liabilities, ending up with a leverage of 3.3. Also, the cash and and and liquidity situation was was stable and and on a healthy level during the quarter.

Now at the end of the quarter, we are on a level of 11.8, which was the same as at the end of the financial last financial year. Investments increased from 3.7 to 5,900,000.0 driven by the the kind of investments we make now into into kind of a scalability and future growth. So that was it. Then I hand over to David for the conclusions.

David, Senior Executive/CEO: Thank you, Robert. So I think when we look at the report overall, as I said earlier, growth, very, very strong, including Baltics. Excluding Baltics, also very strong. Norway, Finland, from a growth perspective, performing the best Sweden, also positive growth, but a bit weaker. But we in Sweden, we’ve been focusing more on the gross margin.

All three countries taking market share, so extremely happy with that. We’re also able to increase the gross margin, which means that we’re not diluting the business. We’re actually selling with higher gross margin driven through the things that we talked about earlier. Proofability increased 3.9%, but we have taken investments for for further growth. So we we believe that we can get more out of it.

And now it’s all about integrating Baltics and continuing the strategy, which is then opening more stores, push more online, get more of the spas and the vet clinics in all countries and then look at the opportunity for more geographical expansion. So we are happy with the position that we’re having. It feels like the things and the decisions that we’ve done is bearing fruit. So the team and myself, Robert and everyone is, of course, extremely happy within the being in the situation now to have this strong growth. So with that, I think we can hand over to Q and A.

Moderator: Yes. Please raise your hand if you have a question to David or Robert. I think Alexander Stemma. Please go ahead.

Alexander Stemma, Analyst: Hi. Thanks for taking your question. Actually, it’s regarding the difference in market dynamics between Sweden, Finland, and Norway. So Finland and Norway, you’ve got very strong organic growth. Sweden, you said you were focusing a bit more on gross margins.

In all countries, you’re winning market share. So does it mean that the you’re winning more market share in Norway and Finland? Does it mean that the Swedish market is a bit slower? How do you explain the difference in growth? And going forward, do you see a convergence or a structural difference?

David, Senior Executive/CEO: Yes. So we see that Sweden is a bit slower overall, we would say. All the market data that we’re getting is that Sweden is not ramping up as fast as the other countries. So the consumption is still a bit slower in Sweden. On top of that, last year, we had quite heavy campaigns that we now are meeting.

So we are reducing the campaign pressure and focusing a bit more on profitable growth in in Sweden. When you look at Norway and Finland, you have more the market that is growing a bit faster, but also that we are growing faster. So, you will say that, we believe that Sweden will come back, but we’re not fully there yet.

Alexander Stemma, Analyst: And the second question I had was good growth. I mean, the growth accelerating, gross margin is there. EBITDA margin, not so much or not not yet. And you you spoke about scalability going forward. So how should we think about it, about the margin back country, and when do we see the leverage back again?

David, Senior Executive/CEO: I think the what we’ve what we’ve already always communicated is that we we use Finland as a yardstick. The strategy is to get Sweden and Norway and all the other countries that we take the market one position in is to take it to Finland levels. But there is obviously a lot of drivers behind it. And you can say that Norway are closer than Sweden. But in the end, we believe that everyone has the possibility to reach the Finland numbers.

Maria, Analyst/Investor: Okay. Thank you.

Moderator: Anyone else questions? Seems like we’re done then.

David, Senior Executive/CEO: Okay. Thank you, everyone. Oh, Maria, I have a question. Yes?

Maria, Analyst/Investor: Yes. Long time.

David, Senior Executive/CEO: Long time. Yes.

Maria, Analyst/Investor: Yes. Good to see you. And just a bit curious on on the in input costs. So how do you see currently input costs of the products that you are sourcing as well if you think about, I mean, your own food production that I mean, is there any any changes in the input cost that you are seeing at the moment?

David, Senior Executive/CEO: Yeah. Maybe, Robert, if you wanna

Robert, CFO/Senior Executive: Yeah. So not no kind of a significant changes at the moment. It’s actually quite stable situation. The only place where we see have seen kind of a bit higher cost is actually distribution costs. And and that that’s something we are working on both on a kind of a the kind of a long haul, but also on a on a kind of a last mile part.

But as such, the kind of input concerns of the of the products that we are sourcing, they are pretty stable actually at the moment. We have also utilized a bit more the kind of a Sonae network in terms of China operations and and and China sourcing, which, of course, helps us. But but no no significant kind of changes then.

Maria, Analyst/Investor: And and then curious that, I mean, what is your current, I mean, outlook for further expansion? I mean, you have acquired the operations in the Baltics. Your balance sheet, I mean, it it looks okay, but maybe it doesn’t, in the near term, allow that much acquisitions given that net debt to EBITDA is 3.3, if I recall it right. Yeah. But can you a little bit talk about because now it it has been, I mean, time flies.

How long has it been since the Sono took made the bid? Maybe more than a year. And think knowing that, I mean, they have substantial operations in in Portugal and in that area that is there, like, something new that we should expect in in terms of the expansion?

David, Senior Executive/CEO: So I think we’re reviewing all the possibilities out there. And and, of course, we we believe that Portugal, Spain could be absolutely something that we will review, more in detail going forward. There’s also opportunity, of course, we could acquire and pay with shares if that’s also an alternative. But I think the most important for us is to the next acquisition and geographical expansion that we do is it needs to be know, a good a really good one. We’re showing, I think it’s too early now to say regarding Baltics even though they have increased profitability and growth, but the full integration is not done.

So we we need to do a bit more there before we take the next step.

Maria, Analyst/Investor: And then finally, a little bit on the strategy. I mean, on on, like, broadening the offer offering that I mean, currently, we talk about, I mean, the vet vet clinics, I mean, have you elaborated if you would be adding, I mean, new services? I I think, I mean, it it has at least in the past, it has been, I mean, this kind of a vaccination. I mean, more like a like, easy to easy pros procedures that you have been offering. So is there any view that, I mean, you wanted to expand that offering?

And then also curious about the strategy because I can’t recall that when I covered the company more in detail that you had this, I mean, 140 spas. So what what is the offering, and and what is kind of a profitability model in the in the spa business?

David, Senior Executive/CEO: So so the strategy is to open more vet clinics to so today, have about 30. We would like to have more vet clinics, but it’s no it’s no stress. So we will probably do more opening organically. Spots is more grooming, trimming, etcetera. And that’s that’s, something that has been growing steady you know, the last years.

And we have, as we said, 400 stores, so there’s a lot of space where we can have, the spas. We don’t so spas is growing really well. That connects is grow is growing really well, but we don’t see the spas as a separate p and l. It’s part of the complete offering. So when you look at the store, when you have this grooming, trimming, etcetera, we look at it as as the box total box including the store.

But but if you should look at it, it it’s profitable. But it’s more having an extra sales uplift on the total sales in the store.

Maria, Analyst/Investor: Okay. Thank you. I mean, this was helpful. I have no further questions. It’s good to see you.

David, Senior Executive/CEO: The same. The same. Okay. Thanks a lot, everyone, for listening in. Have have a great summer, and we see you soon again.

Robert, CFO/Senior Executive: Thank you. Bye.

David, Senior Executive/CEO: Thank you. Bye bye.

Maria, Analyst/Investor: Bye bye.

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