Earnings call transcript: Rugvista’s Q1 2025 revenue rises, stock jumps 15%

Rugvista Group AB reported a strong financial performance for the first quarter of 2025, with net revenue climbing 12% year-over-year to SEK 197 million. The company’s EBIT surged by 36% to SEK 27.2 million, and its EBIT margin improved to 13.8%. The market reacted positively, with Rugvista’s stock price increasing by 15.14% in pre-market trading, reflecting investor confidence in the company’s growth trajectory and strategic initiatives. According to InvestingPro data, the company has maintained a strong financial position, with more cash than debt on its balance sheet. The stock has shown impressive momentum, delivering a 50% return year-to-date, despite its relatively small market capitalization of $6.87 million.

Key Takeaways

• Rugvista’s net revenue increased by 12% year-over-year, reaching SEK 197 million.
• The EBIT rose 36%, leading to an improved EBIT margin of 13.8%.
• The company’s stock price surged by 15.14% following the earnings announcement.
• Marketing spend decreased by 29%, contributing to improved profitability.
• Orders increased by 17%, with new customer acquisition hitting an all-time high for Q1.

Company Performance

Rugvista demonstrated robust growth in the first quarter of 2025, driven by strategic shifts in product offerings and marketing approaches. The company’s focus on outdoor and handmade rugs, coupled with enhancements in its online platform, contributed to increased order volume and new customer acquisition. Despite a challenging consumer sentiment in key markets, Rugvista managed to gain market share, particularly in the DACH and Nordic regions. InvestingPro analysis reveals the company maintains a FAIR overall financial health score of 1.98, with additional insights available in the comprehensive Pro Research Report, which provides deep-dive analysis of over 1,400 stocks.

Financial Highlights

• Revenue: SEK 197 million, up 12% year-over-year
• EBIT: SEK 27.2 million, up 36% year-over-year
• EBIT Margin: 13.8%, an increase of 2.5 percentage points
• Gross Margin: 64%, up 2.4 percentage points
• Marketing Spend: Decreased by 29% compared to last year
• Orders: Increased 17% to 97,000
• New Customers: 69,000, an all-time high for Q1

Market Reaction

Rugvista’s stock price saw a significant increase of 15.14% in pre-market trading, reflecting positive investor sentiment following the earnings report. The stock’s performance is notable as it approaches its 52-week high of SEK 65.8. The market’s response underscores confidence in Rugvista’s strategic direction and its ability to manage costs effectively while driving revenue growth.

Outlook & Guidance

Looking forward, Rugvista plans to continue its investment in warehouse infrastructure, with SEK 55-60 million allocated for this purpose. The company is preparing for a major warehouse move in early June, which is expected to enhance operational efficiency. Additionally, Rugvista is entering a lower season to build inventory for the high season, with a planned dividend payment in Q2.

Executive Commentary

Eva Jungrud, an executive at Rugvista, expressed optimism about the company’s market position, stating, "We think we are probably gaining a little bit of market share." The company is also making strategic choices in its marketing mix, as highlighted by Jungrud: "We see effect from that we are changing our marketing mix." Joakim noted the company’s approach to inventory management, saying, "We are making conscious choices to do some clearance sales."

Risks and Challenges

• Consumer sentiment is decreasing in key markets like Sweden and Germany, which could impact future sales.
• The company faces potential challenges in executing its warehouse move and implementing automated processes.
• Currency fluctuations and purchasing strategies could affect profitability.
• Market performance varies across regions, with a decline in France posing a risk.
• The expansion of the essential product range requires careful management to avoid margin pressures.

Q&A

During the earnings call, analysts inquired about Rugvista’s strategies for stabilizing the average order value (AOV) and the rationale behind the reduction in marketing spend. Executives also addressed developments in the outdoor rug market and discussed currency and purchasing strategies, providing insights into how these factors are managed to sustain growth.

Full transcript - Rugvista Group AB (RUG) Q1 2025:

Eva Jungrud, Company Executive/Presenter: Hi, everyone. Welcome to this first quarter earnings call. With me, Eva Jungrud, and you, Joakim. How are you this morning?

Joakim, Financial Executive: I’m great. I’m feeling good. Thank you.

Eva Jungrud, Company Executive/Presenter: Good. We will do this the way we normally do it. Starts with a bit of a business update that I will run through, then Joakim will focus on the financials, and then we will have a q and a in the end. I would also like to point out that the images in the presentation that you will see are from various campaigns that we’ve released during the quarter. Most of them are actually from our outdoors campaign for rugs that work both outdoors and indoors.

But we have also started playing around quite a bit with AI and to AI generate the images. So there are one or maybe two in there. So feel free to guess which ones when you when we go through the the report. So if we start with the business update, we think we have had a very strong beginning to the year. Super happy with that.

Top line came in at one hundred and ninety seven million, so that’s an increase of almost twelve percent. And apart from one of the COVID q ones, it’s actually the best q one result we’ve had, so that’s very nice. January did start a bit on the slow side, and then the quarter picked up. I think it’s fair to point out that the comparables in March are a bit skewed because Easter was in March, which is normally not the best sales period for us, but still very happy with the top line. And then if we move over to the orders, they increased by a little bit more than 17% compared to last year to almost 97,000 from 82.

And here you can see the or the quarterly order development. And the the top one is quarter by quarter, and the bottom one is rolling 12 on a quarter level, so to speak. So it’s it’s you can see that this is not news to the those of you who followed us for a while, but we are growing quite consistently on orders over time, which, of course, we’re very happy with. Customers also grew 90 oh, sorry, 69,000 compared to 60,000 last year. And actually, both orders and new customers were an all time high for the first quarter in the year, so so also strong numbers.

And then you’ve heard me talk a lot about average order value. We came in almost flat year on year oh, sorry, not year on year, quarter on quarter and down 3% year on year. Here, you can see the development over time. And what we have done is we’ve done a lot of changes on the sites during during the quarter to mitigate the the drop that we’ve seen previously, and we’ve also consistently really worked with how we plan our campaigns. I I think I we will continue to work with this, but I think it’s important to point out that this will shift quarter to quarter because it does depend a lot on what we do and how we plan both discounts and how we plan campaigns and what types of rugs we have in the campaigns, etcetera.

Then if we move over to the profitability, we had a gross margin of 64%, which is higher than normal, and it comes from stronger fundamentals, really. We had a decreased marketing spend 29% compared to 30.5 last year. In q four last year, it was almost 33%. And, again, this is something that fluctuates quarter by quarter, so it’s not a consistent sort of downward trend. But but it is also true that over time, we are trying to reduce this a little bit, even though not not huge amounts.

Also important to look at is that our sessions on-site increased by 53%. This comes from the shift that we are in the middle of and still working on optimizing, where we have gone from being very, very close to the customer doing a purchase to being much higher up in the funnel. And this really, in reality, means that we have shifted from more or less only being in search engines to being on much more visual platforms as well, like Meta and Pinterest and TikTok, etcetera. And also really changing our ads and the formats and making them more visual over time. And then this led to an EBIT of 27,200,000.0 compared to 20,000,000 last year.

So that is a margin of 13.8%, and the improvement is actually 36% compared to last year. So also very happy with that. If we look at the market, consumer sentiment is still actually decreasing in several of our main markets. If we look here, you this this is just a a snapshot of three markets. Sweden is backing a little bit.

That’s the top one. Germany also. France is quite stable. So so I think this is something to be aware of, and it’s, of course, something that we do pay attention to. It’s it’s, of course, connected to the general uncertainty in the world that that we’re seeing.

What we are doing is that becomes even more important for us to be active in choosing where we push sales efforts and marketing efforts and what markets and how we balance what we sell and and what rugs we sell to get the best ROI. And on that note, I’ve said many times that we have seen that customers trade down when they come onto the site. And this is still, in some cases, true, but it really depends on what type of rug and what type of customer. So we have seen a shift that we sell a lot more handmade, and that comes from more visually driven customers. So that really helps with with balancing the AOV for this quarter.

And then if we look a little bit more on our focus areas, the the move is coming up. We’ve been talking about this for, what, two years now. Wow. It’s it’s a very big move. Of course, the warehouse is the big move, so that will happen.

We’ll start early June with that. And then the the office will move later in June, but that’s, of course, a smaller part of this of this very big project. We we are moving to a lot more automated processes, etcetera, in the new in the new warehouse. So we will we’re also currently undergoing a lot of training and looking over how we work and so so on. We are continuing to refine our assortment both in reviewing the total range, what we have and what types of rugs we have.

And also, we are being a bit more cautious in expanding our essential range, which is our our cheapest range that we have. Customer journeys continues to be a huge focus for us and will continue to be a huge focus for a long time ahead. Being in the whole vertical vertical means that we have a lot of different customers that want to buy different rugs. So the importance of guiding them to end up on the right side site part of the site is is super important. We we can do this a lot by what we market and how we market and our search functions in the CRM, but there is still a lot of work when it comes to personalization on-site and localization that that needs to be done.

So you will hear me talk about this for a long time or hear us talk about it. Last but not least, I want to mention our customer KPIs that we continue to be very, very proud of. Here, you see the development. This is Trustpilot. We did a shift in November where now we split.

So before, everyone just got the question, how do you feel about the whole purchase experience? From November, we actually split. So half of the questions go, what do you think about this specific rug, and half go to what do you think about the whole experience. And this gives us a better indication on, for instance, qualities that that are great or less great. So it gives us more granular feedback, which is really good for us.

And that also means that we are now pushing more of the customers, and hence, you only see the Trustpilot score here to to answer this, so we get more input and and more feedback on that. And with that, over to you, Joakim, and some financials.

Joakim, Financial Executive: Thank you, Eva. So first, before the financials, just a quick comment on a change we made to the interim report. So previously, we reported our performance across three segments segments, as you know, b to c, b to b, and MPO. And starting this quarter, representing a single consolidated group group segment. And this change much better reflects how we managed and report the business internally.

So now moving on to the financials. Eva already took you through the underlying order growth, average order development and more and mentioned that we delivered a 12% increase in net revenue. The regional breakdown you see to the right is representing % of the net revenue and not just as before in the b to c segment. DACH grew by 14% with Germany alone up 13%. The Nordics continued to be our fastest growing region with an increase of 19%, and rest of world increased by 8%.

The slightly lower growth here is mainly due to a 5% decline in France. That is our largest country in that segment. But if we exclude France, the rest of world region grew by 12%. So next, looking at profitability. So we’ve seen a clear improvement in variable costs, which has driven the increase in both EBIT and EBIT margin.

Product expenses are flat year on year, almost a slight increase, while shipping and other selling expenses are down by 2.3 points, mainly due to a lower freight rates and more favorable freight market. As a result, our gross margin has improved by 2.4 percentage points, reaching 64%. And we’ve also increased marketing efficiency, reducing spending by 1.5 points. And at the same time, we had incurred around SEK 1,600,000.0 in costs related to the move to our new warehouse and office building and nonrecurring costs. Still, total external expenses are 2.1 points lower than last year.

Personnel costs are up by 0.2 percentage points, but on a comparable basis, they are actually lower. This is because some personal costs were capitalized last year, whereas this year, they are fully expensed. Other operating expenses include exchange rate effects from revaluing assets and liabilities. And as you have seen, there was a significant SEK appreciation during March against most of the currencies. Depreciation and amortization have increased primarily due to the start of amortizing our webshop from the end of quarter two last year and due to the indexed rent increase on our leased properties.

So all in all, if we sum this up, we have achieved an EBIT margin of 13.8%, up 2.5 points year over year even after absorbing a 1.4 points negative currency impact. So now on to inventory. Inventory levels are in line with both last year and year end and remain within our target range, although slightly on the lower side. And this is intentional. We’re we’re managing inventory tightly ahead of our upcoming warehouse move.

And also, if you visit our webshop, you will see that we have a clearance sale ongoing. The purpose of that is to reduce stock further before we move to the new facility. Last but not least, a few comments on cash flow and cash position. So cash flow from operating activities is down compared to last year, primarily due to a less favorable effect from working capital, mainly driven by the timing of tax payments. In terms of investing activities, you can say we have shifted the type of investment.

Last year, investment centered around the capitalized development cost for our webshop, as you know. And this year, we invest in tangible assets like machines, equipment, racking, etcetera, for the new facilities. We continue to have a strong balance sheet with SEK two twenty two million in cash. And, looking ahead, we have the planned dividend payment in quarter two pending an AGM approval, of course. We’re also continuing investments in the new warehouse where we previously communicated an investment of a total of 55 to 60,000,000 SEK.

And so far, we’ve invested 12,000,000 in the last six months. You see the 2,000,000 here and 10,000,000 in the prior quarter. We’re also entering the lower season during which we will build up inventory for the coming high season.

Eva Jungrud, Company Executive/Presenter: So Yeah. I think that’s a very important thing to to, point out that, because of the move

Joakim, Financial Executive: Exactly.

Eva Jungrud, Company Executive/Presenter: We are a bit not low, but on the lower end. So so we we do plan to ramp up

Joakim, Financial Executive: Exactly.

Eva Jungrud, Company Executive/Presenter: Late summer and early fall.

Joakim, Financial Executive: During the low season. And all in all, I think we are in a very solid cash position to support these upcoming activities. So, 12% on top line, a margin that is higher than we usually deliver, lower marketing cost and other expenses overall in line with what we have planned drives a good EBIT and EBIT margin increase. So, Eva, with that, I’ll hand it back to you.

Eva Jungrud, Company Executive/Presenter: Okay. Great. Thank you, Joakim. So even though a bit of an uncertain world, we see a promising start to the year with an all time high in both orders and new customers for the quarter, I should be clear on. You said it already, Joaquin, but top line is up 12%, and EBIT is up 36%.

AOV is fairly stable, although it will fluctuate over time. And tough world still for for many of us, but we did manage to balance the assortment and the country mix really well to drive the the results in this quarter. We continue to focus very, very much on the customer, the journeys on-site, especially how and and where we build differentiators depending on what type of customer one is and where one wants to enter the site. Still a long way to go, but lots of stuff going on there. And the assortment is now in the middle of summer spring summer twenty five, that season, and you see here one of our outdoor rugs.

We have seen a really nice development of that range. And as I said before, handmade is also growing a lot. And this is very much due to both the assortment itself and how we plan and push in our different channels and on-site. Last but not least, we have our AGM on the May 21 where all owners are welcome. It will be in Malmo.

Normally, have it in the office. It’s almost like a party in the office. But this year, due to the move, it will be with Mannheim and Schwatling close to the central station in Malmo. It’s at 11AM on the May 21. And for any owner who’s interested in coming, there are all the details on how to sign up is on our website.

So I think that’s it for the presentation, and now we move over to a q and a if we have any questions.

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

Benjamin Wallstadt, Analyst, ABGSC: Morning, Evan and Joachim. Well done this You speak about changes to your site that supports the AOV development. And I was wondering if you could give us a bit more flavor on on what these changes are, please.

Eva Jungrud, Company Executive/Presenter: Well, it’s I’ve said this before as well. We’re not it’s not a silver bullet, this thing. It’s it’s many small things. One very important thing is what types of rugs we push. For instance, outdoors tend to have a lower AOV than many others.

So then we try to balance that with campaigns for more expensive handmade drugs. On the site, if you go in and look at the site, you can see that we have changed to what we refer to as nice price, which is a different rounding of of the the prices. Is that a round you yeah. It’s rounding. Yeah.

A rounding. And and the point of that is that we are a company that works in the design part of the world, so we want things to look nice, hence the price the NICE PRICE name that also had a small price increase in it.

Joakim, Financial Executive: Exactly. Yeah. We we didn’t round downwards.

Emmanuel Jansen, Analyst, Danske Bank: Yeah.

Eva Jungrud, Company Executive/Presenter: And and the other thing that you can see is is that the rugs are now, again, something we refer to internally as clustered cards. So you see one rug in one shape, if you will, rather than seeing every single rug, which means that we can show a much larger assortment to someone who comes in, and then you could choose both color and size once you enter the product page. And then continuously, we also today work a lot more actively with our algorithms, what we present where and how on the site. So those are a couple of examples of things that we’re doing.

Benjamin Wallstadt, Analyst, ABGSC: Perfect. Thank you very much. And then another another question on on the AOV, perhaps just to clarify. You comment that you expect seasonal changes to the AOV from here. Should we also interpret this comment as you stating that you are confident that the AOV trough is behind us?

Eva Jungrud, Company Executive/Presenter: I don’t know. It depends what we decide to do. I’ll give you an example. We are moving, so we want to make sure that we don’t take with us a lot of rugs that are discontinued lines. So that then means that we drive discounts for those rugs.

So that, of course, affects the AOV downwards rather than upwards. But I I think what’s I think the thing to to keep in mind and the thing that I think is important is that we make conscious choices around this. And if we, for some reason, decide to as in this case, we want to do discounts because we want to not move these rugs, it’s it’s still a conscious choice. So it’s not something that just happens, so to speak. So I think that that’s maybe the the thing to think with you.

Do you is that a good answer, Joaquin?

Joakim, Financial Executive: Yeah. I totally agree. And and it’s it’s probably more about our conscious choices than it is about the total economic environment.

Eva Jungrud, Company Executive/Presenter: Yeah. Exactly. We affected.

Benjamin Wallstadt, Analyst, ABGSC: Yeah. Perfect. And and a follow-up on that then. What do you see in terms of consumer behavior as it relates to discounts compared to, say, a quarter back or two quarters back?

Eva Jungrud, Company Executive/Presenter: Yeah. I I said it or I I touched upon it. We do see that, historically, we have seen a lot of trading down on-site. We don’t see that in the same way. We see that it depends also a lot on what and how we push on-site.

So there is a difference there for sure.

Benjamin Wallstadt, Analyst, ABGSC: Perfect. Thank you. One final one for me. I was wondering if you could give us an update on expected costs related to the warehouse move. In total?

Joakim, Financial Executive: We haven’t communicated a number on how much that will be. We have incurred 1,600,000.0 in quarter one, which is in the early stages of the move. But we haven’t been clear on how much the total will cost. And I guess, as investor and analysts, you will still regard those as nonrecurring costs.

Benjamin Wallstadt, Analyst, ABGSC: Sure. Yeah. I I just thought if you had if you had a number now that I could just some of the transportation No.

Joakim, Financial Executive: No. Sorry. We haven’t

Johan Fred, Analyst, SEB: no. We we don’t

Joakim, Financial Executive: that. Alright. Because we can tell you, give yourself, yeah, Benjamin. It’s a single digit million.

Benjamin Wallstadt, Analyst, ABGSC: Yep. Perfect. That’s all for me for now. I’ll get back in line. Thank you.

Eva Jungrud, Company Executive/Presenter: Thank you. Thanks.

Moderator: The next question comes from Emmanuel Jansen from Danske Bank. Please go ahead.

Emmanuel Jansen, Analyst, Danske Bank: Hi. Good morning, Eba and Joakim. Thank you for taking my questions here. I’m just curious, is it possible I mean, quite impressive growth here with 12% organic growth. Is it possible to maybe give us some commentary on the overall market development?

I know it’s hard to say a general market growth figure, but I assume that you have at least seen what competitors has been doing this quarter gaining market shares, you would say.

Eva Jungrud, Company Executive/Presenter: The truth is we don’t have market numbers on an aggregated level. It’s more we can see in certain countries, etcetera. We think we are probably gaining a little bit of market share, but but we don’t have exact numbers. And it also varies a lot from market to market, as as Farid pointed out. So it’s it’s not like it’s growing everywhere or anything like that.

Do you want to do you have anything to add?

Joakim, Financial Executive: I think we don’t have much of market numbers. What we do see, both in quarter four and in quarter one, we saw different types of surveys that were indicating that the intention to do discretionary spend as a general was going down. So I think in light of that, the order growth of 1712% net revenue is we are quite happy with that.

Emmanuel Jansen, Analyst, Danske Bank: Great. And also, you mentioned the the handmade rugs. Is it possible to state on on the growth in this quarter of handmade rugs?

Eva Jungrud, Company Executive/Presenter: Sorry. What did you say? Is it possible to

Emmanuel Jansen, Analyst, Danske Bank: How much to to give us maybe growth, how much No.

Eva Jungrud, Company Executive/Presenter: We don’t disclose on that level, unfortunately.

Emmanuel Jansen, Analyst, Danske Bank: Fair enough. No no worries. And also, I mean, looking at the order growth here, 17, I know maybe a little bit more easy comparable last year. But do you think given I know as well there’s a balance between AOV and orders growth. But I mean, going forward in the short term, you’ve got to to keep up with this orders growth now in the recent two quarters going ahead.

Eva Jungrud, Company Executive/Presenter: It it I mean, it’s it’s hard to respond to because, of course, it depends on what happens in the world and and and since we don’t really give indications going forward. But but we do see a lot of effect from our our at least if I talk backwards, so to speak, we see effect from that we are changing our marketing mix and that we are more visual and and maybe more embracing the fact that we are selling a design product to many customers. Some of our customers are mainly interested in getting a rug to keep their feet warm, but a lot of customers are interested in in enhancing their homes, so to speak. So so I think there is something there, but, of course, it’s hard to predict the future, especially now. I don’t know if you wanna

Joakim, Financial Executive: do you wanna add And and what you mentioned before there also, Eb, I mean, we are making some conscious choices to do some clearance sales, not to move as much stock to the new warehouse, and that will, of course, also affect the the average order value.

Emmanuel Jansen, Analyst, Danske Bank: Yes. Perfect. And lastly, maybe can you give us some commentary on the trend within the quarter? Did you see high growth in January or in March, etcetera?

Eva Jungrud, Company Executive/Presenter: Yeah. January started slowly for us, and then the quarter ended much better. But as as I said before, it’s just to remember that March had very easy comparables because Easter was in March year or relatively speaking, easy comparables, maybe I should say. So so and now, of course, Easter was in April this year.

Joakim, Financial Executive: Yes.

Johan Fred, Analyst, SEB: Okay. Great.

Emmanuel Jansen, Analyst, Danske Bank: For now. So thank you very much. Bye bye. Okay?

Eva Jungrud, Company Executive/Presenter: Thank you. Thanks.

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

Johan Fred, Analyst, SEB: Hi, good morning guys. Thanks for taking my questions. A first one on your marketing investments. Marketing spend fell at 5% year on year and was relatively flat in absolute terms. Could you just elaborate on what changes you’ve done to your strategy, as you mentioned in the report?

And do you see these changes as a sort of a structural shift? Or is the lowering marketing spend in the quarter more relating to Q1 specifically, if you get my question?

Eva Jungrud, Company Executive/Presenter: Yes. So let’s see. Let’s start with the strategy. The big shift is this being higher up in the funnel. And since we are seeing that we get the effect we want from this, we will absolutely continue.

The other shift I would say that we have done that we will also continue is to be more conscious in the choices in what countries we invest in. Historically, we’ve been a bit a bit more driven by we want to be big in country x or country y, and now we’re more driving towards here we see the best return on investment, balanced with that this is an important market for us. It’s not crazy to think that the big market is irrelevant, for instance. But but a a more of an active balancing work there. That was the strategy.

And then you said, is it the structural so the I would say the percentage is is is probably a little bit low compared to to what we think the trend for the year is because q one is a little bit of a cheaper quarter than, for instance, q four. Yeah.

Joakim, Financial Executive: Yeah. Like you said, q

Johan Fred, Analyst, SEB: four Very clear.

Benjamin Wallstadt, Analyst, ABGSC: Mhmm.

Joakim, Financial Executive: Yeah. Okay.

Johan Fred, Analyst, SEB: Yeah. Please, Joakim, continue.

Joakim, Financial Executive: Yeah. I was just going to add in what Eva mentioned before, that still the long term strategy to bring this cost down as a percentage is still there, but that quarter one might not be the new level, so to say.

Johan Fred, Analyst, SEB: No, no. Got it. Very clear. Thank you. And the question on sort of the outdoor category or the outdoor seasons.

Have you seen any change year over year in in the demand for these products? And and when sit, so to speak?

Eva Jungrud, Company Executive/Presenter: I think the short answer is yes. We have seen a change, but it’s it’s not super easy to know if it’s because we have become a lot more active in that category or if it’s actually a consumer demand. I think we have continuously for the past three years three, four years grown this assortment and and really put more effort into the designs and also the presentation of them. So so it is it is a combination, I think, of of what we do ourselves, and that it’s also a trend in people’s lives to have rugs outdoors as well as indoors.

Joakim, Financial Executive: Yeah.

Johan Fred, Analyst, SEB: But but looking at the year over year trend, did you do did you see the the outdoor season starting earlier this year

Joakim, Financial Executive: or just

Benjamin Wallstadt, Analyst, ABGSC: last It

Eva Jungrud, Company Executive/Presenter: started a little bit earlier this year, but, again, we started the campaigns earlier. So it’s also likely that it’s driven by us starting the campaigns earlier.

Joakim, Financial Executive: Yeah. Just a week. So it’s it’s about yeah. So it’s about the same. Yeah.

Okay.

Johan Fred, Analyst, SEB: Okay. Fair enough. Thank you so much. And the final one on Germany then. Return to strong growth in Q1, albeit against pretty easy comps.

But if there I guess you’ve answered this question maybe in your previous answers, but is there something that you’ve done different differently in in Germany, or is this the result of sort of an overall market improvement? What what are you seeing?

Eva Jungrud, Company Executive/Presenter: We we are doing things differently in Germany, both in terms of the mix in channels and also what types of rugs we push. We are actively, externally in our marketing, pushing slightly more expensive rugs. So so we think that that helps driving the growth. And then in terms of the sentiment in the country, we don’t see, like, huge uptakes of the scent in the general sentiment in the country, to be honest.

Johan Fred, Analyst, SEB: So more so on on better strategy on your part, you would say?

Eva Jungrud, Company Executive/Presenter: Yeah. Yeah. Or or more conscious, at least.

Johan Fred, Analyst, SEB: Got it. Thank you so much for taking the time. Those were all of my questions.

Eva Jungrud, Company Executive/Presenter: Thank you, Johan.

Joakim, Financial Executive: Questions that have come in, I can read them up. We have a question here from Philip, and that goes, with your current strong cash position, what strategic opportunities do you see for deploying that capital going forward?

Eva Jungrud, Company Executive/Presenter: Do you want to maybe repeat what you

Joakim, Financial Executive: Yeah. I was mentioning that, while the dividend is is is coming up in quarter two pending the AGM approval, We’re also having these investments bigger than ever. You know, a normal year, we’ve invested, what, $2.03, 4,000,000 in tangible assets apart from the webshop, and that is now 55 to 60,000,000. So we’ve got quite some spend coming up there. We also have going into the lower season, and we have consciously taken down inventory.

So there is a lot of cash that will be needed to build up inventory for what we hope will be a strong q four. So we have quite some some cash going out in the plan already. That was not the question, though. The question, what what strategic opportunities do you see for deploying that capital going forward? If the question is, are we doing mergers and acquisitions?

We have said that we currently see so many opportunities where we are.

Eva Jungrud, Company Executive/Presenter: In our own world. Yeah.

Joakim, Financial Executive: And we we can drive initiatives to increase increase sales, increase top line, increase profitability without having to pay for an acquisition. So so that’s the current strategy. And

Eva Jungrud, Company Executive/Presenter: then we have next one. It’s from Sebastian. Is the is this is a scale down. Scale of inventory due to the movement of the warehouse affecting gross margins for the rest of the

Joakim, Financial Executive: year more than in Q1? No. No. Of course, sell out will affect the gross margins, and quarter one was an exceptionally good quarter, but that it would take a major hit to the gross margin over the coming quarters is not likely. So then we have a question from Alexander.

Gross margins, impressive gross margin in the quarter, any reason to not extrapolate this level going forward?

Eva Jungrud, Company Executive/Presenter: So I think it’s worth pointing out that the biggest effect comes from freight costs, and it depends both on what countries we ship a lot to, where it’s different costs for different countries. You know, we we don’t charge for returns, and we don’t charge for shipping. So I I wouldn’t maybe extrapolate the whole thing, so to speak. But, of course, we are not actively driving to to increase the freight costs. Is that a

Joakim, Financial Executive: Yes.

Eva Jungrud, Company Executive/Presenter: But it is high. That that’s worth pointing out.

Joakim, Financial Executive: Yeah. And also, in addition, I mean, the product cost is going up. What you have seen lately Yeah.

Eva Jungrud, Company Executive/Presenter: That’s very true.

Joakim, Financial Executive: Is going up and down. And and what you’ve seen lately in the currency markets is that pre pre Trump, it was 1.0678 for euro versus dollar. Then Trump got elected. It got down to 1.02. That’s a number of percentage points there.

And and then now it’s one point, I don’t know, twelve, thirteen. So the dollar has depreciated a lot. And, of course, depending on when we make our purchases, how sustainable those movements are, we have a net outflow of U. S. Dollars for the purchases, and we have a net inflow of euros, and and that affects our margins.

But we are very fast in responding to that in terms of making price increases if in if required. And and, you know, the time lead time we have for implementing a a price increase is probably a day or so. So we can respond to those changes very well. So we hope that answers the question, and we have a question here from Tobias, Kastenhuber. Can you give us an overview about which currency you purchased the rugs?

Is it euro or US dollars? Well, the answer is yes. It’s euros and US dollars. And if you are more interested in our net flows in the different currencies to see our exposure, we have a note 16 in our annual report. We have about a hundred million kronor in in in positive inflow in euros and slightly less than that in negative outflow of US dollars.

And given that we only sell 7% of our sales in Swedish kronors, we have 93% of our income basically in foreign currency, then you can conclude from those numbers that we have a pretty good internal hedge, meaning, we spend we get a lot of incomes in euros, but we also spend on freight and marketing and so on in euros. So the net numbers are not that big, although we we may be impacted from it from time to time. So that was the last question, I believe.

Eva Jungrud, Company Executive/Presenter: Was there one more up there? Did you manage to grow sales 13% in Germany? We’ve seen from other online retailers in various segments that the German market has been very challenging. We touched upon this before, but it it’s it it is quite connected to that we have pushed in different channels, and we have pushed more expensive rugs would be the short answer to that.

Joakim, Financial Executive: Okay.

Eva Jungrud, Company Executive/Presenter: Yeah. So I think that’s it, right, from for for questions point of view. No more? Then we say thank you very much for listening in and attending. Thank you, Joakim.

And look forward to speaking to you for the q two report if you’re not at the AGM, and that will be on the August 14. Yes. Yeah. Thank you very much.

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