EUROPRIS ASA (EPR) Q2 2026 Earnings Call Transcript

Good morning everyone and welcome to our previous presentation of the second quarter results and the first half of 2026 My name is Espen Eldal and as always joining me on stage today will be CFO Stina Bire who will present the financial details and after the presentation we will host the Q&A session which will be managed by EI officer Trine Englöcken and please feel free to type in your questions as we speak and before I start I would like to make a special welcome to the guests we actually have physical present today it's it's very nice that people still show up to these kind of events that is appreciated and I would also like to thank Pareto for hosting the presentation today and the investor meetings we have later on I know it's a busy morning the second quarter reporting season is kicking off today and I guess that all also many of you have started summer holidays. We are going to start it maybe today or tomorrow. So let's get started and jump into the numbers. Total sales in the second quarter were 3.7 billion. That is a reduction of 2.8 percent and down 1.1 percent in constant currency. As we explained when we presented the first quarter this year, the timing of Easter has a major impact on the sales in the first two quarters this year and while the early Easter boosted sales in the first quarter it has a negative impact of around four and a half percent points in the second quarter so in order to evaluate us you should look at the results for the first half and we are now going to do that so when we look at the results for the first half we deliver a sales growth of 3.8% and the 4.4% in constant currency. Norway continues to deliver a very strong performance with a like-for-like sales growth of 5.7%, and in Sweden we have a like-for-like sales growth of 1.5% points in local currency. Note that Sweden was negatively impacted by the temporary closure of 24 stores during the store remodeling program we are running in Sweden at the moment. The gross margin has improved. That is mainly driven by product mix changes in Sweden following the integration actions we are doing and some unrealized currency effects in Norway. EBIT for the first half were $465 million, a solid increase of 20.7%. And Stina will provide some more details on the financials, both on the quarter and the first half in just a few minutes. I'll give some operational updates on Norway and also on Sweden. Starting with Norway, I'm really pleased to see that we continue the strong performance for Outerpeace in Norway. Once again, we deliver profitable sales growth. And the growth this year is volume driven by higher footfall to the stores and also a volume led basket growth. and so far this year we actually see volume growing more than sales and the average that is caused by the average price per item has actually been reduced and this puts some pressure on the operating costs as cost for distribution and handling of goods are impacted by the higher volume and the reduction in price per item is caused by more price conscious consumers we have said that for quite some time that they expect expect consumers to remain price conscious and in the first half our sales growth is driven by campaigns and also by private level products with very low price points. So you see that the consumers are acting and today in today's market they are seeking value for money and it's very comforting to see that our low price concept reminds remains relevant for the consumers in these days. We are still gaining new customers to the Europese concept. And Europese is also an important seasonal destination and the Easter season and also the spring summer season has been important drivers for the sales growth we have delivered so far this year. When we turn to Sweden, the turnaround project in Europe is all about creating a more a healthy and profitable sales mix towards more non-food and seasonal goods. And we see that the results we have in the first half really makes us confident that we are on the right track. We have been able to shift the assortment towards more non-food items and seasonal goods and the Swedish consumers have welcomed the upgraded assortment very much. 10% sales growth is what we see both in the second quarter and the first half from the non-food product range, which is now more or less fully harmonized with what we see in our cities. We have deliberately done less promotions of very low margin consumables at the expense of giving more space in the advertising to seasonal goods and non-food, as we want to establish ÖOB as a destination for these products. that has as expected had a negative impact on sales but had a very positive impact on the gross profit in the first half and the stronger non-food offering that supports the gross margins and will be crucial to attract new customers going forward but also to increase the longer-term profitability of the company. Earl Bay is not about you know making a turnaround just by increasing sales it's also about making a product mix change towards you know higher value items which gives more profitability for the company and we are on the right track the other big thing we're doing in sweden is of course the store remodelings and they are key to re-establish as a relevant and attractive shopping destinations for a broader customer group than we have today And so far this year we have remodeled 24 stores which together with the four pilot stores we opened last year brings the total of modernized stores to 28. And that is a massive project to complete for a company like Odea has been used to doing maybe one or two projects during the half year. And I'm very pleased to see that the projects have been managed very well. Every single store has been finished according to plan and this upgraded store continued to deliver higher sales and better margins than the rest of the chain. So we see good effects from the project and they have been managed in a very good way. When we look into the second half we're planning for another 10 store upgrades per quarter and the remaining store base will be upgraded next year. While these projects, of course, are exhausting, they also create a great deal of energy and spirit into the organization. We use the store employees to perform the projects and that creates an ownership and also a sense of knowledge to the new concept that is extremely important to build the corporate culture we want. so doing these projects the way we're doing them also helps building the team spirit and the culture in the in the company and I've shown you this slide before and this is about the big plan we presented back in 2024 and I'm coming back to that because as you know we have combined our sourcing efforts together with Europis and ÖOB and we have come a very long way in harmonizing the non-food assortment and we see that this has been well received by the customers and it's also supporting the margin uplift we see in ÖOB this year which has been significant. We also made operational improvements and making sure that we execute the concept in a much better way than before and I'm really proud to say that the store standards that we see and the operational standards we see in these days has never been better so they're making good progress and now we're moving forward at speed to improve the customer experience with an ambitious story modeling program we are now remodeled 28 stores more to come in the second half this year and the remaining store base next year and that will be supported by nationwide marketing when enough stores have been upgraded i'm very pleased with the progress we have made in sweden and remain very confident in the targets we have for 2028 of 5 billion in sales and a five percent ebit margin with that i will leave the floor to stina to present some more on the financial details thank you espen and good morning to everyone i hope you're enjoying your summer and i also hope you keep practicing your rowing skills ahead of Saturday.

Due to the different timing of Easter between the years, focus should be on the development for the first half where figures are comparable. To briefly sum up the second quarter for segment Norway, sales were on a par with last year including the estimated negative impact from Easter of 5.5 percentage points. Product mix with higher share of non-food and private labels had a positive impact on the gross margin. And when accounting for the higher operating expenses, EBIT was lower than last year. Moving on to the first half, where figures are comparable, it can be summed up to a sales-driven increase in EBIT. The Outer Police chain had like-for-like growth of 5.7%, mainly from higher footfall, but also from a volume-led growth in the basket we still see We still see growth in private labels and campaigns in addition to good development for seasonal items and these elements all reflect the relevance of the concept and The pure players had growth of 3.9% related to Lekekassen The gross margin was 44.2%, up 0.2% but down 0.4% excluding impact from unrealized currency. And growth in private labels have a positive impact on the gross margin while higher campaign sales have a dilutive impact. The OPEX increase of 7.5% reflected the volume driven sales growth as this increases handling costs both at logistics center and in stores and it also increases distribution costs as more trucks are needed to move the volumes and combined with higher costs for the transportation in itself and while inflation is above 3% in Norway and the wage growth even higher the average price per item for every piece is down and this means that there is no price benefit in the sales growth and the volume growth is actually higher than the sales growth and while volume growth is positive and welcomed it does put pressure on the cost development and all in all this accumulated to an EBIT of five hundred and seventy three million corresponding to a growth of seven point one percent sales for a segment Sweden in the second quarter were one billion NOC reported decline of 9.6% and 3.9% in local currency and the lower sales were due to the timing of Easter and the temporary closure of the 15 stores that were remodeled in the quarter and in addition the deliberate changes to the campaign program with less of very low margin consumables and more of non-food and seasonal items it had a negative impact on football and thereby sales but it contributed to the margin improvement and it is an important part of the journey to attract new customer groups and profitable growth long term. Operating expenses were impacted by the store remodellings and the EBIT loss of 34 million was in line with last year. Sales for the first half were 2 billion NOC, a reported decline of 1.5% but up 0.7% in local currency. and this includes impact from the closure of the 24 stores that were remodeled during the first half. Product mix with a higher share of sale of non-food had a positive impact on gross margin which increased to 33.1 percent. The operating expenses were impacted by costs related to the store remodelings this year while last year was impacted by the ERP project. EBIT loss of 107 million NOC this year was an improvement from the loss of 149 million NOC last year. As mentioned due to the timing of Easter second quarter figures are not directly comparable and one should focus on the first half results but to briefly sum up the second quarter showed sales decline a higher gross margin and lower EBIT with a net profit apparent of 245 million corresponding to an earnings per share of 150 and for the first half sales for the group or 7 billion up 3.8% and 4.4% in constant currency the margin improved to 41% and as this as the sales and margin growth offset higher operating expenses EBIT grew by 20.7% to 465 million net profit to parent increased to 249 million corresponding to an earnings per share of 1.52 up 27 percent the cash flow for the first half shows improvements from operations with last year impacted by inventory buildup the group is investing more related to story modelings in sweden and also the upgrade of the pick and mix candy stands in norway the financial position and liquidity is good with net depth of 5.1 billion and 1.6 billion excluding lease liabilities and cash and liquidity reserves of 2.3 billion and then i will hand it back to Espen for the outlook.

Thank you, Stina. I'll also summarize. We have delivered a very good start to 2026 with continued profitable growth in Norway and good traction on the turnaround process we are doing in Sweden. In the market, we still expect consumers to remain price conscious and Autopis and ÖB are both well positioned with the relevant product offering to benefit in the market where consumers are seeking value for money when we look at the macroeconomics that is still a quite mixed picture in norway inflation remain above targets with possibility of further interest rate hikes in the second half while in sweden the inflation and possibilities for interest rate hikes are lower consumers in both countries are expected to get real wage growth this year and we believe that should be supportive for retail sales with that we will actually invite Stina back on stage and we will open up for the Q&A session and as usual Trine we will start with the questions from the audience in the room if any thank you Philip Bjerke Pareto Securities I have a question on ÖB.

During the first half of 2026, we have seen improvements in EBIT of 42 million. It was flat year over year in Q2. How should they think about the second half for ÖB in terms of the prior guiding of a flat contribution in 2026 compared to 2025?

We are no longer writing explicitly in the report. how should they think about it i think we have all outperformed our role guiding for for oil bear in the first half this year and especially the remodeling of the stores have maybe had less impact on the gross profit than expected so i think you should expect some of the same movements in the in the second half and we have also seen that the customers have responded maybe more positively than expected to the sales mix changes so we are you know improving the gross margin maybe a little bit faster than we expected but at the same time it comes a little bit on expense on the sales of groceries so so it's a little bit mixed effects but i think you

should be you know a little bit more positive than than flat year over year for the second half thank you and and on the the marketing side could you give some more comments on the timing when and you will do a nationwide push on marketing?

I think we are ready to do more nationwide push on the marketing for the Christmas season this year. Because Christmas is a season we're building up also in the non-refurbished stores, and that will be the same concept, basically. So for the Christmas season, I think that will be the first time we will be able to push the bigger marketing button. And then it will be sometime next year that we are ready to to to do more nationwide marketing but as you have seen from the map we are doing these story refurbishments in in clusters so we've done now gothenberg area we have we have done most of the stores in the stockholm area so we are ready to to to do some more local marketing but the bigger push will come first you know next year and a second question on the on the market here in norway like like in the second quarter if we adjust for the easer effects is somewhat weaker than during the first half in whole how how are you seeing the market is there any signs of a slowdown or or should we how should they think about a bit softer growth this quarter adjusted for the easter effects i think it's you should not you know put too much into it the easter has a major impact and you know it's not that easy to really look at you know how these movements are between the first and the second quarter overall we are very satisfied with the development in the first half, and you should evaluate the first half when you look at the like-for-like of them. And 5.7% in Norway is a decent number for the first half.

Thank you.

And there are some questions from the web. Ole Martin Vesgaard, please split like-for-like growth in Norway between volume and price.

Well, as we said, the volume growth is higher than the sales growth. there is some decline on the price but we don't give the explicit numbers but the the volume is the main part and some from negative from price how can you conclude that the lower basket size in Norway reflects more cautious consumers rather than under performance in your offering I think you know we can see that very clear we see that it's higher sales of our private label products we see that the consumers are choosing the the low price points in in the stores and at the same time we see that the campaigns are hitting very well and that campaigns are selling and driving the sales growth so so we can clearly see that you know the customers are making new choices in the stores and we see clear that sales around the big payment days you know we becoming more important so it's a growing number of Norwegian consumers that are actually you know experiencing a tougher economic everyday life so being relevant with good product offerings low price points on everyday products is very important and that is what drives the change and what were the shares of consumers and private label in Norway and Sweden in the second quarter well as I said in the first quarter it doesn't really make sense because of the timing of Easter

So while we had a higher share of consumables in the first quarter, we had a higher share of non-food in the second. But for the first half, for Norway, it is a flat development.

How do gross margins in remodeled Swedish stores compare with legacy stores?

It is slightly higher. We see that on average we get somewhat higher uplift when they are refurbished.

How much higher is the non-food share in remodels source?

It's very difficult to actually give a concrete answer because you have very different timing on these, so adding the numbers up like that, it's not quite as meaningful yet. But we do see the margin impact, so it impacts. But let's come back to it when we have more history.

Should we expect the higher handling and distribution costs seen in the second quarter to continue?

Well, I think that for some time now we have seen that the volume growth is there. I would assume that this will continue and that you should take that into account. And I can also mention that the wage growth in Norway, for us it will impact with around 5% and that's about 60% of our OPEX base. Higher results in the stores, which is well earned for them, but it does, of course, impact our OPEX as well. And when we have more hours needed to kind of handle the goods in the stores, this will have an impact.

What were the costs associated with the store remodeling program in the second quarter?

Well, I think you should calculate about what we have guided on. previously, which is a little bit more than 1 million sec per store.

Next question comes from Petter Nyström for Norway. In the first half, the gross margin is down 0.4 percentage points, excluding FX effect, and you mentioned negative effect from higher share of campaigns. Firstly, is this also a function of more competition in the market? and is this a trend you expect to continue?

It is a function of more competition on some products in the market so we are continuously trying to balance our campaign mix in order to maximize the margins. At the same time we have also seen that the price conscious consumers are shopping more on campaigns but on the other hand the consumers are also shopping more private label products which is positive for the gross margin. So as I would expect us to you know to try to work on the margin and we will continue to do that so we don't expect this to be a negative development going forward thank you that was the last question from the website thank you and enjoy the summer