Q2 2023 – The quarter in brief
H1 2023 – Financial highlights
Clear first signs of progess in the right direction
The wide-ranging transformation work we began last year is now starting to produce effects, and we can clearly see the first signs that we are moving in the right direction. We achieved an improved gross margin in the second quarter compared with the previous year of 49.0% (47.6%), as well as positive earnings of SEK 4.5 million despite net revenue continuing to fall with 15.0%. During the quarter, we saw positive effects of the work on the product range which was a major feature of our change journey last year. Sales of our own brands increased to 41.2% (38.8%) as a proportion of total sales, and we saw that the strongest Nelly products in the quarter sold in larger quantities than the bestsellers in the previous year. We also continued the transition towards a more favourable balance between party fashion and everyday fashion in our product mix and improved our position in several categories, primarily trousers, which enjoyed a strong season. The product mix had a positive impact on the total return rate during the quarter, and we also saw that returns fell in nearly all categories compared with the previous year. As early as the first quarter of the year, we began to see the effects of improved cost control in several areas of the company, and this trend continued in the second quarter. We reduced our operating expenses in warehouse and logistics operations, and we saw a clear fall in marketing and employee benefit expenses compared with the previous year. Over the past year, we have also achieved considerable improvements in our working methods and built a more efficient organisation that will continue to optimise our cost base going forward.
Further improvement in our customer offer
Since we began our transition towards a product range that is clearer and better suited to our customers, we have focused on our own brands to an even greater extent than before and reduced our variety to make it easier for our customers to find the right articles. At times we have also decided to promote sales by reducing prices to increase the movement of our stock
during the transitional period. We have already made big changes but we need to continue to focus on improving our customer offer. We did see that the conversion rate of 2.3% remained at the same level as in the previous year during the second quarter, but the average order value decreased to SEK 764 (831), which means that we need make our range and prices even more customer-friendly to increase sales. We will continue to work on this in the second half of the year and we look forward to presenting a strong autumn and winter collection to our customers. It gave us great pleasure to announce in June that we will be opening a flagship store on Drottninggatan in Stockholm in the autumn. E-commerce will remain our principal business, but a physical store will afford us more opportunities to deepen our relationship with our existing customers and gain new customers who have not yet discovered Nelly.
Continued focus on profitability in the core business
We are now embarking on the second half of the year bolstered by a positive quarter but with the same rate of change. We continue to implement our transformation plan and improvements in our system landscape will now be firmly in our sights. We have started this work and continue to prioritise the elements that improve the customer experience and simplify our internal working methods. I would like to take this opportunity to say a heartfelt thank-you to our amazing Nelly team. You have worked together tirelessly to bring about change so far, and I know that you will tackle the second half of the year with just as much energy and determination.
Acting CEO of Nelly Group AB
Borås, 14 July 2023
Nelly Group AB (publ)
501 13 Borås, Sweden
Corp. ID 556035-6940
Registered office: Borås
Visiting address: Lundbygatan 1, Borås
Conference call/webcast of half-year report
The conference call will be held in English and hosted by Helena Karlinder-Östlundh acting CEO and Ola Wahlström interim CFO.
Note: It is only possible to ask questions in writing (not by phone). To submit questions you want answered after the presentation, please use the link below. It is possible to submit written questions both before and during the broadcast.
Link to webcast: https://nelly.videosync.fi/2023-07-14-q2
To listen to the report by phone, the following callin details are available:
Conference ID (PIN): 100370#