Matas A/S

CSE:MATAS

Earnings Call Transcript 2021-Q1

[Operator]

Ladies and gentlemen, welcome to the Q1 interim report 2020 to 2021 for the period 1st of April 2020 to 30th of June 2020. [Operator Instructions] Today, I'm pleased to present CEO, Gregers Wedell-Wedellsborg; and Anders Skole-Sørensen, CFO. Please begin your meeting.

[Gregers Christian Wedell-Wedellsborg]

Thank you so much, operator, and welcome, everyone, to the presentation covering the first quarter of the 2020-'21 financial year, a very special quarter. With me today, our CFO, Anders Skole-Sørensen.Today, we will go through my comments on the situation as it is right now. We will cover the corona impact on Matas Q1 results and preliminary Q2 sales, then I will hand over to Anders, who will cover the financial results in more detail, and I will close off by offering the background for the outlook for 2021, where we have a new guidance for the financial year, while our long-term ambitions are unchanged. At the end, we will look forward to taking all your questions.Please turn to slide number 3. Overall, we have had a solid quarter. We have seen strong results for Q1, top line growth of 8.1% is actually historical high for us. We've seen that trend continue into Q2. Like-for-like growth was 8.4%. And the trend, as we mentioned, continued into Q2, thanks to the fact that a lot of Danes, well, opted to stay back or had no other choice but to stay in the country and shop locally.We saw EBITDA up 7% with the margin before special items coming in at 18.3%, slightly down from last year. I think the key takeaway on higher level is that our business model and Matas has proved to be very resilient in the face of the pandemic and even through a lockdown period. We saw the sales growth being driven by an extraordinary demand for our Health & Wellbeing products and also the fact that there was limited competition in the first half of Q1, where shopping centers were partly closed.We have seen a spectacularly an online boom, and we will get back to that. And I think we can add that we have seen further proof that the online growth is profitable, a key question for the Matas case. And we have also seen record high customer satisfaction for the online.Supply chain has been volatile. We've seen a lot of sudden demand changes that has impacted our inventories in both Q4 of last year and Q1 of this year.As for the strategy, our main conclusion is that we are on the right track. We are on the right course, but we have an opportunity to actually accelerate our strategic transformation, primarily by investing in digital, and we will also conduct a logistics review to be prepared for the future demand online.We have also seen that this quarter has actually prepared us even more for the international competition that we expect online to be part of our reality in the future.And as I mentioned, we have new financial targets for the financial year, and I should mention straight away that they are subject to higher-than-usual uncertainty due to COVID and due to the risk of another lockdown, even recessionary pressures. We have maintained our long-term financial ambitions, but we note that there is increased macro risk.And with that, please turn to the next slide. We have tried to isolate the effects of COVID-19 in the first quarter. And you know the numbers from the Q4 that we saw a DKK 50 million drop in revenues in Q4. We have seen the reverse of that in Q1, a DKK 35 million increase windfall from some of the beneficial factors that we talked about before. We had COVID-related cost in the fourth quarter of DKK 5 million. We have also had extraordinary costs in Q1 of DKK 4 million.As for our EBITDA, we took around DKK 20 million hit in Q4 -- end of Q4. We've seen around DKK 10 million increase in Q1 as a result of all that's been going on.Working capital is where we felt the most impact with an increase in our inventories. As you can tell, our working capital has improved quite a lot, but it should be noted right away that DKK 100 million of the decrease is due to the liquidity packages that the government has offered to all companies in Denmark. But underlying, our working capital is still increasing.Q2 trading. We've seen a growth rate in Q2 to date, that is similar to what we have seen in Q1. And we should also note that for the liquidity package, we will obviously see a reversal in some of it coming in the Q2 quarter.Please turn to the next slide. This is good news. This is a continuation of what we saw with our trading update, namely that this is not only a recovery driven by Health & Wellbeing, it is a recovery across the board, across all the categories that we have in stock. So Matas Beauty, High-End Beauty and Health & Wellbeing, all delivering growth compared to last year.We have had some spectacular 1-product hits. In the first quarter, we didn't sell any masks, but in the second quarter, of course, demand for mask have -- has exploded. And I know there is some speculation as to whether that will lead to an additional income. I should note that masks in Denmark is a complete commodity right now. It is all over retail, and it is being sold at 0 or very, very slim margins. And that is a decision we actually took consciously that it was all about getting cheap masks out to serve the Danes and to be able to allow everyone to wear a mask. So it will affect our revenues, but it will not significantly affect our income.Please turn to the next slide. This, of course, is one of the main stories of the quarter that we have seen a spectacular growth online, in particular, in the first part of the quarter, but it actually continued into the second quarter at higher levels as well. So for the quarter, in total, 25.5% of our business came from digital channels. And just looking back 3 years to the same quarter in the year '17 and '18, we were at 2.5%. So I think this highlights, more than anything, the quite dramatic transformation that we were already running with Matas and that got an extra kick with the lockdown.I would point your attention to our customer development because is this just a one-off boom and back to normal afterwards. We are seeing some lasting benefits from this online boom. We now are looking at the last 12 months. We have served more than 400,000 customers that shop in both our channels, and that's quite attractive for us because it means we capture a greater share of that value from -- sorry, share of that wallet from those customers.We've also seen about 0.25 million customers shopping at matas.dk in Q1 with record high customer satisfaction. And we actually recruited 60,000 customers that had never shopped at our online shop before, especially in the young demographic. And having seen those customers get a good experience, I think, is something that has lasting value for Matas.If you please turn to the next slide. This is the other good story from the quarter. As you can see, store like-for-like declined overall in the quarter. However, that was driven by the selective sort of store closures we had in the first half of the quarter in shopping centers, in particular. And that trend reversed in the second half. So from April to mid-May, we saw about 30-plus stores that were closed part of that period. Shopping centers, for the most part, remained closed overall as a shopping destination or at least very, very limited to food retail and us. And we saw limited high street traffic because people simply stayed at home and shopped from home.And then in the second part of the quarter, we saw a quite spectacular reversal. All stores, of course, opening again, shopping centers normalizing very, very quickly and traffic returning to the high streets quite rapidly as well. So even in the face of a situation where competition was normalizing, we saw an uptick in like-for-like growth in the physical stores in isolation. And I should note, of course, that there is some benefit from the fact that people are not traveling and staying at home. And then if you please turn to the next slide, I will hand over to Anders to go through the financial results.

[Anders Tormod Skole-Sørensen]

Thank you, Gregers. As you can see from this slide, overall revenue, we saw an increase of 8.1%, as mentioned by Gregers, from DKK 876 million in the first quarter of last year to DKK 947 million in the first quarter of this year. Growth was positively impacted by the 3 factors: higher revenue across all segments, with Health & Wellbeing, of course, being the strongest; the staycation, as already mentioned by Gregers, tailwinds from the Danes staying home this summer; and obviously, the very strong online growth of more than 200%.If we look at the underlying like-for-like growth, they were up by, as mentioned, 8.4%. And mentioned -- also worth mentioning like-for-like growth was positive in every month of the quarter.As to our physical stores, yes, they were down by 9.2% sales in physical stores, yes, year-on-year in the quarter. But that, as mentioned by Gregers, was due to the declining footfall in the first part of the quarter as a result of the COVID-19 pandemic. In the second quarter, we saw a rebound, as Gregers also mentioned.With regard to gross margin, the gross margin in the quarter was 44.4%, which is marginally down from the 45.0% we saw in the same quarter of last year. The channel shift that we are seeing so clearly towards online impacted the margin negatively and was the prime reason for the drop, with higher sales overall and, of course, total gross profit for the quarter rose by almost DKK 26 million in spite of the drop in gross margin.As to costs, overall operating costs rose by just shy of DKK 17 million year-on-year in the quarter. A significant part of the increase was due to added costs from Firtal, which grew a lot; and from Kosmolet, which was in the numbers in this quarter and barely in the numbers last year around because we bought it at the end of the quarter.Of course, the increased activity on matas.dk in our webshop also led to an increase in cost. However, underlying cost reduction measures actually offset this increase, and I will return to the cost development more in detail later.EBITDA before special items were up by close to DKK 10 million to almost DKK 173 million. Adjusted net profit was roughly unchanged at DKK 67 million against DKK 66 million in the first quarter of last year.Free cash flow, which I will also come back to later, amounted to DKK 237 million in the first quarter of this year.The number of transactions for both stores and online was down by 5.4%, driven by lower footfall as mentioned to the stores, while the number of online transactions grew. The basket size grew a very impressive 14.5% or almost DKK 25 per basket as our customers chose to concentrate their purchases on fewer baskets. Please note that these both -- these numbers now both -- they include transactions from the Firtal Group, which they have not done historically, but we've included them now.Overall in the quarter, we continued to see traffic moving towards online, where Matas is very well positioned to serve our customers, both through our own matas.dk webshop as well as through the webshops operated by the Firtal Group, such as, for example, helsebixen.dk, jala-helsekost.dk and made4men.dk.With that, now, please turn to the next slide, where we look at some more long-term trends in the business. Here, we can see the longer-term developments in both revenue, growth, gross margin, EBITDA margin before special items, of course, and the absolute level of EBITDA, again before special items. If you -- just make some very short comments. Of course, the revenue growth is a positive development even longer term and even if we normalize, so to speak, for the very high growth we saw in this quarter, then we should also probably normalize for a very low growth in Q4. So we are seeing what we believe to be a positive upwards trend in line with our strategic goals.As to the level of gross margin, yes, we think that this is a long-term stabilization. But of course, as mentioned, the channel shift that we are experiencing does make a difference here and is weighing down on gross margin.As to EBITDA margin, we also believe we are seeing a stabilizing development. We can't really turn these very long-term trends on EBITDA margin because this is, of course, post-IFRS 16, and we don't have post-IFRS 16 going further back than the first quarter of last year.As to revenue and EBITDA in -- and, so to speak, dollars and cents or Danish kroner, what we are seeing is still the very longer-term picture of saying we do have to work a little harder to make as much money as we have historically, but this is exactly what we are addressing through our strategy.Now please turn to the next page, where I will look a little more in detail at our costs. In the first quarter, overall operating costs, as mentioned, rose by around DKK 17 million. Now it's very important that one of the big changes here was the cost of running matas.dk, our webshop, which rose by DKK 14 million due to the growth of the business, which is driving fulfillment costs.As you know, we started our new webshop in Humlebæk back in September of last year, and the facility was actually fully up and running well before the Black Friday peak in November. We have, however, also on several occasions, made it clear that it takes time to run such a facility and to make it run efficiently. We've made a lot of progress. But the facility is not running at an optimum or peak level, given the COVID-19 pandemic, as since sales on growth on Matas, they go into overdrive with over 200% growth. We have been busy making sure that we meet the expectations of our customers, which, frankly, has led to the addition of operating costs and a constant flow of new hires basically to follow the business.The solid growth in Firtal also meant that their cost base grew by around DKK 11 million, while Kosmolet, as mentioned, added around DKK 6 million to the cost base, but that wasn't because they grew, that was because they weren't in the numbers in the first part of the year -- of the first quarter of last year because we bought them at the end.Finally, the quarter saw a -- around DKK 4 million, as mentioned, in new costs, which are related to measures to limit the spread of the COVID-19 virus. To finance the online growth, we have continued our efforts to reduce the cost base in the rest of the Matas business.On a net basis, the underlying cost base has been permanently reduced by around DKK 18 million compared to the first quarter of last year. But actually, the savings have been higher. In the physical stores and at that part of the HQ, which I -- the lack of a better word, we'll call the analog part, we have reduced cost by at least another DKK 10 million more. But we've chosen to reinvest these savings in the digital side of the business by strengthening, for instance, our [ So Me ] team and Club Matas, amongst others.With that, now, please turn to Slide 11 or the next slide, where I'll talk briefly about the cash flow. Our cash generated from operations amounted to an inflow of DKK 300 million in the first quarter. And this compares to an inflow of a mere DKK 83 million in the first quarter of last year. One of the primary drivers behind the increase of DKK 218 million was the positive cash flow effects from around -- of around DKK 100 million stemming from the COVID-19 aid packages that have extended the due dates on VAT payments and payroll taxes. Most of this benefit, as Gregers has already mentioned, will, however, be reversed. So it's a bit short-lived.Also in the quarter, trade payables rose while they actually fell in the same quarter of last year, adding a quite nice chunk of cash relative to that of last year, while the developments in accounts receivables had a negative impact on working capital. Finally, working capital in the first quarter of this year was less negatively affected by an increase in inventories. Mind you, less negatively, it was still negatively affected, but not by as much as it was in the same quarter of last year. As to CapEx, it was roughly in the same level as we saw in the same quarter last year.Acquisitions and other investments fell by almost DKK 100 million compared to Q1 last year. And this was because we did not make any major acquisitions this year, while we bought Kosmolet last year.Summing up, the free cash flow came in at a positive DKK 237 million compared to a negative DKK 81 million in the same quarter of last year.Now please turn to the next slide where we will cover the development in our inventories. Now in total, inventories was DKK 153 million higher at the end of the first quarter of this year than at the same time last year. If we look at this, 1/4 of the increase was due to a management decision to increase inventories back in the Christmas quarter to avoid stock situation. That is what we described in the graph as being the existing business increase. 1/3 of the increase was driven by the new webshop facility in Humlebæk, plus the addition of increased inventories at Firtal due to the growing online business and also the small bolt-on acquisition carried out by Firtal.We estimate that the remaining, roughly 40%, of the increase in inventories can be traced back to COVID-19, both directly and indirectly, as we continue to see a mismatch between what we have in stock and what the customers are actually looking for. In addition, we have had to boost our inventories of, what we call, COVID-19 specifically related products, such as hand sanitizers and the latest addition, the face masks.At the risk of sounding like a broken record, I would like to take this opportunity to reiterate that our ambition for this financial year is very clear. We will exit this year with a lower level of inventories than we entered with. And we have actually mobilized the whole organization to make sure that we can fulfill this ambition.With that, I hand the word back to Gregers, who will talk about the strategic progress.

[Gregers Christian Wedell-Wedellsborg]

Thank you, Anders. And please turn to the next slide. This is our overview of the strategy and the 5 tracks that we have in our strategy. And overall, the first quarter of this year has actually strengthened our strategic stance and strategic position. We have seen an increase in our brand rankings compared to all other brands in Denmark, actually the second strongest brand evaluated by the customers in all of Denmark is Matas by now and particularly young shoppers have taken a liking to the Matas brand. And as mentioned, we've also seen very high levels of increase in the customer satisfactions, particularly in matas.dk.Online, we have covered. We're stronger than ever online. As for the stores, we have not done a lot of upgrades, not a lot of work on the stores for obvious reasons in the particular quarter. But as I mentioned, the stores have come back quite spectacularly at the end of the quarter.As for new growth, the bet we made 2.5 years ago on strengthening our position in Health & Wellbeing and the green area really paid off in this quarter because this was obviously what customers demanded of Matas in this particular quarter.I think the most notable thing for this quarter is that we have pulled forward a review of our logistics. We have a good and very efficient or very fast delivery setup at this point, but we will be looking into how we should run our logistics long term and what investments are required to build the future logistics setup for Matas.Please turn to the next slide. As we look ahead, obviously, the headline is insecurity and uncertainty. We don't know what is going to happen. However, we are wiser now than we were at the trading update in May. We do expect some recession, but we have seen no impact into the business at this point. However, this is a recession without precedent. It is a recession that so far has not hurt our business, but other businesses, as you well know, are much more impacted by what is going on in the overall economy.We do expect that online competition is going to heat up. However, we feel that we are well prepared and better prepared actually than ever as a result of what we have learned throughout the quarter.As for the second-wave pandemic, we see this as a risk, of course, to society overall. But as we have just shown for Matas in isolation, we actually have a high degree of resilience and have now, of course, learned from all the things that we did right in the first quarter, but also all the things that we did wrong in the first quarter. So we are better prepared to deal with the ups and downs of a second-wave pandemic.As for opportunities, it has become clear that the fact that people have been staying at home, that they have been shopping locally, staying more in rural areas where we have stores, has been a clear advantage to Matas. We really get the benefit from our broad and national store network at this point. And even seeing stores, that we may have looked at in a slightly different light before corona, performing really, really strongly as a result of this, and I think this speaks to the strength of our model.Obviously, there is an opportunity to accelerate the digital growth. And what we have seen throughout the quarter is that Matas has been capable of winning market share, once again, even with such spectacular growth. In online overall, we have been the winner in the digital area.And then finally, we think that demand for health and personal care is here to stay. There is, for sure, new habits that all of us will take into the future as well. And we see that Matas, to an increasing degree, is perceived as a destination, not only for beauty but also for health.So that is the backdrop for what we're looking to for the rest of the year. There is a lot of speculation, and there has been a lot of speculation about Amazon for years. Now speculation has turned into fact, namely that Amazon has announced that they will open in Sweden. They have said nothing about their plans in Denmark. We do get indications that Denmark is on their road map, but there is no hard fact to tell us whether and when Amazon will arrive in Denmark. However, as we've said many, many times, we have, right from day 1 of this strategy, assumed that Amazon will be part of our future and have tried to act as if they were already here.On this slide, we have compiled all the elements of our strategy to compete effectively with Amazon. We know from looking at other countries that there is a big degree of difference as to how successful Amazon is, and in particular, how successful Amazon is in our part of the market. I will not go through all of this and encourage you to read it. It's summing up some of the things we have talked about over the years. But just highlight that on almost every single of the indicators that we follow to ask ourselves whether we are prepared to meet the composition, the trend is going up. And that actually the COVID experience has further fueled our preparedness. Just one example, we have seen that our operating model can actually handle a rapid shift in demand patterns, both for the categories and, of course, for the channels.So I would highlight that this is all about being the first choice for customers, even in a future with new competition. And we are quite well positioned. We think we will have to address Amazon once they arrived, and -- but we feel that we are better prepared than we have ever been.And I will close off by the financial targets and ambitions for the financial year. For this year, we expect total revenue growth around 6% compared to last year. We also expect underlying revenue given that we have made no new acquisitions to be around 6%. EBITDA margin before special items expected to be around 18%. And CapEx, we have actually made a decision to pull forward some investments in the digital space and our software and also actually to increase our capability to do fast delivery, same-day delivery. So we've pulled forward some investments.As for our financial ambitions towards '22-'23, it remains turnover around DKK 4 billion. And EBITDA margin, before special items, above 18%. Annual CapEx between DKK 80 million and DKK 120 million for the remaining years. And our gearing level, as we mentioned in the trading update in May, remains at 2.5 -- between 2.5 and 3, which is a slight tightening of the gearing compared to earlier.And I will close off by noting the obligatory that this guidance is surrounded by more uncertainty than we have been used to, both in relation to how demand is going to develop, how competition is going to develop and impacts of either recession or a second wave, so increased uncertainty. And also, we should note, again, that we have had some benefits from the competitive situation and the fact that Danes are staying at home in this particular quarter that can't be pulled into the rest of the year.And with that, I will ask you to turn to the next slide, and we will open for questions.

[Operator]

[Operator Instructions] Our first question comes from the line of Magnus Jensen from SEB.

[Magnus Thorstholm Jensen, Senior Equities Analyst]

Congratulations with the strong results. Two questions from my side. First, you mentioned Amazon is going to Sweden, which is well known now, and we don't know the exact timing. But do you expect that to have any kind of impact on your business when they open up in Sweden? Or will that basically be an nonevent for you guys?And then the second question goes to -- you said that you would have -- you have some revenue from these masks that will not give you any profits. Will that have a meaningful impact on your gross margin? Maybe you could comment a bit on that. That was my question for now.

[Gregers Christian Wedell-Wedellsborg]

Yes. As for Amazon in Sweden, Danes already now can go shopping in Sweden, both in the physical world and online. And of course, this depends very much on how Amazon acts in their launch in Sweden and what categories they offer and how they do it and what -- especially what delivery turns to Denmark. So for now, we consider them to be another cross-border actor. And I will remind you that it's not new that you can order goods from outside of Denmark into Denmark. So we don't expect that to be a seismic shift in our competitive situation, but obviously, a slight tightening and a forewarning of what we're going to compete with in the years ahead.As for the gross margin impact of the masks, there will be very limited, but some impact on the gross margin. And we can't say whether it will be offset by other things. But obviously, this particular thing will have a slight drag down on the margin.

[Operator]

And the next question comes from the line of Poul Jessen from Danske Bank.

[Poul Ernst Jessen, Senior Analyst]

I came in a little late to the call. So therefore, you may have addressed it, then I apologize. But coming on the face masks as well. Have you -- since we should all be buying that as the last week mainly, have you seen any impact on add-on sales, meaning that people buy other stuff while they are in the store to buy the masks? That's 1 question.Then more on the longer term, if I calculate on your guidance for this year, you increased your guide some on 5% growth in the last 9 months. If you assume that during the summertime has been quite well in, let's say, 3% to 4% for the second half of the year, is that what you look at also yourself?And then secondly, looking beyond COVID, and that means then 2021, I know it's early days, but could you say something about what decisions -- conclusions are you making yourself on what actually is a normalized performance on the business right now, if it's possible?

[Gregers Christian Wedell-Wedellsborg]

Yes. So let me comment on the masks, and I will comment on '21-'22 as well, and Anders will take the guidance. We see both kinds of customers. We see customers coming in just to get masks and they go out again. That drives traffic, but it drives no additional sales. And we also see customers coming in for masks or coming in for something else and buying masks, but we don't think that it's going to be -- give any kind of meaningful change to the business other than it is right now sustaining the momentum that we have seen in the first quarter. But this obviously is going to be part of everyday life as if you were buying a box of Kleenex. So it's not going to be anything out of the ordinary. Once we have passed these couple of weeks of going out to buy your base supply to the home.As for '21-'22, obviously, we don't give any guidance, but your underlying question, whether is what we are seeing in Q1, just a one-off effect? Clearly, there are one-off effects by the favorable competitive situation that we're in and the fact that Danes will be traveling again eventually. However, and I think that this is really key, there are some things that we have gotten out of this era that will help us through '20-'21 and into the next year. And of course, the very strong position that we have now gained online and the fact that we get new customers that we acquire into the business, the fact that those customers are really pleased with the experience that they have, the fact that we have been really stress testing our operating model and are capable of shifting the business in a matter of weeks to accommodate to radical shifts in demand. Just to give you a few examples, and obviously, maybe the key one, the fact that our Matas brand is stronger than ever, and customer satisfaction is higher than ever because that is what it's all about. So I think there are lasting benefits even into the next couple of years from what we have learned and what we have seen and what we have gained in this quarter. But obviously, there are also one-offs that we will never see again.

[Anders Tormod Skole-Sørensen]

Just remind me, Poul, what exactly was your question around the '20-'21 guidance? I wasn't quite sure what your question was.

[Poul Ernst Jessen, Senior Analyst]

Question was that when I take out the growth you had in the first quarter and then implicitly take for the remaining 3 quarters, then it's about 5% growth, then I assume that the second quarter will be highly supported as well as Danes have stayed at home during summer in July and into early August. And if I track that, then I get a growth for maybe the remainder post summer of 4% or something. Is that what you're looking at?

[Anders Tormod Skole-Sørensen]

We're not going to comment on guidance on a quarter-by-quarter level. But obviously, we are looking into a world where we saw -- and if you cast your mind back, we saw a very strong third quarter, which is obviously the most important quarter last year and that does have some impact on the overall level of the guidance for the whole year as such. But otherwise, I can't comment on specific individual quarters.

[Poul Ernst Jessen, Senior Analyst]

Okay. And then I have 2 others. One is then the Kosmolet acquisition. You say that sales to third-parties is actually down, how are you looking at the Kosmolet? When you acquired it, you said it was to get the control of the pricing and the brand, but also to do external sales. And as this is down, is it developing as you expect? Or do you not have many ambitions for...

[Anders Tormod Skole-Sørensen]

No. I think -- yes, we're talking about Kosmolet now, the brand Nilens Jord. Obviously, one of the areas that was quite hard hit by the COVID-19 pandemic was actually make-up sales. So the products that is at the core of Nilens Jord. And as such, that is what we've seen. And also, that's what we've seen with the Nilens Jord sales outside of the Matas channel. And we do certainly expect that to revert to a more normal situation. So you shouldn't put too much emphasis on that specific quarter because of the specific effects that are related to COVID-19.

[Gregers Christian Wedell-Wedellsborg]

Yes, I would agree. Kosmolet had a one-off bad quarter because the main sales channels outside of Matas is department stores and travel retail, which has obviously not had a great first quarter, but we have seen a rapid recovery of Nilens Jord. So we don't think that there is any negative impact to the business case for the Kosmolet acquisition and our plans to strengthen that brand.

[Poul Ernst Jessen, Senior Analyst]

Okay. And then finally, maybe you can have one up on the delivery cost per transaction that you're doing online, I was just considering if you have an Amazon and people look at the U.S. and others, their distribution costs are much lower than in Denmark, and they have this Prime subscription. So as delivery costs in Denmark, I believe, are fairly much higher than in the U.S., then the advantage or the pricing of Prime subscription should be higher to cover it. So what are actually a delivery cost when you have volume discounts for companies like you and others, when you deliver a package?

[Gregers Christian Wedell-Wedellsborg]

Probably more a question for Amazon than for Matas to decide...

[Poul Ernst Jessen, Senior Analyst]

Yes. But you could tell what your...

[Gregers Christian Wedell-Wedellsborg]

Yes. No, well, I think what we've seen that's significant in the quarter is that, that fulfillment costs online came down in line with volumes growing. And we do expect that delivery costs in and of themselves as the market matures and as demand grows, there will be a downward pressure on delivery costs as well. And I will remind you that we actually have a structural advantage to online pure players because we can do delivery to the store, pick up in-store and the delivery cost to do pick up in-store is much, much lower because we can obviously consolidate a lot of packages, bring it out together with our normal logistics string and have it delivered to the store for customers to pick up. So we actually have an advantage in that particular string. As for the delivery to the home, it's pretty much a market price game. There are things you can do and volume discounts, but we are -- have become a big player, and we believe that we are able to compete in that market as well.

[Operator]

And the next question comes from the line of Aleksander Edemann from Nordea.

[Aleksander Edemann, Associate]

Congratulation on the strong report. I have a few questions. So the first one. So on Slide 4, you say that COVID-19 had a 35% -- or DKK 35 million increase in your revenue. Can you maybe comment on what is that reflecting? Is that the sale of like COVID-19-related products such as hand sanitizers? That would be my first question.

[Gregers Christian Wedell-Wedellsborg]

So it's not as specific as that. It's a best guess estimate just as the DKK 50 million in the Q4 was a best guess estimate as to what is the impact of all the factors put together. So the combination of the fact that we were allowed to keep our stores open in shopping centers while others had to close, the fact that we had limited competition from especially department stores, but we had increased competition from the supermarket sector. So it's all -- it's the cocktail effects of all those things, the fluke demand in hand sanitizer, all those things that are directly COVID-related that we might not expect to see again sometime soon, and we estimate that to be around DKK 35 million. It's not wildly off, but it's not an exact number.

[Aleksander Edemann, Associate]

Okay. So I calculated it to be around 4% on your revenue growth, but I guess it's not only products then. Maybe this is a very difficult question to ask, but what do you expect in your guidance for '20-'21 from this COVID-19? Is it fair to assume that we multiple this 35 by 4 to get the effect on the full year guidance? If you can comment on that?

[Gregers Christian Wedell-Wedellsborg]

I think even if we wanted to comment, I think you should take our comments for nothing because there is so much bumpy road ahead and so many clouds ahead that speculating about '21-'22 is widely premature, even if you're inside the business.

[Aleksander Edemann, Associate]

Okay. It's just small to get an underlying performance for the full year guidance, but...

[Gregers Christian Wedell-Wedellsborg]

We will get back to that -- we don't have that clarity at this point. It would be -- it would not be serious to even try.

[Aleksander Edemann, Associate]

Okay. And then my second question. So in this quarter, you talk about permanent reduction in cost in your store network and also in your headquarter. And I think you say it's about DKK 18 million. Do you expect further cost savings in the coming quarters? Or is this a level we should expect?

[Gregers Christian Wedell-Wedellsborg]

No. Our overall strategy -- and this is really key, our overall strategy is to reduce cost in the parts of the business that are not growing, and this has been equal to the physical stores. And we do that by optimizing the existing operating model, but also by consolidating closing stores, as you've seen over the years. And we do that to free up the resources to invest as much as we can and as wisely as we can into getting the #1 position on digital and grow our business in other ways. And this is an effort that we will continue. It will be part of our future for as long as we can envision to constantly optimize the cost of the parts of the business that are not growing. But as I mentioned, right now, we are actually seeing -- we're very happy that we have stores, small and big stores and stores all around the country.

[Aleksander Edemann, Associate]

Okay. And that leads to my final question for now. So I see you reduce your number of stores by 4 in this quarter compared to Q4. And I guess maybe that's also driving some of your cost savings. What should we expect going forward in this year? Are you also trying to reduce your stores further?

[Gregers Christian Wedell-Wedellsborg]

Yes. So we constantly -- we have taken down our investments in modernizing the stores for reasons that we discussed with the trading update, and we have increased investments in digital. We are constantly on the lookout for opportunities to consolidate stores, to refurbish or expand stores or relocate stores to a more attractive location, but I wouldn't expect any kind of a shift in the level of activity that's part of our running business with a clear trend towards having fewer, bigger and more modern stores at the end of the strategy period.

[Aleksander Edemann, Associate]

Okay. And this level of 4 closed stores in this quarter, is that like a normal, let's say, run rate going forward? Or is it like a one-off?

[Gregers Christian Wedell-Wedellsborg]

So we can't guide on that because it's so much driven by opportunity. Is there a lease that we can get a hold of that's attractive? If there are 5 leases, we will go for that. If there's only one, we will go for that. And right now, with the performance of the stores that we are seeing, obviously, that has taken down our appetite to close stores.

[Aleksander Edemann, Associate]

Okay. Fair enough. And then the last one. In this quarter, your EBITDA margin on matas.dk, you haven't disclosed it, but you did in your full year report. Is it still around the 10%?

[Gregers Christian Wedell-Wedellsborg]

Well, the reason we didn't disclose -- we will talk about that annually. So what we can give you is what I said in the beginning that we have actually seen with volumes growing, we've seen further proof that the model that we have built, the operating model that we built, the business that we're running is actually scaling. So we're getting more profitable as the online business grows.

[Operator]

[Operator Instructions] We have a follow-up question from the line of Magnus Jensen from SEB.

[Magnus Thorstholm Jensen, Senior Equities Analyst]

Yes, 2 questions more from my side. First, on trade payables. It increased quite a lot this quarter, how do you expect that to develop for the rest of the financial year? And maybe also comment on why it has increased so much?And the second one is to your omnichannel customers, who you say typically spend a lot more than a normal customer, and you are at around 400,000, could you say how that number has developed over COVID-19, so basically over Q1?

[Anders Tormod Skole-Sørensen]

I'll take the first one. Regarding trade payables. As you know, there was a somewhat special situation around the end of the year because of COVID-19. So if you look at it in a historical context, trade payables at the end of the last financial year was actually rather on the low side. So what we've seen is basically more or less of a normalization. If you go back a couple of years, you will notice that the numbers are not all that different. So that's how you should look at it more than, say, that it's a big trench change or anything. Otherwise than that, I'm not in the habit of giving specific trade payable forecast on a quarterly basis. And I'm certainly not going to do so at the moment where we still have, we say, very rocky waters that we are in. But it's more to be seen in that context of a normalization than anything else.

[Gregers Christian Wedell-Wedellsborg]

And as for the omnichannel number, it's wise of you to focus on that number because it's really what we hope to be the future of our business is not to talk about the online channel and the physical channel but rather talk about customers and how much customers spend with us overall and even how much customers spend with us over a lifetime of hopefully shopping with Matas. So it is a number we follow very closely, and it is a number that we do all that we can to drive up.We have seen an uptick in that number as online has grown. We have seen an uptick in that number, I believe, by 48% since the same period of last year. And we also see that there are really 2 effects: first, that it is the most loyal Matas customer with the biggest spend on Matas that will convert first into omnichannel, thereby leading us to say, okay, this is -- these are more attractive customers from a spend point of view. But there is also another factor, and I think that's the key one to understand, that is that once a customer starts shopping in both channels when we track that customer behavior from before using the Club Matas data to after they have become an omnichannel customer, they spend more with us. And why is that? It's because the brand is more present to them. It's because they have shifted their online shopping from one of our competitors into the Matas family. There are a number of reasons for that. And obviously, as we become better and better at communicating to that customer based on her preferences, we can grow that number. So it is an absolute key number for us to understand and to drive.

[Operator]

And as there are no further questions, I'll hand it back to the speakers for closing remarks.

[Gregers Christian Wedell-Wedellsborg]

Thank you so much for joining us today and for all your questions. I wish you a less rocky season than the one we have just had. Thank you for joining.

[Operator]

This now concludes our conference call. Thank you all for attending. You may now disconnect your lines.