Europris ASA
OSE:EPR
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
63.5
82.05
|
| Price Target |
|
We'll email you a reminder when the closing price reaches NOK.
Choose the stock you wish to monitor with a price alert.
This alert will be permanently deleted.
Europris ASA
You don't have any saved screeners yet
Message to the market today is basically that we had a fantastic quarter. I will say that we had what I could call monster growth on sales, but we have had very good growth all year on the top line. So I was particularly pleased this quarter with also having a very, very good growth on the bottom line. And the retail is what I'd say the ultimate teamwork. So it's a huge credit to the team that we were able to perform at this level, I will come back to the key reasons why. But very, very satisfied. It was one of those quarters where you just got goal in all -- on all aspects of the profit and loss. Yes, we are still -- we have not only cemented, but I think we have strengthened our position as the #1 in Norway in the discount variety retail sector. And as you know, if you read the papers, you think that retail is all dead, but, of course, it's not. There are certain sectors in the retail sector that is doing well. Discount variety retail is obviously one sector. Online is also a sector that is doing well, but of course not growing as much as discount variety retail but it's still doing well. And of course then there are other sectors, which are more in trouble. But retail is not just one unified sector. And we are the #1 in the segment that is growing. And we have had 25 years of consecutive growth and we -- or 26, and we hope that it will be the 27th this year -- or we not only hope, we are pretty sure that it will be, even though we had the most important quarter left of the year. If we took the highlights for the quarter. In particular, we grew by 9.2% in the quarter, total growth; 7.5% like-for-like. Obviously, there was a period in July and early August last year where we had the warm weather and saw lower growth. So comparables was not the toughest in this quarter, but despite that, it was a very, very good quarter. And the most pleasing thing about it is that we really had growth in customers. Many people complain about not having customer growth, we actually have very strong customer growth not just in this quarter, but in all the quarters. So that is very, very pleasing. We also had a positive gross margin, both before and after taking the stocktaking results. And Espen will come back to the stocktaking. But it's good to see that even if you adjust for the stocktaking, it was a very positive development in this quarter. And OpEx is not where we want it to be, but it's under control and within the guideline that we have in previous quarters. So with very good sales growth, stable, slightly growing gross margin and then costs under control, then, of course, it becomes a very nice quarter. As I said on the sales, 9.5%, well above the market, 2.2%. Yes. Basket, it's -- we are growing both in the number of customers, but also in the items. So it's actually -- all the main sort of volume drivers are growing, which is also very pleasing. One of the key reasons -- of course, we had, as I said, low comparables to last year. But one of the key reasons is better execution on the campaigns. We are getting even better on executing our big campaigns and then what I would call our almost flawless transition from summer, late summer season, to what we call the everyday season, which is like August, September, October. So a very, very flawless execution. And a part of the reason for that is the fact that we are now centralizing much more of the control of the volumes all through the value chain so we can actually make that transition much better. So I'm very, very pleased. I've been talking to you about that for 2 years now about how we are centralizing control of the spacing in the store and how we are getting better and better at it. And it's very pleasing to see that we were able to execute a very, very good transition from one season to the other. And this is one of the more sort of -- it's not difficult, but it's -- sometimes you can lose some sales if you're not doing it well. But also, very, very solid execution on the campaigns. Less sold-out, we have better merchandising, more volumes on the big products in the stores and that is also driving growth. We believe also that, that is driving -- we know that, that is also driving customer satisfaction and price perception because customers come into the store and they see one of those fantastic offers on the front page and they actually find the product in the store, too. That is a big part of the strong position we have on price in Norway. Yes, you've seen these figures, the green one here is far above the market, and it should always be. And I think if you look at it in a historic perspective, I think we have never seen -- in the last year, we have had to go back to 2014 to see the same kind of difference between us and the market. And as I've said before, I think it's because we are performing even better than expected, but also that the market is doing worse than expected. So it's the sort of the gap between the market and outperformance has never been higher. And that is, of course, satisfying in a market where retail is sort of going through a transition. I think that there are certain segments and there are certain players that are doing very well, not just us but also some others. And I think that retail is not just one unified sector. It's different segments, some are struggling and some are doing well. This we talked about in the last year in the capital market presentation. This is our 3 focus areas that we've been working on -- with over the last year in order to drive this growth in results. The first one, strengthening the price and cost position. Of course, we are doing a lot of things and we will not go through all the things we are doing in a quarterly presentation. I would, this time, just like to highlight one of them, which is this, as we talked about, the low-rise part of it, the 12-meter high part of it, we opened in May this year. In a couple of -- in a month or 2, we are starting the testing of the operations in the big -- the early testing and then it will be ramped up in Q1, Q2 next year. So by June next year, this high-bay area will be fully operational. And that is, of course, the second phase of our big transition. And then as you know, the third phase is when we do the semiautomatic picking in the low-rise part of the bay area. And that will be started last -- next summer and be finalized by early 2021. And when we are done with all these 3 stages, I think we have the most efficient and automated logistics operations in the sector in Europe actually. So on this aspect, we are then, at least for a short time, we are the best in Europe on this aspect. Of course, there's a lot of other things we need to improve. Yes, so this is what I talked about. You see the racks are in. They are now actually -- the older racks are in, in the high-bay area. But of course, there are some technology and some testing that needs to be done and then we are ramping up next year. But everything so far on-time and on-cost, so there's no red flags. But the critical year is, of course, next year. We also work a lot on the improving the customer experience and that is part of how we can create sales growth. I think this is the fun part of the business that we always have to have a continuous flow of ideas for how we're going to sell more goods and how we're going to present themselves in an even better way in the stores. So we're doing a lot of interesting category things. Some things we'll talk about today, and some things, we will have to come back next quarter where we can talk about it. But there's a lot of different things happening at the moment. One area where we are seeing a very, very good development is in our seasonal offering. I think this spring/summer, if you look at -- on the revenue side, I think we were among the winners in the market this spring/summer. I'm very hopeful, I'll come back to that, that we're going to be one of the winners in the Christmas season, too. And I think also you have this everyday season in between, which is also very important. And as I said initially, I think we had almost a flawless transition from summer, late summer, to this everyday season where we are focusing more on the consumables and sort of everyday products that people need to stock up at home. And a very, very good transition and a very good optimization of what kind of products should we have and where should we have them. And the beauty of centralized control is that you are getting better and better data and you can analyze that data and you can optimize your operation. If you don't have a centralized control, you don't actually know what happened. Maybe they did what you said, but maybe they didn't. But when you have a centralized control, you can actually use the big numbers and optimize all the time. And even if this was a flawless transition and a very good seasonal performance, I still think we can do much better. But this is the beauty of centralized control. We also do a lot of things to drive customer growth. The direct mails, not just the physical direct mails that we have here, but also, of course, online and on the newsletters. We are inviting people to a party, and of course, it has to be a party in 264 stores. And historically, too often, if you came in on a Friday like today, maybe the store was sold out. Now we are actually diligently measuring the stores on sale per 100 customers of all these products and really focusing on the variance between the bottom quarter and the top quarter. And everyone who has been doing sports knows that the variation is the potential. As long as there is variation between the best stores and the lowest-performing stores, there's a huge potential. And the funny thing is that we have been working on this now for 1 year. We have raised the performance and everyone's like, oh, the low performers catch up with the high performers. But the point is that, actually, everyone is rising. So the gap between the high performers and the low performers are still very high, which, again, tells me that we still have a further potential in growing it. And we invite to a party every week. So of course, this is big numbers, big volumes, big sales. Yes. We also have the -- even in this digital world, we are still opening stores. We are not opening stores because we want. We are only opening stores if they're profitable. And as I told you before, every year, we do an audit and we go back and check did we actually achieve the targets we set when we decided to open a store. But the economics of the store are very good and the audit afterward shows that we are actually doing well. So the stores are outperforming our expectations. In this quarter, we opened a store in Etne. This is a huge area in Norway, and a lot of people. And we relocated in Notodden. So we have 6 stores opening this year. We have 5 contracts signed for next year and beyond, and after that there will be more. It's just a matter of the landlords coming to us and giving us the attractive offers. We are not going to open if we don't get the right offers. Some of you asked me all the time about City stores. We have 1 City store, it's doing fantastic. I've said no to many City store locations and I'm going to say no to more if we're not getting the right offers. We will be very disciplined. Of course, we will earn money on it, but we want to have the sufficient return on the capital invested. And I think that the market is working in our direction. So we have to be patient and diligent and not just jump on the first contract. Yes. On that -- with that, Espen, I think you can do the financials.
Yes, thank you, Pål. Yes, let's have a look at the numbers for the third quarter. The gross margin came in at 44.3%, up from 43.6% last year. In the quarter, we have booked NOK 33 million in positive calculation differences from the stocktaking in the stores, of which approximately NOK 29 million relates to previous quarters. During the year, we report calculated gross margin. And at the time of the stocktaking, we reversed the accrual for cost of goods sold and we booked all the invoices and the change in the inventory. And then we see that we have a calculation difference on the price, which basically means that we have reported a slightly too low margin during the last 4 quarters. So the cost prices actually came in a little bit lower than what we calculated. Adjusted for the stocktaking, the gross margin was 42.6%, up from 42% last year. So also the underlying gross margin has increased and this is basically due to improvements in the campaign management. But also that we see a positive shift in the sales mix towards higher-margin categories. When we look at operating expenses, that was 26.5% of sales. Adjusted for the IFRS 16 effect, it was 34.4%, a reduction from last year's 34.8%. We've seen very high growth in the quarter, volume-driven, and we're very pleased to see that the stores has managed to handle this growth without adding additional cost accordingly in the stores. So it's done a very good job in the stores on controlling the cost base. We still see an increase in the number of directly operated stores, which drives the OpEx ratio, especially the franchise takeovers we are doing that increases the OpEx-to-sales ratio. Last quarter, we talked a lot about the extra OpEx in relation to the high fill rate at the central warehouse. This quarter, that number was limited to NOK 5 million. I'll give some more details on what we are doing on the capacity constraints that we have suffered from. Basically, we can say that the capacity constraints are temporarily resolved. Through that, we have increased the warehouse capacity. So basically, we have bought us time until next summer and the excess inventory we have is mainly seasonal goods, but also some base assortment. But it's not obsolete goods, it's absolutely sellable the next season. And I think the only positive thing I can see from this situation is that we have a lot of garden furniture purchased at low U.S. dollar prices for this season that we can sell next year. But we need to store this throughout the winter and we have a high -- added more capacity. So we will pay some more rent from the fourth quarter. We will have additional rent of NOK 2 million per quarter until end of June next year. Then we will exit the warehouses in Fredrikstad and we have the capacity at the new warehouse in Moss when we have operated -- started operations in the high-bay area. So some extra costs will be for rent in the coming quarters that will be booked as nonrecurring rent. And we are continuously now monitoring the volume we have on stock when we order goods for the coming season. We have done a lot of work to get better tools to improve the accuracy when we forecast the volumes we need for the next season when we do the procurements. And we also worked a lot on timing, on the flow of income and goods. So that is -- we see that we will get a better flow of goods that fits better with operations and sales. And that is critical for us to manage that because we have reduced OpEx effect, but still, the inventory situation needs to be managed and it needs -- it will take a full business cycle to reduce the inventory. So still a lot of work ahead of us, but we're making progress and we have done a lot of good work on improving routines and how we do the sourcing in the company. And we also have implemented a plan to reduce the number of SKUs, which will reduce complexity, and in the end, reduce costs for the company. On EBITDA, adjusted EBITDA was NOK 262 million. Again, adjusted for IFRS 16, the EBITDA was NOK 147 million, up from NOK 119 million last year. It's high profit growth and that is mainly due to the good sales growth, and we have managed to come through on the bottom line as well and the underlying improvement in the gross margin is contributing to that. On the cash flow, I'll comment on the year-to-date figures. Last year, the net working capital was affected by inventory increase at the central warehouse. That was the Christmas goods coming in too early. That has now been improved slightly. We see now that with the Christmas goods have come in, in a slight better pattern than last year. So the inventory increase is not that high this year. On the investment side, we spent some more on the investment this year in the new warehouse and also the new head office. And the total net change in cash is negative NOK 400 million versus negative NOK 489 million last year. So it's an improvement in the cash flow over the year. We have a solid cash position, and at the end of the third quarter, the cash and liquidity reserves were NOK 463 million. Pål, I think that's the numbers.
Yes. Yes, the outlook. As we saw -- talked about, I mean I think that we demonstrated a very, very, very good quarter. It strengthened our position as the #1 discount variety retail store in Norway. We have a very competitive price position with the sourcing relationship we have with Tokmanni and ÖoB, which is going very well and progressing very well. So that's sort of a positive. We also see that all the efforts we're doing in -- both in the digital world and in the physical world and combining the marketing activities is very beneficial. We have a huge presence, of course, with 264 stores. But we also have quite a huge presence digitally and combining that to drive growth through the physical stores is very, very positive. Healthy pipeline of new stores. And then, of course, you always ask me about -- since we are in -- starting to Q4, some of you will always ask me about how well we are doing, are you confident about Q4. And I always say -- I always tell you that -- I thought I'd be ahead of you now. So I thought, first of all, the most important part of Q4 is ahead of us, always. October is a small month in Q4. I will say that, so far, growth is okay -- sales growth is okay. Gross margin is very good. We have done some deliberate things in the campaigns in early October where we sort of changed to a more sort of profitable campaign mix and that -- so we succeeded with that. So we have a good start. But of course, as I said, the big weeks in the end of November, early December is, by far, outpassing the small weeks in October. So we are progressing well. But I am actually very satisfied with the quarter, but even more satisfied with what Espen talked about. The work that is being done to streamline the processes and the systems and the routines to make sure that we get a better control of how we order goods. And in that process, we are also streamlining all parts of the value chain in the company. And that is even more pleasing actually in this quarter than the quarterly results, which is backward looking. I think we will benefit a lot from the challenge that we had in the first half from strengthening and streamlining and structuring our processes internally. And that is one of the benefits of Europris, the culture at Europris. You really take those challenges head on and you improve your basic operation. And I think in the end, we will come out strengthened. So that's maybe more exciting than the figures. And the figures were quite exciting, too. So a good quarter, I'm very proud of the team and the things we've done. Any questions?
Yes, there are. Microphone.
Could you please tell us a little bit about the development in ÖoB? How is the sales growth going and the EBITDA development, operations?
Espen, you want to comment?
Yes. The development in ÖoB is progressing, but not as good as planned. They have sales growth, they have a like-for-like growth this year. But they are not getting the margin improvements that we were looking for. Very basically that they have a business plan to turn around the business cycle from groceries more into special items that will increase the gross margin. And that shift in revenue has not come through yet. So there's still -- the growth is mainly driven by the grocery sector and -- so the margin is not coming through. So year-to-date, the results are, it's positive sales growth, but the bottom line has not improved.
We think actually that's an opportunity. We think there are some of the areas where we are good on seasonal focus and nonfood development. We can benefit from cooperating. It will take time. But we are very positive.
Could you please say something about how the weakening NOK is interesting?
Yes, yes, yes.
Interesting, yes. The margins.
I think it's been a lot noise about the currency in the press also lately and I always like to look at this in a little bit longer perspective. Over the last 12 months, the U.S. dollar strengthened 10% versus the NOK. If you go 4 years back, it strengthened more than 30% in 1 year. And through that period, our margins were stable. And we do hedging of the currency, all purchases in dollars and in euros. We source around 30% of our total volume in the dollars, 13%, 14% in euros. And we hedge everything for 6 months. We do that methodically. We've done that for many years and that has meant that we have managed to keep basically flat margins through this kind of currency movements and we are still very loyal to that concept. And we talk a lot with other in the business. We know that retailers, they do hedging. And at one point, the currency will come through in the market. But it will take some time. And we are hedged until that comes. So we're not that worried about the currency on the margins.
Also remember that the RMB is also weakening versus the dollar. So the supplier -- some of the suppliers in the Far East have -- their cost is, of course, in RMB. So there's also an opportunity to get the better prices. Yes?
Gard Aarvik, Pareto. You're saying that the customer traffic is growing. Could you comment on the type of customer that is? Is it the same customer, the same old Europris customer? Or is it a new, call it, shift towards another customer group?
Things are -- we have 31 million customers a year. I wouldn't say that they did a dramatic shift. I always use my own mother as an example. She doesn't dramatically change her habits during the year. So I think it's, in general, you can say it's the same type of customers. What I do think is that if you read the papers, people get a little bit uncertain. There's a lot of uncertainty in the world. I think that we have seen that there's a lot of uncertainty. We saw it in the western part of Norway when they had the oil crisis in 2014, that people are getting a little bit more sort of reflecting on however they can save money and maybe get a little bit of a cushion for a rainy day. And I think, in general, that's good for concepts like us and the discount variety retail sector that people are getting a little bit worried and they think that, okay, maybe I should take that extra 100 meters to get to a Europris store to save some money for a rainy day. So I think in general, the trend is that people are getting a little bit more price conscious and focused on saving. But no dramatic change in the mix of our customers.
Eirik, Carnegie. Rusta just opened a new store on your home turf in Fredrikstad.
I can see from my office.
Yes. Allegedly 1,000 people queued up before opening. How are the kind of specialized competitors -- you're saying market is growing 1.3%, Rusta, Biltema, Jula, are they at around 1.3%? Or are they closer to you guys?
You have to ask Rusta, Biltema and Jula. If you look at the sector in -- first of all, I invited the CEO of Rusta to -- for a coffee, but he didn't have time. But anyway, I think that if you look at the discount variety retail sector, we have SSB figures. You can see that, that is also growing. But actually, which I think is very pleasing, is that we, as the #1 in percentage, should have difficulty growing more than the average. We are growing more than the discount variety retail sector on average. I don't know about Rusta, Jula or Biltema. Obviously, they're growing from very low figures to a little bit more, some of them. But I think that there's a lot of good players in the discount variety retail sector. We are not really worried about them. Maybe I'm very often next to them. And as I said before, I think we are not really competing against each other. This is a big difference between us and the grocery sector or the sports sector. We do not have a one-to-one competitor. You can go into Rusta, Biltema, Jula and Europris. And this is the benefit -- our biggest competition is the laziness of people, that people don't bother saving some money to go to Europris, that they buy somewhere else at a full price chain. So I think the entire sector is doing well. I hope and I think, at least it looks from the average figures, but not as good as us at the moment.
Markus, Kepler Cheuvreux. So a bit on prices going forward because, of course, the NOK is weakening and that will come -- spill over to prices at some point. And how has that been so far this year? How is volume versus prices so far this year? And when do you see this kind of Norwegian kroner being pushed over to the consumer next year because, at some point, that will happen. Your reflections on that?
We have a very healthy growth so far this year. It's mainly driven by customer growth but also the basket has increased. The slight increase in the number of articles per customer and an even smaller increase in the average price. We talked about less than 0.5 percent point in the increase in price per item so far this year. And we live for low prices, so we will not be the first one to increase prices. We will follow the market and make sure that we are competitive.
And just another question. On online, of course, it's a very low percentage. But can you give any flavor on how it is progressing? And -- yes.
Online sales, I mean, is growing but in percent it doesn't make sense because it's from low figures. That's one of those areas where I'm actually also very pleased with the progress in the quarter without you actually being able to see anything in the figures, which is we are launching a new version of this software that we're using. It will dramatically improve our sort of the way we present ourselves to the customers. We will also move the picking of the online operations from the biggest store to the central warehouse, to the mezzanine on the central warehouse next year. That will increase the availability and the assortment of the products being able to offer online. We see that, I would say, 90-plus percent of the sales online is click & collect. If you ask customers, they would like to shop online, but they would also like to get it immediately and they don't mind going into the store to pick it up. They just want to make sure that they get it. And of course, with 264 stores all over Norway, we are fantastically positioned to utilize that potential. So I'm very bullish on online growth in the years to come. I think that we have a huge potential there and we have just started tapping it.
Customer data, to what extent is that relevant for your category? And if it is important, how can you improve collection of such data?
I think this is also one of the areas, which is quite exciting with the new technology. We are actually very concerned about owning our own data. So that's why we are actually pooling data internally and making sure that we don't outsource the data to someone else, third-party providers. With the data we have now, we are starting to accumulate data so that we can actually see, for example, on the campaigns, which one, who buys one of those products here are the most profitable customers. Who are the bargain hunters who you don't earn money on? Because we don't really want to give away one of those products to a bargain hunter who only picks this. Over long term, we want to give it to our most loyal customers. And that kind of data, we are starting to accumulate and starting to use in the optimization of the campaigns. So I think we are in the early phases of a huge shift, but you get much more analytical. Before, you really use your common sense and your intuition and your sort of experience. Now, fact speaks everything. You see it in a centralized control of the spacing in the store, but you also see it in the campaigns, but also in the category development. For example, if I'm responsible for personal care, I'm very concerned about, which one are my most profitable customers? What are they buying, and what is the biggest difference between the least profitable customers I have in my category? Those kind of data we are now getting more and more data on and we can use it to drive category development, too. So we are -- I would say, we're at the embryonic stage of something very exciting.
Yes. I have a question on your offering to business clients. I saw you have a major catalog for Christmas presents this year. And I was wondering how -- what's your ambition on this area going into Q4? And how much of your revenues are from this channel today?
It's -- we don't disclose figures on the -- exact figures on the same. It's growing very nicely. Monday evening, I actually met what we call the [Foreign Language], calling staff. We actually gathered people that is going to call from -- all over the country, who's going to call local businesses to sell these products in the catalog. Some of the products in the catalog were already sold out actually, which is unfortunate. But that's what happens when you grow. I think it's a segment that is also potential. We are targeting the small business-to-business customer, not the big ones, not the departments or the big tenders. We are targeting the small kindergarten schools, small businesses. Next year, we will launch also a bit an online offering there because that's one of the big things lacking. So we are growing double digits already in a physical sort of world. But I think the potential is much bigger in the online. Because a lot of business customer, they don't want to come to the store and get the products. They want it delivered to their -- to work and they're willing to pay for it. So I think there's a potential there. But in the bigger things, it's not huge, but it's a nice growing segment. There was a question here. Yes.
Yes. So as a follow-up on the customers. You do not have a loyalty program, do you?
We have a loyalty program. Yes. So we have 2 things. We have a loyalty program. So we have now 3 -- around 300,000 people who subscribe -- who is MER members. So that's part of it. And for some of them, we are also getting their banking data so that we can actually follow the transaction and we can give them specialized offers. But we also have a system for analyzing all the different customers even if they're anonymous so that we can accumulate that kind of insight that I talked about before. So we have 2 ways: both the identified customers, GDPR-proof and the anonymous customers. And both is very valuable to us. There's a question here. Yes.
[indiscernible]. Can you shed some more light on the quality and composition of the inventory?
Yes, I can say that the inventory is actually more healthy now than it was 12 months ago. As part of preparation for moving to Moss, to the new warehouse, we have done a huge work on reducing the stock of old items at the central warehouse. So that stock has been more than cut by 50% over the last 12 months. So the inventory is healthy, absolutely. So there's no obsolete issues with the inventory. So we are very satisfied with that. Also in the stores, we see a reduction in the old stock items.
Regarding the ÖoB, is the option expiring this December or when?
The option is expiring -- or it starts when 2019 results are delivered and then we'll have a 6-month period. So probably in Q3 next year, we will decide on whether to exercise the option.
Last question on the financing costs. Have you been able to refinance it on anything to lower the cost of finance?
We are in the process of refinancing at the moment. We have received committed offers from the bank group and we are now in the process of selecting the banks we will work with. We expect to have the refinancing closed by the end of the year.
[indiscernible] a few questions. First on the dispute on price with the Runsvengruppen. Any key employees in the operations that hold a lot of shares in Runsven that might be offended if you are not -- if they are not satisfied with the price you have given?
No. No.
And then a few questions on the change of warehouse. You're giving very detailed cost descriptions of what's going on. But why is the ordinary rent dropping from NOK 52 million to NOK 39 million in '22? What's sort of left in the ordinary rent in '21?
That is the old warehouse at Øra in Fredrikstad we're moving out of.
Okay. So you're not including that in the nonrecurring?
No. Because that's ordinary rent. Because we do operations from there until the start of 2021.
And how much does these numbers you give on the warehouse, how much is that out of the total cost guidance you're giving on the new warehouse? Because you're saying something about the percentage of sales that will drop.
Yes. I will be saying that we will reduce -- when -- this is transition period right now where actually the cost will increase in the coming years and then it will be reduced after 2022 when we have exited all the old warehouses. And we said after that, we will have a reduction in OpEx to sales by 0.75 to 1.25 percent points. We have not disclosed details what that consists of, how much is rent, how much is personnel cost and how much is distribution cost. But all those cost elements will be impacted by the cost reduction. And you could -- basically, you can see on the ordinary rent, you see the levels in the presentation and in the report what we have in -- as ordinary rent in 2018, 2019. And then you can see the rent coming through in 2022. As you see, it's a significant reduction in the rent.
We are in the middle of a huge transition from, I would say, average to best in Europe on the logistical side.
I have a few questions from the web. First from Ole Martin Westgaard at DNB. Which categories drive the better margin in Q3? And how is your private label developing?
On the first one, it's home and kitchen that has got above average growth and that is driving the market -- not the market, the margin. On the private label, that is growing and it's growing above average.
We have a lot of exciting things on private label. We want our private labels to be brands, not just private labels. We are a house of brands and we are doing a lot of interesting things in that area. And that -- this all that we see in the figures, that is growing healthy.
Thank you. Next question from Tushar at Goldman Sachs. Can you please comment on the benefits you are getting from the joint purchasing agreement with Tokmanni and will it increase next year?
We haven't disclosed the figures for sort of quarter by quarter. But we have sort of given the long-term guidance for the figures and we still think that, that is realistic. So as I said, that is progressing, even though the results in Runsven is not 100% delivered as expected there. The sourcing relationship, especially with both ÖoB, but also with Tokmanni, is going very well. So the cooperation is doing well, even though the Runsven figures are not as they -- we would have liked them to be.
Thank you. Last question. Compared to last year, how are you preparing for the Black Friday and Christmas season? Any changes given the current momentum?
We don't care about the current moment. But of course, we are preparing for Christmas. Every time when we go into a new season, we ask ourselves the question, are we better in all the different things we're doing than we were 12 months ago? And I ask the question through the top management team, top 50 leaders 3 weeks ago, are we better, and what specifically are you doing in each department that will make us better? As you know, we had 7% like-for-like last year. So if and when we win the Christmas season this year, I think it will not be because of easy comparables, definitely. But I'm very confident. I -- to be honest, I actually don't look that much at the results. I look more at the operations and the way we perform on the different activities. And the list of things we are doing better this year is long. And as long as the list is long, I'm happy and satisfied and I'm very calm about the Christmas season.
Thank you. No more questions.
Okay. So thank you for coming.