XXL ASA

OSE:XXL

Earnings Call Transcript 2018-Q2

[Tolle O. R. Groterud, Investor Relations Director]

Good morning, and welcome to the XXL ASA's Results Presentation. My name is Tolle Groterud, and I have the pleasure of guiding you through today's presentation. Our CEO Fredrik Steenbuch and our CFO Krister Pedersen will take you through the results and the key drivers followed by a Q&A session. For media, there will also be an opportunity to perform separate interviews after that.So without further introductions, I turn the floor over to you, Fredrik.

[Fredrik Steenbuch, CEO & MD]

Thank you, Tolle. We fell about NOK 40 million outside estimates. This is NOK 40 million of gross margin, mainly from the Norwegian operations. This is because we have lowered the prices to get top line growth, but also affected by downsizing of the inventory level, with the following less supplier volume bonuses. We got good sales effect, growth of 14% and like-for-like of 3.8%. However, the prices were set too low. It created volume but punished the gross margin. In addition, we have opened 3 new stores in Norway and Sweden and opening price level from these were used in all stores and online in these countries.April and May went okay. June started okay but collapsed. This explains roughly the deviation from the expectations. We are, of course, not satisfied with this quarter.We reached a revenue growth of 14% and a like-for-like growth of 3.8%. E-commerce grew 38%. We had 3 new store openings in Norway, Bryne and Gjøvik; and Sweden, Halmstad. We are capturing growth with many campaigns, and the margins were under pressure. Downsizing on the inventory level also impacted the gross margin negatively, due to lower supply volume bonuses. Gross margin from 40.1% in Q2 '17 to 38.5% in Q2 '18, with a direct impact on the EBITDA margin from 10.3% in Q2 '17 to 7.9% in Q2 '18. Cost control. The OpEx adjusted for establishing Austria of 29.7% in Q2 '18 versus 29.5% in Q2 '17. The deviation is cost of opening new stores in Norway and higher housing costs in Finland, while both Sweden and especially Denmark improved their cost position. E-commerce is now 15% of group sales compared to 12.4% in Q2 '17. We introduced new media systems -- photo media systems. We improved the personalized landing pages on the site. And segmented newsletters are in place, and we are now increasing the use of it.Our new omni-channel solutions are performing well, and we continue to scale on the existing backbone infrastructure in the group by introducing new online site, louds.no, and by signing new sports teams on our pure online-based team sales service.Growth drivers in the quarter. New stores, NOK 200 million. Like-for-like growth, NOK 78 million. Share of growth: like-for-like growth 28%, and new stores is 72%.Growth split by markets. By segments; Norway is up 10.8%, Sweden is up 9.1%, and Finland is up 12% and Denmark is up 61%, giving a group growth of 13.5%. Like-for-like growth; Norway is up 42% -- sorry, 4.2% and Sweden is up 3.9%, Finland is up 6.4%, giving a group growth of 3.8%. And the share of growth by geography, all segments are contributing to the growth and Austria is already at 26%.Gross margin development. We did aggressive campaigns to drive volume, and downsizing of the inventory level impacted the gross margin negatively, which gave lower supplier bonuses -- supplier volume bonuses in the amount of NOK 20 million, resulting in lower gross margin in Norway and Denmark, stable in Sweden and Finland. And the start-up in Austria gives lower margins as planned for.And the high growth from e-commerce gives lower gross margins, but remember that the e-com business has lower OpEx. So group gross margin declined by 1.6 year-on-year. We do not allow our competitors taking market shares. When the market is volatile, we attack. This is a rational way of protecting the business, but yes, we could have spent less money doing so.OpEx development. The group OpEx is up by 0.8 points to 30.6% year-on-year, because of costs of establishing Austria, new store openings, higher housing costs in Finland and some introduction discounts ends -- as they end in Finland, giving an OpEx of 29.7%, excluding Austria. But Sweden improved their OpEx. And higher volume and scale in Denmark improved their OpEx.XXL has a history of controlling and improving their OpEx. Last periods, we have not been able to continue the improvements. I want to inform you that we have done comprehensive actions, a heavy project to get back on track and continue to strengthen our unique position in this area. You can expect ongoing improved OpEx from 2Q '19, and we will inform you more about this at the Q3 presentation.EBITDA development. We reached an EBITDA of NOK 185 million. We have costs of establishing operations in Austria. So NOK 203 million and an EBITDA margin of 9% when excluding for Austria. The lower EBITDA in Norway is due to significantly lower gross margins, mostly because of the aggressive campaigns to capture volumes and then opening new stores, but also downsizing older inventory. Then again better EBITDA improvement in Sweden.I will take this opportunity to address my colleagues in XXL, all 5,200 of them because I know that a lot of you are watching this. It never feels good to not deliver as expected. It doesn't build much of self-confidence, but I will give you a rough estimate. XXL makes more money than our 10, maybe, 15 largest Nordic competitors make in the air combined, and maybe we actually do that in this quarter alone. This is, to me, a clear signal who will win this game, but expectation to us is higher. They are higher, and that is totally fair. We need to keep our strong position. Then we have to do, as we always say in XXL, no matter the results you deliver, you must always improve. So now we strain up, and we deliver what's expected. And if we cannot do it tomorrow, we do it the day after, but we will do it. And I know that the ones that can do this is you.Norway, aggressive campaigns hurt margins. But it gave 11% revenue growth. A like-for-like growth of 4.2%. We opened 2 new stores, Bryne in April and Gjøvik in June. All stores established so far in 2018 will yield significantly lower sales than average sales per store. All figures received are showing a challenging retail market, especially the second part of June. The gross margin decreased from 42.7% in Q2 '17 to 40.4% in Q2 '18 because of aggressive campaigns and opening campaigns and downsizing of the inventory level. The EBITDA margin declined to 18.7% as a direct result of the gross margin reductions and the costs of opening 2 new stores.Sweden improved operations. A revenue growth of 9% year-on-year, a like-for-like growth of 3.9%. We opened a new store, Halmstad in June. It is still a volatile market with a lot of discounts from many players. XXL Sweden showed a stable gross margin of 37.9%. And OpEx improved from 1 -- with 1 point to 29.5% because of better store operations and cost focus and the cost of opening 3 stores in Q2 last year, resulting in an EBITDA of NOK 57 million and a margin of 8.4%.Finland, 12% revenue growth year-on-year. Like-for-like growth of 6.4%. The gross margin declined by 0.2 points to 36.7%. The OpEx is up 0.5 points to 29.1% because of higher housing costs due to the expiry with discount period of several lease agreements. An EBITDA of NOK 33 million and a margin of 7.6%.Market data. Norway, SSB versus XXL. April, market up 1.2 points, XXL up 15.4%. May, market up 2.5%, XXL up 9.1%. Sweden, SCB versus XXL. Market up 12.9% in April and XXL up 18.4%. In May, market up 7.9% and XXL up 9.7%. In Finland, in April, market up 18.7% and XXL up 16%. But in May, the market was down 0.2% and XXL was up 9.4%.Figures for June are expected to show a challenging month for the market. Also, as the second half of June, July continues to be challenging, and it will impact the quarter, as June is the most important month of the quarter. My best guess is that there will be few significant retailers in the Nordic that will remember the end of June or July as a good month.Denmark, solid growth. Revenue growth of 61% year-on-year. More aggressive campaigns created sales volume. The gross margin declined from 33.1% (sic) [ 23.1% ] to 16.5%, including a high share of freight and return costs, but OpEx improved from 37.7% to 26.5% in Q2 '18, that's scale, giving a negative EBITDA of NOK 2 million. XXL has a competitive business model as a pure online player. Denmark has delivered according to plan and is soon on target to reach breakeven figures on EBITDA. Utilizing the existing infrastructure on the group has proven successful. I'll soon show you some market data, measuring also XXL position as a pure player.Austria, increasing perception in the market. It's still in the early establishing phase. We have 3 stores and e-commerce. The first store opened in August 2017. And revenues of NOK 74 million in Q2 '18, equals 26% of the growth contributing to the quarter -- to the group this quarter. We are investing through aggressive campaigns, reaching a gross margin of 31.5%. An OpEx of NOK 41 million based on high marketing spending when ramping up in 2 large cities with limited immediate synergies. The centralized organization in Austria for buying and support. Giving the negative EBITDA of NOK 18 million. XXL will open the store in Graz this autumn. Our talents annually in Austria has begun to drive efficient marketing in Vienna. We had only 2 stores to carry the cost of making marketing for Vienna's 2 million citizens. So we added on some trial and error in marketing. We said to have had 5% to 15% high top line. We needed a third store in Vienna to carry these marketing costs. And I'm very glad to announce that we have signed up for a store in the absolute city center in [indiscernible] Graz shopping mall to open spring '19.It will drive next to nothing in extra marketing costs, and this is the game changer we needed. And it feels deserved after 1.5 years of negotiating. Market data, online traffic. And now I have to bore you because I will read them all. Norway showing Q2 total visits in millions, XXL 7.3 million, intersport 0.5 million visits, sportamore 1.1 million visits, gsport 2.3 million visits. Sweden, XXL 5.8 million visits, intersport 3.1 million, sportamore 3.2 million, stadium 3.9 million and decathlon 0.9 million. In Finland, XXL 3.6 million visits, intersport 1.4 million, sportamore 1.1 million, stadium 1.0 million and budgetsport 0.9 million. In Denmark, where we are a pure online player, xxl.dk 1.2 million visits, intersport 0.4 million, sportamore is the same, sportmaster 1.8 million, sport24 0.8 million. And Austria, a position taken from start-up August last year, XXL 1.3 million visits, intersport 0.7 million, sportsdirect.com 0.6 million and hervis at 1.3 million.XXL is gaining high online traffic in all markets, and these figures need no further comments regarding securing the digital future of XXL.HQ and Logistics, investing in the backbone. An OpEx of NOK 98 million to 4.2% of group sales, NOK 79 million and 3.8% of group sales in Q2 '17. The deviation is a loss of NOK 3 million related to bankruptcy in one of our suppliers, giving an adjusted OpEx of NOK 95 million and 4% of Group sales. We had several new recruitments to central functions, including purchasers, technical system architects and IT resources, which will give longer-term effect in operating quality and efficiency to secure the gross margin and the OpEx and infrastructure investments of NOK 17 million. And XXL continues to invest in the omni-channel model.We are utilizing the omni-channel stock solution. All stock in the group are available for all customers on all platforms at all times. Now we have rolled out to store -- all stores in Norway and Sweden on 3 categories. It is already accounting for around 10% of the total e-commerce revenues. And it's optimizing value chain over time, giving better inventory and local store management; algorithms control gross margins, products, price limits and prioritize which stores to be used. About 50% of products sold today are products to be phased out. This is working. We will roll out in Austria and Finland as well as new categories in second half 2018. Our 80 physical stores are now serving as warehouses in prime locations close to where people live, making all stock available in all channels.We continue to scale on existing infrastructure. Team sales, our game-changing model is pure online based. We have proudly signed up with a leading Swedish and Finnish hockey teams, Djurgården and Jokerit. We have intention of signing 30 teams in total in 2018 in all markets. Four dedicated employees are working on team sales every day, and we are using the existing XXL infrastructure in terms of purchasing and assortment, e-commerce, logistics and support functions. And we are launching louds.no. What's that? We have a history of extending our business areas, all based on our backbone, the logistics, IT, back office, buying, et cetera. And then we have integrated the new elements into the existing systems, although this, we call, XXL. This time, we are testing something that we can call not XXL, still, it's using the backbone of XXL. Industry changing retail environment. We aim to find new business that digitalizes the group. Now we have made a concept within athleisure fashion category, and it will be at least for the first years pure online. Kirsten Jørgensen and her team have created the online site louds.no. And important, at the same time, the louds team and XXL system architects have built a scalable model, which can be used as a platform for any category. It is done, many investments, several million NOKs are taken. louds.no is using the backbone from XXL. The logistics, IT, back office and so on. louds.no has cost advantages that no others start-up company can compete with, still louds has its own identity separated from XXL.We call this category, not XXL because the model can add business from the outside of where XXL operates today, and we will use louds.no as the front-runner to develop this not XXL model. There are additional benefits. By using louds, we can easily test new technology that would need heavy implication being tested on XXL. We have already received the next step, photo technology, it's tested on louds. We have now a headless website giving flexibility to the XXL website tested on louds. We are learning new marketing channels and new ways of addressing customers, being tested on louds. If louds will sell for NOK 5 million or NOK 25 million or more next year, it is not the case. You should expect no short-term impact. We aim to safeguard XXL future by -- in the rapidly changing retail environment, the more digital opportunities the better. And it shows that we have the ability to plan ahead being in the driving seat when this shift is going on.Priorities going forward. We will improve the omni-channel experience. We will open new stores as many as we have to, not as many as we can. We will improve the e-commerce user experience with new technological opportunities. And always focus on cost improvements, and this focus will be increased by the important project mentioned. And we will continue to launch XXL in new markets. And there are no changes in any long-term plans. Saturday, the 4th of July -- 14th of July, needs to say about a journalist in Norwegian Finance newspaper [indiscernible] servicing wrote an article. It is thoughtful, in his terms of what is going on in the retail. The heading is, "no one goes clear", and he says that, "if you believe that the future omni-channel, combination of stores and online. It's a challenge. It's a peak, you believe to be the winner." I might add, you have seen certain changes that have hit retail in the last years. The changes are fundamental and exponential. [indiscernible] changes are much more rapid and most people did foresee. You will see when there are losers, and the losers will be gone. All retail is part of this. Also pure player is a part of this because they will need to go omni, most of them. They will need stores. It is more difficult to make good money while it lost, but it is doable, at least, if you make as much money as the earlier result or your 10 to 15 largest competitors combined. To sum it all up, we are not satisfied with this second quarter, and we are sorry. We had good growth in second quarter, but the gross margin is too low. And we will strengthen our focus in OpEx, and you can expect ongoing improved OpEx from 2019. That's all. Thank you. CFO, Krister.

[Krister Andreas Fiksdal-Pedersen]

Thank you, Fredrik. Well, yes, we're happy about the growth of 14% in the quarter where June was a difficult retail month. Overall, like-for-like was good in our markets, and e-commerce continues to deliver. However, the growth and related campaigns affected the gross margin negatively. The gross margin was also negatively affected by a reduction in inventory level. However, reduced inventory level is positive in the long run and reduced gross margin puts direct pressure on the EBITDA margin as you, of course, understand.The launch in Austria is also lowering the EBITDA for the group, and adjusted for Austria EBITDA is NOK 211 million. Net financials, we have last year NOK 10 million positive effects on currency. This year, we have a NOK 5 million negative effect that explains more than the difference year-over-year. The tax rate is estimated to be 20%, but will probably be slightly below on a full year basis. XXL has now refinanced bank loans with improved terms. The loan structure is flexible in terms of fluctuations between phases and financial needs between countries and currencies. The maturity is 3 years with an extension option of 2 -- additional 2 years. As earlier, the term loan is spread between the countries converted to local currencies. With this currency risk, with this intercompany loans, where tax negotiation on interest is limited and take advantage of lower IBOR than ABOR.Net interest-bearing debt ended at NOK 1,918,000,000 and liquidity reserve of NOK 525 million. Leverage ratio ended at 2.4 by the end of the quarter.Improved working capital contributed to improved operating cash flow. An improved working capital is mainly delivered by reduced inventory level. Inventory per store was down from NOK 40.1 million to NOK 37.3 million. Negative for gross margin for the quarter, but better for the gross margin in the long run. We have still potential to improve further by the end of Q3 this year. The inventory per store should be closer to NOK 35 million. From this, the inventory will vary between seasons.With reduced purchase of goods, the accounts payable decreased as well. Purchase of goods is the main driver to the accounts payable. And then investments in stores and infrastructure was NOK 135 million and close to the same level as last year. There are no changes in the long-term objectives. We have signed 7 new stores for 2018, we'll have 4 in Norway, 1 in Sweden and 2 in Austria. 5 stores have already opened, and there are 2 to go. Investments in infrastructure will be in the same range as last year between NOK 70 million and NOK 90 million. Long-term objectives, like-for-like growth of mid-single digits over time, including e-commerce. Gross margins for Norway low 40s, high 30s in Sweden and between mid- and high 30s in Finland.EBITDA margin at low 20s in Norway, low double-digit in Sweden and high single-digit in Finland. Reaching low double-digit for Sweden will be difficult this year. Mark that new market entries will affect group margins, and there are no changes in the outlook for Austria. As Fredrik mentioned, for third quarter, July is the most important month. So far July has been as challenging as we saw in June. To sum it up, we are not happy about our financial results for the quarter, but we are happy about the performance and continuing growth and taking market shares. Operating expenses will always be on top priority, and we will continue to save costs to secure that we have the most competitive sports retailer both online and offline. E-commerce is a significant growth driver and now 15% of group sales. This share will increase, and we have many ongoing initiatives to secure online and offline and omni-channel growth. I don't mind that we have at least the same EBITDA margin in our e-commerce business as we have in our store business.This is my last presentation with XXL. Tolle Groterud will act as Interim CFO from August and until Stein Eriksen is in place. For me, I'm very proud to be a part of the XXL story, and what a journey it has been. Yes, there have been some demanding quarters, however, the challenges doesn't change XXL from being the strongest and fastest-growing sports retailer in Northern Europe. And it doesn't change the prospect of the company to take shares in the rest of Europe. It doesn't change any of the ongoing initiatives proving the best omni-channel model, and it doesn't change that the player with the lowest cost will win in the long run. Thank you.

[Tolle O. R. Groterud, Investor Relations Director]

Thank you, Krister. Then we open up for questions. First, from the audience present here in Oslo. So please wait for a microphone and we kindly ask you to introduce yourself and limit the question to one question at a time. So please go ahead. Preben?

[Preben Rasch-Olsen]

I have much more than one question, but I can start with one. You keep on talking about the OpEx doing a lot of things to improve the OpEx, not saying so much about the gross margins. Should we expect the gross margin to be -- remain low for several quarters?

[Krister Andreas Fiksdal-Pedersen]

I can't foresee exactly how the market will act, but you can see competitors now having doubled their stock and that could be a challenge. So in the long run, I will say that the only way to win is to take down the cost, so you can have a better EBITDA. So we have to secure the EBITDA by taking down the cost. And we have a project, we will show you in Q3. And I think the -- I think we shall prepare for pressure on the margin, but its retail, we could have done a better job always, but then it might -- could have affected the sales, because I have been doing a better job with the margin. So to answer your question, yes, we prepare for pressure on the margin.

[Preben Rasch-Olsen]

That brings me to question #2. Hope, that's okay. Because you have always been the one with the lowest prices and have kept pretty stable gross margins and now something is changing. Are there new competitors coming on the scene? Have they done better on procurement? Have you lost out on procurement? What are your thoughts on that?

[Fredrik Steenbuch, CEO & MD]

What happens when the market is volatile or a customer is somewhere else than on the radar in the stores, all retailers take the prices down to get rid of the stock, and that's what has happened now again that it just creates a pressured market. There are no changes in the way we work, in the quality we do it at all.

[Preben Rasch-Olsen]

You also decided to lower your inventory in a rather difficult market, is that because you see even more terrible second half, so you just want to get rid of it? Or is it to clean the stocks when everything else is doing...

[Fredrik Steenbuch, CEO & MD]

We are aiming for an average of 35, and we are trying to get there in the best way we can. So that's why we are lowering the stock. We have a quality, and our stock is healthy.

[Tolle O. R. Groterud, Investor Relations Director]

Okay. Next question. Okay. Then there are no more from the audience here in Oslo. So we are ready to take the questions from those of you listening in on the phone. So we currently ask you to introduce yourself and the limit the number of questions to one at a time. I will then call upon the conference host for further introductions.

[Operator]

[Operator Instructions] We have a question coming through from the line of Magnus Råman from Handelsbanken.

[Magnus Råman, Research Analyst]

My first question relates to that you wrote that some season product sales have matured towards the end of Q2. Can you describe, is that due to demand maturing? Or that you were running out of summer season products in inventory?

[Fredrik Steenbuch, CEO & MD]

The summer started really early -- around early May. So we started to sell summer goods already in early May and then you have sort of a certain maturity when you're coming into June because you have sold on summer-related goods also the whole month of May. So that's the reason.

[Magnus Råman, Research Analyst]

So would you say also that your measures to reduce purchase of goods to improve working capital, take down the inventory, that that has -- then affected your sales potential negatively?

[Fredrik Steenbuch, CEO & MD]

No. I think we have had good amounts of summer-related goods. The thing is that we have sold less of our rain gear, outdoor equipment, outdoor clothing and so on, which is more in demand in May and June normally, I would say.

[Magnus Råman, Research Analyst]

Right. And then on current trading, you mentioned here several times that July trading has been equally weak as the end of June, and of course, the lingering hot weather, I guess, is behind this. But if we see this weather continue throughout July and into August, will you be equally aggressive on campaigns to protect sales throughout Q3?

[Fredrik Steenbuch, CEO & MD]

I think the market will force all retailers to do that, then you have to be more prepared and do a better job. So yes.

[Magnus Råman, Research Analyst]

Okay. That's clear. Then on the cost-cutting program, can you give any light on -- I know you say you will outline more in Q3 here, but is it mainly on rents or on stores staffing or on overheads you see potential to save?

[Fredrik Steenbuch, CEO & MD]

It is a much, much broader project than what you have mentioned now. It's in all areas in XXL. So it's a huge project, and it's a part of the total strategy actually, and we will inform you more in Q3. So all those you mentioned, the answer is yes, but it's much, much more than this because we need to continue the journey of improving our OpEx at all times.

[Magnus Råman, Research Analyst]

Okay. I have a final one, perhaps to the CFO on operating cash flow. The other changes post year is up significantly year-on-year, the negative post. Can you describe this a bit more in detail, please?

[Krister Andreas Fiksdal-Pedersen]

Yes. That is currency effects from consolidating the balance sheet. So we have currencies in euro and SEK into NOK when we consolidate the balance sheet and then we had currency effects, which is on the other changes.

[Operator]

The next question comes from the line of Tushar Jain from Goldman Sachs.

[Tushar Jain, Research Analyst]

Just had a question on promotions basically. I'm just trying to understand how you decide the level of promotions in the market, especially in Norway where -- I mean, you're trying to say the market is promotional, but you are the large part of the market and you are gaining more market share in Norway. So just trying to understand how do you decide how deep you want to go in promotional activities? I'm starting to understand why would you take more market share in a highly promotional market environment?

[Fredrik Steenbuch, CEO & MD]

We make sure that we are always having the best prices in the market. And sometimes you take it too far, as we might have done this time. And then you sell a bit more than you expected, but you make -- have a lower gross margin. So we investigate the market, we estimate where the prices are heading, and we try to go just below to make sure that we are the cheapest. So the market decides the prices, but sometimes we are not that good in doing this and the prices are too low and sometimes they also are a bit too high. But mostly they are a bit too low right now.

[Tushar Jain, Research Analyst]

Got it. And the second question, are you seeing any kind of players exiting the market, I mean, clearly, you are making significant amount of more profit than the next 10, 15 players? Are you seeing any major exists happening in the market and in terms of the store-based retailers in the geographies you are in?

[Fredrik Steenbuch, CEO & MD]

Yes, we see local closures monthly, I will say, in all markets. So there are store closings in all markets, yes.

[Operator]

The next question comes from the line of Martin Stenshall from Danske Bank.

[Martin Stenshall, Senior Analyst]

Question regarding your e-commerce. The growth in Q2 was still very high at 38% year-over-year. Could you please comment on what kind of growth pace we should expect for the rest of the year? So maybe comment on what percentage of group sales we maybe could see, let's say, in 2019, right that we can expect?

[Krister Andreas Fiksdal-Pedersen]

I think we have to see this in the context with the like-for-like growth. And having the target of having mid-single-digit like-for-like, the e-commerce is included there. So I don't think that we can predict more precise than that.

[Fredrik Steenbuch, CEO & MD]

But then again we are very happy with the growth. It's very high. It's twice the next competitor we should compare ourselves to, and we are growing approximately 2 points a year and it's -- now it has increased. And we are very happy for the share of e-com of the business. We are not trying to protect our stores. We are trying to build both stores and e-com as big as possible and let e-com grow as much as possible.

[Martin Stenshall, Senior Analyst]

I also got one question regarding the refinancing of the bank facilities. To what extent could we expect lower financial cost going forward on back of this?

[Krister Andreas Fiksdal-Pedersen]

We have a lot of other items in the financial items. So I wouldn't calculate that in your Excel sheets.

[Operator]

The next question comes from the line of Simon Irwin from Crédit Suisse.

[Simon William George Irwin, Director]

Just in terms of the inventory position. Should we assume that the second half will show similar patterns to the first half in terms of lower supply bonuses as you clear through old stock?

[Fredrik Steenbuch, CEO & MD]

I think that most of that effect is taken. So I don't think that we'll have additional effects of the supply bonuses.

[Simon William George Irwin, Director]

Okay. And obviously, we've seen stock getting out of control, I think, a couple of times really in the past few years. How confident should we be that this isn't going to happen again?

[Fredrik Steenbuch, CEO & MD]

We are having much, much more better systems controlling our stock level. But if you have a failure in a season that will give impact on the stock level. Then again -- under normal circumstances, we have very good control on the stocks, much, much better now than before.

[Simon William George Irwin, Director]

And as income continues to grow faster than expectations and omni-channel becomes such an important part of your business, how do the standalone economics of the overall store base look? And are you getting close to having a tail of stores, which are simply uneconomic, if e-com continues to grow at current levels for another year or 2?

[Fredrik Steenbuch, CEO & MD]

We are struggling and fighting very hard to keep the isolated like-for-like in the store positive. And we are not looking at any stores now that should be closed, but every store has to defend its right in the future, and I think it will. And we have also lease contracts that are according to this challenge, and I think we have good control on this one.

[Operator]

We have a follow-up question now from Martin Stenshall.

[Martin Stenshall, Senior Analyst]

I believe in Q1 2018 the share of e-com in Austria was about 20% of sales. Could you please comment on what that figure was in Q2 '18?

[Krister Andreas Fiksdal-Pedersen]

Lower in this quarter, but the reason is that we have opened 3 stores, and we had only 2 in the first quarter at least with full effect. So yes, it is still high.

[Martin Stenshall, Senior Analyst]

Okay. And then second question, could you please provide any comment on the financials regarding team sales? Are there any financials to talk about yet?

[Fredrik Steenbuch, CEO & MD]

No. Only costs to talk about now. So we are in initial phase and we -- I should say, we'll sign up approximately 30 teams. Some of these contracts are -- have been starting to run. But as for now, it's absolutely more cost than income, but it will be different next year.

[Operator]

We have a further follow-up question from the line of Magnus Råman.

[Magnus Råman, Research Analyst]

Yes. On Austria, in Q2, I believe your run rate sales, I guess, you had 3 stores throughout the quarter here and that the annual run rate sales was just over EUR 10 million per store, which then compares to your plan of EUR 12 million. I mean, if sales were to end up long-term, where you are right now, how do you view that would affect your plans? Will that affect your plans on store openings or would you be able to operate on such a level long-term?

[Krister Andreas Fiksdal-Pedersen]

Yes. The EUR 12 million guidance is, of course, not the first year operation, you need the store to be up and running for some years and then take down some local competitors and so on and grow the store by some like-for-like figures in the first couple of years. So that's the reason, and we are also very early in -- it's early days in Austria. And that's it. We think we need broader store base also.

[Operator]

The next question comes from the line of Petter Nyström from ABG.

[Petter Nyström, Lead Analyst]

Two questions from me. First on growth. You have listed your top line by some 25% last 2 years, while the EBITDA now seems to be quite flattish in the same period. How is this affecting your growth strategy and your rollout case?

[Krister Andreas Fiksdal-Pedersen]

We have no change in the growth strategy. So we are aware of the EBITDA being below expectations and below and being flat, but it doesn't change any of the strategy [indiscernible].

[Petter Nyström, Lead Analyst]

Okay. And then a second question. Your gross margin in Q2 was down 1.6% year-over-year, is it possible to quantify roughly the supply bonus effect in Q2 in percent?

[Fredrik Steenbuch, CEO & MD]

The amount is around NOK 20 million.

[Operator]

We have no further questions on the telephone lines so I'll hand the call back to your host.

[Tolle O. R. Groterud, Investor Relations Director]

Okay. Thank you. So that ends our session. Thank you all for participating and wishing you all the best for the summer holidays. Thank you.

[Operator]

Thank you for joining. You may now replace your handsets.