XXL ASA

OSE:XXL

Earnings Call Transcript 2018-Q3

[Tolle O. R. Grøterud]

Good morning, and welcome to the XXL ASA's Results Presentation. My name is Tolle Grøterud and I have the pleasure of guiding you through today's presentation. We have a lot on the agenda today. First, Fredrik Steenbuch will take you through the results and key drivers, followed by a presentation of our strategic ambitions by our CEO, Ulf Bjerknes. Finally, our CFO, Stein Eriksen, will take us through the financial update, ending with the Q&A session. For media, there will be an opportunity to perform separate interviews after that. So without further introductions, I'll turn the floor on to you, Fredrik.

[Fredrik Steenbuch, CEO & MD]

Thank you, Tolle. Highlights Q3 2018. We reached total revenues of NOK 2.5 billion, growth of 4% with negative like-for-like growth of 6%, but e-commerce, with growth of 40%. Share of e-com is now 14.4% of group sales versus 10.6% in Q3 '17. We had 1 new store opening -- Graz in Austria on the 4th of September. The summer months were impacted by limited demand and traffic, while September represented a more normal month. The gross margin is down from 38.7% in Q3 '17 to 36.9% in Q3 '18, mainly because of lower supplier bonuses of around NOK 20 million or 0.7 points on margins. The inventory per store is coming down and the mix effect with high-growth online with lower gross margins. The overall retail market had many discounts and campaigns in the summer months as a result of everyone fighting harder for the customers. Cost control. The OpEx is up from 28.3% to 29.3%, driven by negative like-for-like growth. Norway and Sweden had negative cost leverage in the stores, while Finland, Denmark and Austria improved their OpEx. An EBITDA of NOK 190 million, down from NOK 252 million in Q3 '17, mainly due to lower sales in the summer months and less supplier bonuses received. Our new omni-channel solutions are performing well. New digital initiatives. Our omni-channel stock solution further rolled out and implemented in all stores and categories in Norway, Sweden and Austria. Finland is next in Q4 '18. This is optimizing the value chain over time and has become an important part of our online. We have more efficient payment solutions by introducing Klarna Instore, providing ability to pay by the mobile phone with credit as an add-on possibility. New pickup services in store to be tested out, giving high degree of self-service. We are doing extensive AB testing on the front-end and the landing pages, now also using louds.no as a test site as well. We are doing a pilot of personalized pages based on navigation behavior. It's fully automated and cookie-based, improving relevancy and customer experience. This, on top of, and also providing an online growth of 40%. Growth drivers in the quarter. The growth is driven by new stores, partly offset by negative like-for-like growth. Growth by geographies. Norway is stable revenues; Sweden, down NOK 50 million, but currency driven. In SEK, Sweden is down some NOK 10 million. So NOK 40 million out of NOK 50 million is driven by currency. It is solid growth in Finland, Denmark and Austria. Growth split by markets. Growth by segments: Norway and Sweden are close to flat; Finland, 13%; Denmark, 54%, giving group growth of 3.6%. The like-for-like growth has not been satisfactory. Then again, we expect most of the decline to be caused by the markets and the very challenging summer season this year and not by our operational skills. Norway down 6.7%, Sweden down 7.2% and Finland up 3%, and the group at minus 6.2%. Gross margin development. The group gross margin declined by 1.8% -- 1.8 points year-on-year, lower supplier bonuses received of around NOK 20 million or 0.7 points on margins. Again, this is a direct effect of our efforts to lower the inventory per store, but also caused by the negative mix effect with high-growth online with lower gross margins. Then again, I'll remember -- remind you that the EBITDA for our online division is a bit higher than for the group, overall -- and overall retail market with many discounts and campaign in the summer months. OpEx development. Group OpEx is up by 1.0 points to 29.3% year-on-year, driven by the negative like-for-like growth of 6.2%. Norway and Sweden had negative cost leverage in the stores. But Finland, Denmark and Austria improved their OpEx. We had many cost initiatives and they adjusted their operations for the difficult summer season by more flexible personnel planning and less marketing activities, which is unusual for us. The last one. We think that this was the right strategy, although we might have held back a bit too long giving away some top line in September. But all in all, it provided good cost control. EBITDA development. We reached an EBITDA of NOK 190 million due to lower EBITDA in Norway because of negative like-for-like growth and lower gross margin. Sweden impacted by lower gross margin, but they managed to keep the OpEx stable. Finland with improvements despite lower gross margin, improving cost efficiency. Norway. It was a tough summer market. Stable revenues of NOK 1.217 billion. Negative like-for-like growth of 6.7%. But you should note that the new stores in [ Aheim are now ] Gjøvik and Bryne, is cannibalizing on several other stores. Though adjusted like-for-like is not minus 6.7%, but minus 5.2%. Then again, the market decline is the main reason. Sweden. High volatility in the market. The negative revenue growth of 1.4% year-on-year in local currency, like-for-like growth down 7.2% in local currency. It's still a volatile market with a lot of discounts from many players. The gross margins declined by 1.9 points year-on-year. Lower amount of supplier volume bonuses hit with around NOK 7 million, which equals 0.9 points, also caused by the mix effect from the strong online growth with lower margins versus negative like-for-like growth in the stores. As in Norway, we scaled on personnel and marketing costs. It was the right thing to do, but it might have lasted a bit too long. The Swedish market stands out with many similar campaigns and discounts in market. And the OpEx stands out stable at 26.2%, and that's well done under this condition. The costs were adjusted through a difficult market. It may have impacted the like-for-like growth, but all in all, the right decision, giving an EBITDA of NOK 76 million and a margin of 10.5%. Finland, driving the market. 13% revenue growth year-on-year in local currency. Like-for-like growth, up 3% in local currency, driven by solid growth from e-commerce. The gross margin declined by 1.4 points to 34.6%. Lower amount of supplier volume bonuses, again, of around NOK 3 million, which equals 1.0 points. And the mix effect from strong growth online on lower margins than in the stores. The OpEx is down from 28.7% to 26.2% year-on-year despite the negative like-for-like growth in the stores, improving cost efficiency and focus over time, resulting in an EBITDA of NOK 37 million and a margin of 8.4%. Market data. July and August. Market figure for September is not disclosed yet. In Norway, SSB versus XXL. In July, the market was down 3.9% and XXL down 2.2%. In August, the market was up 0.2% and XXL down 0.6%. In Sweden, SCB versus XXL monthly growth. The market is up 0.1% and XXL is down 4%. In August, the market is up 13.1% and XXL only up 3.7%. But you should note that the Swedish sporting goods market is more fashion driven and clothing was up 1% in August and shoes down 5.8%. So it makes the market figures difficult to read. Finland. TMA versus XXL. Market down 0.2%, XXL up 11.5%. August, market down 1.6% and XXL up 13.1%. Denmark with strong growth. Revenue growth of 54% year-on-year in local currency, more aggressive campaigns to take volume. The gross margins declined from 21.5% to 16.9% year-on-year. It's influenced by high share of freight and return costs. Sales mix effect: higher average order value with lower margins. The OpEx, however, improved from 35.8% in Q3 '17 to 25.7% in Q3 '18, giving a negative EBITDA of NOK 2 million. XXL now has a competitive business model in Denmark. Denmark has delivered according to plan and is soon on target to reach breakeven figures on EBITDA. Utilizing the existing infrastructure in the group has proven successful. Austria, first year in operation. We're still in the early establishing phase. We now have 4 stores and e-commerce. We opened a new store Graz on the 4 September. Revenues of NOK 99 million in Q3 '18, equals 4% of the group revenues this quarter. We see an increasing perception in the market by attracting customers with campaigns and high marketing spending. The gross margin of 28.9% and OpEx of NOK 45 million. We used high marketing spending when ramping up in 3 large cities and we have limited immediate synergies. The store in Graz carried full cost in Q3 '18, but only a month with sales. We have a centralized organization in Austria for buying and support. And the logistics and support functions within the group are working efficiently, giving a negative EBITDA of NOK 16 million. As you know, XXL has signed a third store in Vienna for opening in Spring 2019 and this is an important milestone for synergies and scale for the Austrian operation. Market data. We worked many years digitalizing XXL to succeed both online and off-line. These figures shows that we are on track. We do understand the new retail world. Maybe I'll bore you a bit, but I will.. Norway. XXL 8.1 million. It's total visits in millions in the quarter. Intersport 0.5 million, sportamore 1.2 and gsport 2.5 million. In Sweden, XXL 5.8 million; intersport, sportamore, stadium in the area of 3% to 4% (sic) [ 3 to 4 million ]. And decathlon at 1.2% (sic) [ 1.2 million ]. Finland. XXL 3.6 million; intersport, sportamore, stadium and budgetsport in the area of 1% (sic) [ 1 million ]. In Denmark where we are a pure online player, visits in millions: XXL 0.9 million, intersport 0.6 million, sportamore 0.5 million and sportmaster 1.9 million. sport24, 0.9 million. And Austria, this position is taken from startup August last year. XXL, 0.9 million, intersport, 0.8 million, sportsdirect 0.6 million and Hervis at 1.3 million. XXL are gaining high online traffic shares 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 102 million to 4.1% of group sales versus NOK 95 million and 3.9% of group sales in Q3 '17, caused by the lower sales than expected in summer months and the increased cost is related to several new recruitments to central functions, including purchasers, technical system architects and IT resources. Year-to-date we have infrastructure investments of NOK 50 million. And we will continue to invest in the omni-channel model. I'm leaving the position of CEO for Mr. Ulf Bjerknes. I have been building the retail chains for the last 25 years in 7 countries. That's enough. I no longer have the motivation to keep on like this. I'll miss the brilliant but annoying questions and comments from our researching journalists and their ability to steer people's minds in my every day. You have really made me feel alive. I love you, guys. I'll miss the challenges and learnings from the analysts. I love you, too. I will not miss airports, hotel rooms or my suitcase, but also seriously I will not miss the legal price cartel, the fixed consumer prices of the European sporting business and their direct and indirect misuse of market position to avoid competition all to the disadvantage of the European consumer and all what EU is founded for. But I'm sure that all other guys will keep on fighting and in the end the good guys will win and the bad guys will be outed. And their brands will be treated accordingly by the consumers. Maybe this would a nice topic on today's call. I'll stay in the company. As of 1st of December, I will work on changing XXL according to the rapid and fundamental changes going on in retail. I have been CEO for XXL for 11 years, from we were 6 stores in Norway. I know which strings to pull. It does not feel good leaving with a share price as is. XXL are now the market leader in the Nordics, also including the market leadership online. Our growth online is outperforming most pure online competitors. We have 1 year in a new market in the heart of Europe at somewhat higher costs than planned for. But that's fixable. XXL makes more money than the next 15 competitors yearly make combined and we produce that in a quarter. I took on my first job part-time Saturdays and Thursdays in a hardware store, 44 years ago, yes, I'm old, old enough to have seen enough to know that what goes up must come down and vice versa. In most cases, it's just a matter of time and effort. We now see clearly that many of the new players in the market, the pure online players will have challenges being profitable. In the years to come, you will see a lot of retail chains, stores, pure onliners, die. It is this simple. 10 years ago, there were only mostly stores competing. Now in addition a lot of new pure online players are fighting for the same consumers, plus the fact that the stores are fighting themselves with their own online platform. The market size, the consumption is more or less the same. There is not room for everyone anymore.I think that the only the ones with good online position and use of technology and the right balance of stores -- and this is key -- will live through these changes. This will picture the winners. I do think that XXL managed to pull the brakes in due time opening stores in smaller cities. Our strategy of focus on bigger cities than maximizing online growth is obvious. Omni-channel in perfect balance is, in the foreseeable future, the best model. Anyway, the main reason for why XXL will win this game is our unique cost efficiency used for omni-channel and our leading position online. The ongoing changes in retail has affected our EBIT by having the strongest OpEx in the market. I expect that we will handle this retail hurricane as the last man standing. And in the end of this challenging period for retail in general and then several competitors are gone, it will be a much easier and nicer market to operate in. A lot of qualified people have left XXL management in the last years, all for their own different reasons, no one were asked to leave. I have always looked at XXL as the best racecar, and that we have the best racecar drivers you can imagine. But XXL is not a racecar no more. The digital online world has changed XXL into something more advanced, more of a rocket. And to fly a rocket, you do not use racecar drivers, no matter how good. You need astronauts. Looking at the new top management of XXL, they're astronauts, they can fly rockets. And if you did not understand this analogy, you should call 911. The latest change is commercial director Bråten is out to work for Dolphin, the chairman and founder's company. Tom Erik Kjønø returns after 4 years abroad for XXL taking on this role. This is the same role as Tom Erik left when he moved abroad. Tommi Jylhä-Vuorio is back at XXL as Digital Development Director. As most of you will know, Tommi led the successful buildup of XXL online to market leadership. And you might read Luke 15: 11-32. That is not exactly what happened, but it will give you a picture. And more capable people have joined the management in the same period. Later you will meet our new star, CFO Stein Eriksen. And replacing me, Ulf Bjerknes as the CEO. You all know his experienced records as MD for Swix, MD for Rottefella and earlier as CFO in listed companies. Ulf has deep insights in the international sporting goods business. Ulf has been at XXL for 10 months now and in fact being the operational leader for many months. Ulf is, as expected, not typically a second in command kind of person. Nevertheless, we have had a very good transition period. It's been enjoyable and this is the guy. Last quarter, we promised to give you insight in our long-term plans. Ulf will today quite soon inform you about the plan. My part ends here. It has been like a roller coaster: 10% really scary, 20% unpleasant, but 70% really pleasant. So thank you. But most of all, thank you to my 55,200 great colleagues and friends. You are XXL. Thank you. And over to you, Ulf.

[Ulf Bjerknes, Group COO]

Thank you, Fredrik. Well, Fredrik said that he will leave and he's going to have a small office right behind me, and he's not going to leave the company so when we wrote the Board papers for the strategy plan I want to talk to you about, Fredrik was already in Austria looking for sites. So people who think that Fredrik is going to retire, they're completely wrong. And Fredrik has done a fabulous job in XXL. I have been a supplier to the company for 18 years in 3 different companies and Fredrik is definitely not the typical manager. He is completely different, and I think for what he and XXL people have done in the last 10 years, you have to be very untypical management style. It has been a very, very tough world and what they have accomplished from 6 to 81 stores in 10 years is just unbelievable, considering the competition we have out there. So taking over XXL is really for me to continue the same track as Fredrik, and maybe adjusting to the new challenges, but keeping as well as we can, the tribe culture because that is something that XXL and Fredrik has built up and it's -- you have to be on the inside to understand it. Well, I'm going to go into the strategy plan. Last night we got a board acceptance for the new strategy plan, and we are not going to shock you. It's really about continuing what we're doing today but it is going to be much more focused maybe, more structure and we will maybe professionalize a lot of the company. I think that 2018 will be remembered in XXL in a -- as a very unique year, and I think it's going to be remembered for that for 3 reasons. One is that in 2018, we had some of the most extreme seasons I have seen in my whole career in sports. We had the longest winter I have ever seen and we also, it was replaced by a spring break or maybe a month of [ no ] season and then we had a 3-month summer season that was also brand-new to sporting retail. The second reason why 2018 is going to be important is that I think looking 5 years back, I think, we're going to look at '18 as the year when retail [ felt the retailship ] physically inside of the stores. We talked about it for many years that it will come, but I think, very many retailers will agree with me that this is the year where we really felt migration from online to retail. And the last one, of course, is the year when we built the plan for the future with the new management. Before I go and talk to, this is about 10 pages. I'll just summarize in short what the strategy plan is all about. XXL has always been all about growth, top line. We will continue that and that will always be our top line focus. But we will be very aggressive in the years to come when it comes to automation and efficiency in how we run the company. We will try to accelerate even harder what I call soft innovation and consumer experience inside the stores. We hope that the new engine will be e-com and omni. There is no doubt that we will try to make the most efficient OPEX situation in the industry and you will notice that with the new CFO, cash flow and working capital will be put on agenda in a different way in the years to come. In this [slide] first I'll talk a little bit about how we see retail is changing. We want to talk to you a little bit about -- how we want to become an omni champion. Many people are talking about it. We have done it for many years, but we want to work even more on becoming an omni-channel. What is OpEx 25? It's a new buzzword of XXL. We want to talk to you a little bit about our key strategic initiatives. We will talk to you a little bit about store growth versus e-com growth. We will talk to you a little bit about what has happened in Austria and the plans we have to improve the operations. And then we will talk a little bit about working capital. First of all, retail is changing and there is a lot of macro factors out there. But these are the following parameters that are key variables for us when we build our plan. There are other important factors, but these are the most important factors that are the basis when we built this plan. We see a fast migration of traffic and sales from stores to online, that is happening very fast there. I think the best example is that a person that goes into a store has -- 60% of them have spent time online before they go into the stores. That affects the way people behave in the store. We see that online sales will be a large part of our sport retail sales in the future. We -- the way we are building our plan now is that we are preparing ourselves for -- within 5 to 7 years that online could represent up to 40% of all retail sales in sports. It might not happen, but we will definitely prepare ourselves for it. The best competitors that we benchmark against today, they actually have growth 40-plus percent, and those are the ones that we have to compete against in the future. Traditional sports store closings will accelerate and new ones will be introduced. Just in Norway, in the last 8 years, almost 200 stores have closed, that is almost 30% of the store base. And you can just imagine that is more or less the same in the other traditional sports retailer countries. And I think that is just the start because now we have pure players coming forward, but we didn't have those for the last 8 years. We also know that the niche and small pure players will struggle. There is a lot of them out there, almost every privately owned sport shop have today their own e-com store. There will be a huge backlog there and we see that very [ manual ] small, medium-sized pure players are struggling financially just like the traditional retailers. We're pretty sure that the successful pure and omni players will be controlling the retail prices and margin and we will be one of them, maybe we are pushing them too hard, but there will be companies like Amazon and XXL that will be out there and will be controlling these situations. Transparency will put pressure on gross margin. We all know about PriceRunner and instruments like that. That is nothing new. It's been around for the sport industry in the last 5, 6, 7 years. Everybody knows the prices everywhere at all times and if you don't have the lowest prices you will be seen through. Omni-channel players will have to utilize a lower OpEx base. All of our competitors today, they have an OpEx base between 15% and 40% and you can just imagine if everybody buys the same product for the same price and some of the best pure players have OpEx down to 15%. You can just imagine if you don't take that into account and address that when you develop your company further. In this world, there should be some clear ambitions for us. We want to continue strong e-com growth. We want it to be more than 30% of the group sales in 2023. That's an ambition we have. Another one, which is very important when we are going to rebuild our company, we know it's going to be a tough world out there for the stores. So we are preparing our stores for a negative [like-for-like growth but that's not going to be our ambition. We will definitely innovate and improve our stores for them to be a winner. But when we are building our plan for the future, our stores have to survive a very brutal retail world. But we feel that with the buildup of the stores, we are pretty well set. I am going to turn this around because this is all about branding. Then building an omni-channel. This is nothing new. We've been doing omni in XXL for many years and we launched Retail Unity in the spring. We have done a lot of initiatives over the last years. Why omni-channel? Well, we see that, and I think all, even the pure players agree with us that the omni-solution for the customers are the most preferred one for guests in the stores. And we see that moving and migrating the customers from online to the stores makes them really happy and gives them the best experience shopping. Another thing, what is an omni champion? Well, I think there are some real key issues we have to start with. You have to start with a good retail base, a well-run retail base. You have to have a good e-com business that is well developed. You have to have scalability inside the group. You have to have the strong management and you definitely need to start from a low OpEx. And that OpEx has to be able to be reduced. Well, I'm going to talk a little bit about that. We believe that we have a highly scalable omni base. Today, we have 81 identical stores. And they are so identical that if we do 1 test, 1 place, 1 hour and if it works, we know it works in 81 stores or it doesn't work in 81 stores. We have a large customer availability in the stores I think, last year, we had almost 17 million receipts. You can just imagine what we can use that for the future. The e-commerce platform has a high volume. I think we have now about 36 million users. We have invested heavily into omni logistics and robotics. Our stores are rapidly being developed to be used as pickup and return and service points. If you go into the stores when you leave today, you will see the service points now being tested out here at [ ulma ]. And we had the same business culture everywhere. Every one of the XXL people have been trained from scratch. We have never bought another company, we have never bought another culture. Everybody has been trained from our own training centers. So we have a very homogeneous organizational culture. We are also starting with a very low OpEx. Our OpEx today is 30% to 31%. So we feel that, that OpEx -- for many companies, would be very proud that if they had OpEx like that 3 years from now. But being new to the company and seeing the same systems, the same organizational buildup and the same departmental structure everywhere, I see a huge scalability in our OpEx. We have the same IT systems everywhere in every store, every country, every department have the same systems. All 81 stores have built up the same way. We have the same organizational setup. We are sharing similar marketing for e-com and stores. And that will be even more in the future. And we have 1 headquarter function for the whole group. And we also see a huge potential in automation, in logistics and administration. And the last one, do we have a strong enough management? Well, that time will show. We have spent most of this year rebuilding our management. There has been a lot of issues around this, also in the newspapers. I must say being quite a veteran in the industry, I said that last night to myself when I drove home from the board meeting, this is the best management team I ever worked with. I was always been proud of the people I worked with before, but coming to XXL and seeing all the extremely skilled people, I'm quite sure that I cannot get a better team around me for the changes we're going to do. Then also we will work closely with our Chairman in the future when implementing and building this new plan.And you must remember that out of the new management of 9 people, still 8 of them -- 7 of them have been with us for many, many years. So it's not like everything has changed. I feel that we have the contingency in the management that we need. But we also need some fresh blood. And I think some of the new ones can represent the fresh blood and some of the people have been with us for a long time can represent the contingency. Well, I want to talk a little bit about OPEX25. I mean, I've been around in many companies. I think many managers would kill for being at OPEX25 in a traditional company. Not many companies are out there and some of the pure players are maybe down to 15%. We are today around 30%, 31%. Can we get down to 25% through all automations, I think, no problems. It's -- I think, we have the tools inside the company. We may need some top line focus and success, but we -- in 2015, only 3 years ago, we were down at 28%. And if you go further back, we went down to 27%. So we haven't been far away. So why do we have an OpEx project? Well, first and foremost, we know the margin pressure will come. We know that we will attack both on margin and top line. We know that the pure players, many of them today that we compare against and we compete against are not profitable companies today. And eventually many of these will start making money. And we know that they pretty sure will also add onto the price pressure and the margin pressure. And then we also have to adapt the company to falling like-for-like growth in the stores. So no doubt that we need an OpEx project like that. What is OpEx really most about? It's really most about generating growth in the stores. If we don't have growth in top line and we have calculated this, we need minimum 10% top line growth to achieve this additional OpEx 25 some years ahead. How are we going to do that? Well, e-commerce has to and will be focused on to become the big engine in building group revenue. This is where we can build the scale. We will still open a controlled amount of stores, I'll get back to that. So we will still fuel the company with stores. Even worse scenarios years ahead if the e-com is 40%, there still will be 60% of stores and people want to shop physically. We will definitely build revenue scale in the omni-channel platform and utilize all our technological opportunities that we can use. We have Retail Unity. I'll come back to artificial intelligence, how that will boost our top line growth. So there's a lot of opportunities out there. But even if we attack the top line, we have to do a lot with our internal operations. We have to automate and create efficiencies in our company. And there is really 3 very important area, it's a personnel area. 98% of all our people are in the stores. And this is where we have to do all the automation and create efficiencies. And you will notice that there will be -- have to be introduced a lot of new routines for them to be able to have an easier workload. And also we have to bring scale through growth in personnel. When it comes to marketing, I think, here we can use scale. We have to improve the marketing model. We have to be more efficient and we also think that by using CRM in the future, we can create a lot of efficiencies in marketing. Another big area for us that we really have to attack and we need help from the market is the housing costs. Traditional retail today in our company, we have about 7% of all our costs are rental costs. In a traditional retail world, that is okay. The retail picture we see now, I think, for the future, if retail doesn't get the housing cost down between 10% and 20%, the retailers will have huge problems. And that is really a message to the property owners. I don't think here in Scandinavia, they have that prices understanding of what the retailers are going through these days because a lot of migration is coming from the stores to online. And I think most of these contracts and the shopping centers don't take that into account. I think you might not see it in the next year, but within 2 to 5 years, there has to come a big change. When it comes to lease costs for the retailers, if they're going to survive as retailers. And then we have to keep the challenge, all other cost items in the group, but we have a very cost and mind driven challenge identity of the group. So I'm not worried about that. If it's one company who can really work on this, it is XXL. Then I will talk a little bit about our key strategic initiatives. These 7 points up here are things that are in our strategy plan. There is no doubt that the first one is the most important one for us. We have to drive like-for-like growth even if we have to prepare for a tough world, we have to do it. There is a lot of sales initiatives coming in now for e-commerce. One of them is team sales. I think, as I stand here now we have about 18,000 active members and it's less than a year since we launched it. Louds was launched earlier this year very early, and it's developing very nicely. The size of louds is not that important, more interesting is the technological platform we have built that can be used later. We have a pilot running right now with very good results when it comes to personalized customer communication. We're quite excited about that. And then we will of course, to drive the like-for-like growth, we will continue to roll out stores and build stores, but I'll come back to that, how will that be versus e-com growth. Then we will protect the margin. It's too bullish to say that we will increase our margin because the world will be tough in the future, of course, internal ambitions will be to improve it, but most of our ambitions will be to protect it. There is not -- we will improve supply chain by AI and machine learning. There is no doubt that when we install our artificial intelligence system early next year, we will not see much effect of it in '19, but in '20 we will see that effect. And that is really about artificial intelligence will replace our [ software ] in the min-max thinking, which is a very dumb system and it will be replaced by a system and that can think for us. And that is all about sending the right goods to the right place at the right time. I think the best example is that when you get artificial intelligence up and running, we will never send a sled to homes by -- in March. I think that's the best example of that. And if we can spend a lot of time and get the right goods at the right time, in my opinion, that could be one of the biggest boosts to margin and top line because that can replace the Retail Unity, for example, which is a fantastic solution for us right now, but it's a costly solution. Yes, the OPEX25 I talked about that will be an important product, and I think everything we will do in the years to come is all about creating efficiency inside our OpEx. Best in-store omni experience. There is no doubt that we have to improve it. And we hope that you will notice by going in the stores in the years ahead that our stores are improving month-by-month. Right now, we are Version 5, Version 1 where we launched XXL and we are now at Version 4. And we hope that when you see Version 5, you'll see a lot of automation, a lot of modernization of the stores that improves the customer experience. The buying process, here we're talking about artificial intelligence again. So I'm just going to move on. Then improve the Swedish business model. You saw for the third quarter, so they're doing really well. But we see that the Swedish model can be improved even more. So it's like going to be taken very well care of in the strategy plan. There is 3 areas where we want to help the Swedish model to improve their margins and maybe get up to Norwegian, maybe not closer to Norwegian, but they will definitely have an ambition to improve the business model. And it's really 3 areas. It's to give them more local assortment. We will continue store rollout in the Sweden and analyze opportunities. We think there will be up to 6 stores -- new stores in the strategy period of 3 years, and we have to change our marketing focus in Sweden a little bit. First of all is that they're going to increase the marketing spending in Sweden. They will get more money than they have today and then also we will spend maybe more on doing some brand building in Sweden. We see that XXL name is very strong in Norway and Finland. We see that XXL name needs some work in Sweden. It's very well accepted, but it's not that known. So we will work on that. Then customer-driven marketing. I think that might the one of the most important things for us for the future, that is to collect the customer addresses in our databases. Right now, we have more than 2 million customers in our database. When you think that we have 70 million receipts in the stores and 36 million users on e-com, the potential as an omni-channel player is very big. And it will be a lot of focus for us in the next years to collect addresses. In my opinion, that one and focus on e-com business will be the 2 most important drivers for our growth. Growth in new stores and E-commerce. Right now, we have 81 stores -- actually, in early November, we will have 82. So we invite you guys to our opening of stores in [ Stoodle ] in November. So we welcome you, that is going to be -- if you want to see our future store for XXL, we should invite you down there. We'll not tell exactly what date it is but you should definitely go down there. Our plan now the way we have built our strategy plan is that it's a rolling plan. That means that it's a 3-year plan. So right now in our strategy plan, we have 21 openings. That doesn't mean that there will be 21 openings, because we will update the plan every year. Next summer if we see that the e-com business in Denmark, Austria or some of the other countries are working really well, that might stop us from opening stores. So we will be very pragmatic about it, but we will definitely be very careful about opening, but we have to have a plan around it. So when we update the plan and I stand here next year talking to you, it might not be 21 it might only be 10. But that will be -- that is something we're going to be following very fast because if e-com grow as fast as we think or even faster, that can take down the store growth. Or when I update the plan next year, we might even be in a situation where you have the first closing. So there is not really 1 store that I'll say that are sure or unsure for the future. The plan right now is 2 stores in Norway in the strategic areas, 6 in Sweden, 2 in Finland and it's 10 stores in the strategy plan because we think that within 3 years we need to fill up the Austrian market. I'll get a little bit back to Austria. Then Austria. This is the first year of operation. We have had a lot of losses, that is quite normal when you open in a market like that and start with low prices to get the customer acceptance. We opened 2 stores in '17, and now we opened 2 stores in '18 and we also open our e-com sites. There is no doubt that we have had a fantastic acceptance by the guests. I think I saw a quote in Austrian papers that the competition they have defined the XXL introduction to the Austrian market as a success. That's very nice to hear. And we are very happy by the reception of the guests. Fantastic feedback and probably some of you saw the lines in front of the Graz opening, I think. Four hours into the opening, I think, it was still 500 meters of line and there was no doubt that the Austrians have been waiting for that kind of sports store in the Austrian market. They're quite similar to us. But we have done a lot of mistakes the first year. We will be the first one to admit that. On the first line here, I'll just go to the first page here. There is really 3 areas that we have to improve. But there is no doubt that to put it in a [ picturely ] way, it should not have been Bergans in the stores the first year, it should have been Marmot. I mean, we had not enough local understanding of the product assortments the first year, that is fixable. But it's a mistake we made. I -- we had improved marketing. We didn't make mistakes in marketing in Austria, but it has been testing. We have to test how the marketing was working because it was a new market. So we have done a lot of testing the first year in the different areas where we launched the stores. So with now coming up with 4 stores we see that we're hitting the market, we are understanding the guests better. The last one is that, we have seen now going into Austria we didn't train the employees in the XXL way that we should have done. So right now, there is going on what I call a retraining of the employees. Then another thing that will be very important, we'll be a little bit more cynical going ahead. We will do a little bit like the Finnish way when we went into Finland. There will be a short-term focus on store openings in areas where we already have presence. That means that we will not use kind of like the shotgun method. We will try now to go back and fill up Vienna before we go to a new city. [ Miratz ] where we had an opening, that's a 600,000 city. It could come a second store there. We will now try to fill up there because there then we'll move much faster to black numbers. Another thing is that we have introduced to the Austrian market and the property owners in Austria are little bit like the Nordic ones. They don't really understand the challenges we have in retail, but we have now -- we are now talking to the next store owners where we're going to open, up, we have to have different contracts and then we're talking about more flexible contracts, revenue-based contracts because our stores have to live in a very -- in a world where the revenue can fluctuate quite a lot. New stores must deliver financially on lower revenue. That doesn't mean we have an ambition that is high, but we have -- we are working with them to try to understand a very low target. So we're working quite hard on that. Then the existing stores, including city center location in Vienna are expected to have a revenue around NOK 10 million when that store is up and running. Gross margin and EBITDA profile will be as in Sweden over time. And we will launch the omni-channel stock solution in late '18, but it will be up and running. And that is going to be very important because that means that if you are an [ e-commer ] in Austria and you buy a product, we can pick it in Austria and it won't be shipped from Örebro. And that will help quite dramatically the availability of goods in Austria. Austrian management capacity will be used in the German rollout. So when we build now the Austrian management, it will definitely be used for an eventual launch in Germany because there are not that much difference between Germany and Austria product wise, language wise there are a lot of similarities. I think it's much more similarities between Austria and Germany than we ever had between Norway, Sweden -- Norway, Finland or Finland, Sweden. The way we see it now we see a potential in Austria, maybe 10 to 15 stores, depending on the e-com success down there. That can change next year, maybe, if we see that e-com accelerate and we might end up with 7 stores, we don't know. But we'll follow that month to month and year to year. Working capital. Well, I promise to all of you that I'll be quite aggressive on this one. We call it attack the balance sheet. I think with Stein Eriksen coming in and me coming in, we will have a different attitude to our balance sheet. We see -- we know that a lot of analysts have looked at it, and we know what they think and I agree with them. We have to improve the -- it's a little bit fat, put it that way. But there's 2 ways to improve our working capital. One thing is we have to deliver on EBITDA and that is definitely our main target. The other one is there's another way of free capital and that is to attack the balance sheet and free up working capital. And when we improve that cash, there's really 2 areas we would like to use it for. One is allocate for future growth. And it's really 2 areas where we're talking about and that is to invest in new stores or e-com. And e-com can be much wider than just e-com. It could be strategic investments into e-com. That might be a tool we might -- are willing to use to keep the growth that we want to have. Another one is to continue investing into the omni-channel strategy, investing into artificial intelligence is very expensive, investing into RFE, that is very expensive, automated checkout, automated pickup points is a very expensive investment. But they have to be prioritized. Another area which is very important for us is to allocate for shareholders and banks. We will keep our dividend policy, but we also want to improve our covenants. So right now that is at 2.7. And our target here is at 2. And there's really 3 areas that we want to work on in our balance sheet. It is a lot of information. Our working capital is at a relatively high-level and there might be some people in XXL that might say that to us that it is a little bit unfair, but XXL has been really about top line growth. It's unbelievable what engine and focus there is inside XXL to create top line and focus on sales. But we want to turn it a little bit around and also focus on our balance sheet. And there's 3 areas we would like to focus on. It's our inventory. We see that we can do a lot about it when we benchmark against even normal players, they're even better than us in this area. And then we want to have a more active assortment strategy, that's a very fancy word. It's really about [ pail ] analysis, budgets and focus on the daily work, controlling our buying behavior inside the company. And the last one is target to increase number of payment days. And that is really about exploring the instrument that is out there to increase the payment days. It can be supplier negotiations or it could be bank solution that we would like to utilize. In 2018, working capital in percent of sales was 18% and if you guys, you can calculate, I think that's a fair target. That is something where we should be within a certain time. Then as a summary, this is my last one. We see a rapid change in sport retail. We have actually taken the most demanding macro variables we see and we have adjusted those. It might not be 40% e-com sales in 5 to 7 years, but we will definitely adjust to it. We believe that XXL is very well positioned. It's an unbelievable scalable company both up-and-down. We have a bunch of opportunities. I think our board was a little bit scared that we have too many opportunities that we want to attack. It's much better to have too many than too little. We will turn XXL into an omni-channel champion. We have done it for many years, but we will have a definite focus. I hope when I stand here in 3 years you will see that XXL you will maybe say to us, "you guys, you are really the omni-channel, you really play e-com and stores really well together." Then -- XXL is highly scalable. Being a finance guy, to have an OpEx structure like we have is really rare. Most companies, they have historical situation with systems and buy up companies and buy up organization, but here everything is scaled for what we do. We will focus very hard on our working capital. I think that's what we can promise you. There's no doubt that we will put a lot of focus on Sweden. We know that Norway and Finland are doing really well. They need improvements, of course, and Austria will be taken care of. But we are putting a lot of effort together with the Swedish management to improve our position in Sweden. Sweden is a very, very tough market, and it's very different from Norway and Sweden. And they have to understand that. And our mission is black numbers in Austria in 2020. We'll not see it in '19. We need probably after 2 years of really hard work. But we feel that, that is our control. We can do it with the things we have inside our company. So that is really in summary and in brief our strategy plan and then I would like to introduce Stein. When Krister left us earlier this year, we started recruiting and we had a fantastic interest, but I must say Stein being here for 3 weeks coming from Orkla with the benchmark and the things he has to the company has been a fantastic situation. He has been with Orkla for 17 years and he has been with us for 3 weeks. So you are welcome to take over.

[Stein Alexander Eriksen, Group Chief Financial Officer]

Well, thank you very much. Thank you very much, Ulf, and good morning, everybody. Yes, [indiscernible]. So I will now take you through some more details around the financial performance of XXL in the third quarter. First off, the group's P&L. [ For the quarter ] operating revenue of NOK 2.5 billion in the third quarter...

[Operator]

Sorry to interrupt. We can actually hear somebody talking in the background and not hear you. [Technical Difficulty]If we could swap microphones, please, thank you.

[Stein Alexander Eriksen, Group Chief Financial Officer]

Yes, an increase of 4%, all driven by new stores and significant growth in e-com. As Fredrik mentioned, we had negative like-for-like growth of 6% in the quarter. The summer months very impacted by limited amount of traffic, while September represented a more normal sales month. Our e-commerce business has continued strong and solid development with 40% growth in the quarter, however, not enough to cover up for the negative like-for-like growth in our stores. The e-com also dilutes our gross margin since this channel has lower margins compared to our stores. Also, gross margins were lower due to lower supply bonuses related to continued reduction in inventory, especially in Norway. EBITDA was down to NOK 190 million and declined versus last year was mainly explained by lower gross margins together with higher OpEx in Norway and Sweden. However, we saw improvement in Finland, Denmark and Austria. Net financial costs ended up NOK 12 million, which is NOK 11 million behind last year, mainly explained by positive currency effects last year and effective tax rate is estimated to be 20%. So that was the income statement. Let's move on to the balance sheet and cash flow. Improved working capital contributed to improved operating cash flow and the main driver was reduced inventory buildup compared to last year. Inventory per store was down from NOK 39 million to NOK 36.4 million, and we still see we have potential to improve further and aim for a target of NOK 35 million by the end of the year. Reduced purchase of goods also contributed positively to reduced accounts receivable, basically supply bonuses, but also decrease of accounts payable. Investments in stores and infrastructure was NOK 193 million and according to plan. Also, I guess, it's worth mentioning XXL had a dividend payment in the third quarter of NOK 278 million and also executed a share buyback of NOK 50 million. XXL is initiating a new share buyback program in Q4 2018 of up to NOK 50 million. Net interest-bearing debt ended at NOK 2.1 billion, giving a leverage ratio of 2.7x and the liquidity reserve was NOK 414 million by the end of the quarter. So to try to sum up what Ulf talked about, our long-term objectives and let us start with net turnover. XXL aims to open 7 to 10 new stores per year, but as Ulf already said and I'll say -- continue to say this, we will evaluate the trends of the e-com growth compared to the opening of new stores. We expect a group like-for-like growth of single digits and that's including e-com. E-com is growing and is growing fast. XXL expects e-com to be towards 30% of total revenue in 2023, and that means a double of total revenue than what it is today. Gross margin as Ulf mentioned or explained, competition and e-com will continue to put pressure on our margins and our response to that is that we have to lower our OpEx. So really working on our cost base and aiming for an OpEx of 25% in the long term. We expect the group EBITDA margins to be at the same level going forward. Moving on to the country perspective. We expect in the long-term EBITDA margins in Norway to be at low 20s. We maintain our belief in Sweden and expect both Finland and Sweden to be low-double digit margins, while in Denmark and Austria, we aim for high single digits. Then a little about -- little bit about the outlook. We have already mentioned it, but XXL has signed 7 new stores for 2018, 4 in Norway, 1 in Sweden and 2 in Austria. And since we have opened 7 -- we have leased 7 and have opened 6, then you can yourselves calculate that it is 1 to go. And just like Ulf said, [ Stoodle ] in Oslo, Norway. For 2019, we have signed 5 new lease agreements and aim for 7-9 stores in total for 2019. However, as earlier stated, we do evaluate the trend of e-com growth. Investments in infrastructure, IT and training for 2018 is calculated to be between NOK 70 million to NOK 90 million. And then some more words about Austria. We target an average sales per store of about EUR 10 million. We expect the gross margin and EBITDA profile to be as in Sweden. CapEx per store estimated to be EUR 1.7 million to EUR 1.9 million per store. Average payback time 4 to 5 years, including net working capital. And we expect to have around 10 to 15 stores in total, depending on the e-com growth speed. Okay. To sum it all up, we are not pleased with our financial performance in the quarter, despite strong e-com growth now at 14% of sales, our stores experienced difficult retail conditions in Q3, especially in the summer months. EBITDA ended at NOK 190 million, hampered by lower gross margins and negative like-for-like growth in our stores, but still we have good cost control. However, looking forward, and as Ulf presented, XXL is actively adapting its model to meet the ongoing transformation in retail and see many possibilities going forward. Also, we will increase focus on working capital in order to secure both future investments in operations and return to our shareholders. We believe XXL will be highly scalable, omni-based, lowest cost and technology driven and adaptive organization, be the omni-channel champion in sports.

[Fredrik Steenbuch, CEO & MD]

Great. Thank you, Stein. Thank you, Stein. Yes. So we had some [ cost focus ] on the microphone. 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 1 question at a time. So please go ahead.

[Unknown Analyst]

[ Anes Benardes ] from DNB Bank. And I have a question about the weather risk and the total market size. We have these 4 weather seasons driving traffic and if we could see a future weather scenario with a kind of decreased number of seasons, especially thinking about autumn and spring, what kind of effect do you think that will have on the total market size?

[Fredrik Steenbuch, CEO & MD]

I think we have up to now shown an ability to adapt to the market, but it's a good question because if there is no snow, we do not have skis. But if there is snow, we sell running shoes. So I think, we will just adapt to the market. Of course if, yes, it's a good question. I can't foresee that happen [ -- how, as is ], we would adapt to that market.

[Tolle O. R. Grøterud]

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

[Operator]

[Operator Instructions] And we have a couple questions coming through directly. And the first one is from Magnus Råman from Handelsbanken.

[Magnus Råman, Research Analyst]

This is Magnus Råman here. And maybe I should first direct a thank you to Fredrik for all of these years and also send good luck wishes to you, Ulf, and thanks also for good and clear run through the updated strategy here. My first question relates to current trading you mentioned here in the report and also in the presentation that you've seen a normal September month so improved market conditions in September. Do you also see an unchanged view of market conditions from September when you look into Q3 and the climate in October? That's my first.

[Fredrik Steenbuch, CEO & MD]

October is not that important in Q4. What's important in Q4, I guess, your question is more about Q4, actually, is if we get snow or not, because if you look at last year, we had a fantastic winter, started early and that's the main issue for October -- sorry, for Q4, there are other -- that's the answer. You have to wait and see on the weather actually. I have to speak about the weather again.

[Ulf Bjerknes, Group COO]

But we have to also say that we will still continue downsizing the inventory. So you will also in Q4, have elements of lower supplier bonuses. So please take that into account.

[Magnus Råman, Research Analyst]

And will that be in same magnitude as in Q3?

[Ulf Bjerknes, Group COO]

I think that this is a good estimate. Yes.

[Magnus Råman, Research Analyst]

Okay. And then on Austria, I mean, you have lowered your store projections quite a few times now. At the end of last year, you expected 15 to 20 stores and you lowered it to 15 stores early this year and now, you've cut again to 10 to 15 stores and I know you also then, of course, lowered estimated sales per store. And is this affecting your coverage of the central organization costs in this country? And could this also possibly bring forward your rollout plans into the Germany market?

[Fredrik Steenbuch, CEO & MD]

Good question. Last question, Germany, that might happen. I think you should take as a good signal that we talk about fewer stores than more stores because the share of e-com is increasing. So I think, it's a good signal from XXL saying just that. Then, again, the sales per store, I think, it's more of our sales, it's an operational issue and we will fix that. We just need to convert better and get more consumers to the store. So that's fixable.

[Magnus Råman, Research Analyst]

Okay. If I read you right, you do not believe in the lower target, you believe you will be able to fulfill the old targets so to speak on sales to the store?

[Fredrik Steenbuch, CEO & MD]

Yes, in a matter of time, I would believe that, yes.

[Magnus Råman, Research Analyst]

All right. I have 1 final one. I think you mentioned the number of e-commerce users, but I guess I got that numbers -- right, could you repeat your number of active e-commerce users?

[Stein Alexander Eriksen, Group Chief Financial Officer]

It's 36 million in a total year measured quite recently. And that is users. Not unique users. But users.

[Magnus Råman, Research Analyst]

You mean site visits, then, I guess.

[Stein Alexander Eriksen, Group Chief Financial Officer]

Yes.

[Magnus Råman, Research Analyst]

But if you would look at active customers, I mean, defined as having made at least 1 purchase in the last 12 months, do you have a number there for a number of active e-commerce customers?

[Fredrik Steenbuch, CEO & MD]

I don't have the number.

[Stein Alexander Eriksen, Group Chief Financial Officer]

We don't have it here.

[Magnus Råman, Research Analyst]

Okay. Maybe we can get it later.

[Operator]

We do have one question more. [Operator Instructions] The next question comes from Tushar Jain from Goldman Sachs.

[Tushar Jain, Research Analyst]

Over the next 4, 5 years, I just want to understand do you see a significant change in your product mix as well, i.e. introducing more fashion products within the XXL format? And if you can elaborate, what do you mean by local assortment, I think, it will be more fashionable local brands that you want to bring onboard. If you can give a little more color, that's the first question.

[Operator]

I'm sorry, Tushar, could you just repeat the question from the beginning? The first bit. Thank you.

[Tushar Jain, Research Analyst]

I just wanted to understand do you see a significant change in the product mix over the next 4 to 5 years, i.e. bringing more fashion content as part of the total product mix. Just trying to understand what will be the focus on how do you increase the inventory turn in your stores?

[Fredrik Steenbuch, CEO & MD]

I think we will stick to the core concept at first. And I think we will develop the core concept and if the consumer ask for more fashionable products, they will have it. But I don't see that coming that we would change XXL in that direction, no, but at all times we will develop our different segments and improve them. We have experience in the louds.no in that area, but that is what we call the not XXL areas.

[Tushar Jain, Research Analyst]

Got it. All right. The second question is -- do you see an acceleration in CapEx happening in the next 2 years mirroring [ all of IT resharers ] we know the store rollout CapEx [ that isn't themselves ]. Beyond 2018 does the CapEx remain high for the next 2 years?

[Stein Alexander Eriksen, Group Chief Financial Officer]

Actually, I think it will be a bit lower going into the next year than this year. And the reason is that we have expanded the camp with the 50 beds so that will not be included. And then it's a matter of 7 or 10 stores then, in a way. So let's say, 200 to 250.

[Tushar Jain, Research Analyst]

Got it. And in terms of the inventory, just want to understand coming very close to your target and to the year-end, are you more focusing on marking the product or lower purchase, i.e. the supplier contribution will still be the issue in the fourth quarter. If you can give a little bit more color on that?

[Fredrik Steenbuch, CEO & MD]

Yes. We will continue downsizing the inventory also going into Q4. So there will be elements of lower supplier volume bonuses. And I guess, a good estimate could be NOK 20 million also in Q4. Longer term, this will actually be a good thing because we have a much healthier inventory situation and we believe that it could actually be a positive thing for the sales mix going into 2019. Longer term, working on inventory and also the working capital elements, of course, is all about artificial intelligence, technology -- technological opportunities and so on.

[Tushar Jain, Research Analyst]

Got it. And my final question. In terms of your sort of rental, what your view, when you're talking to your landlords. Are you making more lease breaks in there? Or is the rentals now being more linked to the store sales, i.e., the cost structure is becoming more flexible depending on what the store sales have been?

[Fredrik Steenbuch, CEO & MD]

As Ulf said, there needs to be shift in the way we treat that cost. And if that will be an advantage, we would do just that. There's always many solutions. The main point is that this cost side is going down. We will attack it.

[Operator]

And the next question comes from Silvia Borsetti from Crédit Suisse.

[Silvia Borsetti]

Two quick questions, please. The first one is on your distribution infrastructure. So your current logistic capabilities are sufficient to serve the roughly 14% online share of your total revenues today. I was wondering if you could give us some color on what challenges -- what changes in investment will you have to make to build out the capabilities to serve the close to 30% online share by 2023? That's my first question, please.

[Stein Alexander Eriksen, Group Chief Financial Officer]

Yes, we have expanded the central warehouse capacity both in Norway and Sweden in recent years going from 23,000 to 33,000 square meters in Norway and from 20,000 to 40,000 square meters in Sweden. And we think that we are then having the growth that we will have in the store base and also in at least in next coming years when it comes to the e-commerce side. Of course, there will always, in every year, be investments into the infrastructure and we have said that it is NOK 70 million to NOK 90 million this year, which includes this [ cantesy ] sale, but let's say it's around NOK 50 million in the coming period. The next big thing for us in central warehouse capacity will be, if we decide on a new central warehouse in the heart of Europe and I guess, that is some years down the road. We will need to have black numbers in Austria before such a decision.

[Silvia Borsetti]

Perfect. And just 1 housekeeping question, please. If you could help us reconcile 2 numbers in the presentation, please. So on Page 30, you talked about investments in stores and infrastructure of NOK 193 million, including the new stores so far in 2018. But on Page 33, you're talking about total investments in infrastructure IT and training facilities for the year in the range of NOK 70 million to NOK 90 million. So if you could help us reconcile these 2 numbers, that will be great.

[Stein Alexander Eriksen, Group Chief Financial Officer]

The NOK 70 million to NOK 90 million is related to infrastructure and not the stores. The other NOK 190 is including all the stores that we have rolled out also. It's new stores, refreshing all the old stores and maintenance CapEx.

[Silvia Borsetti]

Perfect, so the difference is purely the store CapEx?

[Stein Alexander Eriksen, Group Chief Financial Officer]

Correct.

[Operator]

Our next question is coming from Oliver Pisani from Nordea.

[Oliver Schüler Pisani, Analyst of Consumer Goods]

My first question relates to Denmark. I see that you are now targeting high single digits EBITDA margin in Denmark. Is that on a pure-play online model or is that -- does that assume that you will enter the Danish market with physical stores?

[Fredrik Steenbuch, CEO & MD]

That's based on a pure online model. We have been talking about, if we get the right lease prices in Denmark and the situation is good, we will evaluate the open store, but we also say that it's in the short, near future, it's not going to happen. So to your question, yes, it's based on pure-play.

[Oliver Schüler Pisani, Analyst of Consumer Goods]

Okay. And that means that the Austria model where you do have stores, and that's the omni-channel model, how come you target similar EBITDA margins in the long-term as for the pure-play Danish market then?

[Stein Alexander Eriksen, Group Chief Financial Officer]

There are other elements also involved [in operation]. We have a centralized function with costs also in that area, which we will -- which we also will use for potential a further rollout into that region, which explains some of it.

[Oliver Schüler Pisani, Analyst of Consumer Goods]

Okay. That's very clear. Sort of a final question I saw that you introduced the Klarna Instore payment system in this quarter. Could you perhaps elaborate a bit upon the capability that would give you and the reason for investing in that?

[Stein Alexander Eriksen, Group Chief Financial Officer]

Yes. It is really about the same -- using the same interface as you have seen when you're shopping with XXL online. So the customer is used to such an interface when paying on his mobile phone being in the store. So it's improving the customer experience for the store, meaning you can buy with a mobile phone or you can even go home and buy it, and we can also add on credit sales in this respect and it takes couple of seconds rather than a cashier or whatever using minutes for the same transaction. So it's an important tool for being more efficient in the store as well. And the third element is, of course, that we're getting customer data in this respect.

[Operator]

[Operator Instructions] The next question comes from Petter Nyström from ABG.

[Petter Nyström, Lead Analyst]

So first thanks to Fredrik here for his work in XXL and building out a fantastic concept for the consumers. Two questions for me. You talked about more local brands in Sweden and in Austria. Is this something you already have in place or do you need to chase the brand owners?

[Fredrik Steenbuch, CEO & MD]

The answer for that is, yes to both. We have a lot. And in some cases, we need to chase the brand owners.

[Petter Nyström, Lead Analyst]

Then my second question is that you had quite good cost control in Q3 given the minus 6% like-for-like. You mentioned less marketing spend was one of the reasons there. That means if the cost development we now saw in Q3 also representative for Q4 or likely to increase the marketing spend somewhat?

[Fredrik Steenbuch, CEO & MD]

I think, we will increase the marketing spend somewhat and we will gain that on the top line. We took a risk in taking down marketing, never done that before. And then for the summer months when people were at the beach, it was really hot and [ not in-store, ] it was right. But we should have turned back in September and by that key learning, we will do it even more right in Q4.

[Operator]

And our next question comes from Markus Bjerke from SEB.

[Markus Bjerke, Analyst]

Only 1 question for me, please. Could you help me reconcile the Slide 31 and 32 on the long-term objectives. If I look on group level, you put in stable EBITDA margins long-term from 9% in 2017. And then on the next page on the country level, all margins are either flat or up, basically up for all countries except Norway in the long term. I struggle a little bit to see how those 2 slides connect, can you help on that please?

[Fredrik Steenbuch, CEO & MD]

Yes. I think, first of all, Norway is bigger than the other countries. So of course that weighs more. Second, we feel in Sweden that we will have difficulties to maybe obtain the EBITDA levels this year. And then third of all, of course, we have the HQ functions that we will build up in this period so I think, that's the main 3 explanations.

[Operator]

[Operator Instructions] There are no further questions coming through. So I will hand the call back to you in the room. Thank you.

[Fredrik Steenbuch, CEO & MD]

Thank you. So that ends our session. So thank you all for participating, and have a nice day.

[Operator]

Thank you for joining today's conference. You may now replace your handsets to end this call. Thank you.