Byggmax Group AB

STO:BMAX

Earnings Call Transcript 2021-Q1

[Operator]

Hello, and welcome to the Byggmax Conference Call. [Operator Instructions] Just to remind you, this conference call is being recorded. Today, I am pleased to present Mattias Ankarberg. Please go ahead with your meeting.

[Mattias Ankarberg, President & CEO]

Thank you, and welcome, everybody, to the Byggmax Q1 Conference Call. As usual, we will talk to a presentation that is available on our website. And with me, I also have our CFO, Helena, and as usual, we will take turns presenting the material this -- during this call. And we'll kick off on Page 2 with a summary of the quarter. And as you probably have seen, a really strong start to the year despite now meeting tough comparables from a great 2020. So overall, net sales in Q1 increased 26% on top of the 23% in the comparables from last year to just over SEK 1.1 billion in sales. It is still a good market. We still continue to take a lot of market share, and I'll come back to that, of course, in a minute. Like-for-like was up 20%. The big driver versus the market continues to be our e-commerce with Byggmax branded e-commerce increased 90% in the quarter. And in total, for the group, e-commerce is now 26% of Q1 sales. We have a continued increased gross margin, and we continue to be very solid on costs, so a strong scale effect. And a very good profit improvement. EBITA increased to SEK 7 million in the quarter compared to minus SEK 51 million last year and rolling 12 EBITA margin is now almost 11%. On Page 3, we're listing some key events, and it's been quite an eventful quarter, although Q1 is a small quarter for us in terms of sales, a lot of things have happened. So starting from the top, obviously, we're still in a pandemic, and there's a lot of precautions being taken to manage that in the responsible way. We have also in the quarter for the first time for Byggmax being impacted by what we call it partial lockdowns and I'll come back to that, but some stores closed for visits during the quarter. We've continued our initiatives, including upgrading the store portfolio and opening new stores. We have entered Denmark as of January 2021. And we've also quite recently held a Capital Markets Day digitally, where we among other things, updated or presented the updated financial targets, which we'll also come back to today. So I'll go through these things very soon. But before I do that, wanted to highlight another important fact that also was stressed in the first quarter on Page 4. As you're probably aware, we are a discounter. We have a really strong discount position in the markets that we operate in. And we also have an agenda to mean more for more customers. So have a broader offer, but also offer a quality experience, what we call the modern discount approach. And in the quarter, we were pleased to see that we were recognized both for price and quality by independent surveys in Sweden. We were awarded #1 or the lowest price for terrace projects by a Swedish independent survey of 5, 6 retailers. And we've also been recognized for our quality of the products for the terrace project, particularly impregnated wood products by an independent laboratory institute that was led Testfakta in Sweden also. On Page 5, let's pause a little bit on the COVID-19 pandemic situation, what that means to Byggmax, perhaps a bit more than in the last 2 quarterly presentations. First of all, it's important to underline that our priority is to ensure the health and safety of the staff and the customers. And we have taken many precautions to do so, and we have continued all of them in the first quarter in 2021. And there's a long list of things that we have gone through before and I maybe not go through in detail again, but it's -- we are in a more favorable position than many others in the sense that we are -- don't have stores in shopping centers, but on freestanding properties and the self-service concept, but even so a lot of actions have been taken. And secondly, for the first time for Byggmax, we have been impacted by what we call it partial lockdowns in Denmark and Norway in the quarter. And -- or give you the details for part of the quarter, consumers who are not allowed to visit the Danish and Norwegian stores, but click and collect outside the store has been allowed. So we have quickly developed what we call collect outside store offer, which helped to recoup some of the lost store sales were positively so. But there still, of course, is an impact on part of the sales in the quarter. The main impact was in Norway, where there were 23 of the Norwegian stores were closed for visits for about 2 weeks. So it's still a small portion of the total portfolio, 23 out of 175 stores. And it was only for about 2 weeks, and we did recoup some of the lost sales through new collect outside store solutions, but of course, there is still a small negative impact. In -- all though in this pandemic, we have had a positive financial impact and particularly in the sense that there is a stay home effect which impacts all home improvement categories around Western world at least positively during the pandemic. We have had disruptions, but they have been manageable, and they continue to be manageable in the first quarter. And the main difference compared to earlier is that we are now impacted by the partial lockdowns. We still had 23 Norwegian stores closed for visitors as of end Q1. And as of a week ago, that number decreased to 11 stores closed. So that was the update on Byggmax in the COVID-19 situation. Let's turn to Page 6, where we are outlining the market development and our sales performance compared to the market. For those of you who visited or attended, rather, the Capital Markets Day, you know that for the first time in 2020, we now have public independent data on the B2C part of the Nordic DIY markets, which we're really happy about. There is a report in Sweden from an industry association called Byggmaterialhandlarna and there is -- this report is more way from a retail organization called Virke. And that showed almost 20% growth in 2020 for the market versus Byggmax growth in local currencies, 32% growth in 2020. So a clear market share gain from us last year. And the big point here is that, that market share gain is continuing and even accelerating here in Q1 2021, and I will now go through why that is. So in the -- starting with the market on the left-hand side of this page, the market increased around 9%, 8% to 10% in the first quarter. And the reason why we're not more precise is that the March numbers are not yet available. And for those of you who may remember, we have our own consumer panels, we have been spot on versus the 2020 development. So we are confident in the 9% or 8% to 10% estimate. What's driving that market growth in Q1 is, of course, a continued stay home effect. The market started to increase due to the stay home effect as of mid-March last year. So this quarter has had a full quarter of stay home effect. And then there are some other factors also impacting the market development. Weather effects were negative, spring came later than in the last year. There's an increased effect from increased consumer market prices that we'll come back to. But basically, raw material prices have been passed on to increase consumer prices, which increases the size of the market. And then, of course, the negative effects from the partial lockdowns in Norway and Denmark. So in all, the market increased 8% to 10% during the first quarter. And on the other side of this page, you can see the Byggmax Group sales development, which increased by 26% in the first quarter. And I think the easiest way to understand the Byggmax Group sales performance versus the market is to think about it like this. We're driving several initiatives to drive sales growth. And for the stores that we have that are not yet upgraded, so not yet impacted by our newer store concept, they performed in line with the market. So if we start from that sense, we could say that the Byggmax stores not yet upgraded increased sales in line with the market. And then the strategic initiatives that we have within Byggmax is really what's improving the sales and the Byggmax segment in total increased by 23%. So -- and part of that was the entry into Denmark. The Danish business added 4%. So the majority of that was from the strategic initiatives in the markets where we're already last year, Sweden, Norway and Finland. And then on top of the 23% from the Byggmax segment, our other segment, a much smaller segment, Skånska Byggvaror had a fantastic start to the year, with increase of 69%, and we'll come back to why. But in total, that means that the group increased by 26%. So good market, but not upgraded developing in line with the market. And then on top of that, own sales initiatives take the total sales growth to 26% in the quarter. And on Page 7, I'd like to describe to you a bit more around these initiatives, the overview, and then I'll go through some details on the coming pages. So we are shifting or repositioning, you could say, Byggmax in the consumer's minds what we call a modern discount for today's DIY-ers, which means we are coming from the building materials side, but now offering more types of home improvement projects. And we also would like to offer both a, of course, discount offer with the best prices, but also a quality experience. And the way we are driving that is to 3 main initiatives, which all have clear positive impact on the sales. They are e-commerce, store upgrades and store expansion. So at the overview level, e-commerce within the Byggmax brand developed really well in the first quarter, 90% sales increase, continue to be really good growth basically across the board, come back to some details and collect@store continues to be the very fastest growth track of all. Store upgrades to our new Store 3.0 concept continue to generate 6% sales growth per store, and we have upgraded more stores now during the quarter, 2 Store 3.0, so that really helps. And as part of that, we have garden departments now in quite a lot of our stores, almost 40% of the portfolio, and garden performed really strongly in quarter 1, 70% sales growth on the garden categories. And then on top of that, we continue to open new stores. There are still white spots left. So all in all, store expansion delivered 4% sales growth for us in the first quarter. And on top of that, the new stores from the acquired business in Denmark. So all 3 sales -- sorry, growth drivers, growth initiatives continue to perform really strongly with a particular acceleration on the e-commerce part. Now I'd like to give a little bit more detail on each 1 of these 3. So on Page 8, we'll move to the e-commerce part, where we had a very strong growth. And it's been an ongoing work for the last 2, 3 years to really reposition and build out the e-commerce business. So there are several things that are really driving this, including a larger assortment, a better e-commerce site and many more delivery options, which is really helping. We did have a sort of positive boost on the e-com number per se from the lockdown in -- or the partial lockdown in Norway. As mentioned, for the stores where visits was not allowed, collect outside store was allowed, which boosted the e-com number a bit. But still even so in Sweden with no lockdowns, Byggmax e-commerce increased really well, 65% also in Sweden and basically a really strong growth across the board, very strong growth from both the products we also have in stores, the store assortment, very strong growth from the online exclusive range, very strong growth from home delivery and the very fastest growth continued to come from collect@store, which is growing really, really fast. And we -- as mentioned or detailed maybe on the Capital Markets Day, we clearly see that the fastest growth comes from sort of integrating the e-commerce offer with the stores to the collect@store point, but also we see that -- then we just open a store in a new geography, e-commerce sales in that geography increased by 15%. There are other factors as well. But really pleased to see that those effects are coming in the numbers. We are also taking quite a lot of steps forward on the e-commerce front in 2021 and really strengthening the e-commerce offer for the future. And to give you some highlights, I mean, we are the first now in Nordic DIY to offer or launch we call proactive track and trace, which means that Byggmax will keep track of where your order is and let you know, case it arrives early or late or spot on time. It's, of course, something that exists in other retail categories industries, but not in DIY so far. We are developing a larger range online, including some private label ranges. And this spring, we will see the first batches from the garden furniture and bathroom products under our own private label. And we're also continuing to be sort of on the customer side and helping people to do DIY and launching over 200 digital guides and instructions on our website during the year, of which almost half are up already. So a lot of e-commerce and online focus and a lot of progress in that area basically. On the second main growth initiative, store upgrades on Page 9, we are upgrading all of our store portfolio to what we call Store 3.0. And Store 3.0 is our way to describe the sort of new position we would like to have for the Byggmax stores, where we offer more types of home improvement projects. And we also offer a better quality experience in the stores. We do that in 3 versions or 3 formats. So we have a small town format for smaller towns and catchment areas. The regular format, and then we have a large format. And the regular and the large formats, both have garden departments and the larger one have -- than a large garden department. And these formats then include as mentioned, of course, a great offer of building materials, but also garden, paint, flooring, storage, several other categories, which we see have been developing the very fastest also in the last year. And as mentioned many times before, there is a really good sales effect from these upgrades and upgrading a store to Store 3.0 generates 6% sales increase per store. We provide a detailed view of our store portfolio on Page 10. And to give you the specifics, the Store 3.0 is now up to 80 of our stores or 46% of the total store portfolio. The portfolio grew by 6 stores in the quarter, 2 new stores were organically opened, 1 in Sweden and 1 in Norway -- excuse me. And then 4 stores from the acquired Denmark business. We have upgraded 12 stores during the quarter to Store 3.0. And we also now have, as I mentioned, garden departments in almost 40% of the store portfolio. We have announced 10 new store openings so far for 2021, of which 2 have been opened, so 8 not. The goal is to open 12 new. So most of them have been announced. And we have also announced 2 relocations of stores both of those in Sweden. Let me say a few words about Denmark before we shift to our other segment. And it's, of course, a fairly small business. We took over the business as of Jan 1. And the important and positive message is that we're off to a good start. As a quick recap, sales of this business is about DKK 125 million last year. It's, again, a small business with 4 stores in Zeeland. So around the Copenhagen area, if you like, and then 30% of the business is e-commerce. It's a good start of the year with a good sales increase and also, I think, a really good teamwork and good progress on identifying synergies. There are several things that we think we can benefit from sharing supply chain on and the first goods has arrived to the Danish stores from the existing Byggmax supply chain already. In terms of sales, this acquisition adds 4% of sales in the first quarter 2021. On Page 12, we describe our second segment, Skånska Byggvaror, which is, as you know, much smaller, Byggmax segment is 90%. But still an important business and had a fantastic start to the year. Really a strong benefit from the sort of online garden niche position with an online trend, of course, being strong and garden being very strong. So very positively positioned and then also very good results from the growth initiatives we are driving within Skånska Byggvaror particularly around sort of new product development, which is driving good sales and continued digitization of the sales and marketing efforts, which is continuing to take good steps forward. All in all, Byggmax Group is a seasonal business, but Skånska Byggvaror is an even more seasonal business, the first quarter is small. But still, sales growth of 69% in the first quarter, very good, of course, and then also a strong order intake in the quarter. And Skånska Byggvaror is focused, still focused -- remain focused on executing these initiatives that we're talking about before, where there is more to do around product development, around digital sales and marketing and continue to drive the business in particularly Norway and Finland. We had a Capital Markets Day on March 23, so fairly recently. Want to just to mention a few things from that. There were 5 important areas that we covered during the day. We did detail out the drivers of the market share gains last year. We talked about quite some time for -- about the big trends that are now impacting the DIY industry and to some extent, other retail categories as well, where discount is continue to take share. The home is getting an even more important role in people's lives and how e-commerce is growing across retail categories and what that means for Byggmax. We also went in quite some detail around the sort of repositioning of Byggmax to what we call the modern discounter for today's DIY-ers to offer more home improvement projects, to offer a quality experience and combining the best of stores and e-commerce and still, of course, offering the best possible price. Helena mentioned or detailed several things around the financials connected to our strategic growth initiatives, and we also covered updated financial targets, which I will say something more about just in a second. And as a reminder, for those of you who may have missed it, the whole Capital Markets Day is available digitally on our IR website. Page 14, just a short recap of the updated financial target as that is an important, of course, event. The main change, the most important change to the financial targets is the change in the sales target, which is now stated as SEK 10 billion by 2025. It clearly shows that we have an ambition to continue to grow and it's a concrete target that we like to have. The EBITA margin or the profitability target is not changed from previous targets. We have introduced a leverage target or a net debt to EBITDA, excluding the IFRS 16 effect, which we are clearly below now, but we're above earlier to look back a couple of years. The dividend target is not changed, and then we have introduced a new target, which is actually not the financial target, but the target connected to our sustainability efforts connected to our CO2 development, specifically so from CO2 emissions from goods transports, where we aim to reduce that per ton kilometer by 70% by 2030 compared to 2010. So profitability and dividend payout targets unchanged and new for leverage and sustainability and then particularly a clarified sales target to show the ambitions on the sales development in the coming years. And with that, I turn to Helena to go through some of the financials for the first quarter.

[Helena Nathhorst, Chief Financial Officer]

We are on Page 15, the sales development in the first quarter for the group in total and how it's divided into our 2 segments. If we start with our biggest segment, Byggmax, representing almost 90% of our sales. We have the sales development in the first quarter versus 2020, plus 22.9%. The sales growth is divided into like-for-like, acquisition and new stores. And in the period, the like-for-like growth was slightly above 15%, 15.4% and new stores contributed with 3.8%. We also have the acquisition and the 4 new stores in Denmark. And in the Byggmax segment, the new stores contributed with 4.8% of the sales in the quarter. We have the smaller segment, representing approximately 10% of our sales, Skånska Byggvaror and they had a very strong quarter and growth of 69.1%. The like-for-like growth was slightly higher, and it's impacted by foreign exchange negative effects. So for the group, a growth of 26.4%, the strong growth is from the underlying order growth, obviously and the COVID-19, the pandemic from stay home impact. But in addition, we have the strong sales from our growth initiatives contributing to the market share gain as presented previously in the report, where we have the Byggmax stores more in line with the market development. Although a small quarter, but we have also a very strong growth in Skånska Byggvaror from its initiatives as well. Moving on to Page 16 and the full P&L. We have the sales of SEK 1.1 billion in the quarter, this is 1 of our smaller quarters in low season. We have gross margin increase up to 33.9%. It is very positively impacted by favorable product mix and scale effect, but also increased from consumer market prices driven by market expectations of increased raw material prices in the period coming. The cost control remained solid. Comparable costs increased by SEK 9 million in the quarter. And the increase is mainly due to personnel and store operations related to the sales growth. Costs related to new and the acquired stores amounted to SEK 21 million. In the period, we have strong sales development and cost control contributed to increased EBITA by SEK 58 million from minus SEK 51 million to plus SEK 7 million for the first quarter. The strong improvement is seen in both segments, but especially the improvement in Skånska Byggvaror with strong sales in such a small quarter. If we move on to the cash flow and the net debt development. We have cash flow from operating activities of SEK 332 million in the first quarter. It is an increase of SEK 112 million compared to last year. And the improvement is mainly driven by the strong performance and in combination with some increase of accounts payable. We have a significant reduction in net debt. Net debt amounting to SEK 318 million, excluding lease liabilities to be compared with the position of SEK 1.86 million in the first quarter 2020.

[Mattias Ankarberg, President & CEO]

Thank you, Helena. Just to round this call off 2 more points. Firstly, on Page 18, quick overview on the performance versus then the recently updated financial targets. Well, as the recap, sales increased by 26% in Q1, which, of course, is a very good first step with the new financial targets to SEK 7 billion rolling 12 compared to target of SEK 10 billion in 2025. EBITA margin rolling 12 is almost 11%, 10.9%, clearly above the target. Leverage, 0.4x is also clearly better than the target. Dividend, the Board proposes SEK 2.75 per share, which is less than the 50% of net income, still SEK 2.75 per share to be approved by the AGM in May. And the carbon dioxide emissions were 32% lower last year compared to 2010, the target is to get to 70% by 2030. So overall, a good start versus the updated financial targets. Lastly, forward-looking and looking very -- particularly on 2021, and we're now on Page 19, start by saying taking a step back and reflect on the first quarter and what that means. We could say that, of course, it was a really strong start to the year. Still a good market growth, continued the trend from 2020 with really strong market share gains, even more market share gains now in the first quarter '21, continue to be driven by our initiatives and particularly Byggmax e-commerce that is growing at 90% is the biggest driver of that share gain. We also continued to see the fastest growth from younger customers, a trend that we in line with many others in Europe, started to see during the autumn and have continued throughout the autumn and also now in the first quarter 2021, which, of course, is also promising for the future. And just as in previous periods, we do get strong scale effects and profit improvement from sales increase. So overall, a strong quarter, not just financially, but for confirming the initiatives and the effects that they have and also that we take market share. We are still very focused on our organic growth initiatives. And we have much more to do on those, and we clearly see that they are giving positive effect. So we are focused on continuing to move Byggmax towards the modern discounter for today's DIY-ers. As mentioned, the e-commerce efforts are being stepped up during 2021, and we will continue to upgrade the store portfolio. We upgrade mainly in the low season, and we will continue to open new stores, the target is 12 new, plus the 4 acquired in 2021. If we then look a bit ahead, both in the short term and sort of the longer term, we could say that if we talk short term in the sense of next quarter, short term, we expect a continued good market, and we also expect to continue to tackle some operational or quite some operational challenges that we -- just as we did in Q1. We expect the market to be boosted by a stay home effect for at least a good part of Q2 as well, spring arrived later, but it's still a good market overall. We do have still Norwegian partial lockdowns in April, 23 stores at the start of April, 11 stores as of right now. And we are also up against exceptional comparable sales figures from the very peak of the stay home effect in Q2 2020, particularly so in April and May. Longer term, we are focused now on getting to SEK 10 billion in sales in 2025. And of course, the other financial targets coupled with that. We are in a good spot in many ways, but particularly sort of 2 words to mention. First of all, these growth initiatives that is really taking market share, have a lot more to give. We also now have Denmark in place with a good start, which adds to the potential. And then secondly, Byggmax is now positioned to benefit from some really big trends with discounts continuing to take share. Home is becoming even more important and sort of increased digitization and e-commerce growth, which also plays to our favor. That summarizes the -- or excuse me, that concludes the presentation part of this conference call. And with that, we turn to operator to manage questions. Thank you.

[Operator]

[Operator Instructions] And our first question comes from the line of Niklas Ekman from Carnegie.

[Niklas Ekman]

A couple of questions, if I may. Firstly, if I can start with the last bit here. You talk about current trading. And on the 1 hand, very strong momentum on the other hand, very tough comparisons. Are you still growing as you go into Q2? Or are the tough comps basically suggesting that you're now contracting in the start of Q2?

[Mattias Ankarberg, President & CEO]

Well, I think we have to answer that in 2 steps. Q2 last year was completely, I would say, unusual and exceptional and they really peak of the stay home effect was during April and May. In total, the growth last Q2 was 40%. But April and May were clearly beyond that even. So compared to -- as we have a comparative history, a very good start of April and continued good momentum in the market and continued very good effects from our initiatives. But compared to the start of the Q2 last year, we are not all the way up there.

[Niklas Ekman]

Okay. Okay. That's good. And also a question on the gross margin. You touched upon this, whether it's quite a strong gross margin increase, and it seems like it was boosted here by rising raw material prices. Is this something that can continue higher going into Q2 and the coming quarters? Or will tougher comparisons and this kind of the rising raw material prices, is that something that's going to catch up and bring gross margins potentially lower? Or what is kind of the short term -- short, medium-term outlook here for gross margin?

[Mattias Ankarberg, President & CEO]

It's a good question, Niklas. And good touch, let me provide some color on the gross margin. I think even moving back to get the bigger perspective in -- we have been, over the last 2 years, or particularly, I would say, maybe last year to make it a bit easier, have very good gross margin expansion driven by product mix and scale effects, basically, particularly in logistics, where we are -- have a lot of own control. And I think now as you -- exactly as you say, I mean, scale is not so big effect in the smaller Q1, but product mix continues to help, but the biggest driver of the expanded gross margin in Q1 is a pricing effect, and that requires some detailing. So what's going on is that the raw material prices are really increasing in a lot of categories, I guess, around the world, and you are probably very well aware of that on this call. What this market has proven many times, at least during the sort of 4 years, I've been here that increased sort of in goods prices turns into increased consumer prices. And that happens now as well. What is a bit different this time is that that happened quite fast. So consumer prices went up almost faster than the COGS increased. So there is a time effect which impact gross margin positively in Q1 specifically. Now looking forward, we entered the quarter with I would say, a somewhat positive time effect still, but I think it is still very much to be determined when the dust settles in the raw material increase raised around the world, whether the sort of net price impact will be positive or negative on our gross margin. So I hope we will know more. I guess everybody hopefully will know more about stabilized volatile markets by summer or so. But for now, it is a positive temporary effect, and we will see where that lands when we are in summer.

[Niklas Ekman]

That's very clear. I also have a question on the garden assortment. You talked about a very strong growth here of 70% year-over-year. How big share of sales are we talking about roughly? I think you mentioned here that it's available in 40% of your stores. But how big share of your sales roughly are we talking about? And what do you see the potentially? How big part of the of your sales will this be 4 or 5 years from now?

[Mattias Ankarberg, President & CEO]

Very good question also, Niklas. It's still not a huge part of our sales, and garden is particularly peaking during Q2. So we are, in total, as a company is still in sort of high single digits if you just look at the Byggmax part of the business. Then of course, Skånska Byggvaror is really heavy within garden or garden related buildings, which is another 10% for the group. And yes, we are now as part of our Store 3.0 upgrade, putting garden apartments, small or large in most of our stores. So that will clearly continue to help. And we also see very good like-for-like effects of garden where our view is that there isn't really a good discount offer on a lot of garden categories. And then thirdly, I'd like to mention, we also have a very strong growth of online growth of garden products where we have a much wider assortment of garden related products online. So clearly a growth area for us and something that we continue to drive and believe in for the future.

[Niklas Ekman]

Okay. Very good. And also finally, a question on your net debt-to-EBITDA target. You mentioned here a target of to keep net debt to EBITDA under 2.5x. You're at 0.4x now. You're not looking at making any larger acquisitions. And the dividend payout for this year was only set at 35%. So how would you get to almost 2.5x EBITDA in net debt? It sounds like the net debt is going to go lower, not higher? Or are we missing something here?

[Mattias Ankarberg, President & CEO]

Well, your logic is completely correct. So I think the dividend target as sort of the proposed dividend was announced quite early last year was a lot of changes during the pandemic and the Board decided to announce that already in Q3. And I think we are really focused on as the primary growth driver organic growth, and there is no single large acquisition on the table. We are still open to make acquisitions, which are sort of a means to an end, so to speak. I think the Denmark example is pretty good where we acquire something that we think we can continue to develop and helps us boost the organic growth. So that may continue to happen. But even so, yes, we generate a lot of cash and particularly during now Q2 and Q3. So there is a good discussion to be held, I think, also in the Boardroom whether this should impact dividend or M&A or buybacks or even further sort of organic growth initiatives. But I think from a management perspective, we are really pleased that we could have sort of a big room to focus even more on organic growth than we were also able to build up a really good inventory position really early within quite challenged supply market. But even that said, just looking at the numbers exactly to your point, Niklas, we will have a very strong balance sheet even accounting for higher CapEx and early inventory buildups just in the quarter's time or so.

[Operator]

Our next question comes from the line of [ Karl Lane ] from Carnegie.

[Unknown Analyst]

Congratulations on a very solid report here. A few questions from my side, starting with the conversion, our 3.0 conversion on the stores. And talking about this has been quite an important driver here in like-for-like and that the previous concept grows roughly in line with the market. And you are up at 46% today of the total stores versus 39% in Q4. Is there any reason why you're not aiming to sort of do the full conversion before 2023, given now that the market remains very favorable for you also at least here in the near term? Or would that even be possible?

[Mattias Ankarberg, President & CEO]

Yes. Hi, Karl. Thank you. You are completely right in your statement of the fact. And yes, it's an important driver for us. And yes, we have an announced plan to complete all the portfolio upgrade by 2023. And you're also right that this may be a good opportunity to do that a bit faster. I'd say there are also some practical operations aspects to that in terms of upgrades and in some cases, lease contracts, you would like to renegotiate at the same time, et cetera. But by the latest endpoint '23,this should be done and gives us a good continued effect for not the low of years' time to drive like-for-like.

[Unknown Analyst]

Okay. Perfect. And second question here on online. You had a nice slide on that year previously as well and also spent quite a bit of time here on the CMD where you want to be. But could you give any more flavor sort of how long have you come here in the journey versus what you announced here on the CMD, you talked about increasing the number of SKUs, for example, to 150,000 versus 50,000 at now. Could you say anywhere more where you are there today and sort of how long you've come in that improvement journey in the online offering?

[Mattias Ankarberg, President & CEO]

Yes, we can. I think -- and it's good to put that in relation to maybe the Store 3.0, where as you say, we're sort of almost half the portfolio. And I think for the e-commerce part, we see that we have much more left to do. So we are more in -- although we are clearly moving forward, we see a lot more potential. And we are still just -- I think we are now at 55,000 SKUs, if I remember correctly, but there is a lot more work to do to broaden the assortment and to offer a wider Byggmax range with more home improvement projects that should clearly drive sales. And we also believe that there is a lot more to do on the deliveries part and maybe stepping back to the some of the consumer insights from the CMD is that in this category, we would like to spend their time fixing the fence or doing the garden project or painting the wall and time and reliability is really of essence and probably partly why click and collect is growing so incredibly fast. So we believe that with this effort we are doing there and I described that the CMD, we will also continue to take market share. So the track and trace would be a good 1 for us, for example. So that's a good question, Karl, and I think we are sort of almost half of the store portfolio upgrade, we are much more in early stages on the e-commerce part, where we see a lot more potential.

[Unknown Analyst]

Okay. Perfect. And final question here, a follow-up on the gross margin there. You talked about sort of price increases, a combination of price increases and positive mix effect. And I think you already answered the question here sort of how we reason for Q2 on the price increases. But could you say anything on the mix effect here in April so far? Do they remain favorable? And is that a similar sort of thinking from Q1, what you've seen here so far in Q2?

[Mattias Ankarberg, President & CEO]

Yes, it's a gradual continuous positive effect. It's -- it doesn't mean that in Q1, the pricing effect is the bigger 1 of the 2. But what is a nice additional effect from the Store 3.0 upgrades is that the new assortment that we introduced, those categories have a higher gross margin. So as we continue to upgrade the portfolio towards 100%, we also continue to get a positive product mix effect. So it's not a huge shift versus Q1 to Q2. But I mean, all in all, continues to be somewhat positive.

[Operator]

Our next question comes from the line of Fredrik Ivarsson from ABG.

[Fredrik Ivarsson, Research Analyst]

One question from my side. Mattias, you mentioned that you've sort of gained a few new customers in terms of younger customers. And I'm curious to hear what -- how these deviate from your sort of legacy customer, I guess, both in terms of channel and product mix, but also average receipt and those kind of things, if you could just talk a little bit about that.

[Mattias Ankarberg, President & CEO]

Absolutely. And that's a good one. It's something which sort of several players in the DIY industries currently digging into. So it's also a good one to compare notes on. But yes, I think 2 maybe drivers of the sort of younger customers getting into Byggmax, which is all in line with the industry, I would say, and starting at around August, September time mainly visible. First of all, I think more younger customers are now sort of [ entered ] sort of DIY is a phenomenon. And I think at the CMD, we also brought in the European perspective, where I think the trend is that customers, people have been at home. I think there is a trend towards doing things ourselves from taking care of your home and now grand step-by-step younger customers are also taking on DIY. And if you listen to Home Depot, the biggest DIY player on the planet, they see clear trends that the customers comes in and do smaller and easier projects, if I remember correctly, they remembered things like putting up shelves and fixing paints and stuff like that. And then gradually, I guess, with self-confidence moving on to more and more projects or bigger and bigger projects. And it's also part of their growth in the last quarter. I think the second part, which is really driving younger customers into Byggmax is that e-commerce growth, where we also see a lot of younger customers coming in at. We also connected to that we're offering more types of home improvement projects for example, garden equipment, lighting, storage products, which is also maybe more relevant for younger customers. So both the renewed DIY trend seen across the Western world, since the autumn and the e-commerce growth is helping us to get the new customers into Byggmax.

[Fredrik Ivarsson, Research Analyst]

And to follow up on that, just to get it, right? So I read your answer, Mattias, as these new customers probably have a -- or have a lower average receipt but a higher margin than your legacy customers, is that correct?

[Mattias Ankarberg, President & CEO]

Yes, that's correct, Fredrik. And I think it's not so much the -- I guess it's good that you follow up. I guess my point is that it's not so much that the customer profile is different. It's sort of the product mix that they buy, which is different. But yes, that would be a correct statement from your side.

[Operator]

[Operator Instructions] As we have no further questions, I will hand it back for closing remarks.

[Mattias Ankarberg, President & CEO]

Well, thank you, everybody, for joining this call. I wish you all a great day and look forward to talking to you again at the Q2 report.