Boozt AB
STO:BOOZT
| US |
|
Johnson & Johnson
NYSE:JNJ
|
Pharmaceuticals
|
| US |
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
Financial Services
|
| US |
|
Bank of America Corp
NYSE:BAC
|
Banking
|
| US |
|
Mastercard Inc
NYSE:MA
|
Technology
|
| US |
|
UnitedHealth Group Inc
NYSE:UNH
|
Health Care
|
| US |
|
Exxon Mobil Corp
NYSE:XOM
|
Energy
|
| US |
|
Pfizer Inc
NYSE:PFE
|
Pharmaceuticals
|
| US |
|
Palantir Technologies Inc
NYSE:PLTR
|
Technology
|
| US |
|
Nike Inc
NYSE:NKE
|
Textiles, Apparel & Luxury Goods
|
| US |
|
Visa Inc
NYSE:V
|
Technology
|
| CN |
|
Alibaba Group Holding Ltd
NYSE:BABA
|
Retail
|
| US |
|
3M Co
NYSE:MMM
|
Industrial Conglomerates
|
| US |
|
JPMorgan Chase & Co
NYSE:JPM
|
Banking
|
| US |
|
Coca-Cola Co
NYSE:KO
|
Beverages
|
| US |
|
Walmart Inc
NYSE:WMT
|
Retail
|
| US |
|
Verizon Communications Inc
NYSE:VZ
|
Telecommunication
|
If you don’t study any companies, you have the same success buying stocks as you do in a poker game if you bet without looking at your cards.
Utilize notes to systematically review your investment decisions. By reflecting on past outcomes, you can discern effective strategies and identify those that underperformed. This continuous feedback loop enables you to adapt and refine your approach, optimizing for future success.
Each note serves as a learning point, offering insights into your decision-making processes. Over time, you'll accumulate a personalized database of knowledge, enhancing your ability to make informed decisions quickly and effectively.
With a comprehensive record of your investment history at your fingertips, you can compare current opportunities against past experiences. This not only bolsters your confidence but also ensures that each decision is grounded in a well-documented rationale.
Do you really want to delete this note?
This action cannot be undone.
| 52 Week Range |
100.6
140.5
|
| Price Target |
|
We'll email you a reminder when the closing price reaches SEK.
Choose the stock you wish to monitor with a price alert.
|
|
Johnson & Johnson
NYSE:JNJ
|
US |
|
|
Berkshire Hathaway Inc
NYSE:BRK.A
|
US |
|
|
Bank of America Corp
NYSE:BAC
|
US |
|
|
Mastercard Inc
NYSE:MA
|
US |
|
|
UnitedHealth Group Inc
NYSE:UNH
|
US |
|
|
Exxon Mobil Corp
NYSE:XOM
|
US |
|
|
Pfizer Inc
NYSE:PFE
|
US |
|
|
Palantir Technologies Inc
NYSE:PLTR
|
US |
|
|
Nike Inc
NYSE:NKE
|
US |
|
|
Visa Inc
NYSE:V
|
US |
|
|
Alibaba Group Holding Ltd
NYSE:BABA
|
CN |
|
|
3M Co
NYSE:MMM
|
US |
|
|
JPMorgan Chase & Co
NYSE:JPM
|
US |
|
|
Coca-Cola Co
NYSE:KO
|
US |
|
|
Walmart Inc
NYSE:WMT
|
US |
|
|
Verizon Communications Inc
NYSE:VZ
|
US |
This alert will be permanently deleted.
Boozt AB
You don't have any saved screeners yet
Thank you, and good morning, everyone, and welcome to our Q1 2020 presentation. If we go to the first slide and start by going through the key highlights. I'll just go through that briefly. We had a net revenue growth of 8% in Q1. That was -- and that was kind of in line with expectations. So the growth was in line with expectations in January and February, but it was quite negatively impacted by the coronavirus in March, especially Boozt.com. Revenue was negatively impacted by the lower spending on fashion due to the virus as well as we chose not to participate in the very high end of season sales, high discount end of season sales in January and February, and also affected by change in the agreement structure with a large brand. Booztlet, our stock grew to 112% in the quarter. As previously announced, we have done an extraordinary write-down of stock of SEK 57.8 million. And if you would exclude that, our gross margin has actually improved, both due to our better contracts as well as our higher share of campaign buys. We report an adjusted EBITDA of negative SEK 61 million, but if you look beyond that, the underlying adjusted EBIT is actually positive for the quarter. And this is driven by both gross margin improvements as well as operational improvements in our fulfillment setup. Speaking of the fulfillment, we have decided to in-source the fulfillment staff operations as of January 1, 2021. We've been looking at different alternatives to see should we continue to have an outsourced model, but we believe that basically, there's not enough room in the value chain to staff too many parties to have a profit on our operations, also our systems and investments into the infrastructure. We have a very strict control, so we are quite confident that we will be able to do that in a very good manner. Also, we have closed our beauty store in Copenhagen and are going to open up a new beauty store in beauty store to open in Malmö, where we expect to be breakeven. Q2, we'll get back to it later, but we've seen a strong development so far. Cash position end of March was SEK 434 million, and that's including SEK 200 million cash facility that we have drawn. And of course with the strong current trading, this cash position is now considerably stronger than it was at the end of the quarter. And then finally, we have now reinstated the outlook where we expect to grow between 10% and 20% with an adjusted EBIT margin between 1% and 3%. If we go to -- then to the next slide and reflect on the impact of the coronavirus on our business. Initially, we saw a quite negative impact on our business. In general, you might say that demand for fashion almost seemed to come to a full stop, literally up -- at around March 10. We saw that consumers became extremely careful and not really interested in buying fashion. We saw on Boozt.com that net revenue was down more than 35%, 40% in the initial start after the shutdown in the Nordic countries. At the same time, though, we also saw that Booztlet actually grew and basically confirming our belief that in times of trouble, the customers trade downwards and go to the shops like Booztlet, and Booztlet did grow more than 100% in March. Obviously, we needed to take some quite drastic measures. If you look at the people side, all our employees, they start to work from home since March 11. We even set up our customer service. We had been preparing that for like 40 days in advance. So our customer service, actually at the moment, being held out of our staff's private homes. We've done extensive safety measures at the fulfillment center to protect the staff. And this all enabled us to be 100% operational in all areas during this -- both the initial stages of the crisis as well as the later stages. If you look at kind of the strategic measures for us, it was extremely important to make all costs variable. Most costs are already variable. The only thing that's not variable, of course, is our admin and other costs, but even fulfillment cost at the current setup are variable so we could reduce the need for fulfillment staff in the beginning. We also lowered our up-front buy for the autumn/winter '20 season. We initially reduced the offline marketing spend that has since been increased again. And then we utilized our revolving credit facility of SEK 200 million, just to be sure also to be able to help brands and also may be utilize if someone was asking us to pay advance and are willing to pay some -- give us some cash discounts. And basically, our mantra during this phase was to secure the base so that if there would be opportunities going forward, we will be able to utilize that. This also meant that we, on April 5, suspended our 2020 outlook. It was very difficult to see what was going to happen. Consumer sentiment was very low. And we didn't really have any strong data points. At the same time also, we announced that we would do an extraordinary write-down of prior season stock. In this situation, we could see that the SS20 stock would be probably at a sale very fast, meaning that the SS19 stock that we normally use for driving campaigns in the following season, that would be more or less obsolete. So the idea was to write that down and move into Booztlet right away and allow Booztlet to sell that and try to recoup some of the write-down. So as the slide says, we have -- the impact was initially negative, but we will come back later and comment on what has happened after the initial market reaction. If we go to the next slide, going to my favorite KPIs, the customer satisfaction. We can see that our Trustpilot score is still high, 4.6. And the NPS is at a 72, a slight increase versus '19. But also, if you remember from the last quarter, it's also up versus Q4, where we took a small hit after the introduction of the 'fair use', but I'm glad to see that we're back again with extremely satisfied customers. If we go to the next slide, order development. If you look at the number of orders, we have exactly the same amount of orders as in Q1 '19, but the average order value is slightly up. This is very good. This reflects the 'fair use' implementation as well as at the end of the quarter, you can see that the small mix effects are basically starting to count. But it's very good to see that in a market where we have seen our peers seeing declining order values, often due to more mobile behavior, we can see that our average order value is slightly growing up, and this is good. If we go to the next slide, the cohort development. Number of active customers has gone up by 11%, up to around 1.6 million customers for the last 12 months. The number of orders per active customers is more or less the same as last year, a slight increase. But the true frequency is slightly down. And this is quite technical, and I guess that this will be followed up on the meetings one-by-one. But we've tried to exclude the 'fair use' customers, where you can see that the decline is much less and we went down from 6.8% to 6.6%. And the reason for that is that we -- in Q1 '19, which is kind of the reference period, we had more customers from non-core countries, meaning from outside the Nordics. If we look at the true frequency in Denmark and Sweden, it is actually up from the previous year. So that's all good. This just highlights that we are focusing even more on our core customers in the Nordic countries. If we go to the next slide. We want to say that we are moving our beauty store to Sweden. It's no secret that it's been quite a painful experience. It's been more expensive going to the beauty -- expensive than we expected losing around SEK 15 million to SEK 20 million annually. And even though we're trying to do big improvements, we just haven't seen any improvements and we don't believe that this store would ever make being nowhere near to being even breakeven. We have an exit clause in the lease contract that we can exercise in April 2021, where we can have a 12-month notice. And we will use that, but as we are obliged to have a store up and running in that premises, we have decided to put up a temporary, you might say, a long pop up store, Booztlet store, running until April 2022. As we still are very committed to Beauty segment, and also active brands, they are requiring to have a strong flagship presence within Beauty. We opened up -- we are opening up a beauty store in Malmö in Emporia shopping center just next to the Headquarter. This is a very high-quality shopping center, high-quality location and has been very well received by the suppliers. We have moved more or less all our agreements within Beauty to Sweden. And this will both improve our basic shop operations as well as our underlying margins for the 2 segments. Again, as I said, we are very committed to the Beauty segment. We can see that it increases relevance. It improves our market unit relevance and it's among our fastest-growing categories for Boozt, growing year-to-date, more than 80%. So this is very positive. And we expect the new store in Malmö to be breakeven once it's up and running. So if we go to the next slide, the financial update, I will hand over the financial update to Sandra.
Thank you, Hermann. So if we look at the group results, it concludes the net revenue growth of 7.5%. The net revenue growth was positively impacted by currency effects of approximately 0.5 percentage points. The strengthened euro and DKK against the SEK had a slight positive impact on the net revenue growth, while the weakened Norwegian krone had a negative effect. The timing of revenue recognition negatively impacted net revenue growth as we ran a large campaign in the last few days of the quarter where orders were shipped and accounted for in April. The net revenue growth in January and February was in line with expectations, while the outbreak of the coronavirus in the Nordic markets during March severely hit the overall market spending on fashion and apparel. Hence, the net revenue growth on Boozt.com for March deviated negatively from our expectations. Booztlet, however, managed to keep its strong momentum also throughout March. The off-price segment benefits from consumers trading at lower price points in times of economic uncertainty as our buying and merchandising team experienced during the last financial crisis. Growth was mainly driven by the strong growth in Booztlet as we have shifted marketing spend from Boozt to Booztlet to better capitalize on the very promotional environment during January and February, but also during March as the coronavirus reached the Nordic. We have seen a very strong growth in the Beauty, Kids and Sports category on Boozt.com, while performance in the women's category, especially occasion wear such as dresses, were weaker. Net revenue growth was relatively stronger in Denmark and Finland while Sweden grew in line with group average. Norway was negatively impacted by the weak Norwegian krone. Due to the uncertainties, we decreased the marketing spend outside of the Nordics in March, which had a negative effect on the net revenue growth of minus 16.9% in rest of the Europe in the quarter. The decrease of the gross margin to 31.9% in the quarter was entirely driven by the extraordinary write-down of SEK 57.8 million. The write-down was made as a consequence of the expected subdued demand in the light of the uncertain times that we currently are experiencing. The write-down enables the focus on in-season stock on Boozt.com, while giving Booztlet the opportunity to sell a stock at potentially higher margin, and that is fueled by the freight income that we gain since customers pay for shipping and returns on Booztlet. While the main part of the extraordinary write-down is spring/summer inventory for '19, it also included selected parts of the pre-autumn and winter stock for '19. These actions will secure that we do not build up an old stock issue in the spring/summer season in 2021. Excluding the extraordinary write-down, the gross margin was 39.4%, corresponding to an improvement of 1.5 percentage points, where the improvement came from the contractual improvements, including a change of agreement structure with a large brand as well as an increased level of campaign buys. The product margin in the quarter was as a consequence of the healthy inventory position we had coming into the quarter on par with last year, despite the elevated promotional activities in the market. The adjusted EBIT of minus SEK 61 million, corresponding to minus 8%, was highly impacted by the extraordinary write-down of inventory. The adjusted EBIT was also impacted by a negative SEK 5.5 million relating to a changed assumption of the IFRS 16 leasing contract for our Beauty by Boozt store in Copenhagen. The SEK 5.5 million would have already been accounted for, if we would have included the penalty fee that enables us to use the exit clause in the assumption of the valuation of the contract at the time that IFRS 16 was implemented. This is the reason that this part of this IFRS 16 exercise was not adjusted for. The improvement was driven by better underlying gross margin and by the improved cost efficiency in our fulfillment operations. Despite lower growth than we'd expected, we managed to deliver savings in accordance with the expectations that we set up prior to the outbreak of the coronavirus. As a consequence of contractual improvements and optimized allocation in our distribution setup, we also had a slightly improved cost structure for distribution in the quarter. So if we move to the next page, we see that the net revenue growth was a moderate 0.7% for Boozt.com, impacted by the coronavirus outbreak in March, while growth was in line with expectations during January and February. The net revenue growth was also negatively impacted by the change of agreement structure with a large brand and the 'fair use' policy implementation. SEK 41 million of the extraordinary write-downs was allocated to the Boozt.com segment, impacting the adjusted EBIT negatively. Excluding that extraordinary write-down, the adjusted EBIT margin improved compared to last year. The average order value of SEK 785 improved due to lower return rates in line with expectation as of -- as a consequence of the change in product mix as well as the implementation of our 'fair use' policy in the fourth quarter of '19. Our new customer intake increased with 11% in the quarter, which was relatively higher than the net revenue growth in the quarter. In March, at the time when mitigating activities was enforced by Nordic governments, our existing customers generally continued to browse, but was less prone to convert due to the uncertainties on what to expect of the ongoing crisis. In the first half of the second quarter, we have seen that our existing customers shopped more actively. In the first half of the second quarter, we also seen a strong acceleration in new customer intake. As a consequence, we will be even more opportunistic in relation to investments in new customers. Moving on to the next page. We can see that Booztlet maintains its very strong momentum with a growth of 113%. Due to the attractive customer acquisition cost, we've allocated further marketing resources into the Booztlet segment to accelerate growth even stronger in 2020. In Q1, we started investing in offline marketing to build further brand awareness for Booztlet. Of the extraordinary write-down accounted for in the first quarter, SEK 17 million was allocated to Booztlet as a consequence of the expected benefits that the Booztlet shop gets from having increased number of items active on the site. As we continue to improve the assortment of stock composition on Boozlet, we'll provide further incentives for the Booztlet customer to increase their buying frequency. The high industry inventory levels continue to offer good opportunities for purchasing high-quality stock at attractive prices that enables continued strong gross margins. We continue to see strong profitability in the Booztlet business, excluding the extraordinary write-down, the adjusted EBIT margin improved compared to last year. Our focus to elevate Booztlet continues, and for the first half of the second quarter, growth accelerated even further with satisfying margins. So let's move on to the next page. In March, we temporarily closed the physical Booztlet store as a consequence of the coronavirus outbreak. That, in combination with the permanent closure of the Beauty by Boozt store in Copenhagen, had a negative effect on the net revenue in the quarter. We are eligible for government support. But since we believe that an online first business such as ours will benefit in the long-term as the online migration accelerates at an even higher pace than previously, we don't believe that it would be fair of us to accept such support. As Hermann described, we decided to close the Beauty by Boozt store and thereby using the exit clause at first opportunity in April 2021 with termination period of 12 months. Following, we reevaluated the IFRS 16 lease agreement in accordance with the assumption that we will be terminating the agreement in April 2022. A temporary Booztlet store will be operated out of the location until April 2022 for us to honor our contractual obligations. Following the reevaluation, we made an impairment test for the remaining leasing period, hence, the additional cost of SEK 25.7 million that was adjusted for. In addition, we have also made other adjustments relating to the store closure of a total SEK 9.7 million. That cost mainly consists of write-down of fixtures, but also costs relating to inventory and terminated staff. We are currently preparing for the opening of a new Beauty by Boozt flagship store in Malmö and our Beauty brand partners continues to emphasize the importance of a premium physical shop in order for us to be able to sell attractive brands online. We expect that the new store will drive significantly lower cost. Full year effect is expected to be around breakeven. This week, we opened up our physical Booztlet store outside of Copenhagen as the restrictions in Denmark were released and we have taken the measures needed to ensure a safe working environment for our employees. If circumstances change, we will always put our employees first and close the stores temporarily until we can ensure a safe working environment. Moving on to the next page. We see the development in the cost ratios in the first quarter. As previously mentioned, the gross margin is affected by the extraordinary write-down of inventory, while the fulfillment cost ratio improved with 1.4 percentage points. The improvement in the fulfillment cost ratio is in line with our expectations at the beginning of the year, despite lower growth than expected. We are very satisfied with the development of our fulfillment costs so far, and we'll continue to improve operational efficiencies as we currently are preparing for the in-sourcing of our warehouse operations as from January 1, 2021. The marketing cost ratio was on par with last year. We expect to increase marketing spend compared to last year on a full year basis as we invest heavily into the Booztlet.com segment, but also see attractive opportunities for Boozt.com. In mid-March, as a consequence of the uncertainties, we temporarily lowered our marketing spend, but have since increased it again. Adjusted admin and other costs ratio was impacted negatively by the lower growth in Q1. It increased with 0.6 percentage points, driven by continued investments in personnel to support strategic initiatives. The increase in cost of personnel was partially offset by an improvement in other costs of 0.3 percentage points. The adjusted depreciation ratio increased with 1.1 percentage points, mainly driven by the one-off revaluation effect from the closure of the Beauty by Boozt store of SEK 5.5 million. Excluding that effect, the depreciation cost ratio would have been on par with the expectation at 3.8%. Moving on to the next page. We can see that the net working capital was improved with 1 percentage points to 11.9%. The decrease in net working capital percentage was primarily driven by low inventory growth, partly due to the extraordinary write-down of inventory as well as the change to a consignment-like agreement with a large brand partner. At the same time, we had higher accounts payables, mainly as a consequence of earlier in deliveries of spring/summer inventory. Just up for year-end 2019, and due to the long processing lead times from the authorities, we have a substantial amount of accrued income and reverse customs from returns in Norway. As for March 31, this receivable amounted to SEK 55 million while we received SEK 13 million from the authorities in the quarter. From a working capital perspective, this is a temporary constraint, considering the ongoing changes in the customs regulations in Norway that is expected to reduce our net working capital exposure from reverse customs significantly going forward. In addition, an increase in other receivables was driven by timing of payments from customers as we ended the quarter with a large sales campaign where parts of the payments related to that campaign was in transit from payment providers at month end. Moving on to investments in intangible assets in the quarter. The capitalized development cost increased with 51.6% to SEK 13.8 million. Despite the high relative change, the absolute numbers remain relatively low. The increase is driven by the assets developed by the Boozt Innovation Lab. Boozt Innovation Lab is, as you might remember, the former Touchlogic that we acquired in Q4 2019 that now develops proper-tiered systems and apps for the Boozt Group. Investments in fixed assets was SEK 1.3 million in the quarter. And if you look further into 2020, we expect investments in fixed assets slightly below 2019 since parts of the buildup of the AutoStore store will be finalized in the beginning of 2021. Moving on to the operational cash flow, we've seen a significant improvement compared to last year from improved working capital. Cash flow from changes in working capital amounted to a positive SEK 22.2 million, that is to be compared to a negative SEK 65.7 million in '19. Given our current forecast, we estimate that we are well on track to be around cash flow neutral for the full year of 2020. And concluding that financial update, I will now hand back to Hermann.
Thank you, Sandra. And just before we end this presentation, just I'd just like briefly comment on the current trading. So we'll go to the next slide that says strong development in the first part of Q2. We've seen now that we are kind of in the middle of Q2 that had a quite a strong start to the quarter, both Boozt.com and Booztlet have seen relatively high growth. Both are growing more than 20% in the quarter so far. And especially, Booztlet is growing even faster than Booztlet grew in Q1. So we are seeing this migration from offline to online taking place. This is reflected in the very strong new customer intake that we see with a record growth in the new customers in April 2020. Across the shops, Boozt and Booztlet combined, we have seen a 76% growth in number of new customers in April. So -- and as we know that these customers, they tend to stick, this, of course, is quite positive for our business going forward. What is interesting is that we have talked about the categories for some time now. And now they are really, really kicking off. Kids is very strong. Sport, obviously, is very strong. And then especially, Beauty growing 80% year-to-date and now representing around 5% of the net revenue on Boozt.com. So, yes, I think that this has been the time where the categories have had a breakthrough. Of course, we also know that it's been relatively easy with most physical retailers being closed and consumers being concerned going out. So it's -- it feel a bit like playing football against 7 or 8 players. So we know that kind of once the lineup gets stronger, of course, we will have more competition, but we believe that this offline -- online migration has only been accelerated during this crisis, also because we also see that the profitability is developing quite positively. This then, of course, means that our cash position is very strong, and we have considerably more cash available than we had at the end of the quarter. This means now that we have secured -- that when we have secured the base that we have sufficient cash and that also we see a lot of new customers on Boozt and Booztlet that we are pursuing growth opportunities quite bullishly, you might say, this is both across the categories. Also, in -- with regard to attracting new first time buyers, both in Boozt.com and Booztlet, we see, again, this off to online migration really accelerating and what we've learned from China and countries that are kind of early stages of the recovery, that once consumers have started to buy online and see how easy it is, they intend to stick, and so that's very positive. And then finally, we're also trying to help brands to clear excess inventory. We are heavy buyers of stock in the market at the moment. That goes both for Boozt and Booztlet. So quite a positive start, but of course, we're cautious because we cannot tell what will happen. This leads me to the final slide, the outlook. So even though we expected the outlook in April, we are now confident that we can deliver a growth between 10% and 20%. And we're also confident that we can deliver an adjusted EBIT margin between 1% and 3%. Again, though, we know that visibility is quite low, what we have in the books will not be taken away from us, and we now believe that we've seen the worst and we see the low point, and we also believe that we have some data points in how customers react in times of crisis. So we are quite confident that we can deliver on these targets. So with that said, I would like to hand over to the operator to take some questions.
[Operator Instructions] Our first question comes from Daniel Schmidt from Danske Bank.
A couple of questions from me then. And starting off where you ended basically, Hermann. When it comes to current trading, and of course, given that offline has been closed in some of the markets that you operate in, that has, of course, may be made it easier for you. But can you make any assessment. If you look back at the past 10 days or so in Denmark, for instance, is there a big change to your growth trajectory now that offline is opening up?
Basically, no, we are still seeing strong growth. And so obviously, even though the stores open up, customers are still holding back because there's still concern in the economy and -- but we are still seeing strong traction both on Boozt.com and on Booztlet.
And is there any change in the past 10 days when it comes to what segments are moving or not? You mentioned Kids, you mentioned Sports and Cosmetics. Is that the same sort of in May as well as in April?
Yes. It's very much the same. It's the calibration of-- still women are still not buying the dresses because they're not going out. But everything else is quite strong. And of course, Kids, Sports and Beauty are quite strong. So we are seeing the same pattern as we've seen before. But, again, recovery in the different countries is actually quite different. Denmark, of course, is the strongest, where we saw initial strength, in Norway, then holding a bit back. So it's actually quite difficult to say this also why -- the main thing for us is to not try to predict what happens, but be able to kind of react to what is happening at the moment.
Yes. And given the sort of the mix change that you've seen on the back of corona, do you feel -- and you're also mentioning that the cash position is considerably stronger now compared to the end of Q1. Are you insinuating that the profitability with this mix is better than your sort of normal mix?
You actually might say so, yes. And that has a lot to do with that, obviously, when you're selling more men's clothing Kids, Sports and Beauty, your return rates are considerably lower than just selling dresses. So that fact alone, now the returns, of course, gives you a higher profitability.
Yes. And speaking of returns, you mentioned, of course, that, that is driving fulfillment ratios down that you have this fair usage policy in play as of sort of mid-Q4. What are you seeing overall when it comes to returns because you had it rising for sort of 1 percentage points per year for -- since you -- in modern time, what do you see there, looking into 2020? How much can that come down?
Yes. As you know, we introduced the 'fair use' clause in November last year. And actually, what we saw for January and February and also for the beginning of March, return rates came down because of failures. But we also saw that end of March, and then during April, of course, returns came even more down because of the mix effect. So it's difficult for us to predict. But of course, we believe that the 'fair use' level kind of give us some points with regards to reduction of returns. Of course, if this -- if the categories continue having this larger share of the growth. That, of course, is positive also because we now have seen that also men are buying online. And I tend to say that men are easy because once we get the habit and know how easy it is, we stick. So for us, we are not kind of -- we have low expectations, but high hopes you might say.
Yes. But would you say that the fact that the sort of return rates are coming down is mostly due to the mix and the fair usage policy that you introduced? Or is there sort of an underlying change in the behavior, if you look on a like-for-like basis on the women side, for instance?
I think you could add that Booztlet is taking a bigger share of our group revenue, you also have positive impacts from that since the return rates are lower on Booztlet. And also from a profitability point of view, the customers pay for returns in -- on Booztlet.
Yes. Okay. Good. And you also -- I think you also said that you will be in-sourcing your warehouse sort of fulfillment when it comes to returns by the start of 2021. Was that correct?
Yes.
That's correct, yes.
Yes. And would you care to quantify any -- in any way what sort of savings that will give you?
That's too early for us to do that. Of course, we've seen -- the savings we've been doing in the fulfillment is not only because of lower returns. It's also much the -- it's also mostly kind of -- due to our more efficient and our systems. But I think that we -- last time, we quantified that for the improvement of between 1 and 2 percentage points in fulfillment sale, half of that will be due to the in-sourcing of the warehouse, of course, because our partner has obviously a margin of that. And of course, we will share that margin. Also, the risk for us to do the transition is actually quite low because they are working on our systems and the only thing that the current provider is proving is -- actually is hedge. We are doing the trainings. So we see quite a good upside with very lower risk on the in-sourcing.
All right. And is that sort of the last part of the improvements that you are aiming for when it comes to fulfillment, the rest will be sort of fulfilled during 2020, and then you do the in-sourcing, and that will take you to that entire improvement that you've talked about?
Yes. That is -- that are the big changes or probably we can try to improve, but these are the big changes, yes.
Yes. And then finally, on the Beauty store. I think you also said in your statement that you should be breakeven when it comes to the Malmö store after these write-downs and so on. Was that correct?
Yes. That's correct.
Yes. And could you -- would you mind sharing any details in terms of the size of the new store versus the old one and the number of employees and so on?
These are different questions, Dan. I think it's something like 300 square feet...
Yes. It’s a little smaller and there's fewer employees. It's only 1 story. So it's fewer employees. So it's more cost efficient.
More compact. The store in Copenhagen was kind of on 2 floors. And then considerably higher amount of unuseful space. So this is -- it's a very good -- it's a real store in a very good location, and obviously, we have a good deal because the shopping malls don't have a lot of shops asking to open up. So it's a very different environment. So that's why we're quite confident that we will break even on the Malmö new store.
And then since we have it next door, it will be better control for us to actually be able to walk over there.
Our next question comes from Daniel Ovin from Nordea. [Operator Instructions] We move on to the next question, which comes from Niklas Ekman from Carnegie.
Yes. A couple of questions. Firstly, on the margin guidance, it's a fairly broad margin guidance of 1% to 3%. And if I make the calculations correctly, if you adjust for the one-off items, we're talking about anything from a slight margin contraction to a clear margin expansion to close to 5%. Can you elaborate a bit on here the different variables and why you have suggested such a wide margin guidance? What kind of uncertainties are you worried about?
Well, there are a lot of uncertainties and a lot of unknowns that it's hard for us to predict for the full year right now. But what we expect is there will be a pressure on the gross margin. And the reason that we have this spectrum is because of the uncertainties in relation to the gross margin. We are, of course, prepared. And the inventory position we have right now gives us liberty to be able to participate, even if the pressures are high. But there are too many uncertainties for us to be more precise than this.
And on that topic, as you mentioned, you haven't seen much competition from physical retailers now. And as these are opening up, are you seeing a massive increase in markdowns from physical stores? Do you think that you're going to have to be more aggressive on markdowns now in May, June compared to what you were in April, for instance, and in the start of May?
Not until now, we haven't seen that, but we are prepared for it and we expect that it will be like that over the summer.
Okay. And I was also curious, when you talk about the Beauty store in Malmö reaching breakeven, does that -- how -- basically, aren't there investments related to the store? Are you talking about it reaching breakeven by the end of the year? Or that the entire investment will pay off before the end of the year? Or can you just elaborate a bit here on the level of profitability there?
Yes. Sure. So there will be some initial -- of course, we need some shelfs in the store and stuff like that. But on the operations, we believe that it will be breakeven, maybe not 2020, but at least if we look like -- on a 12-month rolling basis or so.
Okay, that's clear. And I was also curious about the write-down for the right-of-use assets for the physical store in Copenhagen. Why are you forced to make a write-down if you're going to continue to use this store for the Booztlet operation?
Well, we -- of course, first, we evaluated a contract due to the timing that we expect to use this asset. But then you need to assess. You have an asset that you need to assess, is this something that you can make profit from? And from an accounting perspective, we made an impairment test and said, "Well, we never believe that with this, we will be able to make profits with these assets, with these costs." So therefore, we did a write-down of this SEK 25-extra-million.
Okay. Great. And also, you mentioned here very strong sales development in April and May. I was curious if you could quantify the development you saw in January and February. Was it the same strong growth rates of 20%-plus in January, February before the coronavirus?
No. Obviously, the growth was lower than 20% in January, February. That was 2 big parts due to that -- we knew that the -- some of our big peers were sitting on huge amount of stock, end of the season, and we knew that there was going to be heavy discounting, and we just decided not to participate and tried to protect our gross margin, and that -- we believe that we did that quite successfully, especially if you look into kind of beyond the numbers that you have -- that we have positive EBIT for the quarter -- for the first half. So it was, yes, very unexpected to have the coronavirus. But obviously, at the beginning, it went according to plan, but then we had to change the plan. But for now, we are bullish again.
Okay. Great. And also just a detailed question here. This SEK 58 million write-down of your inventory, is that a write-down basically to 0 of that inventory? And as a result, when you sell this in Booztlet, does that mean that you're actually going to recoup some of that write-down because you obviously then sell at a very high gross margin? Or is that SEK 58 million, does that account for the fact that it will be sold at a higher gross margin at Booztlet?
Parts of the inventory write-down, so the assets part was written down to 0. So hopefully, we will recoup some of that in Booztlet. The other part was not written down to 0.
[Operator Instructions] We'll try Daniel Ovin from Nordea again.
Yes. Can you hear me now? Hello?
Yes.
Okay. Perfect. Sorry for that. I tried to ask question repeatedly, but nothing happened. So maybe I'll miss something here, but I'll try anyway. So starting with the gross margin then for Q2 here, and though it sounds very encouraging, but can you say anything about the markdown level and then the gross margin outlook for Q2? Is it some massive amount of discounting going on here in early start of Q2? First question.
Yes. Thank you for the question. Gross margin is actually quite decent. And the markdowns are actually also not that high. So it's -- so far, it's been quite okay. Of course, yes, it looks -- there might be more noise than reality in that, but so far both margin and markdowns are decent. And of course, we have been quite concerned with what will happen once the physical stores open because they will be sitting on excess inventory. We also know that end of season sales will start earlier, probably start, yes, end of May, maybe even next week. But that's quite okay for us because our sales always is very high, and we have so far secured quite a good amount of campaign stock. So even though markdowns would improve, our gross margins will still be quite decent. So this was why we said that the profitability in the quarter is developed positively, and we expect to do so. But again, visibility is very low. And if an industry becomes desperate, it's difficult to know what will happen. But so far, we are quite satisfied.
Okay. Perfect. And then also another question. So on the fulfillment cost side. I think that you previously talked about around 100 basis point improvement for 2020. And now with this quite very good start here in Q1, and also high sales growth start of Q2. So do you think that on that line, could it be even higher than 100 basis point sales versus sales for the full year?
Yes. The target is still like to have this 100 basis points improvement. Of course, we are being slightly -- the long term is favoring fulfillment costs, and we've seen these efficiencies, but our ambition is still this 1 percentage points in '20. And then hopefully, 1 more in 2021. So that's still our ambition. And -- but so far, we are doing a good progress.
Okay. Just a final question also then on this new customer growth. So very high number here. I don't know -- I don't think you've given that number before. So maybe you can talk about what you have been seeing in unique new customer growth before? And then also, have you done any test? Do you know how the net -- NPS score for these customers, i.e. trying to assess what is the likelihood that these customers actually will return and stay on the platform? This is the last question.
Yes. Yes, this is much higher than we've seen before. And we haven't published the number before, but we think that it is kind of a testament of seeing how many of the offline product migrations taking place. Our NPS score is quite high. Even though we have seen that some -- there's been some bottlenecks in distribution. And that means that customers are getting kind of their goods slightly later than they are used to, also because we have all these precautionary measures at all points in the supply chain, meaning that deliveries might be delayed, meaning that also that the -- that affects the NPS because the customer satisfaction is very influenced by the delivery. But so far, the NPS is quite high and, I don't know, this indicates that the customers are coming back. So we don't have any indications that these customers would be different compared to the previous new customers. Also because we're still very much focused on the Nordics, and the growth is mainly taking place in the Nordics, which is our main segment. So I think that this also suggests that we're quite confident about the new customers and that they will -- a big part of them will stay both on Boozt.com and on Booztlet.
Our next question comes from Michael Benedict from Berenberg.
First one was on current trading. Just to check, I heard correctly, you said 20% growth for the EBIT till today. So could you just quantify the positive impact you received from the timing effect at the end of March and orders to build in April? That's my first one.
Okay. So we hear you a little -- your connection is a little bad. But you asked about the currency effect and the impact from the cutoff in April, was that right?
So -- no, sorry, the current trading number of 20% growth and then the impact from timing in April?
Okay. Yes. Yes, I could hear it. Yes, we had some impact from this campaign end of March that wasn't fulfilled until beginning of April, so that has a slight effect, but it's not a huge effect and it will not have a big effect on the Q2 numbers. I'm not really keen on quantifying that because that's -- we don't disclose that, but that has a -- that had a slight effect. And yes. So if -- I think it would be to us to disclose that exact number.
Okay. So EBIT was 20% growth you've seen in Q2 today?
Yes -- no, no, we have seen more than 20% growth in Q2 for both shops. So obviously, we also said that Booztlet is growing more than the growth for Q1, which was 113%. So Boozt are also growing more than 20% in the quarter so far, and obviously, Booztlet has grown faster.
Great. And so my second question is on the in-sourcing of fulfillment. Will that reduce the variability of your fulfillment cost expense going forward?
Yes. Obviously, we'll do that. We've benefited from our ability to cut down on the staff. In the beginning, obviously, now -- we're now back to full staff at the warehouse. But what we have initial planned and that was always in the plan was to have redundancy, meaning that a part of the staffing in the warehouse would be provided by staff agencies. And the learning now is that this ratio might be slightly increased compared to our initial plans, meaning that we will have probably 2, if not 3, different staff agencies providing us kind of the marginal staffing so that we have a part of that being variable, both so that we can take care of if there's a downturn as we have seen in March, also, if you have an upside in the trading. So we'll try to make it partly variable. Of course, that will come at the expense of cost or cost structure and leanness. But as you know, we are big [indiscernible] fans, and we believe that you need to build redundancy in your systems to take care of the different bumps that you will encounter along the way.
Great. And my last question was on cash flow FY '20. I think you said that you would be cash free neutral. Is that based on price and cash collection or on free cash flow?
On free -- it's free cash flow.
Our next question comes from Andre Thormann from ABG.
Just for start with the gross margin. Can you elaborate a bit on what will -- what is the worst-case scenario you see here for the remaining 2020 in your guidance on gross margin?
Yes. Worst-case scenario that -- it's a -- you probably know the old ones are the worst-case scenario because how bad can it be. But of course, we -- worst-case would be that you will see a similar situation that we saw in the beginning of the crisis. So meaning that the epidemic would come back, a second wave, and it would be handled as dramatically as we've seen in the first wave. That is kind of our first -- our worst-case scenario. This was why we have said that, okay, the range is quite wide, so that if we are closer to the worst-case scenario, you might see a growth of 10% and an EBIT of 1%. Of course, obviously, we are not expecting a worst-case scenario, but we're prepared for this scenario. The main thing for us is, again, to be in control of the stock. And this is -- so for a retailer like us, it's always to act like this. Your main concern, to you move the stock and make sure that it doesn't become obsolete.
Okay. But what gross margin are you looking into in the case of EBIT margin of 1%? Can you elaborate anything on that or?
Well, we don't really guide on gross margin. And I think, again, it would be a bit premature for us to say that what are the gross margin expectations for -- it's -- most important ones would be October, November and December. And of course, we have some gross margin assumptions, but I think that we are disclosing too much if we tell our peers that when we are expecting gross margins. So we'd rather keep that to ourselves.
Okay. Okay. But can you limit -- let's say that it will see a negative effect in these months, can you limit that in terms of the ongoing buying you will do in terms of buying it cheaper? I mean, is there any effect here we should be aware?
Well, we have made a write-down that is supposed to limit that effect. And we also made -- that we're buying a lot of campaign stock right now is, of course, very good. Then we have the write-down agreements with our bank partners. So if the sensor doesn't meet, we share that risk.
Okay. Okay. In terms of the Booztlet store that will open in Copenhagen, I mean, I understand that the growth of Booztlet will obviously be very high already without that in 2020, but I guess we will see even higher growth on Booztlet with this. I mean, is there any dilutions to margins for Booztlet from opening this store? Or -- anything you can...
No. We don't experience that. And the existing Booztlet store that we have right now mainly sell our claims, the ones that we can't sell online. And of course, that is goods that we've written down because it's not worth it. So the margins on those are very profitable.
Okay. And then in terms of the increasing average order value, is it correctly understood that this is driven from also Kids, Sports and Beauty?
Yes. Obviously, also men. Men, we don't really return. And Kids typically their moms since they buy shoes, they buy shoes size -- on the same -- safe size of clothes and kids tend to grow into the sizes. So same with Sports. So all these categories, and especially Beauty with returns lower than 5%. This is also -- everything helps with regards to lower returns. So from that respect, with the categories showing the strong growth, that helps unit economics and leverage on our valve.
Okay. And then just my last question. In terms of the new store in Malmö, I mean, can you elaborate anything on what is the rent cost of Malmö compared to Copenhagen?
Yes. It's very low. And it's somewhere in the range -- I can't -- it's very low. It's of course, we made -- or I would say, I made the rent agreement in Copenhagen at the very peak at the most expensive time you could make it. So obviously now with -- we are coming with a very strong brand and with a very nice and a beautiful shop. That means that kind of we have gotten a much better deal and a deal where it's possible to make at least breakeven for the store.
But the Copenhagen store, the rent for that one was, what, around SEK 20 million or what are we talking in SEK?
No. No, No. That was not -- it wasn't that high. And we're not allowed to disclose, of course, how much we're paying rent. I don't think that the landlord would appreciate that. But obviously, the rent was high and no one is willing to pay that rent levels now. So that is why we have made write-up because basically no one is interested in opening up a physical retailer in that location for the time being. So -- but it was not SEK 20 million, it was everything in 2 floors because basically you had no sales. We still had to have staff in 2 floors. So you might say that we did a lot of wrong things with regards to the store. But having said that, we believe our Beauty launch is actually quite a success there. If we -- and an alternative would have been to go out and buy an online beauty retailer and the price we would have to have paid for that would have been considerably higher than what it has cost us to build the store, taking into account the level of revenue we have now. So yes, it was a bit more expensive than expected, but actually -- we are actually very, very happy with the Beauty segment, and I believe that the Beauty team that has been in charge for the last 12 months has doing -- been doing an outstanding job in making sure that we have a very strong beauty set up. And now with the store, also mentioning the -- our suppliers have been also transferring their agreements to Sweden, that's, I think is a very good move, and it's very favorable for Boozt.com.
We have a follow-up question from Daniel Schmidt from Danske Bank.
Just a follow-up on what you -- what we have talked about in terms of the gross margin, and you said it's actually quite decent so far in Q2, and the markdown hasn't been that bad. If you sort of incorporate the mix change that you've seen, and I assume that you only saw a couple of weeks of that mix change materializing in Q1, i.e. when COVID-19 really started to impact consumers and that you've seen it all through Q2. Is that sort of taking the edge of might sort of some increased markdown activity in the market, even though it's decent. Is that sort of a net positive compared to the situation in Q1?
Yes. Yes, it is. We saw kind of -- it was so -- you might say that we saw that, in the kind of the final days of March, you saw the markup because the first 10 days shut down basically, the consumer was in a coma. So not much happened there. But then you saw this change. You've seen that through April and May. Obviously, with the consumers buying these categories, returning less, we have more consumers paying for the home delivery. So all in all, of course, the change that's been in consumer behavior during the first half of Q2, obviously, is positive to an e-commerce player like Boozt. If it continues, that would be nice. But you should -- the secret to a happy life, I've been told, is low expectations. So I think that just be prepared to take what comes and then be ready.
Yes. And you said also in terms of the growth so far, did I hear you right that you said that Booztlet has seen an acceleration in its -- in the growth so far in Q2 compared to what they delivered in Q1 for Booztlet?
Yes. Of course, yes, we've all said that Booztlet is our hedge. And when you will have the next recession, we would expect customers to migrate from kind of the mid-premium towards the outlet. And we've seen that very much during this quarter. We've seen an extremely strong growth on Booztlet. And it's nice because it's kind of -- it's quid pro quo thing, and we give good deals and they pay for the shipping in return, so -- and this seems to resonate with the consumers at these times, especially when they're insecure and they're still -- they want to buy clothes, and also with the gradual opening of the societies in the Nordics. People start to kind of wear office wear and what looks good. The weather is getting nice. So obviously, that benefits when we have this extremely strong offering on Booztlet as well.
There appear to be no further questions. I return the conference back to you, speakers.
Okay. Thank you. So this concludes our Q1 call, and we look forward to reconnecting in August for the Q2 report. Thank you very much, and have a good day.