Boozt AB

STO:BOOZT

Earnings Call Transcript 2022-Q3

[Hermann Haraldsson, executive]

Thank you. Good morning all, and welcome to our Q3 2022 webcast. So -- and let's just dive into it, going to the first slide on the key highlights.

So to start with, our Nordic Department Store strategy stands strong, we believe, with growth in the quarter of 7.8%. We continue growing the business profitably while accelerating market share gains despite discretionary spending being under continued pressure. For the first 9 months, we managed to grow 11.9%, and we are on track to deliver growth well ahead of the market and within our guidance for the year.

Markets have continued to be challenging and the consumer sentiment actually has reached new lows during the quarter, along with a steadily increasing inflation. We are now underway with the 2 most important months of the year in terms of sales as well as profits, and our organization is in full execution mode to end the year on a high. Customer acquisition cost has continued at an elevated level throughout the quarter, however, offset by the steadily increasing average order value. So with the underlying business drivers all pointed in the right direction and tracked the very positive trend from previous quarters.

The cohorts from 2021 continued the positive development compared to the 2020 cohort, leading to an increase in the true frequency. At return rates, they have stabilized at a low level, again, thanks to a diversification of categories and not least our unique Fair-Use concept to limit fraud and abusive return behavior.

Last and most important, the average order value has continued to increase, and we are at a record high average order value. This development is mainly supported by more items per basket, and this is a testament to the strength of our Nordic departmental strategy, along with some tailwinds from FX. The additional revenue streams, being Boozt Media Partnership, BooztPay and BrandHub delivered sales results and further progress in the quarter, although comps are becoming somewhat more difficult.

Our colleagues in the Commercial team, along with Buying and Merchandising, has done an outstanding job to manage our inventory position in a time of high uncertainty and very low visibility. Our inventory position is healthy as we have managed a strong sell-through of the SS '22 season, and are well underway with the Autumn/Winter '22 season. We are currently strengthening our product mix with selected campaign buys to further improve our offer towards consumers. So backed by another strong quarter, we reiterate our outlook for '22, and we expect to deliver accelerated market share gains also for the fourth quarter backed by solid profitability.

With that said, we, of course, acknowledge a continued challenging external environment. Therefore, with the current market conditions, we see a higher likelihood of achieving the lower end of our outlook for 2022 in terms of net revenue growth.

With that said, going to the next slide, which always is the most important one, the customer satisfaction KPIs. So if you look at our KPIs on customer satisfaction, then we can see that during the quarter, we have maintained our 5-star rating on Trustpilot and we've managed to deliver an NPS at a stable and best-in-industry level. So the whole organization is kind of laser-focused to continue to meet and exceed the expectations of our customers in terms of selection, price and convenience.

Going to the next slide, on the order development. If we go to the next slide, we can see that the number of orders were more or less in line with last year for Boozt.com. For the first half year, we are slightly down with a minus of 1.6%. The drop in number of orders is offset by the increase in average order value and a continued strong development of our additional revenue streams, mainly Boozt Media Partnership and BooztPay.

The average order value continues to develop strongly in the third quarter and is up to a record high SEK 872 per basket. The main driver is customers adding more items in each basket due to the continued expansion of The Nordic Department Store, but also with some positive effect from FX. I'm very excited to see that the ongoing work to build the best selection across all our department store categories is acknowledged by our customers putting more things in these baskets and supporting the positive development of a basket size, which in turn enables us to continue to deliver best-in-class profitability.

Moving to the next slide, the cohort development. We continue to grow our base of active customers on Boozt.com. In the third quarter, we had 6% more active customers compared to last year and [ 33% ] more than the third quarter in 2020. The number of orders per active customer remains stable and in line with the previous years. True frequency developed positively compared to previous years, so we are encouraged that the cohort from the pandemic years continue to behave in line with what we've seen in the past. So I believe that we can now settle the debate once and for all in terms of the stickiness of the COVID cohorts.

So having said that, I will now hand over to Sandra for some perspectives on the financial performance.

[Sandra Gadd, executive]

Thank you.

So if we look at the group results, we see a net revenue growth of 7.8% in the third quarter. Growth in local currencies was 4.1% due to the strengthening of all currencies used in Scandinavia in relation to the Swedish krona. As you know, we are negatively affected by the low consumer sentiment and high inflation, however, we saw an acceleration in consumer interest towards the end of the quarter as the Autumn/Winter season kicked off. This resulted in a solid growth in September.

The trend with increasing average order values in both our stores continued in the third quarter, which I will come back to within short.

Other revenues that consist of revenues not directly related to product sales were SEK 51.2 million. Growth in these revenue -- in this revenue stream comes from Boozt Media Partnership and BooztPay. Year-to-date, net revenue growth was 11.9%, 8.9% in local currencies.

Return rates are stable at the same level as last year, both for the quarter as well as year-to-date. Our department store model, where the diversification of sales contributes to lower return long-term, is working very well. We are in good control of returns and the costs associated with them.

The gross margin was 40.1% in the quarter, 0.3 percentage points lower than last year due to slightly lower product margins. Year-to-date, the gross margin of 40.3% corresponds to a 0.3 percentage point improvement compared to last year.

Our focus in the third quarter was to make sure that we ended the Spring/Summer season with a satisfying sell-through to be able to focus on seasonal goods during the fourth quarter. In addition, we also wanted to make sure that we got a head start into the always so important Autumn/Winter season. Given the challenging market, we are very satisfied with the gross margin and sell-through numbers delivered in the third quarter as the SS '22 season sell-through is in par with pre-pandemic levels and September delivered a relatively strong sale of AB '22 groups.

We have slowly started to buy into available campaign groups in the markets, and this will enable us to improve our offering to the customers while supporting profitability in a time of high commercial activity across the industry, which is mainly driven by higher inventory levels. The adjusted EBIT margin was 1.9% in the third quarter, which is on par with last year when the adjusted EBIT margin was 2%. Year-to-date, the adjusted EBIT margin was 2.7%, that is to be compared to 5% last year.

So if we move to the next page, we see that the revenue growth for Boozt.com was 8.2% in the third quarter and 9% year-to-date. In our Kids, Beauty and Home category, we saw the best performance. From a country perspective, Sweden and Finland performed the best. The average order value for Boozt.com increased with 8.1% through a historic high of SEK 872 that is to be compared to SEK 807 of last year. As most of you are aware of, the high AOV is, in our view, the key element for us to deliver best in industry profitability. We're happy to see that the department store's strategy really supports the sustainable high average order value.

The number of active customers increased 6% compared to last year, while true frequency developed positively from 6.97%, with cohorts displaying encouraging behavior and similar buying patterns as our historic cohorts.

Looking at profitability in the third quarter, the adjusted EBIT margin decreased from 2.5% last year to 2.1% this year. The decrease in adjusted EBIT margin is mainly related to a lower product margin as a consequence of the high promotional activity currently characterizing the market. Year-to-date, the adjusted EBIT margin decreased from 5.1% to 2.9%.

If we move on to the next page, we see that growth in the Booztlet segment was 5.9% in the quarter and 27.7% year-to-date. Booztlet's growth opportunities are negatively impacted in the short term due to the very high promotional activity in the in-season stores, both online and offline, as a result of high inventory volumes in our industry. In addition, Booztlet played a key role in managing the inventory risk for the Boozt Group in the third quarter, successfully selling previous and in-season items, bringing the overall inventory of the group to a healthy level.

Growth in the Nordics amounted to 8.7%, mainly driven by Finland and Sweden. Rest of Europe experienced a decline of 17.7%, impacted by lower sales in Germany as a consequence of us prioritizing profitability. Our Booztlet customers continue to put more items in their baskets, which contributed to a significant increase in the average order value of 16.7% to SEK 833.

The adjusted EBIT margin increased to 0.9%, that is to be compared to a negative 0.6% last year. The increase in adjusted EBIT was driven by the increase in net revenue and improved cost ratio.

If we move to the next page, we see the development of the cost ratios. The fulfillment cost ratio that consists of fulfillment costs as well as distribution costs was 11.6% in the third quarter, 0.6 percentage points lower than last year. During the quarter, we increased productivity in our fulfillment operations. Working in the other direction, we, just as others, experienced higher costs related to energy both directly and related to the electricity we use in our own operations, but we also see significant increases in costs for packaging materials and fuel surcharges from last-mile providers. On the good side, these costs don't constitute a significant part of our total fulfillment costs and are protected by an industry-leading average order value.

Last year, the fulfillment cost ratio was negatively impacted by shortage of capacity due to higher-than-expected growth in 2020 and 2021, together with longer delivery times for our AutoStore expansion. Year-to-date, the fulfillment cost ratio increased from 11.6% to 11.8%. We expect the ratio to decrease gradually as we improve productivity. We still believe that 11% is a good benchmark on where the ratio should stabilize in the medium term.

The marketing cost ratio decreased from 12% to 11.4% in the quarter, with an absolute spend in line with last year. Our business continues to be managed based on the core principle of a profitable and sustainable customer acquisition costs and customer lifetime value, with a payback period between 16 and 18 months. Due to our strong unit economics and high basket size, we will continue to invest in marketing to continue our accelerated and profitable market share gains. Year-to-date, the marketing cost ratio increased to 11.1% compared to 10.7% last year.

The adjusted admin and other cost ratio increased from 10.7% to 11% in the quarter, and we're pleased to see that we have stabilized the development and managed to partially offset the slowdown in growth and short-term deleverage of our investments into the cost base. The ratio was positively impacted by the decision to ensure that the organization and cost base reflects the current environment and growth opportunities.

With effect from July 1, we reduced staff that implied monthly savings of approximately SEK 3 million. The cost of redundancy payments incurred in June had amounted to SEK 9.5 million. Part of the savings were earmarked to make sure that we could give existing staff salary increases. Those took effect September 1, hence, slightly higher salary costs in absolute terms are to be expected in the fourth quarter and coming into next year.

Year-to-date, the adjusted admin and other cost ratio increased 1 percentage point to 10.8%. The depreciation cost ratio increased from 3.5% to 4.2% in the quarter, which was in line with expectations and impacted by the significant investments we made this year as well as end of last year in order to increase our automated fulfillment capacity. The ratio is expected to decrease over the next few years as we gradually grow into the capacity expansion. Year-to-date, the depreciation cost ratio increased to 3.8%, which is to be compared to 3.1% last year.

Moving on to the next page. We see that the net working capital of 8.4% of the net revenue for the last 12 months was 1.3 percentage points lower than last year.

Our inventory position is 16% higher compared to September last year and 24% compared to June of this year. Inventory in relation to LTM revenues was slightly lower than last year. In Q3, we, as we always do, build up inventory for Q4 to deliver the growth we plan for. However, the in delivery of the Autumn/Winter '22 season was slightly behind last year, minorly impacted by global supply chain disruptions. Last year, the inventory position was partially impacted by temporary capacity constraints at the warehouse.

Making sure that our inventory position is and remains healthy is our first priority at this time. This is a key priority for our organization as markets are volatile and visibility is low. Backed by a strong track record, we remain confident that we have the right tools and the experience to manage the situation going forward.

Free cash flow improved from a negative NOK 488.6 million to a positive SEK 90.1 million, driven by cash flow from changes in working capital and investing activities. In the second quarter, we invested in the seventh expansion phase of AutoStore. This investment is to be finalized during the fourth quarter. Year-to-date, we have invested SEK 371.1 million in fixed assets, where around SEK 30 million was in the third quarter. The majority of this year's investments are related to the AutoStore installation, which will enable us to continue to grow in the coming years, as we previously stated.

Finally, as we believe that a strong cash position is key in the current market environment, we're happy to see that our cash position exceeds SEK 1 billion at the end of the quarter and that we have a net cash position of SEK 90.1 million.

That concludes the financial update, and I would now like to hand back to Hermann.

[Hermann Haraldsson, executive]

Thank you, Sandra, and let's go to the next slide, talking about The Nordic Department Store.

Over the last couple of years, we've made significant progress in building the leading Nordic Department Store. A crucial part has been to establish a full assortment across all categories as well as the introduction of the Home category. We still have a lot of work in front of us to further increase the depth and our expertise, but we have already seen a very positive impact of the increased selection, with customers putting more items in to the basket. And this benefits the most important KPI, the average order value.

I just wanted to share a little insight from our department store strategy and just how meaningful this is in relation to customer loyalty and to the share of wallet. To the left, you see the average female Boozt customer shopping only in the Women's category. The spending for the last 12 months amount with net revenue of SEK 1,000. To the right, you see the average female customer who shops across all our categories, including Booztlet, during the last 12 months. The total spending goes up to SEK 20,000, and the isolated spending in the Women's category goes up 7x. Needless to say, the majority of our customers are still shopping in 1 to 2 categories where we have seen an acceleration of customer shopping in 3 or more categories over the last 2 years.

The current slowdown makes it more challenging to acquire new customers at the same pace as historically. So even though we still will be chasing new customers to our shop, we spent considerable time and resources to grab the opportunity to develop our lower customer base by upselling The Nordic Department Store.

So moving on to our final slide, the outlook. We have managed to deliver accelerated market share gains as well as best in industry profitability for the first 9 months of the year. It is quite difficult for us to predict the duration and the severity of the current slowdown, but I firmly believe that we have put ourselves in a position to make the most of the situation, and we stand ready to further accelerate organic market share gains. On the back of the strong execution and very rapid response to the changes in the market, we are quite pleased to reiterate the outlook for 2022, although consumer sentiment continued to get worse during the third quarter.

Considering the market conditions, the risk, however, currently are higher likelihood of achieving the lower end of the guidance in terms of net revenue growth. In terms of profitability, we still expect to deliver adjusted EBIT in the level of SEK 235 million to SEK 285 million.

So this concludes our presentation, and I would like now to hand over to the operator to get the Q&A session underway.

[Operator]

[Operator Instructions] Your first question comes from Daniel Schmidt from Danske Bank.

[Daniel Schmidt, analyst]

Yes. Hermann and Sandra. A couple of questions from me.

Starting with the last slide, Hermann, that you commented on stating that the current market situation price, a higher likelihood of achieving the lower end of your net revenue guidance for the full year. Does -- in any way sort of just looking at weather conditions over the past couple of months, I think it was quite favorable in September but the opposite in October and November. Has that played in, or is that marginal for you?

[Hermann Haraldsson, executive]

Daniel, of course, we based our forecast or guidance on kind of what has happened. So when we guide -- basically maintain the guidance, it's because we expect things to kind of at least not get worse than they are now. Having said that, it's -- the next 6 weeks will kind of define everything, and so far, so good, I would say. But we expect the rest of the quarter to be very comparative, very promotionally-driven. But this is kind of an environment that we thrive in, so we based kind of the things at least not getting worse.

So having said that, of course, they are probably worse than we expected after Q2, with the consumer sentiment being at an all-time low in all 4 countries at the same time. So far, kind of we're on track, but again, we're just waiting for what happens during the next 6 weeks.

[Daniel Schmidt, analyst]

But what I'm trying to get is, do you think it's a combination of the weather conditions that we've had in the past 5 weeks which I think has been unusually warm, which I guess is making people less inclined to look for Autumn/Winter collection where -- or is it more the fact that you have this deterioration in consumer confidence? .

[Hermann Haraldsson, executive]

It's probably both. I think it's very important to establish cause. If it had been normal, if we didn't have at all a cost of living crisis, we would have blamed it on the weather. But kind of I think it's facing -- the weather, of course, can be an advantage for the rest of the year if it gets colder. But I think, to me, it's more consumer sentiment. And also we see that attracting new customers is harder than before, at the same time as the customers that we get in, they buy more. So that's why we believe that the consumer sentiment, of course, has probably more to say than the weather.

[Daniel Schmidt, analyst]

All right. Okay. Moving on to what you said in terms of customers buying more and average order value reached all-time high, I think you said. And of course, partly supported by the FX situation, but also customers putting more things in their baskets. At the same time, have you been sort of active on this space in terms of any campaign-driven incentives or metrics that stick out versus your normal sort of activity in terms of pushing average order value even higher?

[Sandra Gadd, executive]

Well, I think this thing that we built over time, and it is the department store strategy and making sure that all our categories are visible in our commercials and both in the e-mails, but also in what we do offline, it's just starting to pay off. I think -- it's not like we do a short-term push into anything. This is more just a long-term trend that we've seen that people put more items in the basket.

[Daniel Schmidt, analyst]

Okay. And then thirdly, coming back to -- which, of course, is a little bit surprising that Booztlet did not outgrow Boozt in the quarter, but I think you had a good explanation for that on one of those slides with high promotional activity in the third quarter from every sort of competitor basically. Now heading into the last quarter of this year and your increased focus on campaign goods and filling the assortment, is that going to neutralize, I suppose, a continued high level of promotional activity from competition heading into the last 3 months of this year? Will we see a comeback of Booztlet, you think?

[Hermann Haraldsson, executive]

I think that to address kind of the competition and promotional activity, I think you just have to look at the inventory level of all the listed companies in our space. They all have too much inventory, so you should expect a high degree of campaign and promotional activity for the rest of the year. And that also means that Booztlet is kind of -- when everything else is painted in yellow, kind of Boozt can hardly be more yellow than the rest. So that's why, of course, Booztlet will be less competitive. But we always see that during Black Week, et cetera, that that's not the prime of Booztlet because then kind of the market is very yellow.

So long term, of course, elevated inventory levels with brands benefits Booztlet as they can make campaigns for us. But short term, of course, it's difficult for them to shout much louder, and we don't want to sacrifice kind of the long-term image of Booztlet. We'd rather grow slower than to perish for when the market gets more normalized, and also now that we can get more campaign activities.

So we look at Boozt and Booztlet, kind of 2 brands in the portfolio, and our big concern has been to make sure that we don't have too much inventory. Our inventory level is spot on at the moment, so that's why if it's Boozt or Booztlet's growing in the current market environment, we don't really mind as long as the long-term trend is good and both shops are making money.

[Daniel Schmidt, analyst]

Yes, all right. And speaking about promotional activity, given the environment that we're in terms of consumer sentiment and consumer confidence being rock bottom basically, do you think that focus in the markets when it comes to consumers' willingness to spend is going to turn even more to the Black Week versus sort of the Christmas season?

[Hermann Haraldsson, executive]

The answer would be, I don't know. We haven't been in the situation for -- since we started the company, right? So we're having a cost of living crisis and other stuff. Of course, you would assume that if people have been holding back because of the weather, then there might be a time and say, okay, I will wait to buy outerwear because I know that in a couple of weeks, there will be a promotion activity. So that might kind of advocate that Black Week, and Christmas would be high. But on the other hand, if consumers get more depressed, it would just -- it's just like, it's very, very hard to say.

I know it's kind of mumble and bumble for me, Daniel, but it's difficult to be very clear on that with that.

[Sandra Gadd, executive]

But I guess we can conclude that most customers that are in the market, they want to make a good deal and make sure that they get a good price on what they're intent to buy and that...

[Daniel Schmidt, analyst]

That was basically where I was getting at, that sort of the bargain hunting incentive or willingness to find good deals is going to be even higher this time versus last year. But we'll see.

And then finally, maybe one for Sandra. Could you give us any guidance on the level of CapEx for next year?

[Sandra Gadd, executive]

No. We don't give guidance for next year yet, but I can just reconfirm what we said before that with the investments we made this year and we'll finalize in the fourth quarter, we expect low CapEx next year, and that hasn't changed in any way. Obviously, with lower growth rates than we saw at the end or we assumed in the beginning of the year, the capacity should last for quite some time. So no big investments next year.

[Operator]

The next question comes from Niklas Ekman from Carnegie.

[Niklas Ekman, analyst]

Yes, a couple of questions. Firstly, on the guidance. And given what you're saying here about the market being very campaign-driven, you're guiding for sales in the low end, but you're still -- you're not saying the low end in terms of earnings. If the market is more campaign-driven, doesn't that mean a greater risk to earnings but maybe a solid sales outlook? If you understand my question, can you elaborate a little bit on why you feel optimistic on earnings and not sales?

[Hermann Haraldsson, executive]

Yes, that's because we have a very good control of our costs. We made the rightsizing of the organization in June. And again, the basket size, it really, really protects us. And even though we have seen increases in electricity, in packaging, et cetera, that doesn't kind of impact us as much as some that have lower basket size. So a lot of protection in this is due to a basket size. This was -- even though we have kind of come in -- might come in at a lower end of our guidance, we still maintain the profitability because it's kind of the underlying operation is actually very smooth at the moment.

[Niklas Ekman, analyst]

Very clear. And on your AutoStore now, you've increased the capacity by 70% this year, and of course, sales growth has slowly during the same time. This must mean you have excess capacity. Is that something that is or will hamper your or -- sorry, increase your costs a little bit in the coming quarters?

[Sandra Gadd, executive]

Well, you see the depreciation ratio, it is higher than last year. And so obviously, the longer it takes to go into when you have like optimal efficiency from that, it will cost a little more under depreciation, but that's intentional. And we rather -- we will never -- we never want to end up in the same situation we had last year. That was horrible, where we didn't have enough space. So we think this is good.

And it also gives us time. The good thing, if you want to look at positive way of things, is that since we have the biggest AutoStore installation, we didn't have time before to optimize the processes and flows and how to use this in an optimal way, because there's nobody else telling us that. So we can use this time to make sure that we can make the most out of the investments that we have.

[Hermann Haraldsson, executive]

Yes, because the -- as we continue growing, we will grow into it. So we make the depreciation go longer, it will go down. So costs won't go up.

[Sandra Gadd, executive]

No, they won't go up.

[Niklas Ekman, analyst]

That's a fair point. And thirdly, Boozt Media Partnership, you talked a lot about that in Q1 and Q2. But in this quarter, other sales are only up by SEK 4 million. So have we kind of passed the peak here in terms of earnings contribution from Boozt Media Partnership, or is that something where you see significant further potential in coming quarters?

[Sandra Gadd, executive]

Well, it's also seasonal. That of course, Q3, and when you have a very promotional environment, you don't put as much -- or the brands, it's harder to sell that media space to the brands.

But we have high hopes for our Boozt Media Partnership. There's high ambitions to continue to grow it. Is there any risk in it in terms of perhaps not having the money to invest in the range that we would like them to? Yes, maybe, but we still believe that there's a lot to do there. And we hope that brands will continue to prioritize our space since we are quite efficient and can make sure that it reaches our customer base that is quite big.

[Niklas Ekman, analyst]

And just a final question. On campaign wise, what do you see in terms of potential here short term? You say that you're very happy with your current inventory levels. And I know after Q2, you said that there was a rising opportunity for campaign buys, but your inventory was too high. Are you better balanced now? Do you think that there is much more opportunity here? Is that something that will support Q4 already, or are we more talking 2023?

[Hermann Haraldsson, executive]

That's a good question, Niklas. We believe that the stock composition now is very good. It's actually right where we want it to be. We have started to do campaign buys, but we are cautious because it's really hard to predict how kind of the last 6 months -- 6 weeks of the year or 8 weeks will pass. But obviously, we are kind of going out to market now and trying to compete buys. And if things go as expected, we would probably increase our campaign buys, which bodes well for both Boozt and Booztlet for 2023.

[Operator]

[Operator Instructions] Your next question comes from Benjamin Wahlstedt from ABG.

[Benjamin Wahlstedt, analyst]

So a couple of questions from me on the autumn and winter season. First off, and this might sound silly. When did autumn start for Boozt?

[Hermann Haraldsson, executive]

It's actually a good question. It probably started in October, right?

[Sandra Gadd, executive]

[indiscernible] in September.

[Hermann Haraldsson, executive]

Yes.

[Sandra Gadd, executive]

It's not like winter coats in September, but some of the more things you wear to the offices though. But -- I would say.

[Hermann Haraldsson, executive]

Yes, you can -- we can't give you the [indiscernible].

[Benjamin Wahlstedt, analyst]

Sure, so somewhere in September then I take it. Perfect. Additionally, there seems to have been like a -- so this is -- as far as I understand, this is later than usual. Is your view that you will sort of catch up on Autumn/Winter sales during Q4? Like, should we expect a significant boost in this quarter from a delayed autumn?

[Hermann Haraldsson, executive]

We expect kind of the rest of the year to kind of go as we have planned. It would be nice if there was a kind of a boost in consumer demand because what you're hinting to is like the sales of warm outerwear, of course, has not taken off yet, so that might take off. But again, as we have many more categories than only fashion, that's been compensated, so stock level is good. But of course, we expect to sell as expected, but also kind of equipment as it gets really cold and people -- but that might be too much too hopeful. But of course, we are able to. But we don't want to have any firm views on that there's a pent-up demand due to the weather. That's because we have the consumer sentiment and the promotional environment, which kind of weighs the other way around.

So I think you just have to be -- it's basically a daily trading at the moment.

[Benjamin Wahlstedt, analyst]

All right. Perfect. Another -- this might be slightly smaller part of your business anyways. But do you want to share more on the reasoning behind reducing marketing spend in Germany? I believe it was something you commented on in the report.

[Hermann Haraldsson, executive]

Yes. we want to make money in all our markets, and we've seen that the German -- at least, our German customers seem to be even more depressed than the Nordic customers. So it's just like that there has been a kind of upwards of the payback on the marketing in Germany has been deteriorating with return rates still being at a very high level, and so it doesn't really make sense to push too much for Germany. We can see that recent spent in the Nordic gave a much higher return on marketing investments, which would basically cut very much back on Germany.

[Operator]

There are no further questions at this time. I'll now hand back to Mr. Haraldsson for closing remarks.

[Hermann Haraldsson, executive]

Yes. Thank you very much for participating in our Q3 webcast. This concludes the call, and I look forward to meeting a lot of you over the next couple of weeks. Thank you very much. Bye-bye.