Puulio Stock

Good morning to you, and welcome to Puuilo's Half Year Financial Results Presentation. I am Juha Saarela, CEO of Puuilo; and with me is Puuilo's CFO, Annu von Weymarn.

Good morning, everybody.

We will go through the key results for Q2, which was from May to July as well as the results for the first half of the financial year. After this presentation, you can ask questions by calling the line.

Here is the agenda for today's presentation. First, I will present the key figures and events of Q2 and the first half of this financial year. Following that, Annu will provide a more detailed overview of the financial development during the same period. The third item on the agenda covers the outlook for the current financial year, including the forecast range for both net sales and adjusted EBITDA. Then we will move on to point 4, which is a reminder on our current strategy and long-term financial targets. As I mentioned, we have reserved time for questions at the end.

Let's look at Q2 first. Our second quarter is from May to end of July, and here are the key results. Net sales for the quarter were approximately EUR 153 million, increasing by nearly 13% compared to the same period last year. Like-for-like growth was over 6%, which is clearly stronger than the comparison period last year. Customer traffic continued to increase in both old and new stores and was once again the most important driver of growth. We also saw a slight increase in average basket size.

Then gross margin, it increased to over 39% and improved by 1 percentage point compared to the same period last year. Especially the significant increase in the share of the private label sales had a positive effect on gross margin. Adjusted EBITA was nearly EUR 34 million, which is approximately 22% of net sales compared to the same period last year, adjusted EBITA increased by almost 20% or EUR 5.6 million. Then earnings per share were EUR 0.30 compared to the EUR 0.25 in the comparison period.

We continue to expand according to our plans. During the quarter, we opened a new store in Espoo Espoonlahti. At the same time, our Vantaa Virkamies store was relocated to Vantaa Tammisto. At the end of the quarter, we had 59 stores compared to the 54 last year. As part of executing our strategy, we continue our internalization and preparations for entering the Swedish market. The preparations for our first pilot stores are progressing according to plan. The first store will be opened in Orebro by the end of this year and the second one in Sundsvall during early next year. All in all, it was a good quarter.

Then let's look at the first half of the year, which covers period from February to July. Net sales were EUR 257 million and increased by EUR 32 million or over 14% compared to the same period last year. LFL growth was nearly 7%. Growth continued to come mainly from increasing customer traffic, which we saw in both old and new stores. We also saw a slight increase in average basket size compared to the comparison period last year.

Gross margin, it increased to over 39% and improved by 1.4 percentage points compared to the comparison period. This was mainly driven by a significant increase in the share of private label sales. Adjusted EBITA increased by approximately 28% and was EUR 50 million, corresponding to nearly 20% of net sales. EBITA increased by EUR 11 million and relative profitability improved by over 2 percentage points. Earnings per share were EUR 0.44 compared to EUR 0.33 in the comparison period.

Overall, the first half of the year was good. Customers continue to pay close attention to trade spending, and this is still visible in purchasing behavior. However, customer traffic at Puuilo continues to grow, and that is the most important measure of how well our assortment, pricing and overall concept are performing.

We have continued to grow and gain market share despite an increasingly competitive market environment. We are now seeing some early signs of improving economic conditions, which is, of course, a positive thing for us. The first half of the year was strong, and we have good reasons to expect a favorable second half of this financial year as well. We continue our profitable growth with confidence.

Good. Now is Annu your turn, please.

Thank you, Juha. First, we will take a look at the net sales development in Q2 and in H1. First, on the left-hand side chart, we can see that the net sales for second quarter was EUR 153 million, and they increased approximately 13% in total. In like-for-like stores, net sales grew by about 6%. This increase mainly originates from customer traffic, but now we also saw a slight increase in the average basket size. Customer traffic increased with 12% in all stores and by 5% in like-for-like stores.

Then chart on the right shows the net sales development in H1. Cumulative net sales were EUR 257 million and with the increase of 14% compared to last year. Like-for-like growth was almost 7%. Also in H1, increase in customer traffic explains the main part of the sales development, but also average basket size grew slightly. These figures include 1 new store in Q2 and 3 new stores in first half year.

This positive development in customer traffic is a very important sign for us that our concept works well. We also saw a slight increase in basket size and which tells us that the market environment is improving. I can say that we are very pleased with the development of the net sales.

Next, we will move on to gross margin. Here again, we will start with the Q2 figures on the left. In Q2, gross margin was a bit above 39%, and it increased by 1 percentage point compared to a year ago. This change mainly originates from the increase in the share of private label sales. The chart on the right side shows the cumulative figures. There, we had the same gross margin as in Q2, that is 39.2%. There, we had an increase of 1.4 percentage points compared to last year. Here, the change originates from the increase in the share of private label sales, but also from the change in sales mix.

In Q2, sales of private label products grew by 19%. In H1, the development was plus 23%. Gross margin development has remained strong, and we are very pleased with the continued improvement.

Next, we will take a look at the profitability. Development in Q2, can we see on the left chart, where the adjusted EBITA was almost EUR 34 million with increase of EUR 5.6 million or almost 20% compared to last year. In relative terms, the profitability was 22% compared to last year's a bit below 21%. This means that the relative profitability has increased from a year ago. Adjusted operating expenses in relative terms were slightly lower than last year.

Then H1 figures on the right. Adjusted EBITA was about EUR 50 million with increase of 28% compared to a year ago. It grew by EUR 11 million. Relative profitability was 19.5%, and it grew by more than 2 percentage points. Also in H1, adjusted operating expenses in relative terms were lower than a year ago. The reason behind the improved profitability are the familiar ones, good sales development, positive gross margin development and good cost control that is typical for Puuilo. To summarize the first half of the financial year, our business model continues to scale well. All metrics -- earnings metrics were at good level and developed in right direction.

Next, let's move on to inventories. This chart shows the inventory levels over the last 3 comparable periods. At the end of July this year, inventories were about EUR 130 million, and it increased by EUR 10 million compared to last year. The inventory increase originates from our growth. We have opened 5 new stores during past 12 months. Those inventory figures also include private label products for stores that we will open after the end of reporting period. That has also affected inventory levels.

We can say that this inventory growth is an investment in growth. We have also increased the volume of private label products that has also had an effect on inventory levels. As you can see in the chart, our inventory turnover has improved, and this is something that is in line with our targets. To summarize this, inventories have grown, but in a controlled way, and they are consistent with our network expansion. It's also worth noting that there is natural variation between quarters and years. So movements during a single period should not be over read.

Next, we will take a look at our cash flow. Our cash flow was very strong. On the left, you can see the cash flow -- operating free cash flow in Q2, and that was a bit over EUR 43 million, and it increased by EUR 5 million compared to a year ago. The chart on the right shows the operating free cash flow in H1, and it was EUR 60 million, and the increase was EUR 8.6 million. Cash flow has now improved for 3 years in a row, both on a quarterly basis and also cumulatively. This is something that tells us that our growth is healthy.

Cash flow was supported by the same factors both in Q2 and in H1. Those are good sales growth, improved profitability and positive change in working capital. Strong cash flow gives us financial flexibility. We are able to execute our strategy and expand our store network, both here in Finland and also in Sweden, and this can be made through internally generated funds. At the same time, we are able to distribute profits to our shareholders in line with our target, which is paying out at least 80% of net profit.

Next, financial position. The strong cash flow shown on the previous slide is directly reflected in the balance sheet. In the first chart, where you can see net debt to adjusted EBITDA ratio. There we can see that the ratio has improved in 2 years from 1.3 to 1.1 this July. This is in line with our long-term target where the ratio is less than 2.5. At the same time, we have grown by 13 stores in 2 years period. So we can see that the growth has not come at the expense of the balance sheet.

The middle chart shows the net debt to adjusted EBITDA, excluding the impact of IFRS 16, meaning lease liabilities and there the ratio stood at 0.2 at the end of July. It has also improved from 2 years ago. On the right, cash and cash equivalents, they were more than EUR 51 million at the end of July. At the same time, bank loans were approximately EUR 70 million. This means that net debt, excluding the impact of IFRS 16 was EUR 18 million. This means that the company's net debt is relatively low and our financial position is strong.

Next, we will have a summary of the figures. We already went through in more detail. To summarize this second quarter, the quarter was very strong in terms of both growth and profitability. The quality of growth was good as it was supported both increasing customer traffic and improving gross margin. The development of earnings, cash flow and balance sheet shows that we are able to grow in a controlled and profitable way. This means that our strategy is progressing according to plan.

Next, Juha will go through the updated outlook for the current financial year.

Thank you, Annu. Yes, then the outlook for this financial year. As announced on 1st of this month, we have revised our guidance for this financial year. We forecast that net sales will grow and be between EUR 495 million to EUR 515 million. We also expect adjusted EBITA to be between EUR 87 million to EUR 97 million. Like-for-like store net sales growth in the first half of the year has exceeded expectations. In addition, profitability has been supported by positive gross margin development and disciplined cost control.

Therefore, we have increased our guidance for both net sales and adjusted EBITA compared to our previous guidance. There are uncertainties related to the outlook, including changes in consumer purchasing power and consumer behavior. In addition, geopolitical crisis and international tensions may have direct or indirect effect on inflation, interest rates, product availability and product prices, which could, in turn, affect both sales and profitability. Lastly, the outlook includes the budgeted setup expenses for Puuilo's international expansion, which we expect to remain at approximately EUR 1 million and in line with our previous estimate.

Good. Then a reminder about our strategy and our financial targets. The 6 key elements of our strategy are: The first one, opening new stores and continuing our expansion in Finland. Our target for this period is to reach over 90 stores nationwide. Then entering the international market, starting with the pilot in Sweden. Third one, continuing like-for-like sales growth, where is still significant potential. Then strengthening our current position by increasing private label sales and being one of the most cost-efficient operators in the industry.

Fifth, providing an omnichannel customer experience, a shopping experience that is easy, affordable and fast is a key factor for both current and potential customers. Then sustainability work and its development. We call this theme as responsible retailer, which covers the key elements of our sustainability efforts. Working towards these 6 objectives will support us in achieving our long-term financial targets, and they are presented in the lower half of this page.

Our sales growth target is to achieve average annual sales growth of over 10%. By the end of the strategic period, we aim to exceed EUR 800 million in net sales. In terms of profitability, our target is to reach an adjusted EBITA margin over 17%, corresponding to more than EUR 136 million in adjusted EBIT. Then we aim to distribute at least 80% of company's net results -- the result to shareholders. Regarding net debt, our target is to keep the ratio of the net debt to adjusted EBITDA below 2.5x. The figures for the first half of the year show that we are making good progress towards these targets.

Then expansion in Finland. This year, we have opened stores in Hollola, Jyvaskyla Vaajakoski and Espoo Espoonlahti. Also, we have relocated our store in Vantaa Virkamies to Vantaa Tammisto. During remainder of the year, there will be 5 store openings. New stores, Lahti Holma and Kangasala will open their doors on 17th of this month. Store in Raasepori opens during autumn and Kurikka and Turku near the end of this year.

For the next financial year, we have already announced store openings in Ylivieska and Jamsa. In addition, our Kajaani store will relocate to new premises during the summer '27 and our Jyvaskyla Seppala store will move to the new premises during next year. We will provide updates on other new stores openings in due course. The ramp-up of new stores has followed the same pattern as in our previous openings and has been in line with our expectations. Growth is, therefore, continuing according to plan.

Then let's move on to our expansion in Sweden. As we have communicated before, we are preparing for international expansion in Sweden alongside our continued growth in Finland. All preparations are progressing according to plan. We have already announced our first 2 pilot stores. The first store in Orebro will open towards the end of this year and the second one in Sundsvall during early '27. We will provide updates on other store openings in due course. We will continue to update on our progress as we reach the next milestones in the pilot phase.

Good. Thank you. Now we move on the questions. So moderator, please open the line.

[Operator Instructions] The next question comes from Maria Wikstrom from SEB.

This is Maria from SEB. I have a few questions. I wanted to touch first on the gross margin development. Your gross margin grew 100 basis points in Q2, supported by the higher private label sales. Is that the level that we should expect for the remaining 2 quarters of the year? Or is there some seasonality when it comes to the private label share between the quarters?

Thank you, Maria, for the question. As we went through our increase in gross margin that is mainly based on share of private label -- increase in share of private label sales in total sales. There, we expect that our solid performance will continue. We are not expecting anything that would dramatically change our gross margin. But at the same time, our business is growing and also we are working on our private label products. In past year, that has also increased our gross margin. There may be some variation between quarters, but you should always look at the long-term trend also in our gross margin.

And then I wanted to touch on the current trading environment. Given that the Finnish consumer confidence figure was the highest year-to-date in August. Do you see the sales trend continuing similar from the Q2? Or how do you see the improving consumer confidence impacting your trading environment?

Thank you, Maria. Our concept works very well in the tougher economic situations and environment. If we look at our last year's performance, when the consumer confidence has been very low. We have gained new customers and get a better profitable. But now consumer confidence is in highest level in, let's say, 3 years. It is not very good, but anyway, it is a bit higher. We can get a benefit of this situation also.

It is very difficult to say how much. But anyway, that kind of situation will -- is supporting activations and purchasing in consumers. This situation is good, and we are waiting for that there will be a bit better situation and higher consumer confidence in near future. But yes, this situation supports our growth and our gross margin and profitable development.

Then finally, maybe a little bit on the expected inventory levels now when you are expanding to Sweden. What kind of inventory setup, I mean you will be doing in Sweden. Should we expect the inventories to come up somewhat follow the expansion to Sweden that you would then build up inventory for your own private labels? Or how should we view the inventories, I mean, going forward?

We are going to Sweden with the same concept, with same assortment. So it means -- practically, it means that Swedish -- new stores in Sweden will be quite similar than in Finland. There are no -- we don't expect that there are coming dramatic or significant inventory values. As I said, that there will be similar stores with similar inventory values than in Finland.

If I may add there, we are going to Sweden with the same logistics model as we are using here in Finland. In that perspective, we are not going to -- for example, we are not going to have a centralized warehouse separately in Sweden. They are kind of similar stores that we have here in Finland, also in Sweden.

The next question comes from Miika Ihamaki from DNB Carnegie.

This is Miika Ihamaki from DNB Carnegie. We had yesterday a major announcement in Finland for data center build-out, and this, of course, suggests a prolonged period of construction activity and should be largely supportive for economic outlook overall. So although Puuilo is predominantly a consumer focused rather than a B2B distributor, but you have categories such as tools, work accessories, safety equipment, et cetera, in your offering, do you expect these investments to provide a tangible sales tailwind for Puuilo over the coming years is my first question?

Yes, we saw very nice news from northern part of Finland. I think that it will support the demand in that part of Finland and of course, in some extent to the B2B business. But our business and business model is based for the consumer business and not based about that. But let's say that, of course, we can get a bit benefit of those investments, which are coming. So let's say it that way.

Then based on a strong like-for-like sales development in the first half, can you just talk us through the performance between the months, May, June and July, flag if whether there were any meaningful differences between those months? And for them, is it fair to assume that Q3 has continued with a similar positive momentum?

Well, to begin with the sales in Q3, we are not commenting that on this stage. As before, we are not commenting on a special or separate month movements. But I can tell you that much that there hasn't been any major events or any one-offs that has increased our sales, but our sales increase has been broad-based.

Then lastly, given your visibility into the second half, what specific cost items are you assuming will rise in the second half that were not already present in the sort of Q2 run rate?

Yes. We are expecting the costs to be at a similar level. Of course, there will be salary increases according to union agreement, but we have faced those also in previous years. We are not expecting to have any dramatic change there. In other costs, of course, there is always a pressure for cost increases, but we are not expecting any dramatic changes there either.

[Operator Instructions] The next question comes from Svante Krokfors from Nordea.

A couple of questions left. First one regarding the average basket size has started to grow slightly. Is there -- can you tell if there's -- are consumers already moving to higher price point products? Or what is the main explanation behind the increase in basket size?

Thank you, Svante. Typically, we see when basket size is decreasing or developing -- increasing, it means that customers buy more items when they shop in our stores. This is the typical effect, how it works. Of course, there may be -- can be some effect from the -- a bit more expensive products. But so far, we see that the customers are buying more products than before.

Okay. And regarding private labels, which grew 19% and obviously, the share of private label is growing, which categories do you see the best growth in your private label assortment?

This development has been quite broad-based. We don't comment on where it's mainly coming. But let's say that we are increasing private labels, almost all our key categories, and that is why private label share is broad-based.

And your -- I mean, your online share is relatively small of your sales, but it has been growing quite nicely now. Have you made some efforts? Or what are the -- or what is the explanation behind the accelerating online sales growth?

It is growing alongside our sales growth. Online store is a very important part of our concept and it is some kind of a new way how the customers when they are sourcing or looking for the products and availability prices. In the same time, it is very important marketing channel, but same time, it is a very important part of our concept. We are waiting for that the online business will grow with our total sales growth, but -- like-for-like sales growth, but we are not expecting that it will grow dramatically faster or to be the very important part of our share of our sales.

Then on the Swedish expansion, I think I know what your slogan will be there, that [ gor det ]. But is there any major differences in how you're going to implement your marketing in Sweden compared to Finland?

It is too early to say, but Puuilo concept is -- we have differentiators here in Finland. Of course, we try to create the same kind of -- same differentiators to Sweden. But so at the moment, I can't comment anymore. We are creating our marketing concept, and we will publish then when we open the Orebro store.

There are no more questions at this time. So I hand the conference back to the speakers.

Good. Thank you for the questions and joining us today. I would like to thank our customers for the trust in Puuilo. Customer traffic is an honest measure, and it is continued growth is the best feedback we can reserve. We have had a busy spring and summer. At times, there has been more work than people available to do it. Therefore, I would like to give special thanks to all Puuilo employees for their flexibility, commitment and hard work.

Our next report, the Q3 business review will be published on 10th of December. Thank you for your attention, and I wish you all a very pleasant autumn.

Good morning to you, and welcome. Thanks for joining Puuilo's presentation of the first quarter results for this financial year. I am Juha Saarela, CEO of Puuilo. And with me is Puuilo's CFO, Annu von Weymarn. In this presentation, we will go through the key financial and operational highlights for our first quarter. And after this presentation, you can ask questions by calling the line. Here is the agenda for presentation.

First, I will go through the key numbers and events of the first quarter. And following that, Annu will provide a more detailed overview of the financial development during the same period. And third point is a refresh of the outlook for this financial year and including the forecast ranges. And after that, we will have a short overview of our growth strategy and long-term financial targets. And as I said, we have reserved time for questions at the end.

Our first quarter is from February to the end of April. And here, you can see the key results. And first, net sales. Net sales for the quarter were approximately EUR 104 million, showing good growth to the same period last year and the total growth exceeded 16%. Like-for-like growth was good, and it was almost 8%. Customer traffic continued to increase in both old and new stores. And we experienced sales growth in all months of the quarter, even in like-for-like terms. Also, we experienced a slight increase in average basket size.

Gross margin increased during Q1, and it was 39% and increasing almost 2 percentage points from same period last year. And especially sales growth in private label products had a positive effect on gross margin. Then adjusted EBITA, it was EUR 16.3 million, which corresponds to almost 16% of net sales and absolute EBITA grew by EUR 5.4 million compared to the same period last year. And earnings per share were EUR 0.13, approximately 45% higher than in the comparison period.

We continued to expand in line with our plans and targets and opened new stores in Hollola and Jyväskylän Vaajakoski during the first quarter. Both store openings and sales development after opening have been in line with our expectations. And as a part of executing our strategy, we continue our internationalization and preparations for entering the Swedish market. and it is progressing as planned. This, alongside with growth in Finland is a key part of our current strategy. And geopolitical events and the crisis continues and the situation in the Strait of Hormuz has not changed significantly so far. However, the market tends to adapt and find alternative solution.

And -- but in any case, higher oil prices have some impact on purchasing costs and the logistics costs, both for us and for other players in the industry. In Puuilo's case, these impacts are spread across a broad assortment. And due to the timing of purchases, the effects are not immediately visible or directly proportional. And in addition, we are able to pass on increased purchasing costs to sales prices to a fairly wide extent. Good. Annu, please, it's your turn.

Thank you, Juha. Net sales for the first quarter were approximately EUR 104 million, increasing by 16.3% compared to the previous year. At the same time, like-for-like net sales grew by 7.7%. We exceeded last year's strong like-for-like growth by 1.2 percentage points, which can be considered a solid performance. Customer traffic increased by 14.5% in total and by 6.2% in like-for-like stores. Thus, customer traffic continued to increase also in like-for-like stores. The average basket size also developed positively compared to the previous year despite continued low consumer confidence.

Net sales development was very good during the first quarter, and growth was seen across all product categories. During Q1, we opened new stores in Hollola and Vaajakoski in Jyväskylä. Next, let's move on to gross margin. In Q1, Puuilo's gross margin was 39%, increasing by 2 percentage points compared to the same period last year. The increase was driven by private label products forming a higher share of total sales. Sales of these products grew faster than other sales with growth reaching approximately 28% compared to the previous year.

Private label products are strategically important for us as they expand and differentiate our assortment and support profitability with higher margins compared to other products. The strengthening of the gross margin level gives us more flexibility, both for growth investments and for maintaining earnings development. The share of private label products has developed well in recent year, and we expect this trend to continue in the future.

And next, profitability. In Q1, Puuilo's adjusted EBITA was EUR 16.3 million, increasing by EUR 5.4 million or by over 50% compared to the same period last year. Adjusted EBITA margin was 15.7% of net sales. Relative profitability was good and clearly higher than in the previous year. The most important drivers behind the increase in profitability were net sales growth, positive gross margin development and good cost control. The cost ratio improved by approximately 1.3 percentage points compared to the last year. As the figures show, growth has not come at the expense of profitability. Growth and earnings have developed in parallel, which is reflected in the strong earnings figures in Q1.

Next, we will go through the development of inventory levels. Inventories increased by EUR 10.8 million, which is mainly driven by the expansion of store network. The increase originates in particular from inventories related to the 6 new stores opened during the past 12 months as well as private label products reserved for upcoming stores. In addition, as the share of private label sales has increased, the import volumes of these products have also grown as both the number of items and sales volumes have grown.

Inventory turnover improved slightly compared to the comparison period. However, the company continues implementing measures aimed at accelerating inventory turnover. Our long-term goal is to further improve inventory turnover. However, in the short term, there may be variation between quarters and years, even though the target is to improve inventory turnover in the long run.

And then we will move on to cash flow. In Q1, operating free cash flow was slightly above EUR 17 million, which means that it increased by EUR 3.4 million compared to Q1 in the previous year. The cash flow was driven by strong net sales development and of course, solid profitability. Despite the increase in inventory levels, we were able to maintain strong cash flow development, which we are very pleased with. The strong -- the spring season started to show during the first quarter, but the majority of the cash flow impact is typically realized in the second quarter. We consider that the cash flow development at the beginning of the year indicates both strong operational performance and that earnings are efficiently converted into cash.

Company's net debt to adjusted EBITDA ratio improved compared to the comparison period and was 1.2, which is well aligned with our long-term target of below 2.5. The middle chart shows the ratio of net debt to EBITDA, excluding the impact of IFRS 16. As you can see, the metric excluding IFRS 16, was 0.3, which is on the same level as last year.

Puuilo's cash position at the end of the first quarter was slightly below EUR 41 million, and the company's financial position remains stable. Net debt, excluding IFRS 16, meaning cash minus bank loans was approximately EUR 29 million at the end of Q1. Our long-term loans from financial institutions were approximately EUR 70 million at the period end. In summary,Puuilo's financial position is strong and provides a solid foundation to continue executing our growth strategy as planned.

To summarize, our first quarter was strong, both in terms of growth and profitability. Growth was of high quality as it was supported by both increased customer traffic and improved gross margin. The development of earnings, cash flow and balance sheet demonstrate that we are able to grow in a controlled and profitable manner. Our growth -- our strategy is progressing as planned, and this provides a solid basis to move forward. Next, Juha will go through the outlook for the financial year. Please, Juha.

Thanks, Annu. We repeat the same outlook for this year. We forecast that net sales will grow and be between EUR 480 million to EUR 510 million. And we also expect adjusted EBITA to be between EUR 80 million to EUR 90 million. There are uncertainties related to the outlook, such as the development of the still uncertain general economic situation in addition to changes in purchasing power and consumer behavior.

Additionally, there are other unusual uncertainties in the outlook such as geopolitical crisis and international tensions that may have a direct or indirect impact, especially on the availability and the price of goods, which can affect sales and profitability. As I earlier mentioned, for now, the crisis at the Strait of Hormuz has not dramatically impacted Puuilo's sales or profitability. And at the moment, we are in a good spot. And lastly, the outlook includes the budgeted setup expenses for Puuilo's international expansion at the cost amount of approximately EUR 1 million.

And then a reminder about our strategy and our targets. 6 key elements of our strategy are: first one, opening new stores and continuing our expansion in Finland. And our target for this period is to reach over 90 stores nationwide. Then entering the international market, starting with a pilot in Sweden. Continuing like-for-like sales growth where there is still significant potential. Strengthening our current position by increasing private label sales and being one of the most cost-efficient operators in the industry. And fifth, providing an omnichannel customer experience, shopping experience that is easy, affordable and fast. It is one of the key factor for both current and potential customers. And then sustainability work and its development. We have responsible retailer that covers the key elements of our sustainability efforts.

And working towards these 6 objectives will support us in achieving our long-term financial targets and presented in the lower half of this page. Our sales growth target is to achieve average annual sales growth of over 10%. And by the end of the strategic period, we aim to exceed EUR 800 million in net sales. And profitability, our target is to reach an adjusted EBITA margin over 17%, corresponding to more than EUR 136 million in adjusted EBIT. We aim to distribute at least 80% of the company's net results to shareholders. And regarding net debt, our target is to keep the ratio of net debt to adjusted EBITDA below 2.5x. Then our expansion in Finland.

This year, we have opened stores in Hollola, Jyväskylä Vaajakoski and Espoo Espoonlahti. Next stores will be in Lahti Holma, Kangasala and Raasepori. The store in Vantaa Virkamies will be closed on Sunday, and it will move to Vantaa Tammisto. The store in Tammisto will open Wednesday next week. And if all goes according to plan, during this year, we will open at least 8 new stores. Growth continues and the future looks promising.

Then about entering to Sweden. As we told in connection with our strategic update and also in March, we are preparing for international expansion into Sweden alongside our continued growth in Finland. All preparations are going as planned. Our Sweden country manager started at the beginning of this month. And negotiations for several store locations are ongoing, and this project is progressing well. The budgeted setup costs for this year, I mean, 2026 are approximately EUR 1 million, and they are included in our outlook for the year. With these measures, we will be fully prepared to open the first pilot store.

The setup costs cover IT, legal and organizational costs, including the country manager role in Sweden. This is a small and defined investment to assess the potential of a new market. Our international expansion is based on organic pilot store openings rather than acquisitions. Expansion will be executed with the same operating model that requires only limited capital and that our shareholders are familiar with from our Finnish business. And we will apply the same good cost control to our international expansion as to all other areas of Puuilo's operations. We will provide updates as we reach the next concrete milestones in the pilot process.[Foreign Language] Thank you. And now we move on to questions. So moderator, please open the line.

[Operator Instructions] The next question comes from Maria Wikstrom from SEB.

This is Maria Wikstrom from SEB. I have 3 questions, and I will take them one by one. So I'd like to, I mean, start from a very good like-for-like growth that you reported in the first quarter. If you could specify a bit that what product categories were selling well during the first quarter?

Maria, thanks for the questions. All product categories has grown and are growing. Of course, there are some differences and variations between them, but all product categories have grown. And so our growth has been very wide, and there are no, let's say, issues or problems with product categories growth.

And is there a possible, I mean, to be -- to get a feeling that how much of the growth is benefiting from the warm spring weather in Finland compared to a very cold spring weather last year and versus then the improving, I mean, consumer sentiment in Finland?

Our comparison numbers from last year were quite strong. But as we know, there are variations. I mean, weather variations between years and quarters. Sometimes we can get a bit benefit of good weather and sometimes we don't get. But in a big picture and in longer term, we think -- and we have proven that we are not depending or our sales growth doesn't base on the good weather.

But there are many things behind the good like-for-like growth and good weather is, let's say, minor factor in those. There are other drivers also better brand awareness, maybe there are more activities in consumers -- and our availability is better. Our preparations for the high season has gone better than last year. There are many, many things behind of good like-for-like growth.

Okay. And then I wanted to touch on the gross margin expansion. So the gross margin was up some 190 basis points during the Q1. And do you see this kind of gross margin expansion sustainable in the coming quarters?

Of course, I mean, the -- we already had the Hormuz situation, I mean, during your Q1, but do you think, I mean, you are still able to expand the gross margin in the coming quarters despite, I mean, the situation that is currently going on in the Middle East?

Our gross margin improvement is not surprised of us because that has been happened many, many quarters in line and it is improved many quarters in line and because our private label program is running well, and we improve it and our tactical pricing is better than before and so on. And so it was only a bit higher than Q4 last year.

And if you check our past quarters, you can see that gross margin is growing quite continuously. What is coming to future? -- we think -- and we are quite sure that, of course, higher oil price affect to our purchasing prices in some extent, but because our assortment is so wide and there are the limited amount of products where -- or which the oil price is affecting, we think that the effect of higher oil price will spread to our large assortment quite nicely.

And of course, we can put or pass the higher purchasing prices to our selling prices quite nicely and widely also. We are quite confident about the future from that perspective.

Perfect. And then finally, on the Swedish expansion. So just that I understand it correctly that you are currently thinking of entering the Swedish market with another brand, I mean, not Puuilo brand. So you're going to have a local brand that you expand in Sweden. And in that respect, I mean, do you really think that the EUR 1 million as a setup cost will be enough as it seems, I mean, quite low if you are going to enter the market with a new brand?

We have not decided that what is our brand name in Sweden, but let's say that Puuilo could be the nice and different brand name it is in Finland also. What is coming to the setup cost, EUR 1 million, we are quite confident that it is enough.

And it seems -- it seems that our estimation is that it is a good amount and amount enough to do everything what we need to start the business in Sweden, I mean that in this cost in this year. But everything is going as planned, and we have many negotiations, I mean, a store premises negotiations ongoing. And our country manager is onboarding here in Finland, and we are going as planned.

The next question comes from Svante Krokfors from Nordea.

Svante from Nordea. I hope you can hear me.

Yes, we do.

Very good. A couple of questions. First, I'll start with the private label growth. Correct me if I'm wrong, but I think you mentioned 28% like-for-like growth in private label sales. How do you expect the share of private label sales to develop in 2026? Will it be in similar increases as we saw last year?

There have been variations between quarters and the years of the speed of improvement or -- and sometimes it improves or growth faster and sometimes lower because there are certain timing differences and how many new private label products we can launch quarter-by-quarter and year-by-year. So there is variations.

But in longer term, we are confident that we can increase the number of private labels and share of the private label sales -- share of the total sales also. We have a huge amount of work to do. We are bigger and bigger, and it opens the new possibilities. To the -- to start of new private label programs. And so future on that -- from that perspective seems to be also quite good, and we will continue the development of private labels.

And then regarding the Swedish setup costs which Maria addressed earlier. Did you record any significant costs in Q1 already that I guess you include the costs in adjusted EBITDA and don't take them as one-offs.

Yes. Thank you for the question. Yes, we have had some costs also in Q1 because the preparations have been continued during the beginning of the financial year. But yes, as you can see in our figures, the costs have been, let's say, quite modest. And we -- as Juha earlier said that we are expecting the cost to be within that EUR 1 million for this year.

And then regarding the gross margin, which increased basically 2 percentage points year-on-year. Could you explain a bit apart from increasing share of private label, you have also mentioned earlier that lower price point products have higher gross margin for you?

Have you got support also from there? Or I guess your basket -- average basket size increased slightly in Q1, but could you elaborate a bit on the impact on gross margin from the mix of low and higher price point products?

Well, that is a mix of both. So the share of private label products in total sales have increased. And yes, we have some products also with a higher gross margin. But that is a mix. That doesn't explain the whole difference.

And do you have any comments on the trading in beginning of Q2, i.e., from May forward?

Let's say that we are quite confident about the consumer behavior and trading in the future. There are no big differences or happenings, which can change to our estimations and near future. So this train is driving as before, and we are very confident about the near future.

The next question comes from Arttu Heikura from Inderes.

It's Arttu Heikura I have 2 questions. Your guidance seems a bit cautious after strong Q1. So we do think that your like-for-like growth and profitability improvements in the latter part of this year would be somewhat weaker than we saw in Q1.

It is too early to change our outlook. We are very practically and there have been and will be variations between quarters. So as I said, it is too early to fix our ranges just now. Let's see how our second quarter -- what is our performance then, and we will adjust and fix our ranges if needed.

All right. Then about profitability, which was strong in Q1. So were there any positive one-offs in your fixed costs?

There are no big extras or something comparing to last year. Our OpEx were a bit lower -- relatively a bit lower than last year and mainly for personnel costs. But as you know, in this business, the most important how sales is running, what is the sales growth because, of course, it helps to manage the OpEx is also. But no significant differences comparing to a comparison period.

The next question comes from Miika Ihamaki from DNB Carnegie.

This is Miika from DNB Carnegie. I have also a question on that strong gross margin development. So mainly on the timing, you mentioned that there's been some pressure on the oil-affected products in terms of sourcing costs, but the timing can be a little bit disproportional also to your assortment.

So I was wondering that were you actually increasing the prices and benefiting also from sort of a positive spread that then flowed to your gross margin, which could be then somewhat at least lower in the coming quarters given that not all the purchasing cost pressure has flowed through yet to your P&L?

Our selling prices are not higher than before or if they are, there are some -- of course, we do price adjustments every day, but we have not done dramatical selling prices improvements or the adjustments. Our better gross margin is due for the better and the bigger amount of the private labels. And it is the biggest effect to it.

Okay. And then just on your underlying activity, I got a feeling that you mentioned that the activity might have actually improved. I mean we're seeing still very, very weak headline sentiment here in Finland.

So I was just wondering that do you see that it's then the improved purchasing power that has sort of flown through to your customer base where the spending has improved or then just increased the customer base that now wants to return or just shop at your stores?

Difficult economic times suit to our business very well. And the past 2, 3 years have been quite difficult in Finland, but at the same time, our business and performance has been quite good. We are waiting for better times because it supports our sales growth and average basket size growth also consumer confidence is quite low -- is still quite low, but there may be signals or bigger or wider activations in consumers.

And let's say that near future seems to be a bit better, but it is not time to make conclusions to longer period yet. Let's see what happens in coming months and Finnish economic situation and customer confidence.

[Operator Instructions] The next question comes from Mika Karppinen from Danske Bank.

This is Mika from Danske. Concerning your average basket size, you indicated it has increased slightly. Have you seen any improvement there? And then how big negative contributor this rapidly growing private label sales is to your average basket size right now?

Yes. Average basket size was [EUR 0.4 ]higher than Q4, but it is not fair to compare -- sorry, in comparison period, but it is it is very difficult to compare or say that is it growing or not. Now we have 2 quarters when our average basket size has been bigger than before, but it is too early to say what there is happening. What is coming to our private labels, yes, private label selling prices are a bit lower than branded products. And it may affect the average basket size in some extent, but same time because the gross margin is so much higher comparing to branded products. let's say that it is very important to continue that program and developing of private labels.

Same time, it's good to know and see that because the private labels selling prices are lower and the gross margin is significantly better. By that way, we can get the pricing power and the competition advantage, and we can build our price image for the future and the possibilities to sell cheaper if needed.

There are no more questions at this time. So I hand the conference back to the speakers.

Good. Thank you for the questions and joining us today. I want to thank all our customers for trusting us. We have had a busy spring and early summer. At times, there has been more work than people, requiring flexibility and extra effort. So special thanks to all Puuilo's employees. Happy summer to everyone.

Hello, and welcome. Thank you for attending Puuilo's Financial Statements '25 Presentation. I am Juha Saarela, CEO of Puuilo. And joining me in this presentation is Puuilo's Interim CFO, Annu von Weymarn.

Hello, everybody.

In this presentation, we will go through the key results of Q4 and the results for the whole financial year '25. And after this presentation, you can ask questions by calling the line. We are happy to answer your questions.

Here is the agenda for today's presentation. First, I will go through the key numbers and events of the fourth quarter and the last financial year, and then Annu will provide a more detailed overview of the financial development during the same period. The third point on the agenda covers the capital allocation and dividend proposal. And our General Meeting is planned to take place on 12th of May, and the invitation to the meeting will come later.

And then we will move on to point 4, which is the outlook for the financial year '26 and including the forecast range for both net sales and adjusted EBITA. And after that, we will have a short overview of our growth strategy and our long-term financial targets. And as I said, we have reserved time for questions at the end.

Let's start with the final quarter of the financial year. Our fourth quarter covers the period from November to the end of January. And here, you can see its key results.

First, net sales. Net sales for the quarter was approximately EUR 101 million, showing strong growth compared to the same period last year. Total growth was nearly 18%, and like-for-like growth was also strong at 6.1%, and this increase was partly supported by good sales of winter seasonal goods. And the customer traffic continued to grow in both old and new stores. Net sales increased in all months of the last quarter just as they have in every other month of the financial year.

Then gross margin in Q4, it also increased and was 38.8%, up by 0.3 percentage points from the comparison period. And the improvement was driven especially by higher sales of private label products. Adjusted EBITA in Q4 was EUR 16.5 million, which is 16.3% of net sales, and this was an increase of EUR 2.2 million compared to last year's Q4. And earnings per share were EUR 0.14, around 18% higher than in the comparison period.

We continued expansion according to plan and open new stores in Iisalmi and Heinola during Q4, and the new openings as well as sales performance after openings have been in line with our expectations. And as we announced in connection with our strategic update, we are preparing for international expansion. And in addition to growth in Finland, this is part of our growth ambition for the strategic period '26 to '30.

During autumn and winter, we worked systematically across the organization to achieve readiness for the opening of the first pilot stores in Sweden. Preparations are proceeding according to plan, and our target is to open the first store within the next 18 months.

And then here are the key results for the full financial year. Net sales was approximately EUR 442 million, increasing by EUR 59 million compared to previous financial year, and the total growth was 15.4% and like-for-like growth was 3.7%. Growth was driven especially by higher customer traffic, and customer numbers increased, both old and, of course, new stores. And as mentioned earlier, net sales grew in every month of the financial year.

During the year, the average basket size decreased slightly which lowered like-for-like growth. In Q1 and Q4, the average basket did not decline the comparison period, but it is still too early to say that basket size is consistently increasing.

Gross margin increased by 0.5 percentage points and was 38.2%. The same factors supported gross margin and the good development of it. These factors are strong growth in private label sales and a slight shift in the sales mix. Customers are buying more affordable goods, which have higher margins. Our private label sales developed well, and their share of total sales was 23.6% in last year. This is the most important driver behind the improvement in gross margin.

Adjusted EBITA grew by 15.5% and was EUR 77.4 million, which is 17.5% of net sales. This was around EUR 10.4 million higher than in the previous financial year. Earnings per share was EUR 0.66, approximately 17% higher than in the previous financial year.

During 2025, we opened 7 new stores in Varkaus, Savonlinna, Mantsala, Lohja, Jyvaskyla Keljo, Iisalmi and Heinola. And additionally, we started preparation for expanding into Sweden. Overall, last financial year was good for us. The economic environment is uncertain and consumer confidence has been and continues to be low. Purchasing power has developed favorably, but due to uncertainty, customers remain cautious and postpone more expensive purchases.

The last year wasn't easy for our industry. However, discount retail is performing well and our concept works in the current environment. We have no reason for concern related to the economic cycle. We have attracted new customers, grown our sales, continued expanding and maintained high profitability at the same time. We can be very pleased with these results.

Thank you to all Puuilo employees. Good. And now Annu, it is your turn, please.

Thank you, Juha. Net sales for the fourth quarter were EUR 101 million, increasing by 17.7% compared to the previous year. At the same time, like-for-like net sales grew by 6.1%. Customer traffic increased by 17% in total and by 5.6% in like-for-like stores. The average basket size grew slightly compared to the previous year, supported by good sales of winter products. Customer traffic continued to develop very well, which is important for us. During Q4, we opened new stores in Iisalmi and Heinola.

For the full financial year, net sales were approximately EUR 442 million. On company level, net sales grew by 15.4% and like-for-like by 3.7%. In cumulative terms, customer traffic increased by 16.3% at the company level and by 4.8% on a like-for-like basis. Thus, growth in customer traffic was on a very strong level. Puuilo's sales performance has been good on each quarter. We are particularly pleased that the development has remained this strong despite the current economic environment and continued low consumer confidence.

Next, let's move on to gross margin. In Q4, Puuilo's gross margin was 38.8%, increasing by 0.3 percentage points compared to the same period last year. The increase was driven by private label products forming a higher share of total net sales. Sales of these products grew very strongly in the fourth quarter with growth reaching over 30%.

For the full financial year, the gross margin was 38.2%, increasing by 0.5 percentage point from the previous year. Increase in private label share of sales is also a key driver for the full financial year. In addition, margin development was slightly driven by a favorable sales mix. In cumulative terms, sales of these private label products increased by 26% compared to last year. We are pleased with margin development and expect the same trend to continue in the future.

This slide shows the development of the share of private label products over the past 5 years. The share out of net sales has grown every year. In '25, the share of private label products increased by almost 2% and was 23.6% of the total net sales. The growth of the share has continued throughout the years in a trend-like manner. But of course, there are slight differences in the growth rate between the years.

In 2025, sales of private label products grew by approximately 26%, which is a stronger growth rate than the growth rate of the company's entire net sales. This is one of the main reasons for the increase in gross margin described in the previous slide and also for the upward trend in gross margin that has continued for years. Private label products are present in all our main product categories. We have a few dozen private label brands. The number of private label product articles already reaches thousands of products in total.

The gross margin of our private label products is clearly better than the margin of branded products. Increasing the share of private label products is a key part of Puuilo's growth strategy. And as the figures show, this strategy is working. Work on private labels will continue. Our goal is to increase the private label share of total net sales also in the future. So there is still plenty of work to do for years to come.

Next, let's move on to profitability. Adjusted EBITA for Q4 was EUR 16.5 million, an increase of EUR 2.2 million compared to the same period last year. In percentage terms, adjusted EBITA grew by 15.7% and the EBITA margin was [ 16.3% ]. Profitability was solid but slightly below last year's Q4 level. Cost development was partly driven by a slight increase in personnel expenses and partly by a small increase in other operating expenses.

On a cumulative basis, adjusted EBITA for the whole financial year was EUR 77.4 million with an EBITA margin of 17.5%. Relative profitability was cumulatively on the same level as previous year. Compared to last year, adjusted EBITA grew by EUR 10.4 million or 15.5 in percentage terms.

Strong profitability is driven by strong net sales performance, higher gross margin and disciplined cost control. Adjusted operating expenses were 16.2% of net sales on a cumulative basis with the cost ratio increasing only moderately compared to last year. The increase in costs was due to a small rise in personnel expenses and growth-enabling initiatives incurred during the last year.

Relative operating profit remained at last year's level and exceeds our long-term target. All in all, cost control has remained strong, and we expect it to continue going forward. In summary, Puuilo's financial year '25 was strong and the figures are well aligned with the company's strategic targets.

Here, you can see the development of Puuilo's inventory levels over the past 3 years. Inventories increased by EUR 7.7 million, which is quite a modest increase compared to the expansion of the store network. Inventory turnover improved compared to the comparison period, even though the share of private label products in total sales has increased. However, the company continues implementing measures aimed at accelerating inventory turnover. Our long-term target is to further improve inventory turnover. However, in the short term, there may be some variation between quarters and years due to the reasons mentioned above.

In Q4, Puuilo's operating free cash flow was EUR 8 million, which means that it increased by EUR 8 million compared to Q4 in previous year. The cash flow was driven by strong net sales development and, of course, strong profitability. In cumulative terms, the operating free cash flow was EUR 72.6 million, which is very strong. The growth compared to the same period last year was EUR 28.6 million. We are very pleased with the cash flow development.

The company's net debt to adjusted EBITDA ratio improved slightly from the comparison period and is well aligned with our long-term targets. The middle chart shows the ratio of net debt to EBITDA excluding the impact of IFRS 16. As you can see, the metric calculated without IFRS 16 adjustment has consistently remained on a low level.

Puuilo's cash position at the end of the financial year was approximately EUR 33 million, and the company's financial position is healthy. Net debt excluding IFRS 16, meaning cash minus bank loans, was EUR 36.9 million at the end of the financial year. Our long-term loans from financial institutions were approximately EUR 70 million at the period end.

And here are the figures in summary, which we already went through in detail. We are very pleased with the performance during Q4 and the financial year.

Going forward, Juha will present Puuilo's capital allocation principles and dividend proposal. Please, Juha.

Thank you, Annu. Yes. And next, a brief recap on our capital allocation principles and, after that, the Board's dividend proposal for AGM. Puuilo's capital efficiency creates opportunities to consider additional capital return mechanism for shareholders. Here is the background on that.

Primarily, we always invest free capital in the current strategy and growth and make sure it's secured. Puuilo's strong profitability generated good cash flow, which allows us to finance expansion in Finland and in Sweden, development projects also and increase the amount of our own imports that tie up working capital. They are always the primary uses of capital.

Secondly, we can consider additional capital return mechanisms such as special dividends or share buybacks due to our efficient and highly profitable operation generating funds beyond what is required for our current growth strategy. It should be noted that today we have announced that we will start a share buyback of up to EUR 5 million and primarily for the purposes of our incentive and retention program. Additionally, the company's net debt to adjusted EBITDA must remain below the strategic target of 2.5x.

Our target is to distribute over 80% of net profit to our shareholders. This has been our practice every year since becoming a listed company. Puuilo's Board proposes to the Annual General Meeting that the company pays a regular dividend of EUR 0.54 per share. This would be an increase of EUR 0.08 from the previous year, which is a 17% increase. The regular dividend corresponds to approximately 81% of company's net profit.

And in addition, the Board proposes that the company pays a special dividend of EUR 0.12 per share. Therefore, if the Annual General Meeting approves the Board's proposal, shareholders will receive a total dividend of EUR 0.66 per share. And the dividends would be paid in two installments as in previous years.

Good. And then the outlook for financial year. We forecast that net sales will grow and be between EUR 480 million to EUR 510 million, and we also expect adjusted EBITA to be between EUR 80 million to EUR 90 million. There are uncertainties related to the outlook such as the development of the still uncertain general economic situation, in addition to changes in purchasing power and consumer behavior. Additionally, there are other unusual uncertainties in outlook such as geopolitical crisis and international tensions that may have a direct or indirect impact especially on availability or price of goods, which can affect sales and profitability.

This outlook includes the budgeted setup expenses for Puuilo's international expansion. The cost amount of approximately EUR 1 million. These costs cover IT, legal and organizational costs, including the country manager role for Sweden. These measures prepare the business fully for the opening of the first pilot store in Sweden.

And then a reminder about our strategy and long-term financial targets. The six key elements of our strategy are: opening new stores and continuing our expansion in Finland, and our target for this period is to reach over 90 stores nationwide; and then entering the international market and starting with a pilot in Sweden; third point, continuing like-for-like sales growth where there is still significant potential; then strengthening our current position by increasing private label sales and being one of the most cost-efficient operator in the industry; fifth, providing an omnichannel customer experience, a shopping experience that is easy, affordable and fast is a key factor for both current and potential customers. And the last one, sustainability work and its development, we call this team responsible retailer, which covers the key elements of our sustainability efforts.

And long-term financial targets. Our sales growth target is to achieve average annual sales growth of over 10%. By the end of strategic period, we aim to exceed EUR 800 million in net sales. And in terms of profitability, our target is to reach an adjusted EBITA margin over 17%, corresponding to more than EUR 136 million in adjusted EBITA. And we aim to distribute at least 80% of company's net results to shareholders. And regarding net debt, our target is to keep the ratio of the net debt to adjusted EBITDA below 2.5x.

We opened 7 new stores during last financial year, and the ramp-up of these stores have followed the same pattern as previous openings and all have performed in line with our expectations. This year, we have already opened a store in Hollola. And the next openings will be in Jyvaskyla Vaajakoski, Espoo Espoonlahti, Lahti Holma, Kangasala and Raasepori. And additionally, our store in Vantaa Virkamies will move to new location in Vantaa Tammisto before mid-summer. And if all goes according to plan during this year, we will open at least 7 new stores. So growth continues and the future looks promising.

Some words about Sweden. As we told in connection with our strategy update in autumn, we are preparing for international expansion in Sweden alongside our continued growth in Finland. During autumn and winter, we have worked systematically and broadly across the organization to achieve readiness for opening the first pilot stores in Sweden. Preparations are proceeding as planned, and our target is to open the first store within the next 18 months.

We have recruited a Country Manager for Sweden, who, together with Finnish organization, is responsible for driving the preparations. In addition, we have started negotiations for the first potential store locations in Sweden. The budgeted setup cost for financial year '26 are approximately EUR 1 million, and they are included in our outlook for the year. With these measures, we will be fully prepared for opening the first pilot store. And the setup costs cover IT, legal and organizational costs including the Country Manager also.

This is a small and defined price to assess the potential of a new market. Our international expansion is based on organic pilot store openings rather than acquisitions. Expansion will be executed with the same operating model that requires only limited capital and that our shareholders are familiar within our Finnish business. We will apply the same good cost control to our international expansion as to all other areas of Puuilo's operations. We are well positioned to move forward in a controlled manner. We will provide updates as we reach the next concrete milestones in the pilot process.

Good. And thank you. And now we move on the questions. So moderator, please open the line.

[Operator Instructions] The next question comes from Maria Wikstrom from SEB.

Juha and Annu, I have a few questions. I wanted to touch base on the private label and whether you have seen any changes, or how do you see this current situation with the Iran war impacting the sourcing of the private label? So if you touch a bit about the cost as well, I mean, the transportation costs on the private label and how are you thinking about this impact?

Maria, thank you for the question. Shortly or rapidly, we don't see the big changes or dramatic changes in our case. Of course, oil pricing is increasing. It means that the gasoline for customers here in Finland, it is more expensive and it may reduce the money what they can use about the purchases. But on the other hand, higher oil price hit the material prices, purchases prices to some extent, not directly, but in some extent, surely.

And what is coming that the freight prices, of course, it increased them also. But this situation is not abnormal or new for Puuilo. We remember that this kind of situations has been before. We have hundreds of suppliers. We have suppliers in Finland, we have suppliers in Europe and the other side of the world, in Far East also. And at the same time, we have over 30,000 products in our assortment. That means that the effect of the higher oil price will dilute or fragmenting in our ecosystem or in our assortment in many ways, not dramatically. There are some increases. And of course, there are cases where that situation doesn't change anything.

Our concept is quite defensive still, and we are fine with that situation. Of course, we hope that, that situation will end and it support customers' confidence in the future. But anyway, this is not a big problem for us. What is coming to transporting sea freight times, there are no changes or big changes at the moment. And so we are quite confident about the future.

And then I had a second question on the Swedish expansion. I mean, given that your model in Finland has been probably the fastest one among discount retail peers, I mean, how quickly you're cash positive and what is the payback for the new store investment? Do you see the same metrics, I mean, as far as you know today apply also in the Swedish market?

Yes. We are going there with the same concept, with the same structure, with the same methodology that we are doing here. But of course, we do that by a very practical way. We will pilot, we will test, we will adjust if needed and ensure that our concept works there. Same time, we are expanding in Finland faster than before. And the bigger sales growth will come from Finland in near future also.

But yes, we have same methodology to do that. And we have continued, of course, market study investigations about Sweden and, by that way, also ensure that our concept works as well as possible. We are a challenger also. We fully understand that. But at the same time, we know that there are space in the market in Sweden for that kind of concept that we have.

And then finally, I wanted to touch base because I think, I mean, if we look at last year, I think this time around the fixed cost percentage of sales were actually below the market expectations. But I think that was something that spooked, I mean, some investors during the Q3, that you had higher fixed cost percentage of sales. But now when we look forward to the upcoming financial year, what kind of cost inflation, if any, I mean, you're looking for the upcoming financial year?

If we look at the Finnish business at the moment, we see only slightly pressure about the purchasing prices because oil price. But we can put them. We can put higher purchases prices to our selling prices. So if you think that our average product selling price is about EUR 5, if it changed, EUR 5, it is not a big issue or problem to our customers because we are selling very cheap products anyway and mainly our assortment include that, so cheap products.

But yes, oil price is one which can affect to our costs, but we can put them to our selling prices. What is coming about the fixed costs, I think that there are no big changes. And connecting to our budget, we have estimated the changes about the fixed prices, and they include our forecast also. So no big changes is coming.

The next question comes from Joonas Hayha from OP.

It's Joonas from OP. I have a couple of questions regarding Sweden. Firstly, can you clarify the timeline for the first store opening a bit? Because based on previous comments, I imagine that the first opening would have taken place this year. But in the report, you talk about the next 18 months. So can you clarify the timeline? What's the plan currently?

Joonas, our preparing phase is still ongoing, but as we said that now we have recruited a Country Manager, and we have started the negotiations about the store sites in Sweden. It's too early to say when the first or second or third store opens. But as we have mentioned, they will or it will open in next 18 months. It can happen earlier or later. But anyway, we proceed that processes, and we are preparing for -- to open the new stores in Sweden. So process is ongoing.

Okay. And then a related question. I think the costs that you mentioned in the report, the EUR 1 million from the Swedish expansion is surprisingly low. And the question is then, how should we think about that number if we assume that there are no store openings in 2026 or that the first opening will be in late 2026? I'm just wondering what would that number be, that EUR 1 million number, if we kind of theoretically assume that the first store opening would have happened in the beginning of this year. So how much will annual costs increase once the first store open happens? If you're able to clarify that, that would be helpful.

Yes. Thank you for the question. This EUR 1 million that Juha was telling about in his presentation only represents the setup costs for the Sweden. And if we assume that we would have also store or we would have opened the stores also in 2026, of course, the costs would be higher. But we are going to do this in this same model as we use in Finland. So this means also that we are going to do this in a very cost-efficient way.

The next question comes from Miika Ihamaki from DNB Carnegie.

This is Miika from DNB Carnegie. Given that you have conducted market studies now on Sweden since you announced the expansion and presumably even before, what new learnings have come from those studies?

Miika, I think that it is not a good idea to tell so very deep things. But of course, we have gotten a deeper or better understanding about the Swedish consumer confidence behavior, how they shop different products, what is competition situations and so on. It was a very wide and large study, and it supports for opening to new market.

And then on this EUR 1 million setup costs for Sweden, so should we think that this is a one-off cost for the preparation of the first store? Or will there be another EUR 1 million setup cost next year, another EUR 1 million the following year? How are these setup costs going to play?

Thank you. A very good question. This EUR 1 million cost is the setup costs for the whole project excluding the actual cost for stores. So this is kind of the back office work that we are doing in order to have all the IT systems and that kind of extra costs that are related to the fact that we are going to a new market. So no, no, we are not going to have EUR 1 million extra costs for every store in Sweden.

Just wanted to clarify that. Very well understood. The setup costs and new store openings do still exclude potential marketing and investments in your brand building. Can you guide us that when should we expect these marketing costs to be visible in your P&L?

Marketing costs, when you go as a new player, unknown brand, as a challenger to new market, it means that we need to create our brand. We need to improve our brand awareness. And it is a long-lasting work. And so it means that we will do that in the next years. This is very typical when a new player enters new markets.

The next question comes from Svante Krokfors from Nordea.

Some of the questions have been already answered. But I had one question regarding current trading. You said that all months grew in 2025. And I guess, based on what you said, January was probably strongly driven by the strong winter weather in Finland. Do you have any comments on February, March?

Thank you. We have no reasons to reduce our estimates. We are waiting for the typical spring and summertime. Puuilo train is ongoing. And this situation, this economical situation with the uncertainties, it is fine for us even. But of course, we are waiting for the better times also. How weather affect our sales, sometimes it good weather support and helps our sales growth. Sometimes it don't.

But in the longer term, let's say, half year period or something like that, the demand will come sooner or later. So sometimes, we have the better weathers and the poor weathers. But in longer term, it is not a big problem for us because, as I said, that the demand comes later or the sooner. But yes, this year and the beginning of this year seems to start quite well.

And correct me if I'm wrong. I think I understood that Q4 basket size slight increase was partly related to higher ticket items related to winter sales, and you did not see a material change in the consumer behavior during Q4.

Yes. Basket size was a bit higher than last year comparison period Q4. But now it's too early to say that is it starting to increase in near future. But in last year, in Q1 and Q4, average basket size was a little bit higher. But let's see what happens. Of course, it helps. If it starts to improve and increase, it helps our sales growth, together with customer traffic growth. We are waiting for that.

And then last question regarding the expansion into Sweden. The 18 months is probably a bit longer than I had expected. Obviously, it can happen sooner also. But is it possible -- would you open only one by one pilot stores? Or is it possible that you -- I mean, given obviously get some scale benefits also, could you also open more stores than one at once?

In last autumn, we said that our target is to open a few stores in Sweden during strategy period, I mean, before 2030. And so we have time to do that. We have time to pilot how our concept works there. It is too early to say that when we open, how many we open. But if we keep on that outlook, we will do that. We will open a few stores as pilot stores there. And the first store could open earlier or later. It is too early to say at the moment. As we had stated, that during the next 18 months, we will do that.

The next question comes from Maria Wikstrom from SEB.

Yes, I just have one follow-up question. This EUR 1 million setup cost, I mean, will it be reported as part of the ongoing business? Or will you report it as an extraordinary?

The costs related to that EUR 1 million include both kind of expenses.

Would it be reasonable to assume that it's half and half?

I would say that it's probably more than half is so-called one-off items. But let's see. I'm not giving any special figures on that one.

And is it equal split between Q1 to Q4? Or how should we think about that? Or is there any clarification?

I would say that the costs will incur during the whole '26.

The next question comes from Arttu Heikura from Inderes.

I'm sorry. All my questions were answered. So no questions.

There are no more questions at this time. So I hand the conference back to the speakers.

Good. Thank you for the questions. And of course, thank you for joining us today. I want to thank all our customers for trusting us. And a special thanks to all our employees of your great work. Happy springtime.

Hello, and welcome. Thank you for attending Puuilo's Q3 Results Presentation. I am Juha Saarela, CEO of Puuilo, and joining me in this presentation is Puuilo's CFO, Ville Ranta.

Hello.

In this report, we will go through the key results of Q3, that is period from August to October, and cumulative results of financial year. And after this presentation, you can ask questions by calling the line, and we are happy to answer your questions.

Here is the agenda for today's presentation. First, I will present the key figures and events of the third quarter and the first 3 quarters of the financial year. Following that, we will provide a more detailed overview of the financial development during the same period. The third item on the agenda covers the outlook for the current financial year, including the forecast range for both net sales and adjusted EBITDA. Then we will move on to point four, which presents our growth strategy and long-term financial targets for the strategic period. And as always, we have reserved time for questions at the end.

Our third quarter covers the period from August to the end of October. And here, you can see the key results. And first, net sales. Net sales for the quarter were just over EUR 116 million, showing strong growth compared to the same period last year. Total growth was nearly 14%, and like-for-like growth was 2.2%. The increase in customer traffic continued to be the main driver of sales growth. Sales increased in both old and new stores, and net sales grew in all months of the quarter. The average basket size was slightly lower than in comparison period.

And then profitability. Gross margin in Q3 also increased and was 38.6%, up by 0.6 percentage points compared to the same period last year. The improvement in gross margin was mainly driven by increase in sales of private label products and a continued shift in the sales mix toward more affordable goods. Adjusted EBITA in the third quarter grew by about 11% and amounted to EUR 21.9 million, representing 18.8% of net sales. This was an increase of approximately EUR 2.2 million, and relative profitability remained strong, but was 0.4 percentage points lower than in the comparison period.

In Q3, operating expenses were slightly higher compared to the reference period, mainly due to an increase in personnel costs. This was primarily driven by a higher general increase according to the collective bargaining agreement compared to the previous year. However, the difference is not significant. And earnings per share were EUR 0.19 compared to EUR 0.17 in the comparison period.

And regarding expansion, we did not open new stores during Q3, the most recent openings was in Iisalmi in November, which belongs to last quarter of the financial year.

And then now let's look at the financial year thus far, it means from February to the end of October. First, the net sales. Net sales for the period were approximately EUR 341 million, growing by nearly EUR 44 million compared to the same period last year. And the growth was almost 15%, and the like-for-like growth was 3%. The increase in customer traffic continued to be the main driver of sales growth. Sales increased in both old and new stores and net sales grew in all months of the period. And the average basket size was slightly lower than in the comparison period.

Gross margin for the period increased and was 38%, up by 0.5 percentage points compared to the same period last year. The improvement in gross margin was mainly driven by increased sales of private label products and a continued shift in the sales mix.

Adjusted EBITA grew by about 15% and amounted to approximately EUR 61 million, representing 17.8% of net sales. This was an increase of around EUR 8 million. Relative profitability was slightly better than in the comparison period, up by 0.1 percentage points. Earnings per share were EUR 0.52 compared to the EUR 0.45 in the comparison period.

We continued our strategic expansion and opened 5 new stores in Varkaus, Savonlinna, Lohja, Mäntsälä and Jyväskylä. And at the end of the period, we had 54 stores. And as I mentioned earlier, our 55th store was opened in Iisalmi last month.

Performance and the results for the first part of the year were good considering the circumstances. Business is steady and predictable, with nothing unusual or noteworthy. Customers' cautious spending and frugality as well as unemployment are still reflected in purchasing behavior. However, our customers' traffic continues to grow, which is the most important metric. We have grown and gained market share despite these challenges and despite increasing competition.

Overall, the first part of the year was good, and we expect that last quarter and the beginning of next year to also be favorable. We are in a good position to continue.

Good. Ville, please?

Thanks, Juha. Let's start from the net sales. Net sales for the third quarter was EUR 116.2 million, an increase of 13.7% compared to the previous year. At the same time, like-for-like net sales grew by 2.2%. Customer traffic in our stores increased by 16%, and on a like-for-like basis by 4.6%. The average basket size continued to decline in Q3. This decrease is still influenced by consumers' caution and saving behavior. The growth in customer traffic continued at very good levels, which is extremely important for us. During Q3, we did not open any new stores, which was purely a timing issue, given our otherwise full opening calendar this year.

Cumulatively, 9 months of the financial year have now passed, and the net sales has reached EUR 341 million. The company's total revenue growth was 14.7%, and on a like-for-like basis, 3%. Cumulatively, customer traffic increased across all stores by 16.1%, and on a like-for-like basis by 4.6%, which we are pleased with. Overall, Puuilo's performance from the net sales perspective has been very steady quarter after quarter, considering Finland's challenging economic situation and consumers' cautiousness when making purchases.

Then we move on to gross margin. In Q3, Puuilo's gross margin was 38.6% of revenue, up by 0.6 percentage points compared to the same period last year. The improvement in gross margin was driven by a favorable sales mix and an increased share of our own private label brands in total net sales. Sales of our private label products continued to grow strongly, up 18% during Q3. These private label products are the main factor behind the solid gross margin development in Q3.

On a cumulative basis, Puuilo's gross margin at the end of Q3 stood at 38%, an increase of 0.5 percentage points year-over-year. The same driver is behind this trend. Our private label products are steadily increasing their share of the company's total net sales and delivering better margins. Cumulatively, private label sales grew by a rate of 24%. We are continuing to push hard on private label development and are constantly expanding our assortment with the new private label products.

Then next, let's move on to profitability. Adjusted EBITA for Q3 was EUR 21.9 million, an increase of EUR 2.2 million compared to the same period last year. In percentage terms, adjusted EBITA grew by 11.2%, and EBITA margin was 18.8% of net sales. Relative profitability was solid, but slightly below last year's level, mainly due to the marginally higher personnel costs. These personnel costs were impacted, for example, by wage increases under the retail sector collective agreement and the store opening concentrated in the early part of the year. On a cumulative basis, adjusted EBITA at the end of Q3 was approximately EUR 61 million, with an EBITDA margin of 17.8%. Compared to last year, adjusted EBITA grew by EUR 8.2 million or 15.5% in percentage terms.

Relative profitability was cumulatively slightly better than last year. The improvement in profitability is driven by strong net sales performance, higher gross margin and disciplined cost control. Adjusted operating expenses were 15.9% of net sales on a cumulative basis, with the cost ratio increased only moderately compared to the last year. As a result of these factors, profitability improved slightly. In summary, Puuilo's year-to-date performance has been strong from an earnings perspective, and the figures are well aligned with the company's strategic targets.

And then here, you can see the development of Puuilo's inventory levels over the past 3 comparable quarters. Inventory turnover improved compared to the same period last year. This is despite of the fact that the figure includes initial stock for 7 new stores and a significant increase in import volumes of private label products. The company is implementing measures aimed at accelerating inventory turnover. We actively monitor inventory turnover, and our long-term goal is to improve it further. In the short term, however, there might be fluctuations between quarters and years due to the reasons mentioned above.

In Q3, Puuilo's operating free cash flow was EUR 12.7 million, an increase of EUR 2.7 million. The cash flow was driven by good net sales development and, of course, good profitability. Cumulatively, the operating free cash flow was almost EUR 65 million, which was very strong. The growth compared to the same period last year was EUR 20.6 million, strong cash flow, which we are very pleased with.

The company's net debt to adjusted EBITDA ratio remained at the same level as in the comparison period, and is well aligned with our long-term targets. The middle chart shows the ratio of net debt to EBITDA, excluding the impact of IFRS 16, which increased slightly compared to the previous year. The metric calculated without IFRS 16 adjustments is currently at a low level. Puuilo's cash position at the end of the quarter was approximately EUR 33 million, and the company's financial position is healthy. Net debt, excluding IFRS 16, meaning cash minus bank loans, stood at EUR 36.6 million at the end of October.

And as a reminder, in spring '25, Puuilo completed a financial agreement under which the company decided to raise a total of EUR 20 million in new long-term bank loans. The agreed EUR 20 million increase to the existing loan has now been fully drawn, bringing the total amount of bank loans to around EUR 70 million at the end of the quarter.

And here are the figures in summary, which we already went through in detail. We are very pleased with the performance of the company.

And then Juha will tell you about the outlook update for the financial year '25. Please, Juha.

Thank you, Ville. Good. We specify the outlook for this year. Now we forecast that net sales will grow and will be between EUR 430 million to EUR 450 million. We also expect adjusted EBITA to be between EUR 72 million to EUR 79 million.

There are uncertainties related to the outlook, such as the development of the still uncertain general economic situation, in addition to changes in purchasing power and consumer behavior. Additionally, there are other unusual uncertainties in the outlook, such as the ongoing war in Ukraine, but also other potential geopolitical crisis or international tensions that may have a direct or indirect impact, especially on the availability and price of goods, which can affect sales and profitability.

Next, a brief reminder of our strategy and financial targets for period '26 to '30. The 6 key elements of our strategy are: The first one, opening new stores and continuing our expansion in Finland. Our target for this period is to reach over 90 stores nationwide. And then entering the international market, starting with a pilot in Sweden. Third, continuing like-for-like sales growth where there is still significant potential. Fourth, strengthening our current position by increasing private label sales and being one of the most cost-efficient operator in the industry. And then providing an omnichannel customer experience. A shopping experience that is easy, affordable and fast, is a key factor for both current and potential customers. And the last one, sustainability work and its development. We call this theme responsible retailer, which covers the key elements of our sustainability efforts.

Working towards the 6 objectives will support us in achieving our new long-term financial targets presented in the lower half of the page. Our sales growth target is to achieve average annual sales growth of over 10%. And by the end of the strategic period, we aim to exceed EUR 800 million in net sales. And in terms of profitability, our target is to reach an adjusted EBITA margin over 17%, corresponding to more than EUR 136 million in adjusted EBITA. And then we aim to distribute at least 80% of the company's net result to shareholders. And regarding net debt, our target is to keep the ratio of net debt to adjusted EBITDA below 2.5x.

And then store openings. We opened 5 new stores during the first half of the year, and the ramp-up of these stores has followed the same pattern as previous openings and all have performed in line with our expectations. Expansion continued toward the end of the year, and we opened a store in Iisalmi in November. And the next store will open in January in Heinola, where we are already working on setting up the store. And the next year, new store openings have been announced in Hollola, Espoonlahti, Holma in Lahti, and Kangasala. The Vantaa Virkamies store will relocate to Vantaa Tammisto retail area. And if all goes according to plan, next year, we expect to open at least 7 new stores. So growth continues and the future looks promising.

Thank you. And now we move on to questions. So moderator, please open the line.

[Operator Instructions] The first question comes from Maria Wikstrom from SEB.

This is Maria from SEB. I had a few questions. First, I wanted to touch on the personnel costs and the personnel cost inflation. And I think you write in the report that you had this wage increases starting from August. I kind of thought that the collective agreement raised wage is already starting from May this year. So can you a little bit disclose? I mean what is the timing of your wage increases, please?

Maria, it's Ville here. The union agreement came into force in the beginning of August. So it affected full Q3 quarter in our case. And the biggest driver for the increase in personnel costs is the union agreement increase in Q3.

And can you remind how much that was in August?

It was 2.6%, if I recall correctly -- sorry, it was 2.9%. And actually, it came into force in the beginning of May, actually, sorry.

That's good. That clarifies. And then I wanted to ask about the -- you were mentioning that the gross margin improvement came from partly also on a higher share of private label products. So can you disclose a bit? I mean, where are you currently as a share of private label? I think you are targeting the -- was it the 30% of sales? So how much more room do you have to reach your targets?

We are not disclosing the number during the financial year. So traditionally, we have given out the number in the end of the financial year. But this year, we made an exception. So we told last time, in connection with the strategy update, that the private label share of total net sales were 23% and our long-term target is to reach 35%. And so we are -- well, let's say that we are doing hard work to boost that share up, but I'm not disclosing the exact number now in the end of October. But you can maybe estimate that it's higher than last time, but we are not still in 35%.

Okay. And then finally, I wanted to ask about, I mean, the Swedish expansion. So if you have advantage that product -- that project somehow, I mean, during the third quarter, please?

Maria, this is Juha. Now we are in a preparation phase and we are doing the work in all our organization, and we have started also the country manager recruiting. And let's say that we are much more better to the estimate when we can open the first store in Sweden in next spring time. But at the moment, I don't have any news to tell to you, let's say, that everything goes as planned and every organization are in the preparation phase.

And just to clarify, so you are going to let us know when to open the first store in next spring or you are opening the first store in Sweden next spring?

No, no. As we have told that the first -- the coming months and the coming years are the piloting phase. And it means that we try to open, let's say, 5 to 10 stores in Sweden during '26 to '30. We are not saying that when, and we have not decided that when the first store openings will be, but we may, can do that decision during the next spring time.

[Operator Instructions] The next question comes from Calle Loikkanen from Danske Bank.

Maybe just a follow-up on the personnel costs. Was there any increase in personnel costs related to Sweden? Or was this increase in Finland only?

In Finland only practically. As Juha mentioned to his previous answer that concerning the Sweden, we are in the planning phase still, so all the recruitments for the Sweden will come next year. But let's say this way that, of course, we have done some increases in the organization, but not for Sweden only. Those people who has been hired in the company are preparing partly the Sweden expansion, but also doing work for the Finnish business. So it's 50-50 or -- how would I put it. But the answer is that, no major recruitments for Sweden hasn't been made still.

Okay. And then I was wondering that now in Q3, your personnel costs were up like 20%. In Q2, they were around 14%. And both then -- so I was just wondering that will the personnel cost growth that we should kind of expect for the coming quarters, will it be closer to that 20% or more of that like 14% type of growth that we saw in Q2?

No, you should look the long-term trend there. And I can tell that we will keep the cost control and level in the future. So there might be fluctuations between the quarters, of course. And if you look at the one quarter figures, quite small changes there due to timing or whatever might affect on those figures. But if we look at the full year figures, we will keep the level, and you shouldn't be worried about the personnel expenses in the future. We will keep the cost control.

That's good to hear. And then I was wondering about the basket size development. Was this kind of small decline related to any certain product categories or was it more kind of broad-based? I mean, obviously, the increase in private label sales probably puts pressure on the basket size as well. But was this kind of related to any certain product category or was it broad-based? And then also, do you expect this basket size to continue to trend down slightly also in Q4?

Well, I can say that there is no any major product category, which affected on those. It comes quite evenly from here and there. And the biggest driver behind this, we see, is the consumer weakness. So consumers are still saving. They are very cautious with their purchases. And well, of course, there might be other smaller drivers, of course. What we have told here that, for example, our private label strategy, the private labels grow. And those might have some kind of effect, of course, on basket size because if we replace some products with the private labels, typically, what happens there is that the prices are lower for consumer.

On the other hand, we get better margins on those products that might affect in some extent. But I would say that the effect is very small. The biggest driver is the consumer weakness here. And it's very hard to say at this point when the basket decline will stop. It's more related to this general economic situation. And we have been now waiting for, like how many years, promising that the Finnish economy will recover, but we haven't still seen it. But when it happens, I believe that the basket size recovers.

And I would like to add one thing. As you know that our customer traffic is increasing. It is growing both in old stores and, of course, new stores. And we have opened it and we will open a huge amount of new stores in coming years also. That means that the customers have more options to visit and shop in our stores, and we'll get new customers, new areas we don't have or hadn't stores yet.

As you know that if Puuilo store locating far away from customers' hometown and he or she will shop there, typically, if it is so far away, he buy more than the customer who lives in same city where we have store already. So customers have more and more options to shop in our stores, and they shop more frequently, we think.

Okay. That's actually very, very helpful. And then my final question regarding Sweden. So when are you expecting the first kind of, let's say, a bit more significant costs coming in from Sweden? Is it already in Q4 or is it more like Q1, Q2? So how should we think about the timing of cost from Sweden?

The majority of the costs comes next year. So practically, we only have booked this year, this onetime designing costs -- or how would I describe it, on Q2, and which is recorded on one-off. There is no significant or any major costs during the Q3 or for the rest of the year regarding Sweden. There might be some small costs, I would say. Of course, there is coming something. But majority of the cost will come next year. And as we said that, for example, recruitment for Sweden will be made next year, not this year.

The next question comes from Miika Ihamaki from DNB Carnegie.

It's Miika from DNB Carnegie. I have also a question on the basket size dynamics, but this time across store vintages. So I would like to understand, with your older stores having significantly higher sales per square meter, how does the average basket size correlate with store maturity in this environment? So do your more established stores, the typically larger baskets as customers become more familiar with a full assortment or does the frequency drive the sales growth? So just trying to understand the dynamics here.

Thanks, Miika. I would say that, of course, the frequency of visiting store is, of course, driving up the sales. And as you can see from the customer traffic growth numbers here, that those were really strong. I would say that if we look at -- I won't go in the details, I have to say that. But in general, I would say that the basket size is more related to the micro location of the store.

If the store is located, for example, in a very tense city area where the surrounding people who are living around the store, typically, the basket size is smaller than if we compare to the unit, which is on the country side. So that's the main difference, I would say. But if we look at now the basket size decline, so the decline is quite even, no matter is the store in the countryside or in the city area.

Okay. That's very helpful. And then given that there is 2% to 8% negative margin differential on higher ticket items, do you have any concerns that your gross margins could become under pressure if customers would start purchasing more of these big ticket items, whether it's then '26 or '27? So how can you handle this one?

No, we are not worried about that. So of course, we hope that the basket will turn back to growth. But as you can see from the numbers, we can live with this situation and eventually, it will turn. So the economical situation in Finland will turn. We can live with this level of basket sizes. And of course, we are mixing there, like we have said here, more private labels. We are expanding the store network, and the customer traffic growth has been on a very healthy level for a long time. So I would say that the customer traffic growth is a more important metric for us than only looking at the basket size. But like I said, of course, we would be very happy to receive a higher basket. But that's the KPI, which is very difficult to change.

And I would like to add that, as Ville said, that, of course, we are waiting for the better financial time and when the economical situation start to improve and customers' confidence is better. It means that -- and we can wait that our basket size will increase also. Together with the increasing basket size and increasing the customer traffic, it support our sales growth in the near future very heavily and nicely.

There are no more questions at this time, so I hand the conference back to the speakers.

Good. Thank you for the questions and joining us today, and I want to thank all our customers for trusting us, and special thanks to all our employees of your great work. But additionally, as we have announced, Ville will be leaving the company at the end of the year. At this point, I want to thank Ville, you, for the past years and for the excellent work done. I would have gladly kept you in Puuilo's team. But as they say, everything has its time. I warmly wish you good luck and success in your life and in your new role. Thank you, Ville.

Thank you, Juha, for your kind words. I have had a privilege of being part of creating Finnish retail success story for nearly 10 years. Together with my team, other colleagues, the company's management team and the Board, through our excellent collaboration and support, we have built Puuilo into a thriving listed retail company. We have earned the trust of our customers, and along the way, created significant value for the company's shareholders. I want to wish Puuilo continued success in the future, and extend my heartfelt thanks to all colleagues and stakeholders who have contributed to building this success story. Thank you.

Thanks. And I'd like to wish you a Merry Christmas.