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.

Hello, and welcome. Thank you for attending Puuilo's half year results presentation covering the period ending in July. In this same presentation, we will also share our updated strategy and new long-term financial targets. I am Juha Saarela, CEO of Puuilo and joining me in this presentation is Puuilo's CFO, Ville Ranta.

Good morning.

In the half year report, we will go through the key results of second quarter and H1, that is the period from May to July and the first half of the financial year. And after this presentation, you can ask questions by calling to line. We are happy to answer your questions.

Here is the agenda for the presentation. First, I will present the key figures and events of the second quarter and the first half of the financial year. And following that, Ville 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. And then we will move on to point 4, which presents our updated growth strategy and new long-term financial targets for the strategic period. And as I mentioned, we have reserved time for questions at the end.

Our second quarter covers the period from May to the end of July and here, you can see the key results. First, net sales. Net sales for the quarter were almost EUR 136 million, showing strong growth compared to the same period last year. Total growth was over 13% and like-for-like growth was 1.3%. The increase in customer traffic continued to be the main driver of sales growth and sales increased in both old and new stores. Net sales grew in all months of the second quarter. The average basket size was slightly lower than in the comparison period, but the rate of decline slowed down.

Then profitability. Gross margin in Q2 increased and was 38.2%, up by 0.6 percentage points compared to 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 off-label goods. Adjusted EBITDA in the second quarter grew by nearly 14% and amounted to EUR 28.2 million representing 20.8% of net sales. This was an increase of approximately EUR 3.4 million and relative profitability remained at the same level as in the comparison period.

Then earnings per share were EUR 0.25 compared to EUR 0.22 in the comparison period.

We continued our strategic expansion by opening new stores in Mäntsälä and Jyväskylä Keljo during Q2 and at the end of the period, we had 54 stores.

Let's look at the first half of the year from February to the end of July. First, net sales. Net sales for the period were EUR 225 million, growing by approximately EUR 30 million compared to the same period last year. Growth was over 15% and like-for-like growth was 3.4%. The main driver of sales growth was the increase in customer traffic which continued to increase in both old and new stores. Net sales increased in all months of the period. The average basket size was slightly lower than in the comparison period, but the rate of declines lowered down.

Gross margin for the first half of the year increased and was 37.7%, up by 0.5 percentage points compared to the same period last year and improvement in gross margin was mainly driven by increase in sales of private label products and the continued shift in the sales mix towards more off-label goods.

Adjusted EBITDA for the first half grew by over 18% and amounted to EUR 39 million, which is 17.3% of net sales. This was an increase of approximately EUR 6 million and relative profitability grew by 0.4 percentage points compared to the comparison period.

Earnings per share were EUR 0.33 compared to the EUR 0.28 in the comparison period. And we continued our expansion and we opened five new stores during the period in Varkaus, Savonlinna, Lohja, Mäntsälä and Jyväskylä Keljo. And end of the period, we operated a total of 54 stores.

The performance and results for the first half of the year were good, considering the general economic situation. Customers' cautious spending and frugality as well as relatively high unemployment rate continue to be reflected in purchasing behavior. However, customer traffic at Puuilo continued to grow which is the most important metric to measure the relevance and attractiveness of our assortment, price level and overall concept. We have gained market share despite the weak economic situation and intensified competition.

There are now some signals of the economic recovery and we also believe that customer confidence will slowly begin to improve. It is the effect on the real economy and purchasing behavior always comes with a delay, something to wait for. Overall, the first half of the year was good, and we have reason to expect that the end of the financial year will also be favorable. We continue our profitable growth with confidence.

Good. Now Ville it's your turn, please.

Thanks, Juha. The second quarter net sales were EUR 135.8 million, up by 13.2% compared to the last year. At the same time, like-for-like net sales grew by 1.3%. Customer traffic in our stores grew by 14.6% and 2.8% in like-for-like terms. The average basket size decreased slightly in Q2, but the rate of the decrease slowed down. So the growth in customer traffic continued, and this is a very important metric for us.

In Q2, we opened 2 new stores in Mäntsälä and in the Jyväskylä Keljo, which is the second store in Jyväskylä City. The new store openings has been successful. Then cumulatively, the financial year is now exactly halfway. And at the end of the H1, we had a net sales of EUR 225 million. The growth in the company's net sales was 15.2% and a good level of 3.4% in like-for-like terms. Cumulatively, customer traffic increased by 16.1% in all stores and 4.6% like-for-like terms, which we are pleased with.

As Juha already mentioned earlier, a total of five new stores were opened during the H1. Then let's move on to the gross margin. In Q2, Puuilo's gross margin was 38.2% of net sales, and it grew by 0.6 percentage points compared to the corresponding period of the previous year. The increase in the gross margin level was influenced by the sales mix and the increase in the share of own private label brands in net sales. Sales growth in own private label brands was again strong, growing by 22%. Own private label products is the main factor for the good margin development in Q2.

Cumulatively, Puuilo's gross margin was 37.7% at the end of H1, growing by 0.5 percentage points compared to the last year. The same factor is behind this, that own private label products are continuously increased their share of the company's net sales and bringing us better margins. Cumulatively, sales growth in own private label products was 28%. Compared to the previous year, we have launched almost 1,000 new product articles in the assortment of our own private label brands. The increase in the gross margin level was, therefore, continued, and we are very pleased with this.

Then let's move on to profitability. Adjusted EBITDA for Q2 was EUR 28.2 million, up by EUR 3.4 million compared to the last year. Adjusted EBITDA grew by 13.7% in percentage terms and profitability as a percentage of net sales was 20.8%, better profitability than the previous year in both in euros and percentage terms. Cumulatively, adjusted EBITDA was EUR 39 million at the end of H1 and relative profitability was at the level of 17.3%. Compared to the previous year, adjusted EBITDA grew by EUR 6 million, and in percentage terms by over 18%. Relative profitability improved by 0.4 percentage points. The improved profitability is driven by good sales development, increased gross margin and cost discipline.

Operating expenses were cumulatively 16.1% of net sales and the expense ratio decreased compared to the previous year. As a result of these factors, profitability improved. I could summarize here that all performance indicators were at good level and developed in the right direction.

This graph shows the development of Puuilo's inventory levels over the last three half years. The inventory turnover rate slowed down, which is due to the initial inventories of eight new stores and the increase in the import of our own private label brands. Sales of our own private label brands have grown strongly, which is reflected in the value of the inventory due to the longer delivery cycles. However, our own private labor brands are a winning strategy for us in terms of profitability. However, we are constantly working on this to speed up the delivery cycles and improve purchasing terms.

We actively monitor the inventory turnover rate and the long-term trend goal is to improve turnover rate. However, in the short term, there might be fluctuations between quarters and years for the reasons mentioned above.

In Q2, Puuilo's operating free cash flow was EUR 38.1 million and an increase of EUR 6.5 million. The cash flow was driven by good net sales development and, of course, good profitability as well as positive change in working capital. We have been able to improve purchasing terms, which is natural when volumes are increasing. This is now reflected in the reported cash flow. Cumulatively, the operating free cash flow was almost EUR 52 million, which was very strong.

The growth compared to the same period last year was almost EUR 18 million. Strong cash flow, which we are happy with.

The company's net debt to adjusted EBITDA ratio decreased slightly compared to the comparison period due to strong EBITDA development. The current net debt to adjusted EBITDA ratio is in line with our long-term goals. The middle figure shows the adjusted net debt-to-EBITDA ratio graph, excluding the impact of IFRS 16, which decreased compared to the previous financial year. The key figure calculated excluding the impact of IFRS 16 is currently very low. According to this figure, it could be stated that company is low levered.

Puuilo's cash and cash equivalents were EUR 42.5 million at the end of the quarter and the company's financial position is healthy. Puuilo's net debt, excluding the impact of IFRS 16, meaning the net sum of cash and cash equivalents and bank loans were EUR 17.4 million at the end of July. This also means that the company's absolute net debt is low.

Puuilo made a financing agreement in the spring of 2025 in which the company raised additional EUR 10 million in long-term bank loans. The second part of the EUR 10 million will be withdrawn in October when the EUR 20 million increase on top of the old loan under the financing agreement has been fully withdrawn.

And here are the figures as a 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 for the financial year '25. Please, Juha.

Thank you, Ville. Then the outlook for this financial year, we repeat the outlook for this year. We forecast that net sales will grow and be between EUR 425 million to EUR 455 million. We also expect adjusted EBITDA to be between EUR 70 million to EUR 80 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.

Good. We opened five new stores during the first half of the year. The ramp-up of these stores has followed the same pattern as previous openings and all have performed in line with our expectations. Expansion will continue in the second half of the year in line with our strategy. We expect to open a total of seven stores this year. Later this autumn, we will open a store in Iisalmi and before the end of financial year, another one in Heinola.

For next year, we have already announced two new stores, a second store in Espoo and one in Heinola. In addition, early next autumn, we will relocate our Vantaa store to a new and attractive location in the Tammisto commercial area in Vantaa. Looking ahead to next year, overall, we expect to open several new stores in line with the updated growth strategy published today.

Good. And next, we will present our updated strategy and new long-term financial targets. Here, you can see the agenda for this presentation. I'll start with a brief overview of Puuilo's history. And then together with Ville, we walk through the key elements of the strategy and explain how we plan to reach the new targets. And the third section covers our capital allocation principles. And at the end, we have reserved time for questions about both, the updated strategy and the half year report.

A brief overview of Puuilo's history, which is a truly unique success story. Puuilo was founded in 1982. In its early days, the company sold wooden toys and souvenirs from a small workshop, the name Puuilo originated from this. In the late 1980, many Finnish import companies began sourcing affordable products from Asia, which were in high demand. This opened up a new market for discount retail. To meet this growing demand, Puuilo acquired used buses and converted them into mobile -- as mobile stores. At its peak, six buses drove market squares particularly in Northern and Eastern Finland.

Over time, the business environment evolved and by the late 1990s the popularity of bus-based retail began to decline. In 1998, Puuilo opened its first physical store in Kajaani and discontinued its bus sales operations. By 2006, Puuilo had 4 stores, one of which was located in Vantaa capital area. In 2008, the company launched its online store. In 2015, Puuilo was acquired by a new private equity investor. At the same time, a new management team and strategy were introduced, aimed at accelerating profitable growth.

By 2020, Puuilo had already expanded to 30 stores. Significant investments were made in IT systems, organizational structures and logistics to support the successful execution [Audio Gap] a record number in the history of initial public offerings on the Helsinki Stock Exchange. By the end of the 2024, Puuilo had approximately 50 stores and nearly EUR 340 million in net sales while delivering industry-leading profitability.

Good. And here is our new strategy for '26 to '30, which includes some adjustments compared to the previous strategy. It remains a simple, clear and highly actionable. The six 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. Second, entering the international market and starting it with a pilot in Sweden. Third, continuing like-for-like sales growth where there is still a significant potential.

And next, 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, a shopping experience that is easy, off label and fast is a key factor for both current and potential customers. And sustainability work and its development, we call this the responsible retailer, which covers the key elements of our sustainability efforts.

Working towards the six 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.

In terms of profitability, our target is to reach an adjusted EBITDA margin over 17% corresponding to more than EUR 136 million in adjusted EBITDA. We aim to distribute at least 80% of the company's net results to shareholders. And regarding the net debt, our target is to keep the ratio of net debt to adjusted EBITDA below 2.5x.

Good. And next, a few words about the expansion of our store network. We will continue expanding in Finland with our current concept aiming to grow the chain to over 90 stores. Currently, we have 54 stores open. And if everything goes according to the plan, the number will reach 56 by end of the financial year. By the opening 7 to 10 new stores annually during the strategic period, we aim to reach our goal of more than 100 stores by the end of 2030. This total includes both Finland and Sweden.

Overall, the majority of growth will continue to come from Finland with new stores in Sweden providing additional support during the strategic period. This strategy and our approach to internationalization enable us to continue profitable growth in the years ahead. We have already demonstrated this in the past and our recent performance further highlights that growth company in this sector can also be highly profitable. We are able to grow profitable, especially because we benefit from economies of scale and don't need to increase fixed costs in proportion to sales growth.

Another key driver of profitability is our gross margin which we can further improve, in particular, by increasing the share of our own private label products.

And then about international expansion and new markets. We are taking our first steps in the international market, starting with a pilot phase in Sweden. The Swedish market is relatively familiar to us. It is a neighboring country with mostly the same competitors and similar business environment. We know our strengths, but also we recognize that our concept may require some fine-tuning in a new market. We don't underestimate the competitive landscape, and we are aware of the challenges. But however, we believe that our assortment, pricing and overall concept will work well also in Sweden.

Our first priority is to ensure competitiveness in this new market. Only after that, may it become relevant to consider expansion in the other countries. The five pilot phase in Sweden will be given the time it needs before any further decisions are made.

Then about our unique concept. Our sales growth has consistently been the fastest in the industry year after year. At the same time, new competitors have entered the Finnish market. and existing players have continued to expand. Despite this, our growth expansion and profitability have remained best in class compared to competitors. The reason is simple, our concept is different. Our core assortment is broader and deeper compared to others. Customers can trust they will find what they are looking for with us. Our stores offer specialty items, branded products and private label goods, providing multiple option to meet diverse customer needs.

Our pricing is consistently low and not based on campaigns or bargains. We offer reliable off-label prices. Because our customers are busy and their time is valuable, easy of shopping is a key factor in choosing where to shop. We provide shelf location and availability information for nearly all products in our assortment. Clear store layouts make shopping fast. Products are easy to find and quick to pay for. These cornerstones of our concept create a competitive advantage that drives customer traffic growth, the most important metric in this business.

Next, the growth potential of our like-for-like sales. We currently operate 54 stores and more than half of them are less than five years old. New stores typically grow faster than older ones. Given that a significant portion of our store network consists of these younger stores, it is entirely reasonable to expect our like-for-like sales to grow faster than the average market growth. This growth is also supported by additional drivers, such as increased brand awareness, improved store appeal, change in shopping convenience and better product our labeling just to name a few.

Good and Ville will continue by discussing the drivers behind our profitability.

Thanks, Juha. All of our stores are profitable, very profitable, in fact. The graph on the left side shows the profitability of our stores, expressed as a Finnish accounting standards EBITDA percentage, which means that it also includes rents. Our most profitable stores reached Finnish accounting standards EBITDA of well over 25%, and even the lowest level is over 15%. Notably, the stores at lower profitability are either new or young stores that are still in process of ramp-up. We see that in the future, as the maturity of the store network increases, more and more stores will improve profitability throughout scaling, which in turn, directly affects the profitability of the entire company.

In addition, we have tools to further increase unit-specific profitability, for example, throughout improving workshops planning and, of course, throughout an increase in gross margin. On the right-hand side, you can see the increase in the new stores of Finnish accounting standards, EBITDA profitability from the opening months onwards. On average, a new store is profitable in two months or less. This is based on a strong increase in sales, which starts from the opening day. Our store concept scales up to be profitable in a short time. And the increase in profitability continues with the increase in sales resulting in scaling of fixed costs.

From the point of view of cash flow, the new store requires a total initial investment of approximately EUR 1.8 million, which includes store equipment and starting inventory. Calculated throughout EBITDA, the payback period for the new store is roughly 19 months, which is very fast. Puuilo's gross margin is not particularly high and is even slightly lower compared to some of our key competitors. This is good to note because we clearly have a room for improvement here. Increasing gross margin naturally leads to a higher profitability. Puuilo's gross margin has been rising in a trend-like manner for several years in a row. The main driver of the increase in gross margin is the private label strategy, which we have been doing for over 13 years now.

The number of private labels is growing year-by-year, and their share of total net sales in the previous 12 months was 23%. The share is growing year-by-year as can be seen in the graph at the bottom left. Private label products have a better gross margin. They help us differentiate ourselves, protect ourselves from price competition and improve customer loyalty. We have increased the number of private label products consistently. Our goal is to increase the share of private label products to 35% of total net sales in the long term.

On the right side, you can see examples of Puuilo's own private label products and next to them examples of well-known brands that we also sell. Private label products are almost always cheaper for our customer. In addition, the gross margin of a private label product can be many times higher than a branded product, but of course, this varies depending on the product. We have very strong expertise in private labels and our logistical capabilities have been developed to improve this important strategy for us. Juha, please?

Retailers must serve and engage with their customers by same way using a consistent style, brand, voice and image frequently and across multiple channels. The shopping journey typically begins when a customer sees or hears an ad on the radio, television, direct mail or social media. Alternatively, the customer may have a specific need and remember that we offer certain goods. Before visiting a store, a customer can check product availability, pricing and shelf location online for the preferred store. Once in the store products are easy to find and the customer proceeds to check out and leaves. If assistance is needed, our staff are available to help.

When the shopping experience is smooth and effortless, customers are more likely to return and customer loyalty increases. Our marketing is different and stands out. Our store network is broad and still expanding. Our web store functions well. Availability and shelf location information for all products is available online. Store layouts are easy to navigate and store staff are available when needed.

And then a few words about our sustainability strategy. This was not updated in this round. In our strategy, sustainability is defined as a separate theme under responsible retailer. The three main focus areas of our sustainability work are supply chain, a good workplace and environmental and social responsibility. Each of these include several key sub topics such as value chain employees, working conditions and employment relationship, operational emissions and, for example, data security.

We have made progress in nearly all areas, but there is still plenty of work ahead. We understand that we are still in early stages of our sustainability journey, but we are on the right path and moving towards. This was a brief summary. More detailed information is available in the CSRD, Compliant Sustainability Report, which is published alongside the financial statements.

Good. And now it's, Ville, your turn again.

Thanks, Juha. Next, we will take a closer look at the financial indicators for our new strategy period. First is the development of net sales. The annual net sales growth rate target is over 10% per year. According to our forecast, with this growth rate of over 10%, we will reach the net sales of over EUR 800 million by the end of the financial year 2030. The key drivers behind this are the increase in the number of stores towards the stated 100 stores. In addition, there is a like-for-like growth where we still have plenty of potential, thanks to our young store network.

We still see significant geographical expansion potential in Finland, which means opening more stores in large cities as well as smaller towns and municipalities. We already have experience with several of these types of stores, and we have been positively surprised by the sales levels, for example, in municipalities with fewer than 20,000 inhabitants. This opens up even more growth opportunities for the future.

In addition, international expansion will bring us net sales growth during the strategy period. Secondly, if we look at the components, like-for-like growth continues with the help of the young store network, which I already mentioned. In addition, we are slightly accelerating the annual pace of the new store openings to be between 7 and 10 new stores. In fact, in the last two years, we have opened 7 new stores per year. The figure also includes stores opened abroad, which is why we are talking about the range here. The growth drivers described above can lead to the third factor, namely the absolute growth of adjusted EBITDA.

Profitability is improved by our own private label strategy. The growth in the number of stores and the scaling of profitability here -- there as well as the continuous cost discipline at the company level, which we have successfully maintained it for years. This also -- this is also supported by the company's strong culture and simple structure. And with these actions, we look towards year 2030.

And then let's end this series of numbers with some facts. Net sales have continued to grow strongly after the corona pandemic. What is significant is that the sales growth comes from both old and new stores, meaning that the background is, of course, the expansion of our store network, but also like-for-like growth, which is important to us. The rolling net sales of the last 12 months has already well exceeded the EUR 400 million milestone. The development of the gross margin has also been good. We have been able to maintain our good gross margin level all these years. These years include the global logistics challenges caused by the pandemic, the rapid acceleration of the inflation and consumer uncertainty.

Despite of these factors, our gross margin level has continued to grow. Our private label strategy, already mentioned above, has a strong influence of this background, which leverages the gross margin upwards year after year. Of course, at the same time, the changes in the company's sales mix have also increased our gross margin level as demand shifted to lower-priced goods after the pandemic years.

Adjusted EBITDA growth has also continued, especially in euros, but also relatively. The adjusted EBITDA percentage is already approaching the peak figures after the pandemic years. And we see that this level can be maintained or even improved from these figures in the future. Our long-term target for the relative profitability is over 17%. As the company's net sales grows, it's scaling itself to become more and more profitable. But the international expansion plans we described above require investments in the front line, especially in the beginning, which is why we are aiming for the stated profitability target.

However, the company's earnings in absolute terms will be growing in the future. And last but not least, our cash flow where the graph speaks for itself. Puuilo has hundreds of cash machines at the stores, but the entire company could also be called one big cash machine. This is, of course, due to our good sales and profitability development but also to our very low investment needs as we do not build our stores on the balance sheet, but lease them. In addition, our processes for establishing new stores is efficient and requires very little capital expenditure. So we have a quite good evidence of the company's success, and we intend to continue doing the same in the upcoming strategy period, of course, accelerating growth slightly.

And then Juha will continue from this.

Next, let's move on to the efficient use of capital. Puuilo's capital efficiency creates opportunities to consider additional capital return mechanism for shareholders. Here is some background on that. These don't change the previously stated profit distribution policy and targets but serve as a recap.

Primarily, we always invest free capital in our current strategy and growth, ensuring its secret. Puuilo's strong profitability generate solid cash flow, which allow us to finance ongoing expansion, development projects and increase the share of our imports that tie up working capital. These are always the primary users of capital. Secondly, we may consider additional capital return mechanism such as special dividends as our efficient and highly profitable operation generate funds beyond what is required for our current growth strategy.

Additionally, the company's net debt to adjusted EBITDA must remain below the strategic target of 2.5x. Previously, this was 2x. This gives us room to expand faster in Finland and in new market as store rents are treated as lease liabilities under IFRS 16.

Good. And here is a recap of updated strategy and our financial targets for '26 to '30. Okay. 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.

And I got to say the very good slide work today on the new strategy. I have 3 questions, which -- the first one is with your current plans, I mean, when do you think you would be ready to open the first store in Sweden?

Thank you. We are preparing in our all business units and -- but we can't say [Audio Gap] stores in Sweden. But we are -- now we are in preparing phase.

Okay. And then my second question is, I mean, you have outstanding returns on invested capital, I mean, compared to many other Nordic retailing peers. And I mean, of course, the source is higher margins, but you also don't operate your own warehouse. So now when you are increasing the scale, my question is that do you think you need to invest, I mean, more -- or you need to invest in your own warehouse capabilities? And also, if you could at the same mention, to talk a little bit about the new net debt-to-EBITDA target, which was raised from 2x to 2.5x, so where do you see you are going to invest in this money if you take more debt in the future?

Okay. If I ask first about the warehousing and distribution center question, our logistics model here in Finland is very good, and we think that we can copy that to the new market. As you -- maybe you know that we have outsourced our warehousing and transporting to the big logistics company and almost all the big logistics companies, they are operating in Nordics also. So we can use that same contract in Sweden. And as I mentioned, that we think that we can copy that. But that is one question and thing we need to investigate before we open the first store in Sweden. But at the moment, that it seems that we can copy the same logistics model to the Sweden. And then Ville, will you get the other questions?

Maria, I can take the leverage question. Yes, we decided to raise a leverage ratio a bit from the previous strategy. And I think you noticed that includes the IFRS 16 rent liabilities also. And we are preparing to acquire more rent agreements. So there is more headroom for the new rent agreements and accelerated store openings. That's one reason. And also it gives us also a possibility to use debt if we see that we need more for the investments or then for the capital allocation purposes like we did this year in a small scale. But no any decisions about those yet. So we are preparing for expansion mainly. And we wanted to well prepare and raising a little bit more headroom there.

Okay. And then finally, on the profitability, I mean, you raised the target for your own branded sales from 30% to 35%? Or is this something today's level of 23%? And previously, this has had a positive impact on your gross margin. Still you kept the EBITDA margin target at [Audio Gap] without expansion, would you have increased EBITDA margin targets? Or what's your thinking here?

Yes, good question. Of course, the international expansion, like I said in my presentation that it will require investments or well costs, at least in the first phase, and they are coming to us before we get the operations running internationally. That's the fact. We are communicating that the profitability will be over 17%. And I want to highlight here that we are not stating that it will be 17%, but over 17%. We see that the profitability development will continue as the company will be scaling up in the future also. And here, it's good to note that main of the growth will come from Finland still for this strategy period where the scaling up should continue like it has continued so far.

So we believe that we can improve our profitability, but we want to be careful here because there will be some costs coming from the international expansion. And like Juha said, we are in the beginning of this process. So we are not 100% sure yet how many euros and cents it will be.

Okay. And then maybe it's too early to ask that, I mean, that the international expansion that how many like new headcount you think you would need in the headquarter operations in order to facilitate the growth in Sweden. I would think that given that you are very lean and mean concept that I mean you probably don't have all the resources as of now.

We will do recruiting very carefully. Of course, we need to recruit a new person which is needed, but we don't over-resource our expanding to new market. And we do that work very carefully. I think that this is not a big question or a problem in the future. We are -- our concept is quite a clear and we can run many, many operations in other markets also from Finland and our current headquarter resources. But of course, there are certain recruitment coming.

The next question comes from Calle Loikkanen from Danske Bank.

Gentlemen. It's Calle Loikkanen from Danske Bank. A few questions on my side. First, talking about the first half results for the second quarter, whichever you prefer, I was wondering the about the like-for-like growth of the private label sales. Is that a number that you could provide?

No. No, we are not disclosing the like-for-like numbers for the private labels. We told you the total development number, but that's all.

Okay. Sorry, okay. That's clear. And then I was wondering that you mentioned that you will open 7 new stores in this financial year. But how about the financial year 2026, so how many stores in total should we be expecting for that year?

Yes, our target is to open 7 to 10 new stores in coming years. Sometimes, it is 7, sometimes it is 10 and that is a total number in Finland and Sweden. And actually, sorry.

Yes, you don't want to specify, are we closer to 7 or closer to 10 likely next year?

It depends and there can be changes of our plans because some of new stores or new buildings, they are the building projects and sometimes they delay and reasons, there are many reasons why this happens. That is why, for example, why there are variable between years. But what is coming to -- if we talk about the next year, '26, now it seems that we can open at least 7 new stores.

Okay. Okay. That's very nice, fair enough. And then I was wondering about the comments that you said about Sweden. Did I understand correctly that you first open 5 new stores in Sweden to see how they go before making decisions on more stores and other countries?

No, no. We have not done any decision in other countries than Sweden. Now we are starting the piloting phase in Sweden during that strategic period, '26 to '30. And during that, we will open, let's say, several stores in Sweden. But we are not talking about other markets yet.

Okay. Okay. That's clear enough. And then lastly, on my part. Obviously, you had the kind of alternatives to go international, which you announced, obviously today, but the other alternative would, of course, have been to continue in Sweden -- sorry, continue in Finland, open 90 stores or even more than that in Finland by 2030 and then focus on margins, perhaps dividend distribution and so on. So I was just wondering about -- I mean, you must have thought about both alternatives and then decided on international expansion. But what made you kind of tilt towards that decision rather than the yield and dividend kind of alternative?

Yes. Well, if we look at company valuation or share price perspective, we think that stocks follow earnings by the end of the day. So we see that by doing this international expansion and reporting profitable figures internationally despite of the EBIT percentage. But as long as the revenues per share -- earnings per share growth, we see that it creates more value than just being a dividend company or like stop growing the business.

The next question comes from Frederick [indiscernible].

I have just one simple question. I was kind of curious about the expansion in Sweden. And I would like to know if you're planning on using your Finnish name when the time comes to open the first store in Sweden, so will it be called Puuilo there as well?

Yes. Puuilo brand name, Puuilo name here in Finland is funny, and it is some kind of differentiator here, and we like to use it. As you know that Puuilo doesn't mean anything in Finland also. But that is a good question. I can't say at the moment that what we -- are we changing it or not. But let's see, Puuilo name could work in add-on market also, it is a bird name, funny name. It doesn't mean anything and so on. And -- but let's see, I don't know yet.

The next question comes from Joonas Häyhä from OP.

It's Joonas Häyhä from OP. A few questions. Firstly, regarding the expansion to Sweden. Can you comment on how do you see the competitive landscape? And what kind of differences do you see between Finland and Sweden for the Puuilo stores?

Okay. In Sweden and Finland, we have, let's say, almost same players in discount retail market or variety retail market. And all of main competitors are very familiar for us because they are operating in Finland also. What is coming, the differences between Finland and Sweden, we understand that and know that there are some differences is in demand. I'm talking about customer demands. And that is the reason why we are preparing to do some fine-tuning to our assortment. And we know that there are some other reasons mainly from logistics reasons that we need to source some certain products from Sweden instead of Finland.

But localization needs are quite small and we don't need to change our assortment even our concept heavily. And this is very important because by that way, we can scale our business in Sweden also.

Okay. And if I recall it right, you used to have the online store for this Swedish market, but that has been closed down some time already. Obviously, it's different if you have stores or just an online store in the country. But can you share any learnings from that online exercise that you had previously?

Did you get it? I didn't hear that.

Yes, the Swedish online stores, the experience of that.

Yes, we have had the online store, but the sales of it was quite small, and we closed it because it is not profitable or a good idea to upgrade it and maintain it because of the sales force. And we have not boosted marketing or resources to improve that. But of course, situation now is different. And this is one topic of our preparation to entering to Sweden. We will open to the home bases for Swedish customers and online store also. But I don't know when it happens, but in near future, of course, before then we open the first store there.

Okay. And a final 1 regarding the Swedish expansion. You've said that -- obviously, you said that it's organic, as you see it today. But just curious, did you look at any M&A options that may or may not have been on the table when you consider it how to go to Sweden?

We will do our entering Sweden by organic, mainly by organic, same concept and so on. But if we see certain possibilities to buy something, I don't know yet what it could be, maybe we can consider also M&As, but the big expansion to Sweden or other countries will be made by organic.

Okay. And maybe one final one from me regarding the guidance for 2025. Obviously, you've kept that unchanged, whereas I think previously, you've narrowed it down a little bit during the -- over the course of the year. And obviously, the H1 results were quite strong this year. So can you open up your thinking why did you decide to keep the guidance unchanged at this point?

Yes. Thanks. Well, last year, we changed the guidance in the same event. And we ended up to give a positive result warning. And well, thinking that now afterwards, of course, we shouldn't do that then. And now we see that our EBITDA will hit the range what we are here guiding. So I don't know, it doesn't make any difference to take like EUR 1 million out of the both ends. So the middle point will be the same, but at the same time, I would like to highlight that we are not guiding the middle point, market does. So our EBITDA will hit in the range, but we are now guiding.

Yes. Okay. And maybe one follow-up. Do you expect any costs from the Swedish expansion to occur in H2? Or is it more towards the upcoming years?

I think it's more a coming year's issue. There might be some costs coming already for the H2, but as far as I know at the moment, those costs will be quite reasonable.

The next question comes from Miika Ihamaki from DNB Carnegie.

A few questions from my side. This is Miika from DNB Carnegie. First on the international expansion, I would like to understand more what means fine-tuning the stores in Sweden in the future. I understand this, to some extent, relates to the assortment, how about layouts and ultimately, the financial profile of a store. Should we think that this will be fairly similar in financial profile as your stores in Finland? And also, based on what components have you mapped your store locations in Sweden?

We will enter into Sweden similar concept, similar layout, similar functions, and we try to do fine-tuning as less as is possible. We know that -- as I mentioned, that we know that we need to do some changes or fine tunings mainly to our assortment because, of course, every country, every market, they have a little bit different demands. But for example, coming to the brands, it can be possible that we are selling here in Finland, some very well-known brands, but they don't work in Sweden or other markets, for example.

And other reason can be logistics reason because, for example, a big volume and heavy products may be that it is not a good idea to transport that kind of products from Finland to Sweden, because much more higher costs for example, transporting costs, for example. But yes, our layout and our store concept and layout works here in Finland very well and they are very efficient here, and we don't need to see the reasons why that kind of solutions don't work in Sweden.

What is coming to the locations, we have not decided anything yet. We are starting to the looking store premises during end of this year and the beginning of next year. But let's see what we find.

And then secondly, following up on this, assuming there will be no significant changes to your assortment, this likely means that in the mix, gross margin terms, the relative profitability of a store should be similar then to Finland. Do you think -- and when you have studied the market that there is sort of pressure in the pricing stemming from the competitive differences, although understanding that the landscape looks to you fairly similar than it does in Finland.

We have investigated selling prices compared to our prices here in Finland. And we have done that investigations in neighbor countries, other countries also than in Sweden. And we have quite a clear understanding that the price levels in Sweden and our competitors' price levels in Sweden also. We can wait that we can deliver the very good profitability in Sweden also. Of course, there are some -- as I mentioned, that of course, there are some differences and changes that what we need to do about our assortment, fine-tuning localization or something like that.

But in big picture, that kind of changes and localization needs are quite small. And I think that they don't affect to our profitability significantly there.

And the next question was...

Well, about the store unit economics. So of course, it's all about the sales levels. So as more the store sales, the more profitable it is. But of course, we understand that when we are entering the new market, we are a new player there. And in our models, of course, we are expecting the, let's say, reasonable or how would I put it, like not expecting the big bang in the beginning. Of course, it takes time to build the brand awareness and by this way, build the store net sales levels up and up. But yes, like you have said, we are expecting the -- mostly the same kind of store unit economics there.

Of course, let's see what kind of logistics model we choose. But if we are continuing this current model, of course, the logistics costs a little bit extra to take the goods to Sweden compared to the Finland and that might have a small effect on the gross margin side. But like I said, it's all about the stores specific sales, it starts from there.

And then on your store base in Finland. So you have previously showed a slide of average store sales for different vintage groups, including those that have been a mature plus 10 years old. Have these changed significantly in the recent years to the direction or another, meaning that, for example, has your most mature stores achieved, let's say, meaningfully higher levels than what you have shown us before?

You mean the profitability level?

Average store sales, so I believe that you have shown, for example, for a mature 10-year stores of EUR 3,400 per square meter. How have these developed recently? Have you seen that the organic capacity where these existing stores have been increasing beyond that?

Yes, yes. The over 10 years old stores are still growing. Of course, not in the same rate than the newer ones. But we are still reporting there in many, many old over 10-year stores still grows. But of course, that growth is single-digit growth. But still, we have managed to maintain growth even in the oldest store what we have currently.

The next question comes from Svante Krokfors from Nordea.

Juha, Ville, thank you for the extensive presentation. I will limit my questions to two. First one, do you have any comments on -- you mentioned that in Q2, you posted growth in all months. Do you have any comments on trading post to, i.e., August and early September?

No. No. We can't comment the current quartile, we will come out in December with Q3. Yes, that's all I can say from the beginning of the Q3.

Okay. And then the second one is regarding looking at the time of the IPO and also after that, your view on how many Puuilo stores fit into Finland has increased quite significantly. Could you in your own words explain what the reasons behind this? I guess, it's a combination of that you both see that there could be significantly several stores in the larger cities and probably also target smaller cities, but perhaps in your own words, how would you explain that?

Yes, you are right. We have changed it and upgraded our store network target 2x, if I remember right. Of course, past years, we have more understanding our potential. But at the same time, our concept and our brand is much more clear in the market and let's say that we have a big amount of customers here in Finland, potential customers, Finland, who has not visited in our stores. And that is a little bit, let's say, surprising. But of course, it is a good news.

But otherwise, we have opened some stores, little bit smaller cities or towns when comparing to the past years. And the experiences of those are very, very promise -- promising and our sales runs very well. But now I'm talking about the cities where it is 70,000 people or even under it. Competition situation is favorable, for example, for us. Our all main competitors, they don't have stores in smaller cities, and that opens to the new possibilities to us.

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 and special thanks to all our employees of your work for great summer season. Thank you.