Q1 2024 – the quarter in brief
• Net revenue was SEK 222.2 (234.2) million, corresponding to -5.1% (-18.7%)
• Gross profit was SEK 109.1 (95.8) million, corresponding to a gross margin of 49.1% (40.9%)
• Operating profit was SEK 1.4 (-33.7) million, corresponding to an operating margin of 0.6% (-14.4%)
• Profit/loss after tax was SEK -1.9 (-34.8) million, corresponding to earnings per share of SEK -0.06 (-1.94)
• Cash flow from operating activities was SEK -4.5 (-53.9) million
• Cash and cash equivalents at 31 March amounted to SEK 126.0 (35.8) million, with credit facilities unutilised

Q1 2024 – Significant events during the quarter
• Niklas Lingblom took over as CFO on 5 February and replaces Ola Wahlström, who has been interim CFO since
November 2022.

Significant events after end of quarter
• No significant events have been reported since the end of the period

Positive operating profit for the first quarter of the year
As we move into 2024, we continue to see the clear effects of our transition efforts. Operating profit for the first quarter was SEK 1.4 (-33.7) million, a significant improvement on the previous year. Profit after tax amounted to SEK -1.9 (-34.8) million, and several key underlying factors showed a strong positive trend, not least a gross margin of 49.1% (40.9%). Net revenue for the quarter decreased to SEK 222.2 (234.2) million compared with the previous year, but the decline of -5.1% (-18.7%) was less than all quarters in 2023. It is worth mentioning that in the first quarter of 2023, we chose to drive more sales through price reductions than in the corresponding quarter this year. Cash and cash equivalents at the end of the quarter amounted to SEK 126.0 (35.8) million, so here too, the company strengthened its position compared with the previous year, through both the rights issue carried out in 2023 and fundamental operational improvements.

Our long-term strategy delivers the desired results
During the first quarter of the previous year, we had begun our transformation journey but had not yet seen its effects. The comparison with this period now clearly reveals a healthier core business, with a stable foundation in place for generating sustainable long-term profitability. The core part of Nelly’s business continues to be our product range, and here we are pleased to note that the positive trends crystallised during the second half of 2023 in particular continued into the first quarter of this year. In total alignment with our strategy, we offered a more carefully selected product range with considerably fewer variants than in the previous year, while our top sellers of the quarter again achieved significantly higher quantities than before. The Nelly brand’s position in everyday fashion was further consolidated as tops and jeans in particular erformed better than in the previous year. Together with trousers and jackets, these categories accounted for a significant share of sales. At the end of the first quarter, the current spring and summer season had achieved both higher sell-through rates and a higher share of full-price sales compared with the same time in 2023. Additionally, Nelly’s own brands accounted for 39.9% (35.8%) of total sales in Q1 and the return rate improved to 33.4% (37.8%), giving us confidence that our product range strategy is still on the right track. We continued to demonstrate good cost control during the period, with further improvements in several areas. There was a slight reduction in marketing costs compared with the previous year and we made a number of improvements in this area, aimed at ensuring organic traffic and increasing the profitability of all paid advertising. Our warehousing and distribution costs were also reduced, both in absolute terms and as a share of net revenue, despite lower order volumes. Going forward, we will continue to work on both the customer experience and our costs, particularly now that new system support for further optimisation has been put into operation in the first quarter.

Improvement work continues
There is still significant potential to pursue further operational improvements and we will focus on these in the coming quarters. Total traffic to our website continued to show a negative trend in the first quarter and conversion was lower than in the previous year. The effect of fewer orders on net revenue was partly offset by a larger average order value compared with the previous year. However, to reverse the downward trend, we must continuously develop our range, optimise pricing going forward and strengthen customer communication to become the fashion destination of choice for our target group. Here we see more opportunities to use the Stockholm flagship store to even greater advantage and deepen the collaboration with our external brands in order to offer Nelly customers unique products and experiences.

As previously communicated, the process of redesigning our system landscape was intensified at the end of 2023, and we are now in the middle of several important projects that will significantly strengthen Nelly’s IT architecture from the ground up. The transition to more flexible, user-friendly technology requires significant investment and focus from the organisation, but it will eventually create completely new conditions for a more personalised, inspiring and smooth customer experience, which is why this process is a priority both for the rest of this year and for 2025. The first quarter has marked a promising start to 2024.

We delivered a significantly improved operating profit compared with the previous year and, with our new permanent CFO taking office during the quarter, we now have a full management team working with the rest of the organisation as we continue to execute our plan for the next phase of Nelly’s transformation. Finally, I would like to once again extend my warmest thanks to our amazing customers, whom I now get the opportunity to talk to in our physical store and, of course, to the entire Nelly team. It is a privilege and a pleasure to continue developing and strengthening the company with you.

Helena Karlinder-Östlundh,
CEO Nelly Group AB

Nelly Group AB (publ)
Box 690
501 13 Borås, Sweden
Corp. ID 556035-6940
Registered office: Borås
Visiting adress: Lundbygatan 1, Borås

Webcast of the first quarter
Analysts, investors and the media are invited to a webcast presentation of Q1 on 26 April at 9 a.m. CEST. The presentation will be given in English by Helena Karlinder-Östlundh, CEO, and Niklas Lingblom, CFO. The webcast will be made available on the Nelly Group website.

Link to webcast: https://nelly.videosync.fi/2024-04-26-q1

To listen to the Q1 report by phone, the following callin details are available:

• Finland: +358 9 4245 0972
• Sweden: +46 8 525 07003
• United Kingdom: +44 20 7043 5048
• United States: +1 (774) 450-9900

Conference ID: 100400#
User ID: 73390#