Bokusgruppen Interim Report January–June 2023
24 Jul, 2023, 18:10
Comments from the CEO Maria Edsman:
Stable sales and improved gross margins
Bokusgruppen successfully delivered stable sales and improved gross margins in the second quarter as well, despite a continued challenging operating environment.
Bokusgruppen’s sales increased 0.2% in the second quarter compared to the year-earlier quarter. Our customers continue to shop with us, despite the reduced purchasing power among consumers overall, which is clear evidence of the appeal of our offering.
It is also clear that our ability to adjust and adapt in difficult times is good. The trend of customers returning to physical stores continues. The number of active customers at Akademibokhandeln increased in the quarter in parallel with a fall-off in active customers at Bokus. This indicates the strength of our channel breadth – customers can choose a channel according to their varying needs and preferences.
Akademibokhandeln’s strong performance in the first quarter continued through the second, both in physical stores and online. The positive trend was evident in the number of active customers as well as sales and customer satisfaction (NPS). Sales increased by a full 18.7% online and 3.4% in physical stores. Given that we permanently closed one store and temporarily closed another during the quarter, this in-store increase is a very positive signal.
Bokus continued to have a negative performance during the quarter, reporting a 6.7% decrease in sales. This is due to the drop in number of active customers, where the student segment in particular declined. We also saw some level of restraint in other customer segments. By the latter portion of the quarter, however, the trend was more positive. The digital formats at Bokus posted positive growth, primarily the subscription service Bokus Play. Bokus Reader, an app for purchasing individual audio books and e-books, was launched during the quarter. Bokus Reader simplifies and improves the customer experience for individually purchasing books which can be downloaded, and functions as a complement to the subscription format, which does not suit all customers. We have high expectations that Bokus Reader will have a positive effect on digital sales of individual books.
Cost savings and price increases offset inflation-driven cost increases
We have offset inflation-driven cost increases well, with selective price increases for consumers that led to an increased gross margin and with a large cost-savings programme.
Fixed costs* increased MSEK 6.6 during the quarter, adjusted for items affecting comparability. The increases primarily derived from costs for premises and personnel expenses. Costs for premises increased due to indexation based on CPI from October 2022. Salary cost increased 4% in salary reviews according to agreements, but this increase was offset by the decrease in personnel from the first quarter that had an impact in the second quarter.
However, the aforementioned measures did not fully compensate for cost increases during the quarter. Adjusted EBITA for the quarter was MSEK -23.5, which is MSEK 1.9 lower than the year-earlier quarter. A negative EBITA for the second quarter is nonetheless normal and in line with our seasonal variations. After the first half of the year, adjusted EBITA was still MSEK 4.4 higher than the year-earlier period. Adjustments to EBITA are due to the large pension refunds of MSEK 26.3 we received during the second quarter last year, which affects comparability.
*Refers to fixed operating expenses, including depreciation of right-of-use assets and property, plant and equipment and adjusted for items affecting comparability.
Challenging situation for our e-commerce logistics
Well-functioning logistics are essential for competitive e-commerce. In order to offer an even better customer experience, in 2022 we changed our logistics solution for e-commerce. The implementation suffered several delays due to the component shortage in the wake of the pandemic, which occasionally resulted in longer lead times, lower delivery reliability and suboptimal operation. During the quarter, our logistics partner moved to better facilities and the final element of automation was in place after a year’s delay. Now continuous adjustments and development are under way in order to offer an improved customer experience. Unfortunately, these challenges in combination with high inflation were costly for our logistics partner. Together, we are reviewing how we can support them in creating the right conditions for continued stable shipping during the autumn, which is an important period for our business, and also to support continued development and improvement.
Continued digital transformation
During the quarter we continued to focus on preparations for procuring the new e-commerce system, which is the next step in our digital transformation. The procurement process is now under way and during the coming quarters we expect to choose suppliers and set a plan for execution.
Long-term focus on sustainability
Our sustainability efforts during the quarter were focused on target follow-up and initiatives for the years ahead.
During the quarter, we closed applications for the Bokus Scholarship after having received over 200 applications. The scholarship will be announced and SEK 50,000 will be presented to the winner at the award ceremony on 20 September. The Bokus Scholarship focuses on students and prioritises projects that spread the joy of reading. An estimated 2,000 children participated in Världsbokveckan (World Book Week) hosted at Akademibokhandeln’s stores. I and all of my colleagues at the company are incredibly proud of these activities, which are all part of Bokusgruppen’s important initiatives to promote reading.
During the quarter, Akademibokhandeln entered a partnership with the non-profit organisation Erikshjälpen to sell Bokusgruppen’s products that would have otherwise been disposed of. Akademibokhandeln also held a Book Exchange Party. These are examples of circular and waste-reduction initiatives. Work within the Book Industry Climate Initiatives, which Bokusgruppen participates in, also continued with a focus on measures in the areas of transportation and production.
We live in an uncertain and challenging world. The war continues in Ukraine and general instability in the region makes it difficult to predict what will happen in the autumn. The Riksbank once again raised the policy rate in June, which will put additional pressure on our customers’ purchasing power and their ability to spend money with us or with others. We are following demand and cost trends carefully and are prepared to take additional steps if necessary.
Our experience thus far, however, indicates that books as well as our creative range are considered prioritised and affordable entertainment. This, and our ability to serve customers in our various channels, makes me optimistic as we enter the time of year for vacations. After that, we’ll be in autumn, with the start of the school year and many exciting new book launches that can light up customers’ lives during the darker and colder months of the year.
Maria Edsman, CEO