Bokusgruppen AB (publ) Interim Report January - September 2022
28 Oct, 2022, 17:03
Comment from the CEO Maria Edsman:
Stable gross profit but ongoing initiatives impacted earnings
Sales in the third quarter were stable compared with the previous year. The previously announced investments in online channels continued according to plan during the quarter. These investments are being conducted after several years of strong performance to create higher growth over the long term. The initiative has entailed higher costs, resulting in lower EBITA than in the year-earlier period.
Sales for the third quarter amounted to MSEK 421.0 and were on a par with the previous year. The trend we saw earlier in the year, where in-store sales approached pre-pandemic levels, also continued in this quarter. Net sales for stores increased just over 1% and a cumulative 8.1% for the year. Sales for Bokus Online continued to decline, but at a slower rate than previously and to a lesser extent than the market according to Bokförsäljningsstatistiken.
Costs increased markedly during the quarter. This was due in large part to the planned investments we announced previously, such as a return to more staff in stores after the pandemic, continued brand initiatives for Bokus and Bokus Play as well as logistics improvements and an IT transformation. Inflation has also driven up purchase prices, transport costs and energy prices.
We have successfully compensated for the increased
purchase and transport prices through price increases towards customers, which allowed the gross margin for the company as a whole to remain on the same level as the previous year. We are not seeing any major effects on demand as a result of these price increases except for our more expensive products, such as board games, which decreased slightly in volume. This highlights how important it is that we continue implementing intelligent price optimisation in the coming quarters.
EBITA was positive in the third quarter, amounting to MSEK 14.9. This is significantly lower than in the year-earlier period, largely due to increased investments in online channels.
The adjusted operating cash flow amounted to MSEK 23.5, down MSEK 25.5 year on year due to lower earnings and higher investments.
Complete offering strengthens us as a group
The return from online retail to physical stores continued, albeit not to the same extent as in the previous quarter. However, Akademibokhandeln Online went against this trend for online stores and increased its sales 16.7% during the quarter. This is gratifying and we see it as proof that our customers appreciate our omnichannel strategy and the seamless customer experience we strive to offer.
The roll-out of self-checkouts continues at our physical stores and on 1 October Akademibokhandeln’s third pop-up store opened at Stockholm Central Station.
During the quarter, the number of Bokus Play subscribers also continued to increase drastically. Sales of digital books, both single purchases and through Bokus Play, increased a full 19.2% in the quarter. This was the result of a very successful campaign to attract new customers in our stores, and we can safely say that Bokus Play is growing more than the market.
It is clear that the breadth of our customer offering strengthens us in many ways, as does our cross-selling between our brands and between physical and digital stores.
The all-important start of the academic year
This year’s back-to-school campaign went well in physical stores and online. However, sales of course literature, primarily on Bokus, decreased compared with the previous year. We can see that the secondhand market for course literature is gaining ground, while there are also 4.7% fewer students in Sweden’s post-secondary institutions.
New logistics partner – start-up in focus
The move to our new logistics partner continued during the quarter. Deliveries are now at a satisfactory level but have not yet reached their full potential, partly due to delayed automation, which will be in place within a few months.
Bokus turns 25 and the new Bokus Scholarship awarded
Time flies – during the quarter we celebrated Bokus’s 25th anniversary. With a quarter century behind us, we can safely say that this pioneer in online shopping is now stronger and better prepared than ever. At the celebration, we also awarded the first Bokus Scholarship of SEK 50,000 to students who had done the most work to spread the joy of reading. The initiative is part of Bokusgruppen’s sustainability work related to Reading Promotion and will be awarded annually.
Bokusgruppen previously announced an accelerated investment in online channels throughout 2022 to create higher growth over the long term. This investment pertains to system platforms, consumer logistics and increased marketing. These investments have continued according to plan and are being conducted after several years of strong performance. These initiatives will continue, albeit at a slower pace than planned to offset increasing costs.
The global situation remains uncertain, unfortunately without any end in sight at the time of writing. The war in Ukraine continues to wreak havoc and the immediate threat to Sweden and large parts of the world escalated during the quarter. We are seeing the beginning of a new era with significantly higher interest rates for both companies and private individuals, not to mention the highest inflation we have seen in many years. All of this will undoubtedly hit our customers in their wallets. We do not yet know whether they will continue to purchase books and our other products as relatively inexpensive treats in tough times.
However, we expect our costs to increase as inflation rises, including significant index increases on rent. These cost increases make further price hikes for our customers unavoidable. We will also have our full focus on ensuring that we have the flexibility we need in our cost base to offset unforeseen events during the coming quarters. Finally, we will focus on efficiency initiatives that reduce our cost base over time.
With that said, our complete offering – with physical and online stores as well as subscriptions – has never been more relevant than now. We are entering the year’s strongest quarter in terms of sales and earnings with a healthy level of humility in the face of an impending economic downturn, but also with great confidence in the ability of our customer offering to stand strong, our solid financial base and our long-term vision to spread the joy of reading for everyone, every day.
Maria Edsman, CEO