Kid (Oslo:KID) Q1 2026 Earnings Call

0:00 Good morning, everyone, and welcome to our first quarter presentation. I am Marianne Fulford, CEO at Kidd. And with me today, I have CFO, Mats Kiegen, who will go through the financials. Q1 marks a return to normal operation and stabilized warehouse processes. We deliver a solid 9.1% revenue growth, driven by positive development across both Kid and HempTex. The quarter was positively impacted by seasonal assortment and strong online development. Easter assortment performed well due to commercial assortment and the timing of Easter. The same did our spring and summer assortment, which arrived earlier this year. And the early arrival contributed to more inspiring stores with a higher share of newness compared to last year, and it drives both store traffic and sales.

0:57 Online revenues increased significantly in the quarter, driven by positive development in both Kid and HempTechs. The online revenues represent 14.1 of total group revenues in the first quarter. Over the past period, we've made several upgrades to our websites with better product presentation and inspiration, driving traffic, improving customer experience and lifting omni sales. Gross margin increased this quarter, positively impacted by freight and reduced clearance sale in January. And operating expenses increased by 8.6%, and Mats will provide you with more details later.

1:44 The logistic challenges we had last year did not impact revenues this quarter, even though some stores weren't fully stocked until mid of Q1. Overall, the warehouse ran as planned in Q1 with higher capacity and much better flow, supporting increased volumes and normal deliveries to our stores. The central warehouse is now stable with more reliable and predictable day to day operations. We're still working on improving processes and gradually replacing IT systems. Efficiency has already improved and we expect it to keep getting better and as system upgrades continue and volumes grow.

2:32 Sublease agreements now cover approximately 65% of the warehouse capacity, including a new agreement for an additional 50% signed during the quarter. As a result, around two thirds of the warehouse cost base for '26 is secured through sub leasing agreements. And we also remain confident in securing a long term solution for the year. We continue to modernize our system landscape to support future growth and project activity remains high, particularly with core retail and operational systems. The rollout of our new point of sale, PUS CASA system, is well underway across the group with good progress achieved during the quarter.

3:23 A new workforce management system has been implemented in Norway together with additional supporting systems. And remaining initiatives will be completed progressively and entering into 2027, the group will have a modern and scalable system platform supporting future growth and operational efficiency.

3:47 Category development continues to be a key growth driver. And during the quarter, we delivered a solid growth across major and focus categories, alongside continued positive development in new categories. For the past two years, we have reported revenues from new categories introduced since 2022. This definition is carried forward and from 2026 expanded to also include all furnitures as outdoor and garden furniture have not previously been included. The revised

4:27 definition provides a more representative view of our new category growth initiatives. Store projects continue to support profitable growth through refurbishment, enlargement and relocations. During the quarter, we completed seven store projects, three new stores and one extended store were opened, while one store was closed. And with that, I give the word over to Mats, who will take you through the financials. Thank you, Marjane, and good morning, everyone. First of all, the first quarter represent a solid start to 2026.

5:12 In Q1, we see improved operational stability across the group with normalized warehouse capacity supporting execution and underlying performance developing well. I will walk you through the financial performance and key drivers for the quarter. Group revenues increased by 9.1% to 800,500,000 in the first quarter, driven by both Kid Interior and HempTex. In constant currency, the growth was 8% with a like for like growth of 6.1%, including online sales. I will come back to highlights for the segments shortly. Online was a key growth driver with a growth of close to 25% year on year and increased online share to 14.121.2%, including click and collect.

6:10 This development proves both strong customer demand and improved execution across channels. In terms of categories, we observed a general positive underlying development across our categories, and I would like to point out Bedlin, Bathroom and Outdoor Furniture supported by strong sales of seasonal assortments from Easter, Spring and Summer. Kid Interior performed solid with a total revenue growth of 8.9% and like for like growth was up by 7.4%. The revenue development is driven up by increased number of transacting customers in the online channel and in our physical stores, partly offset by a slight negative contribution from basket size due to the product mix.

7:06 Easter had a positive timing effect this year, particularly in Norway compared with the group's other markets. Q1 include the same number of shopping days on a group level as in 2025, but the distribution and value of these days vary across segments due to holidays. The April revenue figures disclosed today provide additional context beyond the quarter. HempTex delivered a reported total growth of 9.4%, and as for previous quarter, we see a significant currency effect in the reported group figures translated into NOK. Measured on a constant currency basis, the revenue growth increased by steady 6.6%, driven up by strong online development.

8:01 The development is positively impacted by an increased number of transacting customers in our physical stores and online, combined with decreased basket size, as seen in Norway. To summarize, the growth in the quarter was broad based, driven by digital sales, solid store performance in Norway and strong execution in key categories and seasonal assortments, achieving a revenue growth for Kid Group of 9.1%.

8:34 Group gross margin increased by 0.6 percentage points to 61.2% in the first quarter, reflecting a solid gross margin development across the group. The improvement was primarily driven by a lower share of freight cost in the cost of goods sold and reduced clearance of seasonal assortments compared to last year. Both segments contributed positively. Kid Interior delivered a stable gross margin with a slight improvement, impacted by mix effects and campaign activity, while HempTex showed a stronger margin improvement year on year. Summarized, the group gross margin of 61.2% for the quarter is considered robust and is well in line with our financial objectives.

9:25 Reported operating expenses increased by 8.6% in the quarter from last year. The development is impacted by new stores, projects and increased activity level compared to previous year. Employee benefit expenses increased by 8,000,000 on a constant currency basis, and I would like to highlight the following items.

9:53 The development in employee benefit expenses is mainly reflecting general salary increases and higher working hours in larger and new stores, in addition to store projects and the ongoing system modernizing. The increase was partly offset by lower logistics staffing, as a higher share of labor during the warehouse ramp up was sourced externally and by the lower bonus accrual effect compared to last year. We have control in terms of number of worked hours in our like for like stores, and the increase is affected by our new stores, larger stores and the store projects.

10:40 These are all key initiatives that will drive future growth. Other operating expenses increased by $800,000 on a constant currency basis and is attributed to higher activity levels, larger store portfolio in terms of space and logistic costs. In addition, online sales continued to drive higher last mile distribution costs this quarter. The operation in the warehouse in Sweden is supported by external workforce in the ramp up. The hours in the logistics are linked to the volumes distributed to our stores and as a consequence of the online revenue development.

11:32 Earlier arrival of seasonal assortments this year also drives hours this quarter. Please note that external workforce is booked as other OpEx, representing temporary line shift, which gradually will be hired and presented as employee benefit expenses going forward. Finally, currency effects had a significant impact on the reported OpEx base in the quarter from translation from SEK to NOK, explaining almost SEK4 million. Overall, the cost development reflects higher activity, future growth initiatives and a temporary shift in cost mix, while the OpEx to sales ratio remained stable.

12:22 EBITDA for the quarter reflects the combined effect of solid revenue growth, improved gross margin and a stable OpEx to sales ratio. High revenues supported by strong online sales and a good store performance, together with improved gross margin, more than offset the higher activity driven operating costs in the quarter. Overall, this demonstrates good operating leverage in the business as activity levels increase and reflects improved operational stability compared with last year. Cash flow from development in the first quarter primarily reflects normal seasonal patterns in the business.

13:08 Cash flow from operation was impacted by inventory buildup ahead of the spring and summer season, combined with payments of public duties and positive changes in the trade payables. These effects are timing related and expected to normalize over the year. Cash flow from investments mainly reflects continued investments in new stores, store projects and IT initiatives, in line with our investment activity stated in the financial objectives. Financing cash flow reflects the use of available credit facilities together with ordinary lease payment and net interests. Overall, the cash flow development in the quarter is consistent with operational activity and investment level we have described earlier.

14:02 To conclude, the Group's financial position remains satisfactory at the end of the quarter. We had cash and available credit facilities of 296,200,000 at the quarter end, providing liquidity to support ongoing operations and planned activities. Net interest bearing debt, excluding IFRS 16, increased compared with last year, reflecting higher activity levels, changes in working capital and investments during the quarter combined with the results following the transition year 2025. This resulting in a gearing ratio of 2.04 and remains within a manageable range.

14:52 Overall, the balance sheet and financing structure provide sufficient flexibility as we continue to focus on the disciplined execution across the business. That said, I would like to give the word to Marianne to give a status on our store portfolio and outlook. Thank you, Mats. Store projects continue to support profitable growth across the group, both through refurbishment, enlargement and relocations. We continue a high store project activity fueling future like for like growth going forward. During the quarter, Kidd completed five store projects and opened two new stores.

15:37 And at quarter end, contracts had been signed for one new store and one extended store in Norway, the last one so far opening at Buskerstorstenten in May. In addition, contracts were signed for three further store projects, while one store is planned to be closed during the quarter. HempTex completed two store projects and one extended store at Kolared in Yrtyburg, closed one store and opened one new store. At quarter end, HempTex had not signed any new or extended stores. Contracts were signed for six store projects, while two stores are planned to be closed. As with previous Q1 reports and a more detailed review of the development of our store portfolio is provided, covering both the results of store projects and our outlook going forward.

16:39 And conclusion from previous years, presentations have once again been verified and the increased store portfolio drives profitable growth. We therefore continue expanding store sizes as it remains a profitable strategy. Over the last years, category development and new categories have become an important growth driver, supporting more traffic, attracting new customers and increasing in store customer experience and sale. This has increased the need for an updated store layout, improving fittings and more space in our stores. And today, our assortment needs at least 600 square meters to be displayed in a physical store, which is the foundation for our standard store size.

17:34 And we therefore work to develop the store portfolio towards the standard store size of approximately 600 square meters by expanding or relocating existing stores in all our markets. And the potential for growth by increasing the number of square meters is equally relevant for both Kid and Gentex going forward. And the chart on the right clearly shows that the larger stores drive higher revenue and contribution per store.

18:12 This slide is a bit busy to read, but I'll do my best to explain. There is a clear potential for growth in both Kid and HempTechs by increasing the number of Sclerometers assets. The average store size within our portfolio still remains below the desired level, particularly within Hemtex. And we therefore continue to develop our store portfolio as we need at least 600 square meters. Compared to 2021, Kid has increased the average store size in the portfolio by 13.1%. Average store size in Kid was five eighteen square meter in 2025.

19:00 And compared to 2021, HempTex has increased the average store size in the portfolio by 26.2% and the average store size in HempTex was four sixty three square meter in 2025. And note that 14 extended stores have been excluded from the tables and figure. And please also refer to the chart in the bottom right. The dashed line indicates the target store size of approximately 600 square meters. And the peak of the graph illustrates where the majority of the stores are concentrated for Kidd in green and Hemp Tex, the beige one, respectively.

19:47 And the gap between the dashed line and the peak highlights the significant number of stores that would benefit from expansion in order to move closer to the target size.

20:06 And I would like to highlight that HempTex now has launched its first store online outside Scandinavia and The Baltics. Hemptex.de went live on May 5. And with a new Nordic warehouse in place, we have strengthened our logistics and distribution capabilities, enabling us to serve customers across the whole European market.

20:34 Germany represent a large and attractive market, where Scandinavian design is highly valued. But Germany is also a market characterized by intense competition. And several retailers have successfully established themselves in Germany, demonstrating the market's potential, while others have chosen to exit after initial entry. And our approach is therefore deliberate and paced. We are entering with a digital first strategy enabling us to test, learn and optimize before potentially taking further steps or exiting the market.

21:18 We see this primarily as a pilot with our focus on our core markets going forward. And true to the Kid Spirit, we will build step by step and we have a long term perspective and are entering with a low risk, cost conscious approach.

21:41 And looking ahead, efficiency improvements in warehouse operations remain key focus. As operations now are stabilized, optimization initiatives will progress through 2026 and further. We will continue our work with securing a long term solution for the Norwegian warehouse facility.

22:08 System modernization is crucial not to fall behind, and a number of system improvements have been implemented over the last two years. We have shifted to improved core system for logistics, sourcing and supply chain, And we are rolling out a new point of sale system this spring. And remaining system modernization will be completed progressively going forward. And into 2027, we will have a modern and scalable system platform ready for future growth.

22:46 A high store project activity will continue, developing our store portfolio towards target size and fuel like for like growth going forward. We will secure best in class execution across categories and channels. With great seasonal execution, we shall inspire every customer this summer, both online and with an even better in store presentation and customer experience.

23:17 We will continue our category development, both securing a renewal of existing and major categories, but also working on new initiatives.

23:30 Garden and outdoor furniture and the beach shop are key focus categories this summer. And if you would like the nice sun loungers in the picture, you can buy them at Kidan HempTex this season. And as we speak, our product developers have just started working with Spring twenty twenty seven. A new Country Manager started at HempTex on May 1. This role will have an overall responsibility for store operation and portfolio development across all HempTech's three countries. With this change, we set up an organization that strengthens our sales culture, improves coordination between markets and drives an even stronger sales and growth agenda in Hemplex.

24:23 And finally, we are pleased to inform that group revenues increased by 4.6 in April and 7.1% year to date per April, including the effect from the timing of Easter. And that said, I think we are ready to open up for Q and A The first question, the extended stores seems to drive higher sales, but at the same time new categories show somewhat slow growth. Can you please add some color to this?

25:14 Would you give an I answer, can answer that one. I think it's important to note that new categories are important, but the same are the development of our major categories and focus categories. And during the quarter, we have had a significant growth in spring and summer and Easter assortment, which has been focused. I would also like to mention that we have swapped a lot of the furniture in stores to put more focus on outdoor furniture into second quarter. So I would not pay too much attention to only looking at new categories, but see it under a total of new categories, focus and major categories.

26:15 Yes, they will vary from quarter to quarter. Yes. Another question, you had higher financial costs in the quarter. Was there anything special this quarter? And I think I can take that question. The increased financial expense this quarter mainly relates to the higher level of net interest bearing debt we went out of 2025 with. So we increased the net interest bearing debt due to the transition year 2025. In addition, we have some arjo effect this quarter. Next question. Can you please elaborate on the Easter effect for the Kid group and quantify the revenue impact for second quarter twenty twenty six?

27:09 I can try to answer that one. We have given you the revenues of April since you have to look at March and April in total to look at the Easter effect. What I would like to underline is that the Easter effect hits harder in Kid in March, meaning that we see more sale of Easter in Kid in March and more sale of Easter in HempTax in April. So please look at April and March under, yes, the same. Yes. On the new warehouse in Sweden, you write improved efficiency and further gains are expected.

27:58 Can you please give some details on this? Maybe not so many details, but what we can tell is that we have stabilized the warehouse processes, but there are still many efficiency gains to unlock. Unlock. And they will be unlocked through 2026 and also into 2027. So yes, there will be a lot of work going on in the warehouse to improve efficiency definitely. Talking about warehouse, we have another for the warehouse facility in Norway. What's the latest news for the warehouse facility and what is the cost impact to be expected in 2026 with reference to the SEK 20,000,000 you reported in the Q4 presentation?

28:50 Yes, maybe I'll answer the first part of it and As you the second, we informed, we have signed a new sublease agreement in the first quarter covering 50% approximately of the warehouse in Lille, which means that we now cover roughly 65% of the warehouse cost. So yes. And in terms of the cost impact, the cost will be there, but we will have an other operating income from the sublease, and we communicated roughly 20,000,000 for the full year 2026. With the signed sublease agreement, we expect to cover approximately 12,000,000 to NOK 13,000,000 of the total of NOK 20,000,000 as previously communicated for the full year 2026.

29:49 Another question for the warehouse in Lihir is, can you disclose in term length of the new sublease contract? Maybe you answer that one. Yes, we will not disclose the exact terms, but it's like a short term, more temporary. Yes, making us able to have a long term agreement going further. Yes. And that's the key focus and we are confident to secure a long term solution for the Kid group. Is the lower growth development in HempTex for the quarter due to lower customer momentum?

30:41 And how did HempTex perform in April? Will you take that, Mariana? Yes, I can take that. Referring to what I said a couple of questions ago, I think you have to see March and April in a total because the Easter effect are more relevant to kid in March and to HempTechs in April as HempTech and Sweden have more opening hours and the Easter effects. Look at March and April under one. Yes. Another question right here for the warehouse in Lille. Is the new sublease contract effective from Q1? And we can say that the contract was signed in Q1, but effective in Q2. Yes.

31:37 So going forward. I think we covered a lot of the questions now. Yes, another question here now. What explains I think for you, Mariana, what explains the lower basket size in Norway and Sweden in Q1 compared to past year? The lower basket size, you have to again affected by the Easter effect, a lot of small items, yes, decreasing the basket size. Yes. Okay. We have some questions, I think we can consolidate it for the launch in Germany.

32:22 So can you comment on the revenue generated in Germany first week? And can you provide detail when hemptechs.com is expected to go live? I know that many of you are curious and excited about the launch. To me, it's important to underline that we see this as a pilot and that our main focus are our core market and core whole market and core business. We have not started any marketing yet. We have just launched a silent website, and we will put some marketing on and some influencer corporations going forward. So I would say that maybe we have opened a door to something big or maybe we will close that door in a couple of years. We don't know, but our main focus is our core markets, yes.

33:23 I think that was the final question. And thank you everyone for this presentation and your attendance. We see you next quarter. Have a great day. See you next time.