• Net revenue was SEK 234.2 (288.1) million, corresponding to a fall of -18.7% (-7.6%)

• Gross profit was SEK 95.8 (127.5) million, corresponding to a gross margin of 40.9% (44.3%)

• Operating loss was SEK -33.7 (-23.9) million, corresponding to an operating margin of -14.4% (-8.3%)

• Net income was SEK -34.8 (-28.5) million, corresponding to earnings per share of SEK -1.93 (-1.59)

Q1 2023 – Significant events during the quarter

• It was announced on 12 January 2023 that the CEO, Ludvig Anderberg, was leaving Nelly Group at his own request. Helena Karlinder-Östlundh has been acting CEO since then.

• In connection with the release of the year-end report for 2022 on 3 February, it was announced that the Board had decided on the same day to implement a preferential share issue. The aim of the Rights issue is to secure liquidity and pave the way for the implementation of Nelly’s ongoing transition towards profitability.

• An extraordinary general meeting was held on 14 March 2023 and it approved the Board’s decision to implement a preferential share issue.

Q1 2023 – Significant events after end of quarter

• It was announced on 12 April that the preferential share issue had been fully subscribed, and that Nelly would thereby receive approximately SEK 53 million before issue costs.

” During the past nine months we have made clear improvements in several areas and thereby started to create the right conditions to achieve profitability, although much remains to be done.”

Helena Karlinder-Östlundh, acting CEO of Nelly Group AB

Reduced sales in an even more challenging market climate
During the first quarter, our net revenue decreased by 18.7% compared with the corresponding period of the previous year. Our total customer traffic was almost in line with the corresponding quarter of 2022, and we achieved a higher organic share, but it was primarily in the lower conversion that our customers’ increased restraint was noticeable, even during the periods when we chose to boost sales through price reductions. We saw that the challenging market situation we observed during the fourth quarter of the previous year further intensified during the first quarter of this year and was a contributing factor in the weak sales trend. We also noticed the effect of the first quarter’s range already being partly purchased before we started our transition last year, meaning it could therefore only be adjusted to a limited extent afterwards. In addition to these factors, the sales pattern was also affected most of all in March by the weather and the late start to spring, which we assess primarily shifts the inventory turnover rate of our most seasonal products to the second quarter.
During the first quarter we saw an increase in our return rate compared with the previous year, which was largely driven by our category mix and a change in customer behaviour in some of our markets. Here, in the coming quarters, we will further accelerate our work to reduce the return rate, both through a carefully curated range and an optimisation of our return handling processes.

Clearly improved cost control and strengthened working capital
During the second half of 2022, we worked extensively to lower our operating costs within a number of areas, and we now see that this has had an effect during the first quarter. We have continued to focus on increasing organic traffic while streamlining our investment in paid traffic, which has led to clearly reduced marketing costs compared with the corresponding period in the previous year. Our staff costs also improved compared with the same period in the previous year, and we began to see the full effect of the reorganisation we implemented in the autumn. We have now established strong cost control in the organisation, which we will continue to push forward.
In February, we communicated that the company intended to carry out a fully-secured rights issue, and it was gratifying to see the support that both existing and new shareholders showed us by oversubscribing to the rights issue. This now strengthens our working capital during the transition that we are in the middle of and will continue to pursue this year.

Continued focus on a strong customer offering and a profitable core business
During the past nine months we have made fundamental improvements in several areas and accordingly started to create the right conditions for achieving profitability, although much remains to be done. We continue to enhance our customer offering, and the work we began in the previous year on the assortment to create more traffic security will produce a range that is increasingly more targeted and transparent during the coming quarters. The initiatives we have pursued to simply and streamline our entire business are also an important prerequisite for enabling profitability, especially in a market situation with a price-sensitive and restrained consumer. We have seen that our customers are prepared to prioritise attractive and relevant products at the right price even in this climate, which gives us confidence for the full year 2023.

Helena Karlinder-Östlundh
Acting CEO of Nelly Group AB

Webcast of the interim report
Analysts, investors and the media are invited to a webcast presentation of Q1 on 28 April at 09 a.m. The presentation will be held in English by Helena Karlinder-Östlundh, acting CEO, and Ola Wahlström, interim CFO. The webcast will be made available on the Nelly Group website.
Webcast: https://nelly.videosync.fi/2023-04-28-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 (PIN): 100357#
The presentation material and the webcast will be available at:
www.nellygroup.com/en/investors/presentations/