Nelly

Q2 2024 – Financial highlights
• Net revenue was SEK 314.1 (288.6) million, corresponding to a rise of 8.8% (-15.0%)
• Gross profit was SEK 171.9 (141.4) million, corresponding to a gross margin of 54.7% (49.0%)
• Operating profit was SEK 30.5 (7.7) million, corresponding to an operating margin of 9.7% (2.7%)
• Profit after tax was SEK 26.7 (4.5) million, corresponding to earnings per share of SEK 0.89 (0.17)
• Cash flow from operating activities was SEK 105.8 (76.7) million
• Cash and cash equivalents as at 30 June amounted to SEK 219.9 (150.2) million, with credit facilities unutilised

H1 2024 – Financial highlights
• Net revenue was SEK 536.3 (522.8) million, corresponding to a rise of 2.6% (-16.7%)
• Gross profit was SEK 281.1 (237.2) million, corresponding to a gross margin of 52.4% (45.4%)
• Operating profit was SEK 31.9 (-26.0) million, corresponding to an operating margin of 5.9% (-5.0%)
• Profit after tax was SEK 24.8 (-30.3) million, corresponding to earnings per share of SEK 0.83 (-1.36).

Q2 2024 – Significant events during the quarter
• On 26 April, Nelly Group announced in a press release that the principal shareholder Rite Internet Ventures Holding AB (via the wholly owned subsidiary Rite Ventures SPV AB) (‘Rite Ventures’) had announced that it had acquired shares in Nelly, increasing its holding to the equivalent of 30.11% of shares and votes, thus passing the threshold for the obligation to make a bid.

• On 22 May, Nelly Group announced that the company’s independent Bid Committee had recommended Nelly Group shareholders not to accept the bid offer of SEK 17.00 per share made by Rite Internet Ventures Holding AB on 8 May 2024 via the wholly owned subsidiary Rite Ventures SPV AB. More information on the bid offer and the Bid Committee’s recommendation is available on Nelly Group’s website at https://www.nellygroup.com/en/media/press-releases.

• On 7 June, Rite Internet Ventures Holding AB announced that, on the acceptance deadline for the bid offer published on 8 May 2024, shareholders corresponding to approximately 3.94% of the total number of shares and votes in Nelly Group AB had accepted the bid. Rite Ventures thus controls approximately 34.06% of the total number of shares and votes outstanding in Nelly at the end of the quarter.

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

Growth with improved profitability
Our intensive transformation work, which continues unabated, contributed to another strong improvement in earnings in the second quarter. Net revenue increased on the previous year to SEK 314.1 (288.6) million for the quarter, corresponding to growth of 8.8%. The gross margin rose to 54.7% (49.0%), contributing to operating profit of SEK 30.5 (7.7) million and profit after tax of SEK 26.7 (4.5) million. Cash and cash equivalents amounted to SEK 219.9 (150.2) million at the end of the quarter. The earnings for the second quarter clearly show that we have built up a healthier core business, which can be developed further and which will form the basis for long-term sustainable profitability and growth.

Further major advances in line with our strategy
We are approaching the end of our spring and summer season for 2024 and can see that further improvements have been achieved in many important areas. We are moving towards a much higher sell-through rate for the range than in the corresponding season in the previous year and have once again increased the proportion of full price sales. Dresses remained an important category in the second quarter, but are now a smaller part of the range as we push to achieve a strong position in everyday fashion. Tops, jeans, trousers and swimwear have all performed well this season and made a positive contribution to both net revenue and profitability. As in the previous quarter, Nelly’s own brands continued to develop well, accounting for 43.8% (41.2%) of total sales in the second quarter. The return rate also improved considerably to 31.3% (38.0%), the lowest level since we started focusing on actively reducing unnecessary returns last year.

In line with our strategy, we also took further steps to deepen our partnership with several of our external brands during the quarter, including via an exclusive capsule collection produced by our design team together with Neo Noir. We also held several well-attended events in our store on Drottninggatan in Stockholm, including a popular customer event in
partnership with ADIDAS. These unique products and experiences are important to Nelly customers, and we look forward to launching more exciting partnerships in the autumn, making increasing use of the physical store as a place for our customers to meet and seek inspiration.

As communicated previously, the work to transform our IT landscape will be a major focus area throughout 2024 and, in the second quarter, we took a major first step as several central new systems went live. Much work remains to be done in this area to make a full transition to more flexible, user-friendly infrastructure, but we are on the right path and continue to maintain a fast pace of change.

We maintained effective cost control in the second quarter, although we made a conscious decision to invest more in certain areas. Marketing costs were higher than in the previous year, reflecting the fact that this area is also in the process of change as we implement new working methods, in part to boost the profitability of all paid advertising. Going forward, we will continue to work hard to optimise the effectiveness of our marketing, while ensuring a sustainable cost base.

Focus on creating an even more attractive customer offer
We have considerably enhanced our customer offer in the past two years, in particular as a result of the changes made to the range. During the second quarter, many members of the Nelly team worked intensively to create clearer customer communication and offer our target group more uniqueness, for example, via deeper partnerships with our external brands. The total traffic to our site rose slightly compared with the corresponding quarter of 2023, but we encountered continued challenges in converting visits into sales. Conversion was lower, resulting in fewer orders than in the previous year. We, therefore, need to continue to develop and further enhance our customer offer in the coming quarter to consolidate our position, become the preferred fashion destination for our target group and create added value for our customers. Going forward, we see great potential in simply continuing on the path we have chosen to follow.

Following a profitable quarter and buoyed up by a first period of growth, we are embarking on the second half of the year and looking forward to realising the potential for improvement that remains in several areas of the company. Our fantastic Nelly team has already shown the dramatic improvements that can be achieved with a clear plan, close cooperation between all departments and genuine commitment to our target group. I cannot adequately express my gratitude to all my talented colleagues and, of course, our customers, who constantly inspire us and give us the energy to continue to build Nelly into a strong company.

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 second quarter 2024
Analysts, investors and the media are invited to a webcast presentation of Q2 on 12 July 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/2024-07-12-q2
To listen to the presentation by phone, the following call-in 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: 100415#
User ID: 42868#