Nelly

Q4 2023 – the quarter in brief
• Net revenue was SEK 301.6 (387.2) million, corresponding to -22.1% (-4.9%)
• Gross profit was SEK 150.9 (159.3) million, corresponding to a gross margin of 50.0% (41.1%)
• Operating profit was SEK 24.0 (-1.8) million, corresponding to an operating margin of 8.0% (-0.5%)
• Profit after tax was SEK 19.7 (-7.9) million, corresponding to earnings per share of SEK 0.66 (-0.44)
• Cash flow from operating activities was SEK 50.4 (62.3) million
• Cash and cash equivalents amounted to SEK 151.1 (96.8) million as at 31 December and credit facilities were
unutilized

Q4 2023 – Significant events during the quarter
• No significant events were reported during the quarter

January-December 2023 – the year in brief
• Net revenue was SEK 1,060.8 (1,299.0) million, corresponding to -18.3% (-9.1%)
• Gross profit was SEK 507.9 (566.2) million, corresponding to a gross margin of 47.9% (43.6%)
• Operating profit was SEK 10.9 (-56.1) million, corresponding to an operating margin of 1.0% (-4.3%)
• Profit/loss after tax was SEK -1.5 (-71.7) million, corresponding to earnings per share of SEK -0.06 (-3.98)
• Cash flow from operating activities was SEK 59.3 (-65.0) million

Significant events after the year-end
• No significant events have been reported since the year-end

Another profitable quarter and a marked improvement for the full year
In the fourth quarter, we continued to see the pleasing effects of the transformation work we carried out at Nelly over the past 18 months. Our gross margin improved on the previous year to 50.0% (41.1%), and we also achieved a higher operating margin of 8.0% (-0.5%). Profit after tax amounted to SEK 19.7 (-7.9) million, which meant that we had delivered our third profitable quarter in a row. These effects also meant that, despite a weak first quarter of 2023 and the continued downward trend in net revenue to SEK 1,060.8 (1,299.0) million for the full year, we managed to increase gross margin to 47.9% (43.6%) and return to an operating profit of SEK 10.9 (-56.1) million.

Healthier core business
The most important part of our customer offer is our range, and it is clear that the fundamental changes we have made to it continue to deliver positive effects. During the fourth quarter, we reduced the range of variety still further in accordance with our strategy, and our bestsellers also sold in considerably higher quantities in this period than in the previous year. We
continued to enhance our position in several categories, above all trousers, jackets and jeans, all central elements of our strong everyday fashion range. Nelly’s own brands accounted for 36.3% (32.9%) of total sales, and this positive trend was also reflected over the full year at 38.2% (35.1%). The return rate increased slightly to 33.0% (32.0%) during the quarter, which is largely explained by lower B2B sales without a right of return and by the product mix, which consisted to a greater
extent in the fourth quarter of categories in which we have not yet managed to apply measures to reduce returns. However, we achieved a slight improvement in the return rate for 2023 as a whole: 35.8% (36.0%). Overall, we succeeded in achieving better stock movement after returns in the autumn and winter seasons compared with the previous year, while also increasing the proportion of full price sales. We ended 2023 with a healthier inventory balance, giving us space and time to focus on strong new products for spring and summer. Our operating profit benefited again from reduced costs in several areas in the fourth quarter, now that we have realised the full effects of our previously announced saving programme. We continued to optimise our marketing costs by promoting organic traffic and continuously improving our paid advertising. Payroll costs were also lower than last year giventhat the business is now run by a significantly smaller organisation. We delivered marked improvements in our costs in 2023 as a whole, both in these two areas and in our warehousing and distribution costs. We have focused constantly on enhancing Nelly’s customer offer throughout our journey of transformation. Despite this, during the fourth quarter we saw a continuation of the downward trend we had experienced throughout 2023 in both traffic to our site and the conversion rate. The market climate was also challenging during this period, and it was clear to us that customers were carefully considering their purchases. In this climate, many people prefer to invest in everyday fashion that can be used in several different contexts, and an even more attractive range with the right price points is required to ensure that customers choose us over many other options. Consequently, it is important for us to continue to develop our product range and intensify our work to optimise our prices. Going forward, we will also deepen our collaboration with a number of carefully selected external brands that we know to be strong in our target group.

Full focus on the next phase of our transformation
We delivered further improvements in many areas of the company in 2023, and now start the new year in a strong position with three profitable quarters behind us. In 2024, we will continue our transformation work even further and we look forward to being able to accelerate the transformation in several areas, in particular to remould our system landscape. In this
area we have just begun partnerships with several new suppliers to enable us to offer a smoother customer experience going forward, with new personalisation options and more inspiration. It was an exciting year full of lessons learned for us. I would really like to take the opportunity to say a big thank you to both our wonderful customers and the entire Nelly team. They have tirelessly worked to implement many improvements to make us a competitive, sound company in the long term, helping the young women and men of the Nordic region look elegant and sharp every day.

Helena Karlinder-Östlundh,
CEO of Nelly Group AB

Webcast of the year-end report
Analysts, investors and the media are invited to a webcast presentation of Q4 on 2 February at 9 a.m. The presentation will be held in English by Helena Karlinder-Östlundh, CEO, and Ola Wahlström, interim CFO. The webcast will be made available on the Nelly Group website.

Webcast:
Link to webcast: https://nelly.videosync.fi/2024-02-02-q4
To listen to the Q4 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: 100393#
User ID: 26057#