Greetings. InderesTV viewers. Puuilo reported its Q2 earnings this morning, and as usual, we have the company's CEO, Juha Saarela, in an interview. Hi there, Juha! Hello! You already released some information regarding the full-year guidance and a bit of a PRE-comment on Q2. Just last week, let's start with that. As for the full year, the earnings guidance was raised by 7 million. Both ends of that range. Could you elaborate a bit on whether this stems specifically from the stronger performance earlier in the year or also from an improved outlook for the remainder of the year?

Well, I suppose this is a fairly typical situation for us, where the beginning of the year has gone well and slightly better than expected, and as the financial year progresses, our ability to make estimates improves regardless. But then, of course, when evaluating the upcoming remainder of the financial year and developments in the operating environment. And then looking at our own performance from the previous half-year period. That is how it is. It's a combination of a good start to the year, confidence in the rest of the year, and the fact that forecasting becomes easier as the financial year moves along.

Yes, naturally. Right, could you then tell us a bit about the main points of Q2? How did you perform?

Yes, sales grew well. Similarly, the margin grew, operating expenses were kept under control, and that led to a better earnings release than last year. Naturally, we have many internal factors. This is also a matter of many things. Puuilo as a whole. The company's performance. The quality of operations improves year by year. And. You could say that, of course, it's the result of hard work.

Indeed, one can see activity among customers now. In the consumer market, that certainly plays a part. The average purchase has now risen for the third consecutive quarter. To us, that tells us that people are buying more at one time. Which in turn signals that there is activity. There is activity and engagement in the market. And the consumer confidence index, of course. Now looking at a three-year comparison period, it is at its highest level. It is not at its peak, but in any case, it perhaps helps to some extent.

Naturally, we have lived through a low economic cycle for many years, consumer confidence has been low, and we have nevertheless gained more customers, so in a way, this consumer confidence question is perhaps not such a central metric for us every time, because our customer volume has grown through all these years anyway.

Yes, exactly. The margin improved again and was well over 39 percent for the entirety of this early part of the year. You commented in the previous interview a quarter ago that no major risks related to inflation expectations or pressures were in sight. Is this still the outlook, that for the rest of the year, a level similar to what was seen at the beginning of the year is a entirely realistic expectation?

Well, we certainly believe so. In the long-term improvement of the margin still, and we have every reason to do so. What improves our margin the most is the strong relative sales growth of our own imported goods, and this often offsets any cost increases happening in supply chains or elsewhere in the operating environment. The sales growth of private label products is stronger, and it offsets underlying factors quite well in the long run, such as rising ocean freight costs, oil prices, or other raw material and energy prices. Looking ahead, we believe that our margin will be able to rise even further from here. It is clear that there will be variations between quarters, but that is part of this business.

What about over the longer term, then, how much desire or need do you have to further increase that margin percentage? Considering that you are already above your targeted level on an EBITA level. So is it. Is it like. That is of course a choice of what we want to do, but would we rather focus on pricing and growth instead?

Well, if there is no special need, and if business is good and our price image remains strong, we will undoubtedly grow our margin in the future as well. This has naturally given us the advantage of having pricing power. And is the margin high enough now? That is somewhat of a relative question. The margin can be higher, and indeed, much higher margins are seen in the retail sector, so Puuilo's. Margin in itself is not particularly high. We have the opportunity to grow it even from this level. But. Naturally, we must at the same time ensure that our price image remains competitive.

Yes, you already referred a bit to the improved economic situation and consumer outlook, meaning there has been a clear turnaround in the market. But how? How does it. How do you expect this to be reflected in Puuilo's business going forward?

If nothing extraordinary happens now, I would dare to expect consumer confidence to grow, which will help us to some extent. It shows as increased store visits. It shows in the growth of the average purchase. We certainly benefit from it. It is of course as I stated earlier, that.

Puuilo also succeeds well in situations where consumers have. Customers experience uncertainty in their personal finances, and in that sense, discount stores and Puuilo are in a pretty good position in those situations as well. But then if consumer confidence rises, the economy starts to grow, and there is belief in the future. That increases activity, and that is certainly reflected in our sales as well.

Exactly. Then a couple of questions about Sweden, which you expanded into during the summer. You announced the first store openings along with their timing and locations, so could you elaborate a bit on how these were chosen as the first ones and how operations are progressing there?

Well, we are now entering a new market in a very down-to-earth manner. We are growing in Finland while simultaneously opening pilot stores in Sweden. We are looking for good commercial premises. Mostly existing retail spaces in central shopping locations. And as negotiations take place, there might be a large number of them ongoing at the same time. Some of them mature and become ready sooner than others, but naturally, selections are made so that we want to find those stores and store locations in central retail areas. This is all about testing.

We are now going to Marieberg in Örebro. We are opening a store which is a major retail area there, where all our key competitors are and where a lot of customers move about. Birsta in Sundsvall, a correspondingly highly commercial area in that region. But you know. We want to test our store in locations where a lot of customers move and where all our competitors are, so that the best experiences and results are generated, which can then be analyzed when the time is right.

Right. Are these cities of a size that you specifically want to target? Or is there more of a coincidence involved? What dictated the first choices?

Well, of course, these are of that size. There is both coincidence and choice involved. As I stated, we are naturally looking for potential cities and regions, which means they are perhaps more likely to be larger cities rather than small ones. I am not saying that Puuilo couldn't also test smaller towns and rural centers in Sweden, just as we have stores in quite small localities in Finland and we manage quite well in them.

Indeed. What about regarding Sweden? Once you get these stores open, what will be the key metrics? What will you be tracking there, and what is roughly the time horizon or number of stores? What is needed to perform this research regarding these pilot stores? That you referred to?

We will track them. In Finland, we track our stores using certain quite classical retail metrics, and we will do the same in Sweden. Naturally, since we are going with our own concept, with quite the same product range, roughly similar premises, etc., the metric system will also be very similar. We will certainly monitor them. Now we will open a sufficient number of stores and monitor them for a sufficiently long time. Then we will draw conclusions. When the time is right.

Can anything be said about that? Regarding that range, can any conclusions be drawn during next year yet.

Of course we need a certain number of stores there so that we can draw conclusions based on that. We will be opening stores in different parts of Sweden under various conditions. There we will see the situations of individual stores and individual regions and see the big picture. We will return to that when the time is right.

Let's do that. Then still, we touched upon the guidance at the beginning, but let's return to it. Just briefly at the end here, what are the key variables for the rest of the year now, what determines whether we are at the upper or lower end of the guidance?

Well, of course how sales go, and that is influenced to some extent by consumer confidence, although as I noted, it hasn't been quite that central an issue for us here, nor do I believe it will be in the future. We will manage just fine even if consumer confidence drops here, and that may well happen in the coming months. Time will tell. But of course changes in customer volume is one thing that affects it.

Then the second is how our margin develops and how business expenses develop. These are the three factors there that can affect whether the upper or lower end of our guidance is still valid. These three factors.

Expenses are probably reasonably well under your control anyway, so does it ultimately come mainly from the fluctuation in sales?

Well, we certainly have quite a good estimate for the business expenses for the rest of the year at the moment. They are quite easy to estimate, so it's clear that sales and margin are the two key things.

All right, let's wait and see how the rest of the year goes. Thank you for the interview.

Thank you.