Good morning, everyone, and welcome to Nelly Group's results call for the second quarter of 2026. My name is Helena Karlinder-Östlundh, and I'm the CEO of Nelly Group.

I'm joined today by our CFO, Josefin Dalum. Let me start today's call with a short walk-through of our agenda before we get into the specifics of the second quarter.

We will begin today's presentation with a short introduction to the Nelly business in the form of a video. I will then give my comments on the second quarter, after which Josefin will take you through the financial summary.

We will finish with your questions. As always, you are very welcome to send us your questions at any time during the presentation, but we do appreciate getting them as early as possible so that we can plan ahead for the time we have and answer as many of your questions as possible.

To begin, let us kick off with a short video providing an overview of the Nelly business.

Nelly is a staple in Nordic fashion and has been so for over 20 years now. It was founded in 2004 as a pioneer in online fashion for young women.

Menswear was added in 2008. Nelly is an e-commerce business with two flagship stores, one in Stockholm and one in Copenhagen.

We want to help our customers look and feel their best every day. With 1 million active customers in the Nordics alone and 1.7 million followers on social media, Nelly reaches 2 million orders placed yearly.

Now let's take a closer look at the second quarter. Overall, the second quarter was a comparatively weak quarter with the negative trend we saw in the first quarter persisting.

The main reason for our performance continued to be the lack of precision in our assortment planning and buying ahead of the spring and summer season, which we also communicated in Q1. This resulted in insufficient stock depths on a number of best-selling products and an assortment that overall just was simply not fashion-forward enough.

Also beyond the assortment, we recognized that neither our positioning nor our brand expression fully reached the level we want to maintain in this quarter. As a result, net revenue was down 4.3%, and our operating margin was 9.3%, which we can compare to the same quarter last year where we achieved an operating margin of 15.3%.

Operating profits came in at 32.3 million Swedish crowns as compared to 55.4 million in Q2 last year. Of course, we are not satisfied with this result.

It is worth remembering here that in fashion, some buying decisions will always turn out to be less accurate than others, and this is fundamentally because first orders are placed long before the products are in season. However, we recognized that we need to now further strengthen our processes and ways of working so that we can absorb these better and limit the impact on our financial performance.

That said, the first half was still profitable, which really shows that the business does rest on firmer foundations now than it has historically. Turning now to our customers, this chart that you see here shows the number of active customers in the Nordics, and this is measured over a rolling 12-month basis.

As we see here, compared with the second quarter last year, the customer base grew. However, if we compare it to the previous quarter, quarter one of this year, we saw a decline in the second quarter.

This very much reflects that the relevance in our assortment was just not high enough for the more trend-conscious Nordic customer that we have at Nelly. Underneath the total number, we see that returning customers actually made up a larger share of the mix in this quarter, whereas new customer recruitment was held back by the weaker assortment.

This is really where we saw the biggest difference to the second quarter last year where we had stronger new customer recruitment. Now, in Germany, by contrast—Germany, of course, is not reflected in these numbers here given this is active customers in the Nordics—but in Germany, we have seen early traction, and the customer base grew once again in the second quarter.

I think the key takeaway from this once again is simply that growing our customer base absolutely depends on having a strong assortment. The two go very much hand-in-hand.

Getting the assortment right, of course, is at the very core of our business. Moving on to gross margins, this came in at 53.2% in the second quarter as compared to 54.5% in the same quarter last year.

Here, a more extensive campaign activity and the deeper discounting that came with it weighed on the margin throughout the quarter. To put very simply, this was what was required to drive sell-through of the spring and summer season.

As we have communicated previously, we made some misses in the spring and summer season, but we still prioritized achieving a healthy sell-through, and the deeper discounting simply was required to achieve this. Now, this effect was partly, but not entirely, offset by our higher own-brand share, which, of course, made a positive contribution to gross margin.

To summarize, the margin reflects pressure from discounting on the one side and support from own-brand on the other, with the net effect being a small decline compared to last year. Let's also now take a closer look at our own-brand share.

Own-brand share reached 64.1% in the second quarter, which was up from 54.8% last year. Our own brands really led the growth in some core categories this quarter.

This was actually true for both women's wear and men's wear. For Nelly specifically, on the women's wear side, jeans, pants, and knitwear all grew year-on-year, and our own brand was the main driver of this growth.

Conversely, where we fell short was tops and dresses in particular in this second quarter. They're both important categories in the second quarter, of course.

Tops in particular is a key category for us. It is a category that we are known for.

Nelly is known for tops, and also an important one for both recruiting new customers and for basket size. It does really matter a lot that we get the tops category right.

Now, we have said this before, but it's worth mentioning here again that strategically, our aim is to offer a perfectly curated mix of our own brands and carefully selected external brands. The mix and the curation are at the core of our business model.

Own-brand share will not grow indefinitely, and it will also fluctuate between quarters given both category mix and different trends. Own-brand share will fluctuate, but overall, of course, we are pleased with the positive customer response to our own brands, particularly in some of those core categories that I just mentioned.

Next, we will look at how our return rate developed during the quarter. The return rate improved to 27.7% in the second quarter from 28.4% in the same quarter last year.

Return rates in our business is driven primarily by category mix and also at times by specific trends. For example, as we've mentioned before, looser silhouettes in jeans continued to add to returns in Q2, whereas the growth we saw in pants worked the other way and helped to bring them down.

Of course, we have to be first and foremost guided by what our customers want each season. Regardless of that, our focus on preventing all unnecessary returns continues, and this is something that we continue to work with and on across all areas of the business.

It's I think important to really emphasize that this continuous work is what's required to keep the return rate at a low level. Finally, looking at the operating margin, it came in at 9.3% in Q2 against 15.3% in the same quarter last year.

This is a significant difference, of course. Apart from the lower sales in the quarter, there are two factors here that are worth highlighting.

First, as I mentioned, we prioritized sell-through of the spring and summer assortment, which came at a cost to the margin, of course, but it does give us a cleaner start to the autumn and winter season. Second, we are carrying the cost of several growth investments, which we also communicated already in the first quarter, including several new roles in our head office, the Copenhagen store which we opened in October of last year, and also targeted efforts to build the German market.

Of course, in a quarter with softer sales, those investments weigh heavily on the results. This reinforces for us once again that while growth requires some investment, rigorous cost discipline also remains central to keeping our financial performance stable going forward.

With that, I will hand over to Josefin, who will take you through the financials in more detail.

Thank you, Helena, for the introduction. Let me share a few more details on our Q2 financial performance.

Net revenue for the quarter amounted to 346.3 million kronor compared with 361.7 million kronor in the same quarter last year. In local currencies, the decline was 5.8%, hence currency movements had a positive impact on the reported figures.

As Helena described, the shortfall was concentrated in Nordic markets and driven by assortment precision, especially within the categories tops and dresses. Average order value in the Nordics decreased by 5.2% to 715 kronor on a lower average number of items per order, and the number of orders in the Nordics fell by 3.8%.

As Helena mentioned, the return rate, which has been a key area of focus in recent years, decreased again in the year-over-year comparison by 0.7 percentage points, ending at 27.7%. This was primarily driven by a more favorable product mix.

Gross profit for the quarter amounted to 184.1 million kronor compared with 196.9 million kronor in the same quarter last year, which is a decline of 6.5%. In margin terms, gross margin came in at 53.2%, down 1.3 percentage points compared with the same quarter last year.

The higher own-brand share supported profitability, while increased campaign activity affected the result negative. Moving to operating expenses, operating expenses increased by 10 million quarter-on-quarter.

Fulfillment and distribution costs were 41.7 million kronor, down from 42.7 million, and broadly flat with continued improvements in distributions. As a share of net revenue, they rose slightly to 12% as part of the cost base are fixed against the lower revenue.

This also gives us scalability for future growth, though. Marketing costs were 38.1 million kronor, up from 36.2 million, mainly on higher paid advertising in our core markets, continued investments behind the launch in Germany, and brand building activities.

Paid advertising in the Nordics carried a higher cost per order on weaker demand. As a share of net revenue, marketing was 11%, up from 10% last year in the same quarter.

Admin and other operating costs were 72 million kronor, up from 62.6 million last year, driven primarily by higher personnel costs in the Copenhagen flagship store, which opened in the fourth quarter of 2025. As Helena noted, both after the first quarter as well for this one, these are mainly investments in the company's continued development.

Operating profit for the quarter ended at 32.3 million kronor, 23.1 million lower than last year, as lower gross profit combined with a higher cost base. The operating margin was 9.3%, down from 15.3%.

Importantly, the business remained clearly profitable through a weak first half, which points to a steadier foundation than in the past. Turning to cash flow and the balance sheet, our financial position strengthened further.

Operating cash flow for the quarter was 99 million kronor compared with 104.1 million last year. A lower result weighed on the figure, while changes in working capital contributed positively.

Cash flow from investing activities was -4 million kronor, mainly IT and technology investments. Cash flow from financing activities was -10 million kronor relating to amortization of lease liabilities.

Inventory was 217.6 million kronor at the end of June, up from 172 million a year ago, which gives 17.2% of rolling 12-month net revenue. The build-up is mainly deliberate and made in autumn and winter season stock.

We bought ahead of planned growth and brought autumn deliveries forward to secure proven sellers, and only a small share is due to the lower sales in the first half of the year. Disciplined sell-through remains a core focus and has been one of our success factors through the transformation, and will continue to be so.

Our cash balance was 300.6 million kronor at the end of June, up 15.8% from 259.6 million a year ago, leaving us with a strong balance sheet and an equity ratio of 42.7%, up from 32.6% last year. This morning, we also communicated that we will initiate a share repurchase program.

The purpose of the repurchase is to optimize the company's capital structure. The repurchases shall commence no earlier than 17th of August 2026 and shall end no later than 17th February 2027.

A maximum of 2,500,000 ordinary shares in the company may be repurchased for a total amount of up to 30 million Swedish crowns. The repurchase will be carried out by Danske Bank, and the board intends to propose that the repurchased shares should be canceled through a reduction of Nelly's share capital at the next annual general meeting.

Further information about the repurchase program and financial figures will be available on Nelly Group's website. That concludes the financial highlights, and I will now hand back to Helena for some closing remarks.

Thank you, Josefin. Now, let me briefly summarize the first half in terms of the learnings we are bringing forward with us, and also the actions we are taking.

The clear learning is that we had insufficient rigor and precision in our planning and execution, and specifically in our assortment planning and buying ahead of the spring and summer season. Our brand expression was also not at the level we aim for.

Of course, these two are intimately connected. At the same time, there are several positive trends to build on: a number of core categories grew year-on-year; our own-brand share grew; the return rate remained a continued focus for everyone in the company and came down in the second quarter; and importantly, the business stayed profitable despite softer sales.

Putting all this into context, we see that the competitive landscape is now changing very quickly, and that the bar for what precision is required in business model, positioning, and brand is higher than it has been before. It's clear to us that the players that will succeed are those that are working in more innovative and agile ways going forward.

Against this background, we have now launched a deeper program of work that is underway across the areas that matter most for us going forward. This includes positioning, brand, our creative processes, buying, data, AI, and supply chain.

Part of this is about tightening the systematics of how we build the assortment so that our buys are more clearly informed by data and always, without fail, pass all the defined checkpoints before we commit, which through this process lowers the risk of the kind of misses we saw in this first half. The balance we are working towards, though, is to stay brave enough to lead on key fashion trends while being systematic enough to manage the risk that comes with it.

To support this work, our board has now organized itself into an assortment committee and a strategy committee, both of which will be great assets for us as we look to drive progress on these matters. To close, we really see that with disciplined execution, Nelly's potential remains substantial and our strategy holds firm.

As we've said before, the customer is our compass always. With the right execution, we really do see that we are well placed in several markets to become a truly unique destination for the most on-trend fashion always rooted in Stockholm and Scandi style, which is our particular point of difference.

We do this by combining our own brands with carefully selected international brands, as we've said before, to create a genuinely curated offering for our customers. We will get there through disciplined planning and execution, but also through innovation across the areas I just mentioned.

The second quarter of this year was comparatively weak, but the direction is clear and we are certain that the potential is intact. That brings us to the end of our presentation, and Josefin and I will now take your questions.

Yes, thank you. As we mentioned during the presentation, there really were two competing forces at work here.

As the question also mentions, some positives that definitely had a positive effect on the margin, but critically, we had to employ a deeper level of discounting across a longer period during the second quarter to ensure that we still achieved a healthy sell-through of the spring and summer season assortment. That is simply put what happens when we make some misses in how we develop our assortment.

We have always throughout the transformation said that sell-through is an incredibly important metric for us. In this particular quarter, and in the first half of the year really, we had to ensure a good sell-through by means of discounting, which impacted the margin.

Yes, thank you. The increase is mainly in fresh, current autumn and winter season stock.

Older stock is broadly flat year-on-year, there is no aging overhang. Of course, softer sales in both the spring and summer ranges contributed, but the build-up is largely due to deliberate timing, buying for planned growth, and pulling autumn deliveries forward for proven sellers.

Of course, we manage our inventory levels tightly, and we expect the ratio to reflect our ongoing growth journey as we keep our focus on the sell-through rate.

Yes, great question. We have not made a decision regarding any physical store in Germany at this point.

Now, as we've communicated before, we are approaching Germany in a very measured and long-term way, and sort of slowly building through targeted efforts. Opening a physical store in Germany would be quite a big step for us.

This is not something that is decided or planned at this point, but of course, it's, yeah, something that might be a relevant possibility to look at as we get further into the German market.

Great question. There's not really a straightforward answer to this, unfortunately, because there are, again, sort of different factors that we have to consider here.

As we said, the cycles in our business are quite long. Yes, we do buy the assortment quite far before we get into the season.

At the same time, though, we do have, of course, the opportunity to correct some parts of the assortment closer to the time. It is also a new season, the autumn and winter season typically the categories that we actually performed well on during the first half, jeans and pants and knitwear, tend to account for a larger share of sales in the autumn and winter season.

That's sort of on the positive side. On the negative side, though, I think also we have to be mindful that if we compare to last year, for example, we entered into the autumn and winter season with a number of well-established best-sellers that were already selling at a solid and high level going into the third quarter.

We also had higher new customer recruitment in the first half last year. I think there are some sort of positive trends that we can build on during the second half, but we also have to be mindful that, yeah, we're carrying some of the misses from the first half do impact us in the second half as well.

and as we have mentioned, what you see in the admin cost base is above all investment in continuing to develop Nelly, the Copenhagen store and strengthening the team being the main pieces. We look at the cost base as a whole rather than any single line or quarter, but these investments are not to be seen as one-offs in the quarter.

Of course, we keep the cost base under continuous review to make sure we're investing where it builds the business, while staying very disciplined and finding efficiencies elsewhere. The focus for us is on getting the balance between investment and efficiency right over time.

Yes, and the priority order is quite straightforward. First, we invest in profitable growth and maintain a solid balance sheet, and then return excess capital to shareholders thereafter.

The purpose of the repurchase, as I said, is to optimize the company's capital structure overall. The board evaluates the best way forward on an ongoing basis, and right now, we see the buyback as the most efficient route.

As we've had this question before, and I think important to again reinforce that we haven't set a specific target or level for the return rate that we sort of believe is the right one. We continuously work to optimize the return rate, and I think it's sort of important to understand that the return rate, keeping it at a low level requires constant work.

Even if you've managed to bring it down, if you take the focus off it, it will increase again. I think what we've found now is a very good way of continuously working with return rate as a question.

It's a something that every part of the business focuses on. It's something that we talk about all the time.

I can't really give a specific level, but I can say that it's definitely become embedded in the way we work as a key metric for us that we constantly monitor and proactively take action on to keep at a low level.

We unfortunately can't give any forward guidance in that sense, given that we are now also into a new quarter. It's a little bit too early to tell as well how the autumn collection will be performing, but what I can definitely say is that we are really doing everything we possibly can to optimize both in terms of sort of the brand expression and also stock depths.

We are working very actively on delivering the best we can with the autumn and winter collection, but a little bit too early to tell.

I think as we said, our own-brand share reached 64, a little bit over 64%, which was again a significant step up from last year. I think first and foremost, we are, of course, pleased and proud that the customers really appreciate the Nelly brands.

I think also we have talked about some of the categories that we mentioned earlier today quite a lot before, jeans, for example, being one that we've worked very actively with for some time. It's, of course, pleasing then to see growth again year-on-year in this category.

I think also pants, we see that, of course, we have worked a lot on our pants category, but we also see that pants as a category is increasing in trend going forward, so that's a positive for us. I think in general, our own brand, as I said, that the mix between our own brand and external brands is important to us, but of course, in our own brand is where we have complete control.

This will continue to play a very important role for us going forward this autumn and winter, but far beyond that, of course. I think that was all for our questions.

Thank you all so much for joining us today. As always, I want to of course thank all of our customers who chose Nelly during this past quarter once again or perhaps for the first time.

Of course, as well, all of our colleagues whose commitment and hard work is absolutely essential to the success of Nelly and the next steps in the company's development. Thank you very much.