After a bumpy second quarter where sales declined, Nelly Group has once again returned to the growth track. During the third quarter, the fashion retailer's net sales increased by 10.3 percent to SEK 313.1 million, up from SEK 283.7 million during the same period last year. At the same time, operating profit fell slightly to SEK 42.4 million, compared to SEK 43.3 million the previous year.
A strong summer sale kicked off the period, clearing out spring and summer garments, followed by an autumn assortment that converted better than in the first half of the year. Categories such as trousers, knitwear and tops performed particularly well thanks to a clear shift in fashion trends.
Forced to resort to discounts
But the increased sales came at a price. Although the number of active customers and orders increased, traffic in the Nordic region decreased, especially in organic channels. To drive growth, Nelly was therefore forced to increase both the pace of campaigns and the marketing budget. This development is analyzed by the company's outgoing CEO, Helena Karlinder-Östlundh, with clear self-criticism in the report.
Growth required a higher discount level and marketing intensity, which meant that marketing costs as a percentage of net sales increased to 10 percent. Overall, the development shows that the assortment does not yet have sufficient intrinsic appeal and that Nelly's brand position needs to be refined, writes Helena Karlinder-Östlundh in the CEO's statement.
To remedy the challenges with the collections, management and the board of directors are now working closely together in the new assortment and strategy committees established earlier this year. The goal is to systematically increase the precision and fashion content of purchases, as well as to identify trends much earlier.
This work has already begun to yield concrete results at the beginning of the autumn and winter season. Thanks to shorter lead times, the purchasing teams have been able to quickly add new trend colors to already planned products, and in the future, a more cohesive development of the entire supply chain and investments in support systems and data are expected.
Eliminates remote work
To further increase the pace of change, a major internal change was implemented in September. Nelly then moved into a completely new headquarters in Gothenburg and took the opportunity to tighten the reins on where employees perform their work.
In September, Nelly's headquarters moved to new premises in Gothenburg and we simultaneously switched to working from the office as the main principle. The changes are part of the improvement work and aim to strengthen cross-functional collaboration and further shorten the path from decision to implementation, explains Helena Karlinder-Östlundh.
The ongoing transformation is taking place while the company prepares for a double power shift at the top. In August, it became clear that Helena Karlinder-Östlundh is leaving the CEO position to take over the beauty chain Kicks, and shortly thereafter it was announced that CFO Josefin Dalum is also moving on to a new role at Blomsterlandet. The recruitment of their replacements is in full swing, but both managers will remain in place during the transition period.
Now, the e-commerce company is entering the crucial fourth quarter with a focus on profitable growth, continued work on the German market and sharpening the brand's position in the Nordic region. An important piece of the puzzle in this work is the company's third physical flagship store, which will open its doors with a completely new store concept on Fredsgatan in Gothenburg during the autumn.