CEO’s review

From Musti’s interim report Q3/2020, 4 August 2020

CEO David Rönnberg

The impacts of COVID-19 have become increasingly evident during the third quarter of Musti’s financial year and the pandemic continues to severely affect people, businesses and societies. During the pandemic, our top priorities have been to keep our staff and customers safe and to maintain our ability to deliver high-quality support to our customers under exceptional circumstances.

These challenging societal and economic conditions have to date, however, proven the resilience of Musti’s business model and are very pleased with Musti’s third quarter of the financial year 2020:
• Our net sales grew by 16.6% to EUR 68.8 million compared to the corresponding quarter last year. The increase was largely due to like-for-like growth of 11.5%, mainly driven by the increasing number of new customers joining our existing loyal customers.
• Online sales increased by 36.7% and accounted for 25.0% of total net sales during the quarter. Online sales growth was boosted by a channel shift towards online due to the change in customer behaviour caused by the COVID-19 pandemic in all countries which started to normalize in June.
• Store sales increased by 12.0% to EUR 48.4 million, driven by increased number of stores and strong like-for-like store sales growth in Sweden and Norway, offset by the impact of COVID-19 on selected stores. The impact of COVID-19 was strongest in Finland due to restrictions relating to shopping centers.
• Musti’s underlying growth has continued strong after the third quarter

The number of registered puppies grew by approximately 14% in Sweden in April – June 2020 compared to approximately 5% in January – March 2020. Finland and Norway have seen similar increases in the number of registered puppies. This growth in the number of registered puppies led to an increased demand for pet products and thus higher growth expectations for the market. In the third quarter we continued to focus on market share growth in all markets led by Sweden and Norway. To support this Musti will open altogether 20-25 new owned stores during the reporting year 2020.

Musti’s omnichannel business model combines the convenience of both store and online purchases. Stores provide an essential and convenient touch point and allow Pet Parents to explore products, receive trusted advice from Musti Experts and access pet services. The physical in-store offering is complemented by Musti’s online channel. Our strong omnichannel strategy and scalable platform have served us well, as we have seen a strong shift from stores to online channels due to the COVID-19 pandemic.

Musti is focusing on profitable growth, supported by its scalable, cost efficient platform. This work was evident in the profitability development in the third quarter as Musti Group’s adjusted EBITA increased by 54.3% to EUR 6.4 million from the corresponding quarter last year. The improvement was mainly due to an increase in sales combined with operating leverage. Sweden and Norway are approaching the profitability level of Finland faster than expected, adjusted EBITA margin increasing to 10.5% in Sweden and to 15.7% in Norway in the third quarter. In Finland, adjusted EBITA margin increased to 22.9%. Operating profit increased 113% to EUR 4.2 million in the third quarter.

The pet care market has proven to be resilient to economic downturns in the past. During the COVID-19 pandemic, the resilience of our business, comparable to grocery stores, has, to date, been apparent. We will continue to take the appropriate operational actions required during these times as we continue to serve our customers according to their channel preference, win new customers and keep our staff and customers safe.

We believe the trends driving the pet care market, coming from the pet parenting megatrend of the humanization of pets, coupled with increased pet population growth, will continue to underpin strong market growth. This increased demand gives us more opportunity to grow market share utilizing our channel agnostic omnichannel business model and allows us to reach even more customers enabling us to continue developing our value proposition to better serve our customers in the Nordic markets.

I want to thank everyone at Musti for their dedication and efforts during this difficult time. I am extremely grateful for the agility and commitment our employees demonstrated towards our customers through the challenging times. Our mission is to make the life of pets and their parents easier, safer and more fun, and the effort of our team have enabled us to do that even under these exceptional circumstances.

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