Nelly Group

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Nelly Group

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Company Update Retail Sweden 10 December 2020

Black is the new black

We re-initiate our coverage of Nelly following the separate listings of its two former divisions Qliro, the consumer bank, and CDON, the marketplace. Nelly now offers a pure exposure to the digital shift in Nordic fashion consumption, targeting primarily younger women with a very curated offer. We expect efficiency gains from automation and an increasing share of higher margin own brand sales to bolster a marked rebound in earnings over our forecast period.

Re-initiation of coverage – focus is now back on the Nordics

Following the Lex Asea dividend and separate listing of online marketplace CDON, we now de-consolidate this company from Nelly Group. Nelly, a leading online fashion retailer targeting the younger-woman segment with a niched and curated look, is well-placed to capitalize on the digital fashion market opportunity in the Nordic region. Its soft exit from Europe is set to weigh on growth but add to margins (limited marketing, campaigns and full-price sales). As corroborated by peer performance in Boozt (Unrated), Nelly’s decision to implement the same robotic system from AutoStore in its new warehouse should lead to markedly lower handling costs per order and support earnings growth over our forecast period.

Online penetration still low, private labels add to gross margins

The digitisation of consumer behaviour has pushed Sweden’s online apparel penetration to 21% in this year: still lower than in other discretionary spending segments. Further penetration gains add to growth prospects for Nelly; private labels add to margins. We expect EBIT to reach SEK 33m in 2022 (2.3% of sales).

We set our mid-point DCF based equity value at SEK 5.50 in Nelly

While our earnings still imply lower margins than peers, the current EV/Sales valuation of almost 0.3 our 2022 forecasts imply significant discounts to its peer group valuation at about 1.0-1.3x. We set our mid-point DCF value at SEK 5.50 per share at which level Nelly would trade at just above 0.5x EV/Sales.

Key Data (2020E)

Share Price (12M)

Absolute (green) / Relative to Sweden (purple).

1 1.5 2 2.5 3 3.5 4

Dec Jan Apr Jun Aug Oct Dec

Financials (SEK)

Year end: Dec 2018 2019 2020E 2021E 2022E

Revenues (m) 3,226 2,939 2,123 1,441 1,481

Adj. EBIT (45) (78) (87) 8 33

Pre-tax profit (m) (84) (105) (124) 8 33

EPS (0.91) (0.73) (0.80) 0.04 0.18

Adj. EPS (0.87) (0.66) (0.62) 0.04 0.18

DPS 0.00 0.00 0.00 0.00 0.00

Revenue growth (%) (20.3) (8.9) (27.7) (32.1) 2.8

Adj. EBIT growth (%) n.m. n.m. n.m. n.m. 294.0

Adj. EPS growth (%) n.m. n.m. n.m. n.m. 307.7

Adj. EBIT margin (%) (1.4) (2.7) (4.1) 0.6 2.3

ROE (%) (13.6) (11.7) (14.9) 0.9 3.7

ROCE (%) (3.2) (5.5) (7.6) 1.4 4.0

PER (x) n.m. n.m. n.m. 78.3 19.2

Free cash flow yield (%) (70.4) 12.7 32.3 0.3 4.3

Dividend yield (%) 0.0 0.0 0.0 0.0 0.0

P/BV (x) 0.46 0.39 0.73 0.73 0.70

EV/Sales (x) 0.01 0.01 0.15 0.22 0.27

EV/Adj. EBITDA (x) 1.2 0.6 (4.2) 6.2 5.2

EV/Adj. EBIT (x) (0.9) (0.5) (3.7) 37.9 12.1

Operating cash flow/EV (%) (566.6) 496.0 31.6 19.9 19.1 Estimate Revisions (%)

2020E 2021E 2022E

Revenues (14) (34) (31)

Adj. EBIT (73) (60) 1

Adj. EPS (56) (48) 20

Marketing communication commissioned by:

Nelly Group

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Investment case

We set our mid-point DCF at SEK 5.50

Valuation summary

DCF value, mid-point (SEK) 5.50

Share price (SEK) 3.38

2022E EV/Sales at current share price (x) 0.28

2022E EV/EBIT at current share price (x) 12.3

Low High Mid

DCF valuation range (SEK) 4.10 6.90 5.50

Share price potantial vs DCF valuation range (%) 21 104 63

2022E EV/Sales at DCF valuation range 0.36 0.70 0.53

2022E EV/EBIT at DCF valuation range 16.1 31.2 23.7

Disc./(prem.) to DCF value (%) 25 (25) 0

Source: SEB

Based on revised forecasts (including de-consolidating CDON after the 6 November Lex Asea dividend and separate listing), using a WACC of 7.5% and a steady-state EBIT margin of 1.8%, we arrive at a mid-point DCF-based equity value of SEK 5.50 per share for Nelly Group. While our earnings still imply lower margins compared to more similar peers like ASOS and Boohoo, the current EV/Sales valuation of almost 0.3 our 2022 forecasts imply significant discounts to its peer group valuation at about 1.0 (ASOS, Boohoo) to 1.3x (median). We set our mid-point DCF value at SEK 5.50 per share at which level Nelly would trade at just above 0.5x EV/Sales.

Online fashion retail peer group valuation

EV/Sales (x) EV/EBIT (x) 3Y sales EBIT marg

Online retail peers 2021E 2022E 2021E 2022E CAGR (%) 2022E (%)

ASOS plc 1.02 0.88 26.8 21.2 16.1 4.1

boohoo group Plc 1.30 1.08 16.5 13.8 23.1 7.8

Boozt AB 1.76 1.53 29.2 23.2 16.3 6.6

Zalando SE 2.09 1.77 53.0 40.2 18.4 4.4

Peer group, avg 1.54 1.32 31.4 24.6 18.5 5.7

Peer group, med 1.53 1.31 28.0 22.2 17.3 5.5

Nelly Group 0.23 0.28 38.7 12.3 (16.5)* 2.3

*Exiting its European business will weigh on group total sales developments Source: SEB, Factset.

Nelly has been a leading online fashion retailer in the Nordic region since its inception in 2003 and subsequent expansion into the other Nordic markets. The company is targeting the younger-woman segment with a niched and curated look. In particular, the group has a strong position in terms of unique customers in the 20-30 age group, similar to that of, for example, UK’s ASOS.

In terms of gross margin prospects, Nelly is more like ASOS than, for example, local peer Boozt. This reflects its focus on growing its private label sales (about 42% of revenue in this year) compared to Boozt (perhaps 3%) and Zalando (pending exit from its private label sales) that largely focus on distributing well- known external brands.

In summary, we see the following key drivers for sales and earnings growth in Nelly Group over our forecast period:

● Increasing online penetration to bolster growth in underlying markets

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● Ongoing soft-exit from its European markets (i.e. limiting marketing, campaign spend) will yield full-margin sales

● Increasing focus on higher margin private label sales to bolster gross margins

● The decision to automate its new warehouse should add efficiency gains to EBIT margins ahead from lower handling costs

In all we forecast Nelly Group to reach sales of closer to SEK 1.5bn in 2022 and to generate EBIT of SEK 33m in the same year, implying a margin of 2.3%. While this is below its sector peers, our forecasts reflect more of an investment year ahead. We assume that gross margin gains, from increasing share of private label sales and fulfilment cost reductions, from automation of distribution, needs to be re-invested into the business to build a stronger position in the longer term. Also, in the near-term we expect increased marketing spend to mitigate the impact from these underlying margin drivers.

Case in a nutshell: we reckon operating margins could improve significantly

Source: SEB

Financial forecast – summary (pro forma)

Nelly Group - pro forma P&L (SEKm) Q1/20 Q2/20 Q3/20 Q4/20E Q1/21E Q2/21E Q3/21E Q4/21E 2019 2020E 2021E 2022E Net sales (SEKm)

Sweden 150 192 150 200 158 204 159 203 687 692 725 752

Nordic 136 183 138 178 143 191 147 184 619 635 666 689

Europe 19 18 13 14 14 14 9 13 150 64 50 40

Net sales 305 393 300 392 315 409 315 401 1,456 1,391 1,441 1,481

Gross profit (SEKm)

Cost of goods (180) (216) (162) (216) (180) (221) (169) (220) (768) (774) (790) (789)

Gross profit 125 178 138 176 136 188 147 181 688 617 651 692

Product margin (%) 41.0 45.2 46.1 45.0 43.0 46.0 46.5 45.1 47.3 44.3 45.2 46.7

Product margin, chg, y/y (pp) (7.0) (5.8) (0.9) 2.0 2.0 0.8 0.4 0.1 (2.0) (2.9) 0.8 1.6

EBIT (SEKm)

Nelly, reported (27) 19 (5) 5 (13) 18 1 18 (6) (8) 24 41

Central costs (pro forma estimates) (2) (2) (2) (2) (2) (5) (2) (2) (8) (8) (8) (8)

Nelly Group EBIT (29) 17 (7) 3 (14) 13 (1) 16 (14) (16) 17 33

NRIs (3) 0 (5) 0 0 0 0 0 (5) (8) 0 0

Nelly Group adj. EBIT (26) 17 (2) 3 (14) 13 (1) 16 (9) (8) 17 33

EBIT margin (%) (9.4) 4.2 (2.3) 0.8 (4.5) 3.3 (0.4) 4.0 (0.9) (1.1) 1.2 2.3

Adj. EBIT margin (%) (8.6) 4.2 (0.5) 0.8 (4.5) 3.3 (0.4) 4.0 (0.6) (0.6) 1.2 2.3

Source: SEB

(1.9)(1.7)(1.7)(2.0)(2.2)(2.0)(1.4) (0.5)

2.2 3.4

5.6 6.3 6.6

4.5

3.2 3.5

2.1 2.6 2.5 1.5

(0.6) (1.5)

(1.8) (2.2)

(0.6) 0.3 0.1 0.1

1.0 2.3

2.9

(4.0) (2.0) 0.0 2.0 4.0 6.0 8.0

Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Q2/19 Q3/19 Q4/19 Q1/20 Q2/20 Q3/20 Q4/20E Q1/21E Q2/21E Q3/21E Q4/21E 2022E 2023E

12M trailing EBIT margin (%) 12M trailing adj. EBIT margin (%)

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Fundamental DCF equity valuation – mid-point

Source: SEB

DCF valuation range – sensitivities

Source: SEB

Large market potential in favour of online

According to industry estimates, the Nordic market for apparel and beauty is valued at about SEK 280bn. While several retailers are struggling with store economics, the ongoing digital shift to online consumption has accelerated (partly driven by the pandemic) and penetration levels is estimated to exceed 20% in this year. While this is a rather marked shift compared to only a few years ago, this is also still below penetration rates in other consumer segments, such as in electronics. Here, over a third of consumption is now digital. Assuming similar penetration levels in the apparel and beauty market, this would take the value to SEK 85-90bn – up from SEK 55bn currently. We argue Nelly Group – positioned with a clear and curated offering in its niche segment – is well-placed to capitalize on this digital fashion market opportunity over the coming years.

Sweden: online apparel retail penetration forecasts (%) Sweden: online clothing vs electronics

DCF valuation (SEKm) Weighted average cost of capital (%)

NPV of FCF in explicit forecast period 532 Risk free interest rate 2.5

NPV of continuing value 173 Risk premium 5.0

Value of operation 705 Cost of equity 7.5

Net debt (283) After tax cost of debt 1.8

Share issue/buy-back in forecast period 0

Value of associated companies 0 WACC 7.5

Value of minority shareholders' equity 0

Value of marketable assets 0 Assumptions

DCF value of equity 989 Number of forecast years 10

DCF value per share (SEK) 5.50 EBIT margin - steady state (%) 1.8

Current share price (SEK) 3.38 EBIT multiple - steady state (x) 9.5

DCF performance potential (%) 63 Continuing value (% of NPV) 24.5

-2% -1% 0 +1% +2%

-2% 3.87 4.63 5.39 6.14 6.90

Abs. change in -1% 3.84 4.64 5.44 6.24 7.04

sales growth - 0 3.81 4.65 5.50 6.35 7.19

all years +1% 3.77 4.67 5.56 6.46 7.35

+2% 3.73 4.68 5.63 6.57 7.52

Absolute change in EBITDA margin - all years

7.5 8.4 9.1 10.3 11.6 12.9 13.9 15.0 16.1

12.0 13.0 13.2 13.4

17.5 19.5

20.8 22.6

24.1

0.0 5.0 10.0 15.0 20.0 25.0 30.0

20E 21E 22E

12.0

23.0

13.0

23.0

13.2

26.0

13.4

30.0

17.5

32.0

19.5

33.3

20.8

34.2

0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0 40.0

Online share of retail sales:

Clothing vs. Electronics (%)

+13.4 pp diff

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Nordic online apparel market scenarios (SEKbn) The Nordic market and brand positioning

Source: SEB, Euromonitor, Eurostat, Boozt Source: Boozt

Nelly’s niche position: no of customers by age target group

Source: SEB, Nelly Group

Gross margins driven by private label

Nelly Group maintains a large share of sales from its own brands and that carry higher contribution margins compared to external brands. Currently, we expect close to SEK 575m or about 41.5% of revenue in 2020 to be derived from private label. We expect Nelly to continue to increase this share over our forecast period and which will bolster gross margins as well. We forecast private label sales to grow to almost 43.5% of revenue in 2022. This would equate into almost a 2pp increase compared to this year’s levels. We forecast gross margins to improve from 44.4% in 2020 to 46.7% in 2022 (+2.3pp).

56

70

84

98

112

0.0 20.0 40.0 60.0 80.0 100.0 120.0

Online market value @ 20% online penetration

Online market value @ 40% online penetration 2019E: Nordic apparel and beauty

market value of SEK 280bn and online market value scenarios

Online apparel and Beauty market value today (SEKbn)

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Peer comparison: private label share of sales, 2020E Zalando: replacing PLs with partner program

Source: SEB, Company accounts Source: SEB, Zalando

Nelly Group: key margin assumptions and operating KPI forecasts

12M trailing operating KPI forecasts Q1/19 Q2/19 Q3/19 Q4/19 Q1/20 Q2/20 Q3/20 Q4/20E Q1/21E Q2/21E Q3/21E Q4/21E 2022E 12M trail. no of active customers ('000) 1,343 1,346 1,337 1,323 1,305 1,284 1,259 1,246 1,252 1,258 1,267 1,275 1,312 12M trail. no of visits ('000) 29,091 29,319 29,392 29,604 29,387 28,560 28,679 28,419 28,557 28,703 28,897 29,130 119,66

12M trail. no of orders ('000) 762 756 750 737 727 731 714 719 717 720 724 748 3,080

12M trail average basket (GMV incl. VAT) (SEK) 709 723 733 737 738 709 704 699 694 689 683 683 688

12M trail average order value (SEK) 466 475 488 495 504 493 496 491 496 499 502 492 481

Traffic and basket growth

12M trail growth, no of active customers, y/y (%) 10.8 8.3 3.9 0.2 (2.8) (4.6) (5.9) (5.9) (4.1) (2.0) 0.7 2.4 2.7 12M trail. no of visits growth, y/y (%) 2.2 0.8 (0.3) 1.9 1.0 (2.6) (2.4) (4.0) (2.8) 0.5 0.8 2.5 2.7 12M trail. no of orders growth, y/y (%) 3.9 (0.6) (3.6) (4.1) (4.7) (3.3) (4.9) (2.4) (1.3) (1.6) 1.4 4.0 3.0 12M trail. average basket growth, y/y (%) 4.5 7.0 7.8 6.6 4.1 (1.9) (3.9) (5.2) (6.0) (2.8) (3.0) (2.4) (0.2) 12M trail. average order value growth, y/y (%) 3.5 6.4 9.4 9.5 8.1 3.7 1.6 (0.9) (1.5) 1.4 1.2 0.3 (0.2) Sales mix and margin drivers

12M trail. private label sales (SEKm) 635 632 628 626 615 586 577 577 586 596 609 617 643 12M trail. private label share of sales (%) 44.8 44.0 43.0 43.0 42.2 41.0 41.2 41.5 41.8 42.1 42.5 42.8 43.4 12M trail. return rate, avg (%) 38.4 38.9 38.9 38.4 38.1 37.4 36.9 36.7 36.5 36.4 36.2 36.0 34.8 12M trail. product margin (%) 49.8 49.5 48.6 47.3 45.8 44.1 43.8 44.4 44.8 45.1 45.2 45.2 46.7 12M trail. fulfillm. & distr. costs/sales (%) 19.3 19.5 19.8 20.6 20.9 21.3 21.9 22.0 21.9 21.8 21.5 21.0 19.6 Source: SEB

Nelly Group: private label share of sales and gross margin forecasts (%)

Source: SEB

42

33

3

1 0.0

10.0 20.0 30.0 40.0 50.0

Nelly Group ASOS Boozt Zalando (discont. in Apr 2019)

Estimated private label share of sales 2020E (%)

41.5

43.4 44.4

46.7

25.0 30.0 35.0 40.0 45.0 50.0 55.0

Q4/14 Q1/15 Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Q2/19 Q3/19 Q4/19 Q1/20 Q2/20 Q3/20 Q4/20E Q1/21E Q2/21E Q3/21E Q4/21E 2022E 2023E

12M trail. private label share of sales (%) 12M trailing product margin (%)

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Peer comparison: gross margin forecasts (%) Average order value forecasts (EUR)

Source: SEB, Factset Source: SEB, Factset

Automation: fulfilment cost potential

While its soft exit from Europe is set to weigh on total growth in the group, it will add to margins reflecting more limited spending on marketing and campaigns and resulting in full-price and full-margin sales only. We do not expect the group to keep these gains in its margins, but rather to re-allocate some spending to its core Nordic markets.

Nelly has recently announced the restructuring of its distribution by consolidating its Falkenberg operation in its new facility in Borås. In addition, the company has just announced the automation of its new warehouse by installing a proven system from AutoStore. This investment (SEK 84m) will be added to its rental costs over the ten-year lease period.

Boozt example: automation bring significant margin gains

Boozt: estimating the impact from automation of fulfilment 2017 2018 2019 2020E

Automation phase 1 2 3 4

Revenue capacity (SEKm) 2,000 3,500 4,500 6,500

Bins 130,000 250,000 360,000 500,000

Robots 130 250 360 500

Capex relating to automation (SEKm) (9M/20) (149) (42) (115) (29)

Capex relating to automation/sales (%) 7.4 1.5 3.3 0.7

Accumulated automation capex (SEKm) (149) (192) (306) (335)

Net sales (SEKm) 2,016 2,784 3,425 4,262

Fulfilment & distr. costs (SEKm) 312 384 469 507

Fulfilment & distr. costs/sales (%) 15.5 13.8 13.7 11.9

Fulfilment cost ratio, chg, y/y (pp) (0.6) (1.7) (0.1) (1.8)

Current cost ratio compared to 2017 (pp) 0.0 (1.7) (1.8) (3.6)

2017 fulfilment costs as share of sales (%) 15.5 15.5 15.5 15.5

Fulfilment costs based on 2017 share of sales (SEKm) 312 431 531 660

Fulfilment cost savings vs 2017 levels (SEKm) 0 48 62 153

Accumulated fulfilment cost savings vs. 2017 levels (SEKm) 0 48 109 262 Source: SEB, Factset, Boozt

Local sector peer Boozt has been operating AutoStore since its decision in 2017 to automate its distribution capacity.

As corroborated by Boozt, the automation has had a significant impact on its financials over the past years. Compared to 15.5% of sales in fulfilment and distribution costs in 2017, Boozt last year reached 13.7% of sales and in this year consensus forecasts imply ratios to continue down to below 12% of sales.

40.8

39.9 44.3

46.7

42.3 42.3

47.4 47.9

30.0 35.0 40.0 45.0 50.0 55.0 60.0

2014 2015 2016 2017 2018 2019 2020E 2021E 2022E

Boozt Nelly Group Zalando ASOS

Gross margin forecasts (%)

78.6 81.7

46.7 46.4

56.9 58.0

40.7 40.6

0.0 10.0 20.0 30.0 40.0 50.0 60.0 70.0 80.0 90.0 100.0

2014 2015 2016 2017 2018 2019 2020E 2021E 2022E

Boozt.com Nelly Group Zalando ASOS Average order value forecasts (EUR)

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This compares to Nelly, which is operating with fulfilment and distribution costs levels at about 22% of sales. Nelly’s decision to implement the same robotic system in its new warehouse should lead to markedly lower handling costs per order and support earnings growth over our forecast period, we believe. Also, we reckon working capital improvements will feed through the balance sheet and cash flow ahead and we forecast inventory-to-sales to improve as well in 2020-2022.

Nelly vs. Boozt: 12M trailing fulfilment & distribution cost ratio forecasts (%)

Source: SEB, Factset, Boozt

Online fashion peers: fulfilment & distribution costs/sales 2020E (%)

Source: SEB, Factset 16.0

11.9

11.0 20.5

22.0

19.6

0.0 5.0 10.0 15.0 20.0 25.0 30.0

Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Q2/19 Q3/19 Q4/19 Q1/20 Q2/20 Q3/20 Q4/20E Q1/21E Q2/21E Q3/21E Q4/21E 2022E

Boozt Nelly Group

26.4

23.2

22.0

20.8

11.9

0.0 5.0 10.0 15.0 20.0 25.0 30.0 35.0

Zalando ASOS Nelly Group Peer group avg. Boozt

Fulfilment & Distr. costs/sales, 2020E (%)

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Online peers: EBIT margin forecasts, 2020E (%) Nelly Group: working capital management

Source: SEB, Factset Source: SEB

Nelly Group: 12M trailing geographical sales growth forecasts, y/y (%)

Source: SEB

Sales growth forecasts - by market

(SEKm) Q1/20 Q2/20 Q3/20 Q4/20E Q1/21E Q2/21E Q3/21E Q4/21E 2019 2020E 2021E 2022E

Net sales (SEKm)

Sweden 150 192 150 200 158 204 159 203 687 692 725 752

Nordic 136 183 138 178 143 191 147 184 619 635 666 689

Europe 19 18 13 14 14 14 9 13 150 64 50 40

Net sales 305 393 300 392 315 409 315 401 1,456 1,391 1,441 1,481

Sales growth (%)

Sweden 6.5 (3.8) (2.5) 3.6 5.5 6.5 6.0 1.7 3.9 0.7 4.8 3.7

Nordic 6.2 1.5 (3.1) 5.5 5.3 4.5 7.0 3.4 8.9 2.5 4.9 3.5

Europe (42.4) (58.7) (63.1) (62.5) (27.8) (25.4) (28.9) (5.9) (6.8) (57.0) (22.5) (19.8)

Net sales growth, y/y (%) 1.0 (7.3) (9.0) (1.8) 3.3 4.1 5.0 2.2 4.7 (4.5) 3.6 2.8

Source: SEB

1.7

3.8 4.0

4.6

6.0

0.0 1.0 2.0 3.0 4.0 5.0 6.0 7.0

Nelly Group ASOS Peer group avg.

Zalando Boozt

Adj. EBIT margin forecasts, 2021E (%)

20.5

13.0 17.8

15.8

12.8 14.7

17.4 16.9

15.0 16.7

16.1 15.5

10.0 12.0 14.0 16.0 18.0 20.0 22.0

2012 2013 2014 2015 2016 2017 2018 2019 2020E 2021E 2022E 2023E

Nelly inventory/sales (%)

17.8

11.7 8.6

6.6 2.0 2.3

3.9 2.7 6.0 7.6

5.3 6.1 6.3 6.7 6.2 7.5 6.0 5.1 4.7

2.9 (0.7)

(4.2)(4.5)(4.0) (0.8)

2.4 3.6 2.8 3.5

(10.0) (5.0) 0.0 5.0 10.0 15.0 20.0 25.0 30.0

Q2/15 Q3/15 Q4/15 Q1/16 Q2/16 Q3/16 Q4/16 Q1/17 Q2/17 Q3/17 Q4/17 Q1/18 Q2/18 Q3/18 Q4/18 Q1/19 Q2/19 Q3/19 Q4/19 Q1/20 Q2/20 Q3/20 Q4/20E Q1/21E Q2/21E Q3/21E Q4/21E 2022E 2023E

Sweden Nordic 12M trailing sales growth, y/y (%)

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Peer group valuation and performance

Peer group valuation

Ccy Share Mkt cap EV/Sales (x) EV/EBIT (x) EBIT

(%) Sales

3Y % Abs. performance (%) Apparel & Online Retail price price (EURm) 2020E 2021E 2022E 2020E 2021E 2022E 2021E CAGR -1M -3M -12M Online Retail

AO World Plc GBP 3.53 1,863 1.03 0.98 n.a. 30.8 26.6 n.a. 3.7 n.a. (11.0) 95.5 298.0

ASOS plc GBP 43.90 4,834 1.42 1.02 0.88 31.0 26.8 21.2 3.8 16.1 (6.3) (6.3) 47.3

boohoo group Plc GBP 3.07 4,275 1.64 1.30 1.08 20.6 16.5 13.8 7.9 23.1 7.8 0.9 11.3

Boozt AB SEK 157.40 976 2.07 1.76 1.53 31.9 29.2 23.2 6.0 16.3 (12.4) 26.9 184.1

BHG Group SEK 149.00 1,558 1.84 1.70 1.44 25.0 22.7 18.8 7.5 10.0 20.0 28.7 180.6

Delticom AG EUR 5.88 73 0.29 0.28 0.27 n.a. 62.4 26.4 0.4 4.2 73.5 51.5 42.4

Dustin SEK 61.40 530 0.56 0.55 0.52 17.6 15.1 13.4 3.6 3.1 2.0 16.1 (20.7)

Farfetch Limited Class A USD 59.61 14,616 12.54 9.40 7.35 n.a. n.a. n.a. (16.3) 30.6 40.3 129.1 524.2

Footway Group AB Class B SEK 18.90 141 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. (5.5) 3.3 (3.8)

Ocado Group PLC GBP 22.50 18,568 6.45 5.48 4.80 n.a. n.a. n.a. (3.7) 16.5 (12.8) (4.2) 84.4

Overstock.com, Inc. USD 60.04 2,120 0.82 0.79 0.65 55.9 51.4 20.0 1.5 12.3 (10.8) (5.1) 735.6

SRP Groupe SA EUR 1.65 194 0.29 0.28 0.27 47.8 30.2 25.2 0.9 2.0 26.0 89.7 106.2

Verkkokauppa.com Oyj EUR 6.18 279 0.48 0.47 0.45 13.4 14.1 12.9 3.4 3.5 12.8 35.2 75.3

Zalando SE EUR 78.74 20,154 2.49 2.09 1.77 54.6 53.0 40.2 3.9 18.4 (10.3) 7.2 89.9

zooplus AG EUR 154.40 1,104 0.61 0.53 0.47 40.3 43.1 31.1 1.2 13.6 5.8 15.9 78.3

Online Retail, avg 2.32 1.90 1.65 33.5 32.6 22.4 1.7 13.1 7.9 32.3 162.2

Online Retail, med 1.23 1.00 0.88 31.0 28.0 21.2 3.5 13.6 2.0 16.1 84.4

Abercrombie & Fitch Co. Class A USD 21.86 1,126 0.63 0.63 n.a. 18.5 16.1 n.a. 3.9 n.a. 40.8 53.6 29.3 Associated British Foods plc GBP 22.93 20,023 1.20 1.32 1.24 16.4 15.9 13.3 8.3 8.2 37.3 17.0 (9.7) Burlington Stores, Inc. USD 233.34 12,760 2.49 2.27 2.07 29.4 24.2 19.5 9.4 9.7 16.2 8.6 4.6

CALIDA Holding AG CHF 29.60 227 n.a. n.a. n.a. n.a. n.a. n.a. 5.8 5.3 11.3 8.4 (16.6)

Esprit Holdings Limited HKD 1.03 207 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 22.6 15.7 (37.2)

FAST RETAILING CO., LTD. JPY 85,400.0 71,819 3.09 3.76 3.44 41.5 33.0 27.5 11.4 11.8 13.1 27.0 33.6

FNG SH BVBA EUR 3.50 33 n.a. n.a. n.a. n.a. n.a. n.a. n.a. n.a. 0.0 0.0 (75.5)

Gap, Inc. USD 21.49 6,635 0.83 0.82 0.75 16.1 12.6 8.2 6.5 5.7 0.3 24.2 32.1

H&M Hennes & Mauritz AB Class B SEK 187.00 26,605 2.01 1.75 1.69 n.a. 24.6 20.6 7.1 9.9 21.2 30.0 (2.5)

HUGO BOSS AG EUR 27.58 1,942 1.46 1.24 1.16 n.a. 18.9 13.2 6.6 12.0 31.5 20.0 (36.0)

Industria de Diseno Textil, S.A. EUR 26.88 83,776 3.22 3.02 2.80 20.0 17.5 15.3 17.3 7.2 15.7 16.7 (7.1) JD Sports Fashion Plc GBP 7.88 8,459 1.34 1.24 1.03 16.1 13.8 11.7 9.0 14.0 5.0 (1.0) (1.4)

Joules Group Plc GBP 1.65 197 0.92 0.84 n.a. 17.4 12.1 n.a. 6.9 n.a. 57.9 50.7 (24.3)

L Brands, Inc. USD 40.96 9,404 1.45 1.45 1.52 12.4 12.0 12.0 12.0 (2.4) 22.9 41.6 129.9

LPP S.A. PLN 7,170.00 2,981 n.a. n.a. n.a. n.a. n.a. n.a. 7.3 n.a. 10.5 (0.5) (17.8)

Marks and Spencer Group plc GBP 1.37 2,959 0.66 0.65 0.66 13.6 12.4 10.5 5.2 (0.1) 42.6 26.5 (31.8)

N Brown Group plc GBP 0.62 315 0.78 0.74 n.a. 10.2 8.1 n.a. 9.1 n.a. 13.7 14.4 (48.4)

Next plc GBP 66.94 9,817 2.49 2.35 2.33 15.1 13.8 14.0 17.1 3.3 9.4 14.3 (2.6)

OVS SpA EUR 1.06 241 1.21 1.14 n.a. 23.7 17.7 n.a. 6.4 n.a. 28.7 30.9 (48.8)

PVH Corp. USD 91.68 5,381 1.18 1.13 1.11 15.9 13.6 12.9 8.3 3.0 55.1 38.8 (9.6)

Ralph Lauren Corporation Class A USD 97.15 3,867 1.49 1.42 1.34 13.5 12.5 10.2 11.3 5.5 42.4 29.4 (13.0)

Frasers Group PLC GBP 4.38 2,508 0.77 0.73 n.a. 16.0 16.9 n.a. 4.3 n.a. 9.7 21.8 24.4

Stockmann Oyj Abp Class B EUR 1.05 85 1.19 1.13 1.10 n.a. 42.7 31.3 2.6 4.0 19.6 28.0 (46.3)

Superdry PLC GBP 2.73 247 0.74 0.69 n.a. 28.8 17.6 n.a. 3.9 n.a. 66.7 103.0 (45.8)

TJX Companies Inc USD 65.42 64,841 1.97 1.85 1.73 18.8 16.9 15.5 11.0 6.8 21.3 18.3 9.3 Under Armour, Inc. Class A USD 17.24 5,592 2.08 1.84 1.76 n.a. 67.0 38.8 2.7 8.8 16.4 57.4 (9.1)

VRG S.A. PLN 2.43 128 1.04 0.88 0.80 49.6 19.6 12.7 4.5 14.5 21.5 11.0 (37.7)

V.F. Corporation USD 89.26 28,738 3.51 3.19 2.93 26.5 22.9 19.0 14.0 9.4 27.5 30.5 (1.3)

XXL ASA NOK 19.17 456 0.66 0.66 0.63 29.5 16.3 13.5 4.0 2.1 (14.2) (11.3) 43.5

Apparel Retail, avg 1.54 1.47 1.58 21.4 20.0 16.8 8.0 6.9 23.0 25.0 (7.4)

Apparel Retail, med 1.21 1.24 1.34 17.4 16.9 13.5 7.1 7.0 21.2 21.8 (9.6)

Apparel & Online Retail, avg 1.82 1.62 1.61 25.6 24.1 18.9 5.8 9.3 17.9 27.5 50.4 Apparel & Online Retail, med 1.21 1.14 1.20 20.3 17.6 15.4 6.0 8.8 16.0 20.9 (1.3)

Nelly Group SEK 3.38 59 0.16 0.23 0.28 n.a. 38.7 12.3 0.6 (16.5) 14.2 20.9 17.1

Discount/(Premium) to Online peers, avg (%/pp)

Discount/(Premium) to Online peers, med (%/pp) 91.4 86.0 82.8 n.a. (60.9) 35.0 5.3 25.8 3.7 6.6 33.3 87.2 79.9 76.9 n.a. (120.2) 20.5 5.4 25.2 1.8 0.1 (18.4) Source: SEB, Facset

(11)

Online retail peers: share price performance, -12M (%)

Source: SEB, Factset

Online retail peers: EV/Sales estimates (x)

Source: SEB, Factset

Nelly Group: capitalization and valuation forecasts

2018 2019 2020E 2021E 2022E

Capitalization (SEKm)

Share price (SEK) 3.38 3.38 3.38 3.38 3.38

No of shares, f. dil. (m) 149.8 149.8 179.7 179.7 179.7

Market cap (SEKm) 506 506 607 607 607

Net debt/(cash) (SEKm) (420) (314) (283) (285) (203)

EV (SEKm) 86 193 324 322 404

Valuation (x)

Net sales 3,226 2,939 2,123 1,441 1,481

Adj. EBIT (45) (78) (87) 8 33

Adj. EBIT margin (%) (1.4) (2.7) (4.1) 0.6 2.3

EV/Sales (x) 0.03 0.07 0.15 0.22 0.27

EV/EBIT (x) n.a. n.a. n.a. 37.9 12.1

Source: SEB

(20.7) (3.8)

11.3 17.1

42.4 47.3

75.3 78.3 84.4 84.4 89.9

106.2 180.6 184.1

298.0

524.2

735.6

(100.0) 0.0 100.0 200.0 300.0 400.0 500.0 600.0 700.0 800.0

Dustin Footway Group AB Class B boohoo group Plc Nelly Group Delticom AG ASOS plc Verkkokauppa.com Oyj zooplus AG Ocado Group PLC Online Retail, med Zalando SE SRP Groupe SA BHG Group Boozt AB AO World Plc Farfetch Limited Class A Overstock.com, Inc.

Abs. performance (%) -12M

0.23 0.28 0.28

0.47 0.53 0.55

0.79 0.98 1.00 1.02

1.30 1.70

1.76 2.09

5.48

0.00 1.00 2.00 3.00 4.00 5.00 6.00

Nelly Group Delticom AG SRP Groupe SA Verkkokauppa.com Oyj zooplus AG Dustin Overstock.com, Inc.

AO World Plc Online Retail, med ASOS plc boohoo group Plc BHG Group Boozt AB Zalando SE Ocado Group PLC

EV/Sales (x) 2021E