Puuilo - The newest player in the discount store market

I agree with the opinions of those above, with the distinction that my local town doesn’t have a Motonet or Biltema, and I prefer Puuilo over Tokmanni due to its smaller store size.

Additionally, 75% of what Tokmanni offers is useless to me because I buy groceries from Prisma, clothes online, and I already own most of the electronics and tools, or I get them from Puuilo.

What I like about Puuilo is its somewhat compact overall concept regarding product selection and store area. Furthermore, the sales assistants are always ready to help when something is missing. I do see potential for growth there, but how much is a question mark. The company can expand for some time through acquisitions and new stores; it will be interesting to see if there will be large-scale brand and product selection updates.

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I would believe that this is a well-considered decision and part of the chain’s branding. The labyrinthine layout forces the customer to wander around the store and at the same time wonder about all the things that can be found there. The cramped space, on the other hand, aims to create an image of cheapness and at the same time enables efficient use of space and an increase in product quantity. The helpfulness of the salespeople, in turn, emphasizes the image of customer appreciation, despite the cheapness.

Systematic brand building in its own category.

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In an interview, the Puuilo guy said that they have opened (and will open) ~4 stores annually and the average sales growth has been about 23% over the last ten years. In 2019-2021, growth has been ~32%, of which 5.6% is like-for-like sales growth.

In other words, growth is strongly focused on opening new stores. The interview mentioned that Puuilo still has room to double its number of stores in Finland, so one could imagine that this part is fairly certain growth.

However, I cannot say how big a boost the company will get from listing.

I myself had never even thought about Puuilo before the listing, and now I’m tempted to go see what all they sell at the local store :smiley:

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Let’s just say that since I work in substation contracting, Puuilo has gradually become a very popular place for all sorts of installation supplies and even tools. They have a little bit of everything.

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The Puuilo in my locality is very clear and you don’t need to be much of a Pac-Man to move around there. This probably varies a lot from store to store how labyrinthine or clear it seems, and I believe this is more of a cost issue. In an interview with Verneri, the company’s CEO mentions affordable business premises as one factor in Puuilo’s profitability, meaning they aim to find the most cost-effective solution rather than always building new business premises for a new store.

The compact size of the stores and efficiently used square meters also enable affordable and often more attractive prices than competitors.

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Good shop. The missus gets lost in the bucket shop and I get lost in Puuilo. For a Sunday DIY person like me, you can find everything you need there. No need to wander around a couple of hectares of hardware store.

E. I’m considering participating in the offering. However, there are so few shares available that I have to wonder if it’s worth the effort to tie up large sums of money for a long time for this.

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I’ve heard the name Puuilo mentioned by friends living in the provinces over the years. I would have gladly shopped there ages ago, but there isn’t a store nearby. I’ll participate in the IPO if the price is reasonable. It looks like a store will be opening nearby later this year, so in the future, Biltema, Tokmanni, and Motonet will be left in the dust when I shop at “my own company” :wink:

However, I probably won’t get many shares from the offering. At the latest, the “80% of earnings as dividends” will cause many households to start trying on their buying pants.

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What I remember from the CEO’s interview is that they aim to meticulously study customer needs. I’ve often wondered how I’ve so frequently found the exact bits and bobs I needed at the store, even when I hadn’t imagined beforehand that they’d be on the shelf. It’s often been pointless to look for similar DIY gadgets at a hardware store.

It’s great that Puuilo is listing. It’s nice to drop by the store. My better half has often been happy to come along.

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It’s a good store, better than Tokmanni, Rusta, etc. The selection is good, and they keep the store quite tidy despite the crowdedness.

If Tokmanni has been able to expand this well and has been a good investment, then Puuilo can certainly do the same, provided there is a willingness to grow.

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I myself live a few hundred meters from Puuilo and the parking lot is constantly full of cars… this was the case even before corona. I’m not surprised that people go there, because the selections are such that there is something for everyone. As far as I know, at least the handymen and electricians from smaller “kiosks” also shop there a lot, so the prices are apparently competitive on that side as well.

The average size of purchases and profitability are a mystery to me, but there is enough interest just with those specs that I will follow.

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A couple of years ago, a Puuilo opened half a kilometer away from me, and I really like going there. I always rent a trailer from there now because it’s cheap and easy. The online store is surprisingly modern and better than, for example, K-rauta.

This would definitely be suitable for my portfolio at the right price, but it feels like IPOs nowadays are ruined by ridiculous valuations. 560 million for this “sausage stand”? Revenue at the end of 2020 was 170 million and projected to be over 400 million by 2026, meaning 16% (organic) growth per annum? It doesn’t sound impossible, and the company has grown well and profitably, but at some point, opening new stores won’t boost revenue in the same way anymore. I need to look into it more closely and I’ll keep an eye on what price it will be offered at. If there’s an IPO dip after the IPO rally, I might just use my holiday money to buy some shares for my portfolio. :grinning:

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It must be said that for the current owners, now is an excellent time to go public. EBITA has been 4-5 percentage points lower in previous years, but increased traffic due to the stay-at-home phenomenon has at least temporarily raised profitability to a higher level than usual.

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With last year’s results, P/E is ~23, and with a 10-year average growth, PEG would be around 1. With 16% growth, it’s 1.4. It’s not completely overpriced if you also consider that opening new stores is pretty certain growth, which has been ongoing for years.

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More on Puuilo’s business premises.

As already noted in the thread, Puuilo often uses business premises vacated by other chains.

Some of Puuilo’s business premises are also brand new, newly built business premises. One example is the construction of Puuilo’s Porvoo department store. The department store was built by WasaGroup, and Puuilo leased it.

  • The Porvoo department store reflects the fact that the most important factor for a location is good transport connections. In other words, a good commercial location is the most important thing; the age of the property is not such an important matter.

Puuilo CEO Juha Saarela: “Porvoo had a ready-zoned plot in a good location in terms of traffic and commercial activity

  • It’s also worth noting WasaGroup’s Wasa360 concept from the Porvoo project. In this concept, premises were designed for the tenant to best serve their operations. The project was carried out so that the rent level remained suitable for the tenant’s operations.

  • The financing for the property was provided by the WGF III real estate development fund, which leased the department store to Puuilo with a long-term lease agreement.

Another example is the construction of the Rauma department store. Kiinteistö Fere Center Oy built the property, and Puuilo leased it. Motonet was already located in Fere Center’s retail cluster.

On the other hand, Lehto also builds business premises for Puuilo. According to Lehto’s website, a total of 7 department stores.

https://lehto.fi/referenssit/puuilo/

Lehto has already built seven business premises for Puuilo across Finland: in Jyväskylä, Joensuu, Järvenpää, Lahti, Kokkola, and two department stores in Oulu, one of which will be completed in autumn 2020.

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An annual 16% organic growth until 2026 seems a bit bold as a basis for the calculation. At the level of the entire Finnish market, demand growth is likely to remain at a few percent, so anything beyond that is gaining market share from competitors.

Competitors also likely have expansion plans, so in addition to market share growth, it’s probably worth considering factors that could erode market share from the other end.

An 80% dividend and rapid establishment of new stores sounds like a threat of indebtedness. It would be nice to dig into the numbers, but since there’s no intention to buy, there’s not enough motivation.

So these observations are just an easy throwaway, which probably aren’t of much use other than as a hint of what might be worth investigating if one intends to put their own money into play.

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Good points you’ve made. It seems I forgot the question mark after the word “organic.” To my knowledge, the market has grown thanks to the pandemic, but if it returns to normal once the pandemic ends, then growth will require seizing market share from competitors. The race could become tight.

P.S. I don’t know if this is what you meant, but doesn’t organic growth mean not just increasing the total market pot, but also increasing one’s own sales in an existing market? By “organic,” I was referring to the fact that acquisitions don’t seem to be part of Puuilo’s strategy?

That was a solid CEO in Verphu’s roast! Clear answers and clear plans.

And since good, functional management is always about 50% of the decision in my investment consideration, participating in Puuilo’s IPO sounds quite tempting.

Uncle Masse, FA, and then we’ll scoop up a little more from the post-IPO drop :notes: :rofl: :rofl: :notes:

P.S. Wizard-Kajaani isn’t taking this case for himself too, is he?? Kamux, Harvia, Marimekko, Orthex… Puuilo?? :slight_smile:

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Puuilo is, in my opinion, the best of the discount stores. There’s a good selection, and often both a budget and a higher-quality version of a product are available. There’s also stock on the shelves, and more can be ordered.

The store in my hometown is quite messy, cramped, and the shelves are haphazard, especially compared to, say, IKH (which isn’t a discount store but rather a quality specialist store, in my opinion). Additionally, when you can get everything from garage jacks to fence posts and trailers, through kitchen supplies, horse feed, and candy under one roof, it takes an inexperienced person a while to find a product. Motonet, in my opinion, is clearer, at least here, even though the assortment is quite similar. The products at Motonet are perhaps a bit higher quality and less of a random assortment and Chinese imports than Puuilo’s selection.

I personally like to buy quality tools from quality places, and from stores like Puuilo, Tokmanni, and Biltema, I’ll pick up that single, cheap thing I need, like trailer rental, grit for sanding, cardboard boxes for moving, protective gear for painting, or fishing tackle for kids.

If one considers the stock price in the long run, this concept certainly won’t lead to world domination, and the domestic market is, as I understand it, quite saturated. What could be Puuilo’s distinguishing feature, or is it just “everything for everyone as cheaply as possible” somewhere between Tokmanni and Motonet? What is the share of animal products in sales? At least at the checkout, every other customer seems to have tens of kilos of Luppa. What is the impact of rising freight costs for Chinese imports on this? It’s probably pointless to talk about domestic products.

However, the above doesn’t really affect the popularity of an IPO nowadays. This one will likely be oversubscribed and make a significant jump on its first day. So, one must participate.

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The company presentation will be live on InderesTV next week, starting on June 15th at 6:00 PM: :v: Puuilo suunnittelee listautumista Nasdaq Helsingin pörssilistalle - Live alkaa tiistaina 15.6. klo 18.00 - Inderes

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The subscription period for the IPO begins on June 11, 2021, at 10:00 AM. :face_with_monocle:

https://www.puuilo.fi/listautuminen

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