Tokmanni - House of Opportunities?

[Vanerihands]

According to analysts, the decline in the general merchandise market does not bode well for Tokmanni’s Q1 performance:

Kotimaisen kaupan kasvu jatkui maaliskuussa elintarvikkeiden turvin - Inderes

The 3% decline in the general merchandise market in March, which is important for Tokmanni, and the flat development in January-March do not bode well for the company’s Q1 results to be reported on May 17, 2024. In our view, consumption has been concentrated on daily, lower price point product categories. We estimate that some general merchandise sales have shifted to hypermarkets as a result of high customer traffic (Kesko’s visitor numbers and Q1 revenue increased, and S Group’s revenue grew significantly) and price campaigning.

[Ghostrider]

Good article about Normal in HS - also relates to Tokmanni
”According to the latest estimate, Finland could accommodate 130–140 Normal stores. The figure has been revised upwards continuously.”
Finnish discount retail is expanding rapidly, but at some point the market must saturate in terms of growth/new locations. The question is at what point, if Tokmannis, Puuilos, and Normals etc. are being added at a rate of 30 locations. Who is the strongest candidate and why?

Kuluttaminen | ”Me emme keksineet sitä”. Suomeen työntyi ”epänormaali”...

[enska]

Kauppalehti on discount retailers.

Tokmanni highlights from the statements of Danske’s portfolio manager:

• Danske’s portfolio manager Ville Kivipelto says that the main reason for additional Tokmanni purchases is a rather attractive valuation level.

• Tokmanni looks cheap based on various valuation multiples.

• The company is gaining momentum from the economic recovery and the increasing number of stores following the Dollarstore acquisition, as well as synergy benefits. The dividend yield is attractive.

Halpakauppiaiden osakkeet näyttävät nyt houkuttavilta, mutta mihin niistä...

[Vanerihands]

Tokmanni is withdrawing from the Keljo project in Jyväskylä and closing the Miny store in Lippulaiva, Espoo. Tokmanni is moving from Espoontori in Espoo to a larger space in the Entresse Shopping Centre:

Tokmanni avaa yhteensä kuusi uutta myymälää tänä vuonna – Esimerkiksi...

In Espoo, Tokmanni has signed a long-term lease for Entresse Shopping Centre located in the Espoo Centre. Tokmanni aims to hold the store opening in the shopping centre in October–November of this year.

The new store will have approximately 2,000 square meters of space, compared to approximately 1,300 square meters in the Tokmanni store in the Espoontori Shopping Centre.

Alongside the aforementioned stores, Tokmanni announced back in 2022 that it was planning a new Tokmanni store in the Keljo area of Jyväskylä. Since then, the plans have been postponed, and now Tokmanni reports that it is withdrawing from the project entirely.
– The reasons for the withdrawal are changes that emerged during the project’s planning phase and increased costs, Koponen says.

The Miny store opened in the Lippulaiva urban centre in Espoonlahti in 2022 will be closed in July, as Miny is seen to have better prospects for success in shop-in-shop departments serving within selected Tokmanni stores in the city.

[Gadus]

@enska

and synergy benefits

Has an estimate been presented on how GM could improve through these synergies? It might be very obvious for Dollar Store, but is there room for improvement on Tokmanni’s side? Some kind of Nordic cooperation was already being carried out at the moment, I believe.

[enska]

@Gadus

how GM could improve

What is GM, other than general manager? I can’t open that article anymore, so I can’t say.

[poutapilvia]

GM=Gross Margin

(blah blah blah and filling the character limit)

[enska]

The article is open now. It didn’t really go into more detail.

[KuHa]

Analyst’s pre-comments regarding Tokmanni’s Q1 results.

Tokmanni Q1 perjantaina: Markkinalta ei olla saatu tukea - Inderes

[TeeDee]

Tokmanni also featured in Handelsbanken’s morning report.

ViewReleaseInStandardHtml

Short-term recommendation Hold and 3y target price 21 EUR.

[NukkeNukuttaja]

I want to have this table visible and expanded for the morning, even though @KuHa will probably be fast again , it saves at least one click and the message will be at the very end of the thread; watch out that @Vanerihands doesn’t find some store opening during the next 12.5 hours

My own expectations are quite pessimistic as well, but although the general merchandise market has been weak, logistics issues have been a burden, and spring only arrived in May, there are likely some moving parts in analyst forecasts due to Dollarstore. Sentiment on the Hesuli stock exchange has also improved in recent weeks, meaning a weak result might not necessarily be punished to the fullest; instead, some value is also given to growth.

[KuHa]

https://www.inderes.fi/releases/tokmanni-group-oyjn-liiketoimintakatsaus-11-3132024-vahvaa-kasvua-haastavassa-markkinatilanteessa

https://mfn.se/cis/a/tokmanni-group/tokmanni-group-oyj-n-liiketoimintakatsaus-1-1-31-3-2024-vahvaa-kasvua-haastavassa-markkinatilanteessa-b439556c

Strong growth in a challenging market situation

HIGHLIGHTS FROM THE FIRST QUARTER OF 2024

• Tokmanni Group’s revenue grew by 42.4% (4.7%) to EUR 339.2 million (238.2)
• Comparable revenue grew by 1.7% (2.7%)
• Comparable gross profit was EUR 115.4 million (75.5) and the comparable gross margin was 34.0% (31.7%)
• Comparable operating profit was EUR -5.1 million (-2.2), -1.5% of revenue (-0.9%)
• Cash flow from operating activities was EUR -40.0 million (-12.9)
• Diluted earnings per share were EUR -0.20 (-0.07)

GUIDANCE FOR 2024 UNCHANGED

Tokmanni Group estimates its 2024 revenue to be EUR 1,660–1,760 million. Comparable operating profit is estimated to be EUR 110–130 million.

TOKMANNI GROUP CEO MIKA RAUTIAINEN

Strong growth driven by Dollarstore, fixed costs weighed on the result

In the first quarter of 2024, Tokmanni Group’s revenue grew by 42.4% and amounted to EUR 339.2 million. The significant growth is backed by the acquisition completed last August. Comparable revenue grew by 1.7% (2.7%). The 4.7% growth in groceries accelerated comparable sales. Customers’ purchasing power and confidence in their own finances remained at a low level. Low prices and attractive campaigns interested our customers even more.

The integration of Tokmanni and Dollarstore is progressing according to plan. The main focus is on combining sourcing at the group level. Our goal by the end of 2025 is to achieve annual synergy benefits of over EUR 15 million. By the end of March, the synergy benefits achieved have already reached EUR 6.7 million on an annual basis.

The Tokmanni segment’s revenue grew by 4.2% in the first quarter and was EUR 248.1 million. Comparable revenue grew by 1.7%. The comparable number of customers grew slightly from the previous year, and at the same time, the comparable average basket grew by 1.2%. The good development in sales was primarily influenced by the timing of Easter at the end of March, whereas in the comparison period, Easter fell in early April. The comparable gross margin was 32.8% (31.7%). The comparable operating result was EUR -1.7 million (-1.9).

The Dollarstore segment’s revenue in the first quarter was EUR 91.1 million. On a comparable basis, revenue grew by 1.8% in local currencies. The comparable number of customers decreased slightly from the previous year, while the comparable average basket grew by 3.4%. The comparable gross margin was 37.4%. The comparable operating result was EUR -2.8 million.

The first quarter is the weakest for both Tokmanni and Dollarstore in terms of sales and profitability. However, both segments performed reasonably well in the current market situation.

PRESS AND ANALYST CONFERENCE

Tokmanni Group’s CEO Mika Rautiainen and CFO Tapio Arimo will present the review to analysts, investors, and the media on the publication date at 10:00 AM. The presentation will be held in English. The live webcast can be followed at https://ir.tokmanni.fi/fi/sijoittajat or via the link below. A recording of the presentation will be available on the company’s website after the event. Webcast link: https://rajucast.tv/tokmanni-group/business-review-for-january-march-2024/

[Vanerihands]

The results presentation slides can be found here:
https://ir.tokmanni.fi/fi/sijoittajat/raportit-esitykset

[NukkeNukuttaja]

This result doesn’t give much cause for cheers. The gross margin has risen from the comparison period, likely thanks to Dollarstore, but otherwise, it’s hard to find positives in the figures. Naturally, there is a lot of inorganic growth. Seasonality and the weak economic climate are certainly weighing heavily. The market will surely punish this, especially since April, which is part of Q2, was probably a rather weak month—I’d be happy to be wrong about this🙂. However, the long-term attractiveness remains; this shouldn’t be evaluated as a quarterly game. Let’s wait for professional commentary🙂

Cash flow was now negative 40 million, compared to -13 million in the comparison period last year, and as much as 65 million negative in Q1/2022.

What explains that growth in net debt excluding lease liabilities @Arttu_Heikura, now 235 million, but 165 million in the financial statements!? Weren’t the figures already consolidated with Dollarstore then!? Are inventories full again and accounts payable [high]!?

Easter had a positive impact @AES

Addition: I might have overlooked the cash position in my net debt reflections, so the debt hasn’t increased!?

[AES]

I haven’t read it in detail yet, but could the timing of Easter, for example, have had an impact? I’m wondering about how EBITDA was closer to expectations while operating profit fell short?

Guidance was reiterated, so no need to worry

[James_Bondi]

A pessimist is never disappointed, but the market is.
I consider this morning’s release a positive outcome; things could have gone worse considering recent variables.

DS’s synergies have started to yield results, and I believe we will see strong figures from Sweden once the cycle starts to pick up. Tokmanni continues to grow, and dividends keep trickling in for shareholders at regular intervals.

[JM555]

Actually, the Tokmanni segment looked quite good to me. Same-store sales growth, whereas Arttu’s [numbers] seemed to even show a decline, if organic growth was 0 despite the new stores. Additionally, the Tokmanni segment’s gross margin improved to 32.8% from 31.7%, and comparable operating profit even improved slightly despite the strikes and the Red Sea. The big disappointment was the comparable decline in footfall for Dollarstore.

[JM555]

Easter actually had a positive impact on sales, but of course Q1 is often loss-making due to the seasonality of retail.

[NukkeNukuttaja]

@Arttu_Heikura has already provided quick comments on the results: Tokmanni Q1-aamutulos: DollarStoren kausiluontoisuus kiinnostuksen kohteena - Inderes

[Thomas_Westerholm]

@NukkeNukuttaja

@Arttu_Heikura already gave quick comments on the results there: Tokmanni Q1 morning result: DollarStore’s seasonality of interest - Inderes

Arttu is on paternity leave, so the morning comment was written by me. I know the company well, of course, but the story has changed quite a bit with the DollarStore acquisition.
The Tokmanni segment’s performance looked good to me, but DollarStore seems to be struggling relative to expectations. Of course, creating forecasts on a quarterly level is always difficult for a new segment with no quarterly data available.