“SEB cuts Tokmanni to hold (buy), target price 6.50 euro (10)”
OP remains on the reduce side and lowers the target price from 8 euros to 7 euros.
5 Likes
Rusta has fairly large garden departments, so in that sense, the competition with Tokmanni is likely significant.
I wonder how extensive the garden section is in Dollarstore?
2 Likes
The rapid reforms (increase in costs) by the new management are slowed down by the fact that Tokmanni’s indebtedness is indeed close to covenant limits. If these were breached, the company would have to renegotiate its financing (i.e., the cost of debt increases, etc.).
The risk of a larger share issue could become relevant at that point if Dollarstore’s goodwill were to be written down in full. Otherwise, the debt situation is manageable by the CFO. Assuming that the operating profit remains roughly at its current level.
DS’s core customer has historically been a low-income consumer who consumes low price-point products. These 1–5 euro products have been removed from the selection, which has apparently affected the number of customers. They have been replaced by Tokmanni’s private label (PL) products, whose average price exceeds that 1–5€ range. At the same time, competitors are doing well. For example, Rusta is perceived as a seller of very low-priced products. Also, ÖoB’s concept change seems to have worked, as they have stabilized their results and LFL (like-for-like) customers rose in Q1. Dollarstore was growing fast before Tokmanni (image below).
I would like to emphasize that those pilot stores are new stores opened in new locations. In my opinion, it is not an indication that this new selection (which has worked in pilot stores) would automatically work in old stores, where core customers have reduced their purchases recently due to the changes made by Tokmanni. Also, the good development of competitors may have an impact on the negative development of comparable stores. The shopping basket will surely grow with the change as the store fills with higher-priced products, but the focus is on the development of the customer count!
I don’t think the operating costs of SPAR stores have risen significantly, as these are stores that already operated as fresh food stores. Certainly, during peak hours, checkout staff has had to be increased, but this scales to some extent when the number of other store personnel doesn’t need to increase at the same pace as sales? Rautiainen was interviewed by us specifically regarding the SPAR expansion, which can be viewed here.
That PL growth and gross margin development has been a perpetual problem for Tokmanni also in Finland. I haven’t received a single clear answer from the company regarding this, but in practice, it means that the euros gained from the higher margins and growth of PL have flowed to customers in the form of lower prices. Of course, the procurement organization brings additional costs, but I would like to believe that costs here haven’t risen at the same rate as the number of SKUs. Puuilo is an example of how PL growth has also flowed through to the bottom line (gross margin).
I emphasize that the share of food sales growth has so far been very small relative to Tokmanni’s size. Five stores that previously operated with fresh food have now been converted to SPAR. In the future, however, the trend you presented will be relevant.
In the stores, the product selection has, to my understanding, remained around 30,000 for a long time. There may have been changes in the number of SKUs in the online store, but this is brought about by dropshipping.
Finland accounts for the vast majority of that “other” segment. There is also online sales there, but that is also small. https://www.asiakastieto.fi/yritykset/fi/rusta-finland-oy/07504666/taloustiedot
13 Likes
Has any hard data been released by the company regarding the actual impact of this Tokmanni Klubi “nonsense”? A large portion of Tokmanni’s traditional customer base doesn’t exactly belong to the most enthusiastic (age) group of tech-savvy early adopters.
Personally, at least, I see this Club thing as a negative when browsing Tokmanni’s traditionally good promotional flyer. If something is on what looks like a good offer, it’s only for Club members. The resulting antipathy makes me skip the shopping trip altogether. As a result, the idea of attracting customers with offers works in the exact opposite way. In my opinion, Club offers should be separated from normal marketing into their own channel entirely.
4 Likes
If the Tokmanni Klubi has over three million members, then the majority belong to the club, and regardless of the age distribution, a significant portion also uses the mobile app.
In my opinion, they should act in whatever way is most effective for marketing. In the exact same way, for example, K-Group or Lidl advertise mobile benefits in their circulars or TV commercials.
From the company’s perspective, it is beneficial to guide people into becoming mobile app users. Through the app, they can offer advertisements cost-effectively and in a personalized manner. Furthermore, apps can be harnessed more broadly for commercial use, as we can see in the form of partner offers, etc., from various chains.
5 Likes