Lukewarm December seals sluggish trade year

Translation: Original published in Finnish on 2/3/2025 at 7:00 am EET.

The target market of Kesko's grocery trade, Tokmanni and Lindex's Stockmann division, i.e. the department store and hypermarket chains, grew by 2% in December, sealing a trading year affected by weak consumer demand. Food was the main growth driver with a 2% increase, while consumer goods had a smaller impact (+1%). Among consumer goods, sales of apparel, which had returned to growth in November, resumed their downward trend (-2%), while sales of household and leisure goods rose by around 2%. On an annual basis, total trade grew by 2%, driven in practice only by food. Thus, we can say that 2024 was a weak year for trade. We believe that interest rate cuts and wage increases will improve consumer confidence in their own economy, thereby improving the conditions for trade growth in 2025.

A strong December for Kesko

Kesko's grocery trade reported growth of almost 5% in December and 2% in Q4. Consumer customer trade in December went clearly better than the market, although Kesko lagged behind market development for the entire quarter. Kespro's December sales were in line with the market, but Kesko's corporate customer trade clearly gained market share for the entire quarter, similar to previous quarters. A strong December bodes well, but what is interesting and crucial for investors in the short term is to monitor the impact of Kesko's price investment program, launched in January 2025, on the growth figures. If growth is not generated by lowering prices, the question arises as to the real competitiveness of Kesko's consumer concepts in a slightly more demanding or even normal market (cf. the COVID period, when Kesko won the market with a quality image). Despite the uncertainties and the sluggish recent performance, we believe that the price investments and in particular the expanding hypermarket network will give Kesko competitive strength in the long term. Kesko will report its results on Wednesday, February 5.

Tokmanni’s market development supports meeting expectations

Developments continued to be mixed for Tokmanni. Grocery sales, which account for around 53% of the company's total sales, continued to grow moderately, while sales in the company's key apparel category continued to decline. For home and leisure products, Q4 was a growth quarter at the market level, which we believe supported the company's performance in the final quarter of the fiscal year. We expect Tokmanni's Finnish business to grow 2.2% in Q4, driven by slight like-for-like growth and an expanded store network, broadly in line with the 2.9% market growth achieved. From this perspective, it will not take a miracle to meet our expectations at the lower end of the guidance range. Tokmanni will report its results on March 7.

Tokmanni recently announced that it is increasing the role of grocery in its Finnish business, which we believe will provide a more regular customer flow, defensiveness and a counterbalance to the recently underperforming consumer goods trade.

Market developments are subdued for Lindex

The market was negative for the Lindex Group, with sales in the key apparel product group down 2% in December and 5% for the full fourth quarter. Our Q4 forecast for the Stockmann division is -2%, so there is some downward pressure on the revenue guidance. For the Group as a whole, however, our earnings forecast is slightly below Lindex's guidance. The company will report its Q4 results on Friday of this week, and it is starting to look like the results will be in line with guidance and thus better than our current forecasts.