Translation: Original comment published in Finnish on 10/2/2023 at 7:00 am EEST

The Finnish Grocery Trade Association (Päivittäistavarakauppa ry PTY) reported that the revenue of department store and hypermarket chains (K-Citymarket, Prisma, Sokos, Tokmanni, Minimani and Stockmann) grew by 7.3% in August. Grocery sales grew by 9.5% and the revenue of the consumer goods trade turned up from the previous month's decline, although the increase in sales was subdued at 2.6%. Within consumer goods trade, clothing sales were 7.6% above the comparison period, while the sales of home and leisure goods grew by just 1%.

Market development slightly better than our Stockmann forecasts

Clothing is clearly the biggest product group for Stockmann's department stores. Some conclusions can also be drawn concerning Lindex from the market development. However, clothing store figures are not included in these statistics and Finland is not Lindex's main market unlike in department stores. We estimate that Stockmann department stores' revenue growth in Q3 is -3%, so after the market's good August, Q3 development thus far (clothing +4%) is somewhat better than we expected. We believe that the warm weather in September has slowed down the clothing trade. However, Stockmann’s figures are depressed by, e.g., the decrease in the floor area of the Itis department store. Overall, however, our forecasts are subject to slight upward pressure.

Kesko’s development in line with the market

The daily goods trade grew by 5.6% in August, which is almost in line with the comparable growth (5.3%) in the grocery segment reported by Kesko. The value of foodservice wholesale (incl. Kespro, Meira Nova Oy, Suomen Palvelutukkurit Oy, Valio Oy / Valio Aimo ja Wihuri Metro-tukku) increased by 2.4% in August from the comparison period. Kesko’s foodservice business Kespro grew by 6.3% during August, which signals a clear increase in the market share. We estimate that the volume in the grocery market increased, as the price increase (6.8%) was weaker than sales growth. We consider grocery volume growth a positive driver for Kesko, as a significant share of Kesko Group’s earnings comes from wholesale to K-retailers. At the same time, competition in the Finnish grocery trade has intensified as S Group opens new marketplaces at a rapid pace. Kesko has partly responded to the competition by announcing new store openings and real estate development projects. As market news were expected from Kesko’s point of view, we do not see any need for forecast changes in the company’s grocery segment. We expect that Kesko’s grocery trade sales growth was 4% in Q3, which is explained by, for example, a sluggish July.

Expected market development for Tokmanni

For Tokmanni, the reported market figures were in line with our expectations, as we estimate 1% comparable and 4% reported (incl. new store openings) revenue growth in Finland in Q3. Tokmanni Group’s 25% growth estimate for Q3 is affected by the Dollarstore acquisition in Sweden.