Lindex Group Q3’24 flash comment: Poor result, upper limits of guidance lowered

Translation: Original published in Finnish on 10/25/2024 at 9:12 am EEST.

Lindex Group's Q3 results were well below our expectations and the comparison period, as the Lindex segment's sales suffered from logistical problems and its gross margin was also below our expectations. The company also lowered the upper end of its full-year guidance and now expects an adjusted EBIT of 70-80 MEUR. A weak Q3 naturally puts downward pressure on forecasts and we believe there is still work to be done in Q4 to meet the lower end of the guidance. There was nothing new to report on the restructuring process and the strategic review of the department stores, but we expect more news on this later in the year. 

Revenue decreased in both segments

Lindex Group revenue decreased 2%, or slightly more in local currencies, compared to our forecast of flat revenue development year-on-year. The revenue of the Lindex division declined 2% (-2.5% in local currencies) due to international logistical challenges, compared to our expectations of 1% growth. In Sweden, Lindex's main market, the market development has been slightly positive, so the Lindex division seems to have lost some market share as a result of the challenges. The Stockmann division's revenue decreased by 3%, in line with our expectations, partly due to weak market development in Finland.

Below prior year result and weaker-than-expected Lindex segment

The Lindex division's adjusted EBIT was 21 MEUR, well below our expectations (27 MEUR) and the comparison period (26 MEUR). The Lindex division's gross margin was 63.3%, slightly down year-on-year and below our expectations, although still at a good level. The weaker results were mainly due to lower-than-expected revenue and gross margin, but fixed costs were also slightly higher than expected. The result of the Stockmann division was broadly in line with our expectations (-5 MEUR) and flat year-on-year, with cost increases offsetting the impact of lower revenue. In addition to weak EBIT, EPS were negatively impacted by significantly higher-than-expected taxes.

Upper end of guidance was lowered; after a weak Q3, there is still work to be done in Q4 to reach the lower end

Lindex revisited its guidance and lowered its upper ends. In 2024, the company now expects revenue to change by -2% to 0% in local currencies (previously +/- 2%) and adjusted EBIT to be 70-80 MEUR. In January-September, net sales decreased by 2.2% in local currencies and adjusted EBIT decreased by 11 MEUR (adj. EBIT was 80 MEUR in 2023). Even before the Q3 result, our forecast was already below the midpoint of the old guidance. Given the weak Q3 and January-September performance, we believe the lower end of the guidance range is realistic, but even that requires a relatively successful Q4.

There was nothing new to report on the restructuring process and the strategic review of the department stores. However, the strategic review is expected to be completed this year.