Tokmanni Q1 morning result: DollarStore's seasonality draws attention

Translation: Original comment published in Finnish on 5/17/2024 at 9:26 am EEST.

Tokmanni's Q1 revenue was well in line with our expectations in the seasonally slowest quarter of the year. Tokmanni segment's profitability was slightly above our expectations, but DollarStore's weaker-than-expected profitability led to a revenue shortfall. In our view, the lower than expected profitability can be explained by the higher than expected seasonality of the new DollarStore segment's results. As expected, Tokmanni reiterated its guidance for the current year in the report, but flagged challenges ahead for the start of Q2. 

Revenue in line with expectations

Tokmanni’s Q1 revenue grew by 42% to 339 MEUR, which was in line with our expectations. Although the most significant growth was driven by the DollarStore acquisition, the company also achieved organic growth in both business segments. The Tokmanni segment's revenue grew by 4.2%, while comparable in-store sales increased by 1.7%. According to statistics from the Finnish Grocery Trade Association (PTY), total sales in department stores and hypermarkets grew by 4.5% in Q1, although the emphasis by product category is not fully comparable to Tokmanni. DollarStore's comparable in-store sales also showed a 1.8% increase. According to the company, the timing of Easter in Q1 supported sales. At the end of the quarter, Tokmanni's total number of stores was 372, which clearly exceeded the comparison period's level of 231 stores due to the acquisition of DollarStore and the organic growth of the store network in Finland (+6 stores).

DollarStore's profitability missed our expectations

Tokmanni's comparable EBIT for the first quarter decreased to -5.1 MEUR, missing our forecast of -2.7 MEUR. The Group's comparable gross margin increased to 34.0% from 31.7% in the previous year, making fixed costs the challenge for the quarter. Tokmanni segment profitability improved from the comparison period and exceeded our expectations, but DollarStore's Q1 result was weaker than we expected. Higher than expected seasonality may explain the weaker than expected profitability of the business in Q1. The impact of the events in the Red Sea and the political strikes in Finland may also have put pressure on costs in Q1, although the company has flagged their impact for Q2. Net financial items of 9.1 MEUR were below our expectations, which compensated for the difference with our EPS forecasts.

This year's guidance was repeated

As expected, Tokmanni reiterated its guidance of 1,660-1,760 MEUR revenue and 110-130 MEUR comparable EBIT in its Q1 report. Prior to the report, we expected revenue of 1,673 MEUR and a comparable EBIT of 116 MEUR, so our forecasts are close to the lower end of the guidance range. According to the company, the beginning of the second quarter has been affected by events in the Red Sea and political strikes, which has been reflected in clear shortages in shelf availability and additional costs. The spring season is an important sales period for Tokmanni, but according to the company, it did not fully start in Southern Finland until the beginning of May.