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- Tokmanni’s Q1 was weak at group level because the Dollarstore segment in Sweden and Denmark dragged earnings down, while the Tokmanni segment improved its profit. According to the analyst, Dollarstore’s EBIT declined due to assortment and organizational changes, as well as weaker like-for-like sales and customer flows.
- Tokmanni reiterated its 2026 guidance, and the analyst said delivery depends on continued improvement in the Tokmanni segment and a Dollarstore turnaround later this year. He expects the next quarter to remain soft for Dollarstore, with EBIT improvement more likely in the latter part of the year as customer flows and like-for-like revenue recover.
- The analyst estimated Dollarstore’s profitability at below 1% EBIT margin versus a historical level of around 4–5%, while Tokmanni segment profitability remains at a good level relative to its history. Management’s Dollarstore renewal is being implemented in three phases, with two phases in 2026 and the final phase next year.
- On valuation, the analyst said low P/E multiples are offset by weak performance and relatively high leverage, making EV-based valuation appear neutral. Net debt/EBITDA is around 3x, which he described as elevated but not currently alarming, and Inderes maintains a Reduce recommendation because of the risks tied to the Dollarstore turnaround.
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Hi everyone, and welcome to InderesTV. Today we're going to talk about Tokmanni with analyst Arttu Heikura. Welcome. So we're going to talk about Q1, and it was, to be frank, a bit weak, and the part dragging down the group's earnings is Dollarstore. What are the biggest problems here?
Well... If I start from the positive ones, yeah, the Tokmanni segment went quite well. Q1 went quite well. The profit improved. But the biggest problems are in the Swedish and Danish Dollarstore segment. The profit decreased. EBIT has been decreasing for some while. The company is making changes in the Dollarstore segment and making changes to the assortment and also to the organizational structures, which together are now pushing EBIT down, and also the like-for-like revenue and customer flows decreased. during the quarter, so that is one of the key reasons why EBIT also decreased.
Hmm. Yeah. So it's clearly on the dollar store side.
Yep.
Yeah. But Tokmanni repeated its guidance for 2026. But achieving this requires earnings improvement and the Dollarstore turnaround.
Yep.
Do you think this is doable?
Well... I can't directly say,
Mm.
but there is some, if I start from the Tokmanni segment, the profit improvement has been quite good. They have made right decisions in their operations and we see that the profit will improve during the whole year. Dollarstore, um, we see that the next quarter is also going to be a bit slow. But towards the end of the year, given that the company has made changes to the entire concept, we believe that the changes will give some tailwind for the segment, and in the latter part of the year we believe that Dollarstore's EBIT will improve.
Okay, so
And that comes also from improving customer flows and revenue in like-for-like stores.
it will be doable.
Yeah. So far we think so.
Yeah, okay. Costs have risen, and due to the expansion of the store network and organizational changes, what does the profitability look like?
Yeah. Currently, Tokmanni segment profitability is at a good level,
Mm-hmm.
not at the highest level, but on a good level based on Tokmanni's history, whereas the dollar store's profitability is very, very low. It is under one percent on our estimates, and in history Dollarstore has made around a four to five percent EBIT margin. So the current situation in Dollarstore is that profitability is very low.
Very low.
Yes.
Yes, I would say so.
And it is due to these changes and uh decreased customer flows and and things like that.
So how long will these changes take?
Uh the company said that it will take this year uh they are making some um Some renewals in three phases. Two of the phases are happening this year and the third phase is happening during next year. And the company believes that all these changes mean that the concept is ready during next year.
So then we'll see yeah
Yeah.
So management has highlighted the double-digit growth in the SPAR-related stores in Finland.
Yeah.
However, grocery typically has lower margins and higher logistical costs. What is your view on this?
Well, if I start from the basics of grocery business, yes, the margins are low, but... They are kind of compensated with the higher inventory turnover. So with that, the growth and the return on the investments are still on a good level due to the high inventory turnover despite the low EBIT margin. With that, if Tokmanni succeeds in growing the business and is able to keep the ROIC on a good level, that makes sense to grow there. But of course... When it comes to volume, Tokmanni is a very small player in the grocery business right now, so the competitiveness of the entire business is pretty much lower than the biggest players such as S Group and K Group. So the key question is whether Tokmanni is able to compete with these players. And we will see that during the next ten to twenty years. So I mean that this is a very long-term project.
Yeah, a long-term game.
Yeah.
So how will they be testing this SPAR element in Sweden as well?
Not at this moment. No, the SPAR concept, I mean the SPAR license, is for Finland only.
Okay.
But in fact, in Sweden there is no SPAR player. So in theory, Tokmanni could also be expanding its SPAR concept to Sweden, but not at this moment.
Yeah, they have a lot of other stuff to do.
Yep.
Yeah. So we already kind of touched upon this one, but when do you expect the earnings performance to improve?
Yeah, well, we believe that earnings performance will improve during this year. The main driver is the Tokmanni segment because it's the largest segment of Tokmanni Group and makes most of the profits of the entire group. So even only minor improvement in EBITDA will absolutely be much higher. Yeah. Yeah. So, but in the coming years we believe that the Dollarstore segment's renewals of the concept will also... bring more EBITDA, but still, I mean our estimates for Dollarstore are relatively low for the coming years, and if the company succeeds in the entire chain reset it could be much higher, but at this moment we cannot kind of expect very high EBIT growth in the Dollarstore segment because of the poor performance during the last two years.
Mm-hmm. Yeah. So, but in the years to come at least.
Mm-hmm. Yeah.
So, Tokmanni's leverage. Is it on a high, alarming high level or not?
Not that alarming high,
Mm.
but uh it's it's relatively high but
Mm-hmm.
not not alarming.
Yeah.
If the company is able to keep EBIT flat or improve it, then fine. If EBIT goes down, then the situation is much more alarming. Right now, the net debt-to-EBITDA figure is at 3x, and we see that 3x is not the limit but is nearing the limit of covenant boundaries, but The company has improved its inventory turnover and cash flow, so with that we believe that the leverage is coming down uh in the coming years.
Okay.
Yeah.
So not alarming in any way.
Well, I cannot say in any way, but not not right now.
Yeah. So what about valuation and our recommendation?
Well, absolutely, the absolute valuation figures seem pretty low, especially the P/E ratio. Mm-hmm. But when we take into account the poor performance and the high leverage, we see that we have to give more emphasis to the EV-based multiples, and with EV/EBIT multiples, the valuation is rather neutral. And given all the risks related to the Dollarstore turnaround, we think that the uh risk-reward ratio is currently quite poor, and we are currently at Reduce recommendation, but I have to say that if the company succeeds in the Dollarstore turnaround, the returns can also be quite high. So it's very much dependent on Dollarstore's performance during these coming years.
Yeah. Thank you, Arttu, for all these comments. Dependent on Dollarstore's turnaround.
Yep.
Yeah. And if you want to know more, go to inderes.se, and if you have more questions for Arttu, sign in to our forum. welcome.
Tokmanni Q1’26: Waiting for Dollarstore’s turnaround
Tokmanni’s Q1 was a bit weak, with Dollarstore dragging down the group’s earnings. Short-term earnings improvement hinges on Dollarstore’s turnaround, which we view as carrying significant risk, given the company’s recent performance. Analyst Arttu Heikura summarizes.
