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Tokmanni - LFL growth expected to normalize

Tokmanni will report its Q1 earnings on April 25th. Last year’s LFL growth was surprisingly high and for Q1’19 we expect LFL growth to normalize. Tokmanni’s Q1 revenue should be driven by the positive retail growth in early 2019. We retain our “Buy” rating with TP of EUR 9.0

Store network growing fast in 2019

Tokmanni’s store network was 186 at the end of 2018 and in Q1’19 the store network grew by four new stores in Northern Finland through acquisitions. In February Tokmanni agreed on the opening of three new stores in 2019 and on one store reopening. Tokmanni’s revised target is to increase its store network to cover more than 200 stores, which implies of five new store openings or relocated stores each year. With this year’s store network growth Tokmanni should clearly exceed its yearly target.

LFL growth expected to normalize in Q1

As retail market is highly seasonal, Q1 is normally weaker than other periods. Tokmanni’s LFL growth hit records in 2018 with annual LFL growth of +5.6%. In Q1’18 Tokmanni’s reported LFL growth was as high as of 6,1%. We have kept our expectations conservative in 2019E and foresee of LFL growth of 1%. We have retained our gross margin expectation for Q1 at 33,3% even though Tokmanni’s target is to increase the gross margin in 2019.

Retaining estimates intact with “Buy” and TP of EUR 9

We foresee Q1 revenue of EUR 186m (7.2% growth y/y, of which LFL 1.0%) and adj. EBITDA of EUR 5.1m. (EUR 0.9m Q1’18). We retain “Buy” rating with TP of EUR 9.0. On our estimates Tokmanni trades 10.7x and 9x EV/EBIT in FY19-20E (prior IFRS 16 changes) and offers attractive dividend yield in FY19-20E. Our estimates do not reflect IFRS 16 changes yet but will be updated when Q1 results are out.

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