Tokmanni |

The largest general discount retailer in Finland

| Finland

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Financial overview

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Tokmanni - Customer flows hampered by COVID-19

27.03.2020 | Company update

Tokmanni withdrew its 20E guidance as there is a clear decline in customer flows due to the coronavirus. New guidance will be given at a later point when the visibility is more clear. We expect 20E sales of EUR 919m (-2.7% y/y) and adj. EBIT of EUR 55.3m (-21% y/y). We note that there are significant uncertainties with our short-term estimates. We keep our rating “BUY” with TP of EUR 12.5 (16).

Coronavirus hampering customer flows
Tokmanni withdrew its guidance for 20E due to the situation around coronavirus. According to the company, after the emergency restrictions that came into force in March, the customer flows have clearly declined in stores. At the current stage, the company doesn’t give a guidance for the year 20E but expects that the coronavirus and the restrictions on movement will affect at least Q2’20E sales. As stated by the company, it is very challenging to estimate the development in H2’20E. Based on the guidance given in February, Tokmanni expected good revenue growth and slight growth in LFL-sales for 20E and profitability (adj. EBIT margin) to increase from the previous year.

Expecting declining sales in Q2’20E
We expect a clear decline in Q2’20E sales (-27% y/y) as the movement restrictions are likely to last for several weeks. Tokmanni aims to keep all the stores open during this unexpected time. We expect the consumer demand for grocery to remain stable but at the same time demand for non-grocery products is expected to decline. We expect online sales to increase but the contribution to the total sales is still expected to remain marginal. As the visibility is very weak it is difficult to estimate the total impacts on H2’20E sales. We expect the lockdowns in China, occurred in Q1’20, to have a negative impact on Tokmanni’s direct import, which will hamper gross margin development. As most of Tokmanni’s employees work in stores (85%), the company should be able to adjust its workforce in some level. We expect only limited adjustment possibilities in other operations, hampering profitability in Q2’20E.

“BUY” with TP of EUR 12.5 (16)
We have decreased our 20E sales expectation by ~8% and adj. EBIT estimate by ~30%. We now expect 20E sales to decline by 2.7% y/y (EUR 919m) and adj. EBIT of EUR 55.3m (-21% y/y), resulting in adj. EBIT margin of 6.0%. We note that there are significant uncertainties with our short-term estimates. We expect the customer flows and demand to normalize relatively fast after the situation and expect Tokmanni is able to return back to its growth path. On our estimates, Tokmanni trades at 20E-21E EV/EBIT multiple of 16.7x and 10.4x, which translates into 4% premium in 20E and 29% discount in 21E compared to the int. discount peers. We keep our rating “BUY” with TP of EUR 12.5 (16).

Tokmanni - Bright future of discount retailing

06.03.2020 | Company report

Tokmanni continued its strong performance in 2019 as sales grew by 8.5% y/y while adj. EBIT margin improved to 7.5%. Profitability improvement through gross margin improvement and OPEX scalability is high on the company’s agenda and we see the set targets to be reachable. We keep our rating “BUY” with TP of EUR 16.

Targeting EUR 1bn of sales

Tokmanni targets EUR 1bn in sales with further store network expansion and LFL growth. With 191 stores at the end of 2019 and at the targeted store network expansion pace (12,000m2 or ~5 stores annually) Tokmanni is set to reach its target of over 200 stores within the next few years. The company’s LFL growth has notably improved from 2017 levels as it was 5.6% y/y in 2018 and 4.3% y/y in 2019. We expect Tokmanni to reach its sales target of EUR 1bn during 2020E.

Further adj. EBIT margin improvement potential

Tokmanni targets to increase its adj. EBIT margin to ~9%. The adj. EBIT margin target implies ~1.5 percentage point (pp) margin improvement compared to the level reached in 2019 (7.5%). Some 0.5-1.5pp of this is to come from gross margin, which is to improve primarily driven by increased direct sourcing and by increased share of private label products in the mix. The targeted gross margin improvement is in line with what we had already incorporated into our estimates and it reaffirms the validity of further sourcing improvement potential, which has been key to our investment case. OPEX scalability should contribute the remaining 0.5-1.0pp. Positive LFL growth and more efficient operations are expected to be a key driver behind OPEX scalability.

We retain our rating “BUY” and TP of EUR 16

We approach Tokmanni’s valuation through our scenario analysis and valuation multiples. Our scenario analysis, with emphasis on base case and optimistic estimates, yields a fair value of EUR 16.0. On our estimates, Tokmanni trades at 20E-21E EV/EBIT multiple of 12.9x and 11.7x which translates into 7-10% discount compared to the Nordic non-grocery peers and 12-17% discount compared to the international discount peers. We keep our rating “BUY” and TP of EUR 16 intact.

Tokmanni - Towards EUR 1bn of sales

10.02.2020 | Company update

Tokmanni’s Q4 result was in line with expectations and the company executed well its strategy to improve profitability. We expect further improvement in profitability, driven by gross margin increase. We expect Tokmanni to reach EUR 1bn (6.2% y/y) of sales in 20E and adj. EBIT increase of ~17% y/y (EUR 82m). We keep our rating “BUY” with TP of EUR 16 intact.

Good performance continued

Tokmanni’s Q4 result was broadly in line with expectations with revenue of EUR 284.8 (+6.1% y/y) vs. our EUR 287.7m (cons. 287.0m). Revenue was driven by successful campaigns whereas the timing of tax refunds, late winter in certain areas and the postal strike weighed down sales. Gross margin increased to 35.2% (Q4’18:34.4%) vs. our 35.5%, reflecting the increase in direct import (28.6% vs 26.4% of total sales in Q4’18). Costs were well controlled and the decreased relative share of operating expenses (18.9% vs. 19.8% in Q4’18) impacted positively on adj. EBIT, which improved by ~26.5% y/y to EUR 32.0m vs. our EUR 32.7m (cons. 31.8m). Proposed ’19 dividend is EUR 0.62 (EUR 0.62/0.60 Evli/cons).

Expecting profitability to further improve and sales of EUR 1bn

Tokmanni successfully executed its strategy to improve profitability in ’19 as adj. EBIT margin rose from 6.0% (2018) to 7.5%. In our view, there is still potential for further profitability improvement, especially through gross margin improvement. The company targets to increase its adj. EBIT margin gradually to ~9% and indicated that gross margin improvement potential is some 0.5-1.5% while the operating expenses improvement potential is ~0.5-1.0%. We expect gross margin (34.4% in ’19) to improve to 34.8% in ‘20E and to 35.1% in ‘21E, boosted by increased share of direct import (and own products). We expect the relative share of operating expenses to decrease by 30-40bps in ‘20E-21E, driven by more efficient supply chain. Tokmanni targets to reach revenue of EUR 1bn (timeline not specified) which we expect to be reached during 20E, as increased customer flows and new store openings are boosting revenue growth. We expect LFL sales growth of 2.0% and 1.7% in 20E-21E.

“BUY” with TP of EUR 16 intact

Tokmanni expects good revenue growth in ‘20E and slight growth in LFL sales. The adj. EBIT margin is expected to increase from the previous year. We have slightly increased our estimates and expect 20E sales of EUR 1bn (6.2% y/y) and adj. EBIT of EUR 82.1 (~17% y/y), resulting in adj. EBIT margin of 8.2%. On our estimates, Tokmanni trades at 20E-21E EV/EBIT multiple of 14.6x and 13.7x which is on par with its Nordic non-grocery peers and 25-27% discount compared to the international peer group. We keep our rating “BUY” with TP of EUR 16.

Tokmanni - Q4 result in line with expectations

07.02.2020 | Earnings Flash

Tokmanni’s Q4 revenue increased by 6.1% and was EUR 284.8m vs. EUR 287.7m/287.0m Evli/consensus. LFL growth was 3.1% vs. 3.7% our expectation. Tokmanni’s adj. EBIT was EUR 32.0m vs. EUR 32.7m/31.8m Evli/cons. Gross margin was 35.2% vs. 35.5%/35.2% Evli/cons.

• Q4 revenue grew by 6.1% and was EUR 284.8m vs. EUR 287.7m/287.0m Evli/consensus. Revenue was boosted by successful campaigns but at the same time the change in the timing of tax refunds, delayed winter season and the postal strike slowed down year-end sales.

• Q4 adj. gross profit was EUR 100.1m (35.2% margin) vs. EUR 102.1.m (35.5 %) Evli expectation.

• Q4 adj. EBITDA was EUR 47.6m vs EUR 47.7m/46.3m Evli/consensus

• Q4 adj. EBIT was EUR 32.0 (11.2% margin) vs. EUR 32.7m (11.4%) our expectation and EUR 31.8m (11.1%) consensus.

• Q4 eps was EUR 0.39 vs EUR 0.41/0.39 Evli/consensus

• 2019 dividend: EUR 0.62 vs. EUR 0.62/0.60 Evli/cons.

• Tokmanni expects good revenue growth for 2020, based on the revenue from the new stores acquired and opened in 2019 and new stores to be opened in 2020, as well as on slight growth in like-for-like revenue. Group profitability (comparable EBIT margin) is expected to improve on the previous year.

Tokmanni - Increasing target price ahead of Q4

31.01.2020 | Preview

Tokmanni reports its Q4 earnings on next week’s Friday, 7th of February. We expect Q4 revenue to grow by 7.2% to EUR 288m and EBIT of EUR 32.7m. We keep our rating “BUY” with updated TP of EUR 16 (13.5) ahead of Q4.

New store openings to support sales

Q4 is normally the strongest quarter in terms of both revenue and profit for Tokmanni. According to PTY, revenue of department stores & hypermarkets grew by some 6% in Oct-Nov but declined by 1.5% in December. Decline in sales was exceptionally high in clothing (-11.6%) but also in home & leisure (-4.8%), partly due to mild winter. We expect Tokmanni’s Q4’19E revenue to grow by 7.2% to EUR 288m (Q4’18 268m) driven by new store openings and increased customer flows. Two new stores were opened during Q4 with combined selling space of ~4500m2. We expect Q4’19E adj. EBIT of EUR 32.7m (Q4’18: 25.6m) resulting in EBIT margin of 11.4%.

Expecting further profitability improvements in 2020E

So far Tokmanni’s ‘19 has been strong. In Jan-Sept’19 LFL sales grew +4.9% and at the same time gross profit developed favorably as gross margin was 34.1% vs. 33.7% in Jan-Sept’18. The actions taken to improve profitability seem to work although we hope to get more color on the progress made in improving the efficiency of Tokmanni’s supply chain as the success of this is one of the key drivers for further profitability improvement. In 2020E, we expect EBIT margin to increase to 8.2%, stemming mainly from gross margin improvement and 4.4% y/y revenue growth (EUR 989m) driven by store network expansion. The company’s long-term target is to reach adj. EBIT margin of ~9%.

“BUY” with TP of EUR 16 (13.5)

We have kept our estimates intact ahead of Q4 and expect FY19E revenue of EUR 947m (FY18: 870m) and adj. EBIT of EUR 71m (FY18: 52m). We expect Tokmanni to propose a dividend of EUR 0.62 per share in ’19 (cons. EUR 0.60). We keep our rating “BUY” with updated TP of EUR 16 (13.5) due to the ~20-30% increase in Nordic non-grocery peer multiples. On our estimates, with the new target price of EUR 16, Tokmanni trades at ’20E-21E EV/EBIT multiple of 16.1x and 14.6x which still translates into ~7-10% discount compared to its international peers.

Tokmanni - Upgraded to “BUY”

31.10.2019 | Company update

Tokmanni’s Q3 sales were in line with our expectation and the company was able to deliver strong earnings. The outlook for future earnings development looks positive. We have increased our estimates for 20E-21E. We upgrade to “BUY” with TP of EUR 13.5 (prev. EUR 10.2).

Solid Q3 performance

Tokmanni’s upswing continued in Q3 as the company beat the already high Q3 expectations. Sales grew by 9.9% (of which LFL growth of 4.9% vs. our 3.0%) to EUR 231.5m vs. EUR 231.3/228.4m Evli/consensus. Sales were supported by increased number of customer visits and higher average purchases but also by tax refunds. Tokmanni’s adj. gross profit was EUR 82.0m (35.4%) vs. EUR 82.1m (35.5%) our view. Gross margin improvement was driven by the structure of sales, private labels and increased direct import. Improved profit margin and lower relative share of costs reflected to the company’s operating result as Tokmanni’s adj. EBIT increased to EUR 21.9m vs. EUR 19.4m/18.7m Evli/consensus.

Positive earnings outlook – estimates upgraded

Tokmanni updated its 2019E outlook for revenue and expects strong revenue growth for 2019 based on the revenue from the new stores acquired and opened in 2018 and new stores to be opened in 2019, as well as on good growth in LFL revenue (prev. Tokmanni expects good revenue growth for 2019, based on the revenue from the new stores acquired and opened in 2018 and new stores to be opened in 2019, as well as on slight growth in LFL revenue.). The company reiterated its guidance for profitability and expects comparable EBIT margin to improve from the previous year. We expect 2019E revenue to grow by 8.8% to EUR 947m and EBIT to improve to EUR 71m (prev. estimate of EUR 68m) resulting in EBIT margin of 7.5% (2018: 6.0%). In our view, Tokmanni has succeeded in appealing more customers by wide selection of products and low prices and the actions taken towards improved profitability are working, creating positive outlook for the earnings development also in the future. The company’s long-term comparable EBIT margin target is about 9% which we believe to be achievable. We have increased our 2020E-2021E revenue expectation by 0.5%-1% and adj. EBIT expectation by 3-4%. We expect 2020E-2021E LFL growth of 1.5% and EBIT margins of 8.2% and 8.6 %.

Seasonally strong final quarter ahead

Tokmanni will open two new stores during Q4’19 in Vääksy and Virrat, which will increase the store network to 191 stores (Tokmanni targets to increase its store network to above 200 stores). The new store openings as well as Christmas sales should support the sales growth in the last quarter of the year, which is normally the strongest quarter of the year for Tokmanni. The company indicated that many of the “easy” ways of improving profitability have already been used but the company continues to take actions towards improved operational efficiency for example by continuing profitability improvements of its supply chain. Margin expansion is also supported by increasing the share of direct import and private labels (the current private label’s share of sales is 31.8%).

Upgraded to “BUY” with TP of EUR 13.5 (10.2)

Tokmanni’s EBIT margin levels in 19E-20E are at the same level with the company’s international discount peers. We see that Tokmanni is able to achieve and maintain higher margins than the Nordic peers, which justifies higher multiples similar to our international discount peer group median. On our estimates, Tokmanni trades at 19E-20E EV/EBIT multiple of 15.0x and 13.1x which translates into 16-25% discount compared to the international discount peers and to ~10% premium compared to the Nordic peers. Our target price translates into EV/EBIT of 16.4x and 14.3x on our 19E and 20E estimates, which still are below the EV/EBIT multiples of Tokmanni’s international discount peers. The company also offers attractive dividend yield (~6%) in 19E-20E. Based on our estimates increase, we upgrade to “BUY” with TP of EUR 13.5 (prev. EUR 10.2).

Tokmanni - Strong performance continues

30.10.2019 | Earnings Flash

Tokmanni’s Q3 revenue increased by 9.9% and was EUR 231.5m vs. EUR 231.3m/228.4m Evli/consensus. LFL growth continues to be above our estimates at 4.9% vs. 3.0% our expectation. Tokmanni’s adj. EBIT was EUR 21.9m vs. EUR 19.4m/18.7m Evli/cons. Gross margin was 35.4% vs. 35.5%/34.4% Evli/cons. Tokmanni updated its 2019E outlook.

  • Q3 revenue grew by 9.9% and was EUR 231.5m vs. EUR 231.3m/228.4m Evli/consensus.
  • Q3 adj. gross profit was EUR 82.0m (35.4% margin) vs. EUR 82.1.m (35.5 %) Evli expectation.
  • Q3 adj. EBITDA was EUR 37.2m vs EUR 34.4m/33.9m Evli/consensus
  • Q3 adj. EBIT was EUR 21.9m (9.5% margin) vs. EUR 19.4m (8.4%) our expectation and EUR 18.7m (8.2%) consensus.
  • Q3 eps was EUR 0.27 vs EUR 0.23/0.22 Evli/consensus
  • Revenue was driven by increased customer numbers and customers’ average purchases but also due to tax refunds
  • Updated 2019E outlook: Tokmanni expects strong revenue growth for 2019, based on the revenue from the new stores acquired and opened in 2018 and new stores to be opened in 2019, as well as on good growth in like-for-like revenue. Group profitability (comparable EBIT margin) is expected to improve on the previous year.

Tokmanni - Expecting a good quarter

22.10.2019 | Preview

Tokmanni will report its Q3 earnings on next week’s Wednesday, October 30th. The company had a strong H1 and we expect the good momentum to continue throughout the year. With the 11.2% share price increase, our rating is now “HOLD” (prev. “BUY”) while our target price remains unchanged at EUR 10.2.

Market pick up providing tail wind

Tokmanni’s H1’19 was strong as the company was able to increase its revenue (9.4% y/y) and keep a good EBIT level, particularly in Q2. We expect the good momentum to continue throughout the year as we enter the seasonally stronger H2. According to PTY, revenue of department store and hypermarket chains increased by 5.3% and 7.4% in July-August (3% y/y in H1’19) which indicates good for Tokmanni in Q3’19. We expect Q3’19E revenue of EUR 231.3m (9.8% y/y, LFL growth 3.0%) vs. EUR 229.6m/cons and EBIT of EUR 19.4m vs. 18.7m/cons. In Q3, Tokmanni strengthened its existing private label assortment with a new label Pisara (beauty and cleansing products). The current share of Tokmanni’s own brands as of sales is ~30% and it plays an important part in Tokmanni’s earnings improvement.

Efficiency improvements ongoing

Tokmanni targets to increase its store network to cover more than 200 stores. The company currently has 189 stores and two new stores will be opened during Q4’19. Tokmanni’s long-term target is to achieve comparable EBIT margin of ~9% by improving gross margin and reducing the relative share of current opex. Some results of the efficiency improvement actions were already shown during H1’19 and we expect further gross margin improvements in H2’19E (35.5% H2’19E vs. 34.3% H2’18). We also expect the profitability improvements of the company’s supply chain to be on the right track, although most of the benefits will be fully seen in midterm.

“HOLD” (prev. “BUY”) with TP of EUR 10.2

We have kept our estimates intact ahead of Q3 earnings and expect 2019E sales of EUR 945.9m (8.7% y/y) and EBIT of EUR 67.6m resulting in EBIT margin of 7.1%. With the share price increase, our rating is now “HOLD” (prev. “BUY”) while our target price remains unchanged at EUR 10.2.

Tokmanni - Good momentum expected to continue

09.08.2019 | Company update

Tokmanni delivered good Q2 earnings. The company focuses on improving profitability in 2019E but will also strengthen its store network in H2 and launch two own brands. Tokmanni reiterated its guidance and expects revenue and EBIT margin to improve from last year. We upgrade to “BUY” with TP of EUR 10.2 (prev. EUR 9.0).

Strong Q2 earnings

Tokmanni delivered strong Q2 earnings. The company’s revenue increased by 10.2 % and was EUR 240m vs. EUR 236m/234m Evli/consensus. The sales were boosted by new store openings and the timing of Easter. The company was also able to reduce the dependence of weather during the spring season. The company’s gross margin was EUR 84.5m (35.2 %) which was close to our expectation of EUR 83.9m (35.6 %). Gross margin improvement was mainly driven by the structure of sales and reduced waste in groceries. Tokmanni’s Q2 EBIT was 18.7m (7.8 %) vs. EUR 15.8m (6.7 %) Evli and 15.0m (6.4 %) consensus. Operational efficiency improvements impacted positively on the company’s profitability in Q2.

Focus on profitability improvements

Tokmanni’s target in 19E is to improve its profitability through improved gross margin and more efficient operations. The company stated that it will keep its customer promise of low prices thus gross margin improvements are made by increasing the share of own brands and direct import as well as by reducing waste in groceries. The profitability improvements of the company’s supply chain are on the right track, although most of the benefits will be seen later in the future.

Upgraded to “BUY” with TP of EUR 10.2 (prev. EUR 9)

Based on the Q2 result, we have raised our 19E-20E estimates and expect 19E revenue of EUR 946m (prev. EUR 936m) and EBIT of EUR 68m (prev. EUR 62m) resulting in EBIT margin of 7.1 %. We expect 20E revenue of EUR 984m and EBIT of EUR 78m (7.9 %). On our estimates, Tokmanni trades at 19E-20E EV/EBIT multiple of 13.4x and 11.4x which translates into ~28 % discount compared to the international discount peers but is valued at par to its Nordic peers. The company also offers attractive dividend yield (~7 %) in 19E-20E. We upgrade to “BUY” with TP of EUR 10.2 (prev. 9.0).

Tokmanni - Strong Q2 performance

08.08.2019 | Earnings Flash

Tokmanni’s Q2 revenue increased by 10.2 % and was EUR 239.9m vs. EUR 236m/234m Evli/consensus. LFL growth continues to be clearly above our estimates at 5.3 % vs. 2.5 % our expectation. Gross margin was 35.2 % vs. 35.6 % our expectation. Tokmanni reiterated its 2019E guidance.

  • Q2 revenue grew by 10.2 % and was EUR 239.9m vs. EUR 236m/234m Evli/consensus.
  • Q2 adj. gross profit was EUR 84.5m (35.2 % margin) vs. EUR 83.9.m (35,6 %) Evli expectation.
  • Q2 adj. EBITDA was EUR 34.0m vs EUR 30.8/29.7m Evli/consensus
  • Q2 adj. EBIT was EUR 18.7 (7,8 % margin) vs. EUR 15.8m (6.7 %) Evli expectation and EUR 15.0m (6.4 %) consensus
  • Q2 eps was EUR 0.21 vs EUR 0.18/0.18 Evli/consensus
  • Revenue was driven by the timing of Easter and good sales in spring season. Also, the operational efficiency measures progressed in the right direction during Q2.
  • 2019 guidance intact: revenue will grow in 2019 based on the sales from new openings in 2018 and in 2019. Profitability will increase y/y in 2019E.

Tokmanni - Boom in store openings in Q2

31.07.2019 | Preview

Tokmanni will report its Q2 result on next week’s Thursday, August 8th. The company has opened and relocated stores in a good pace in Q2 and therefore the company should clearly exceed its annual expansion targets in 2019. We expect Q2 LFL growth of 2.5% and continued profitability improvements. We keep our rating “HOLD” with TP of EUR 9.0 ahead of Q2.

New store openings in Q2

Tokmanni’s target is to increase its store network to above 200 stores and to increase its retail space by some 12,000 square meters annually which means approximately five new store openings per year. During Q2’19, Tokmanni has reopened the old Ale-Makasiini stores under the Tokmanni brand in Central Finland, which the company acquired in Q4’18. The company has also relocated stores and opened new stores in Tesoma and Loppi in Q2. Due to the active opening pace in H1, Tokmanni will exceed its annual target of approx. five new store openings/year.

Improving profitability in 2019E

Tokmanni is focusing towards improved profitability in 2019E. The company aims to reach ~9% adj. EBIT margin in long-term. Profitability improvements will be made through gross margin and operational efficiency improvements such as pushing OPEX as % of sales down. Some results were shown already in Q1’19 and we expect the same trend to continue in Q2. We expect 2019E EBIT of EUR 62m (~19% growth y/y), while consensus is at EUR 61m.

We keep our rating “HOLD” with TP of EUR 9.0

We have kept our estimates intact and expect Q2 revenue of EUR 236m (cons. EUR 234m) and gross margin of 35.5%. Tokmanni’s LFL growth was exceptionally high in Q2’18 (7.7%). We have taken a more conservative view for Q2’19 LFL growth and expect LFL growth of 2.5%. We foresee Q2 EBIT of EUR 16 (cons. EUR 15m) and EBIT margin of 6.7%. On our estimates, Tokmanni trades at 19E-20E EV/EBIT multiple of 13.8x and 11.8x (~2-5% premium compared to the peer group). We keep our rating “HOLD” with TP of EUR 9.0 ahead of Q2.

Tokmanni - Focus on improving profitability in ‘19E

26.04.2019 | Company update

Tokmanni’s focus in 2019E is to increase profitability and profit margin. Tokmanni’s revenue and LFL growth grew well in Q1 driven by campaigns and clearance sales. We see valuation of being moderate. Hence, we retain TP of EUR 9.0, but downgrade our rating to “HOLD”

LFL growth was clearly above expectations

Tokmanni’s Q1 revenue grew by 8.3% and was EUR 188m vs. EUR 186m our expectation. LFL growth continued to be high with 4.1 % growth vs. 1 % our view. Sales was driven by clearance sales, Nettopäivät campaign and the change in assortment of newly-aqcuired Ale-Makasiini stores. Sales development was particularly good in clothing and tool products categories. At the same time, discounted prices weighed down gross margin (31,2% vs. 33,3% our view). Tokmanni’s target is to increase its gross margin and profitability and reduce the relative share of fixed costs in 2019E.

Focus on new store openings and increase in profitability

Tokmanni’s target to expand its store network has been efficient. In Q1’19 Tokmanni’s store network was 188 stores (175 stores in Q1’18). Tokmanni reiterates its guidance and targets to increase its retail space by some 12,000 square meters annually which means approximately five new store openings per year. Tokmanni has agreed on opening of seven new stores and two relocated stores during 2019, hence, Tokmanni will exceed its targets in 2019E.

Retaining TP of EUR 9 with “HOLD”

Tokmanni’s figures were impacted by the changes of IFRS 16. We have updated our figures to reflect the changes. Based on Q1 results, we have slightly adjusted upwards our estimates. We now see revenue of EUR 936m and EBIT of EUR 63m for 2019E compared to previous estimates of EUR 921m and EUR 58m. In 2019E Tokmanni trades at 13x EV/EBIT which is some 18% discount to Nordic grocery focused peers. We retain our TP of EUR 9, but downgrade our rating to “HOLD”.

Tokmanni - LFL growth continues to be impressive

25.04.2019 | Earnings Flash

Tokmanni had revenue of EUR 188,1m, which beats EUR 186/184m Evli/consensus estimates by ~ 1 %. LFL growth continues to be clearly above estimations at 4.1% vs. 1% our expectation. Strong revenue and LFL growth were driven by Nettopäivät campaign, change of assortments of Ale-Makasiini stores and clearance sales. Gross margin was 31,2 % vs. our 33,3% expectation. Due to the changes of IFRS 16, adj. EBITDA of 12.8 is not comparable with our estimate of 5.1. Tokmanni 2019E guidance reiterated; profitability and adj. gross margin are expected to increase from last year.

  • Q1 revenue was EUR 188m vs. EUR 186m/184m Evli/cons, ~1 % above estimates. Revenue grew by 8.3% y/y, driven by 4.1% LFL growth (Evli LFL expectation 1%) and new openings.
  • Q1 adj. gross profit was EUR 58.8m (31.2% margin) vs. EUR 62.0m (33,3%) Evli expectation.
  • Q1 adj. fixed costs in total were EUR 46.8m (24.9% of revenue) vs. EUR 57.8m (31.1% of sales) Evli view.
  • Q1 adj. EBITDA was EUR 12.8m (6.8% margin) vs. EUR 5.1m (2.7%) Evli and EUR 5.3m (2.9%) consensus.
  • 2019 guidance intact: revenue will grow in 2019 based on new openings in 2018 and in 2019. Profitability (adj. EBITDA margin) will increase y/y in 2019E.

Tokmanni - LFL growth expected to normalize

18.04.2019 | Preview

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.

Tokmanni - Towards improving profitability in 2019E

11.02.2019 | Company update

Tokmanni’s focus is shifting towards improving profitability in 2019E. We continue to consider valuation is being moderate against the margin improvement potential and hence we retain “Buy” rating with an ex-div TP of EUR 9.

Q4 was just fine

Tokmanni’s Q4 revenue grew broadly as expected, with LFL still strong at 4.7% vs. our 4.0% expectation. However, adj. EBITDA missed estimates by EUR 3m, driven by one-off costs due to a product recall in the quarter (adj. EBITDA impact EUR -1.4m) and other one-off costs related to integration of the acquisitions carried out in late 2018. Integration costs should not have a meaningful impact on Q1’19, we understand. The negative impact of the product recall on gross profit was estimated at EUR 1.1-1.2m – excluding this the gross margin would have been in line with our estimate of 34.8%. Overall, Q4 looked just fine.

Focus shifting towards improving profitability in 2019E

Tokmanni’s 2018 was about improving customer trust by investing in prices, marketing and selections. In 2019E focus is shifting towards improving profitability by increasing the revenue share of direct imports (ie. increasing the gross margin) and pushing OPEX as % of sales down. Certain real estate - related costs have already been negotiated down.

Now targeting above 200 stores

Tokmanni updated its financial targets to reflect IFRS 16. These included no drama, but at the same time the target for the store network was revised to “above” 200 stores vs. “about” 200 stores previously. This is based on a view that demand will be sufficient.

Retaining Buy” with ex-div TP of EUR 9

We continue to consider valuation is being moderate against the margin improvement potential and hence we retain “Buy” rating with an ex-div TP of EUR 9.

Tokmanni - Adj. EBITDA misses due to one-offs; dividend beats; guidance in line

08.02.2019 | Earnings Flash

Tokmanni’s revenue grew broadly as expected, with LFL still strong at 4.7% vs. our 4.0% expectation. Adj. EBITDA misses estimates (EUR 28.2m vs. EUR ~31m Evli and cons), driven by one-off costs due to a product recall in the quarter (impact EUR -1.4m) and other costs related to integration of Ale-Makasiini and by prerarations related to the purchase of stores in Northern Finland. Dividend is a bit better than expected, while guidance for 2019E is unsurprising. Tokmanni updated its financial targets to reflect IFRS 16, and now targets “above” 200 stores vs. “about” 200 stores previously. Overall, the report looks just fine.

  • Q4 revenue was EUR 268m vs. EUR 267/269m Evli/cons. Revenue grew by 8.0% y/y, driven by 4.7% LFL growth (Evli exp. 4.0%) and new openings.
  • Q4 adj. EBITDA was EUR 28.2m (10.5% margin) vs. EUR 31.0m (11.6%) Evli and EUR 31.3m (11.7%) consensus. The miss is driven by one-off costs due to a product recall in the quarter (impact EUR -1.4m) and other costs related to integration of Ale-Makasiini and by preparations related to the purchase of stores in Northern Finland.
  • 2018 dividend: EUR 0.50 vs. EUR 0.45/0.47 Evli/cons.
  • 2019 guidance is unsurprising: Tokmanni expects good revenue growth for 2019, based on the revenue from the new stores acquired and opened in 2018 and new stores to be opened in 2019, as well as on slight growth in LFL revenue. Group profitability (comparable EBIT margin) is expected to improve on the previous year.

Tokmanni - Expecting growth in revenue, earnings and dividend

23.01.2019 | Preview

Tokmanni will report its seasonally strong Q4 earnings on Feb 8th. As usual LFL growth and margins are of interest. We expect revenue and earnings to grow with continued LFL growth and stable gross margin. We foresee the dividend at EUR 0.45, which corresponds to 70% EPS payout and yields 5.6%. Our rating and target price (“Buy”, TP EUR 9) remain intact ahead of Q4 earnings.

Store network approaching 200 stores with acquisitions

Tokmanni acquired 4 stores in Northern Finland in December with combined revenue of some EUR 9m in 2017. The stores were transferred to Tokmanni at the beginning of 2019. These together with the earlier Ale-Makasiini acquisition (9 stores, revenue EUR 20m in 2017) put Tokmanni's store count at 190 vs. the target of about 200 stores. At the targeted opening pace of ~5 stores per year, Tokmanni is set to reach its 200 store target in the next couple of years. Growth beyond this was not addressed at the CMD in December, but plans are likely to receive increased attention going forward.

Expecting continued LFL growth and stable GM in Q4

Tokmanni’s LFL growth has surprised positively in Q1-Q3 (+6%), considering the company has had zero or slightly negative LFL growth in recent years. Solid LFL growth has been supported by weak comparables, better weather, assortment improvements and somewhat more active take on campaigning. Revenue guidance was raised to reflect good LFL performance with Q3 earnings. We expect LFL growth to continue at solid 4% level in Q4, but for 2019E we maintain a more conservative 1% LFL growth assumption. We foresee the gross margin at 34.8% in Q4, which is in line with the average level of Q4s in 2015-2017.

Expecting growth in revenue, earnings and dividend

We expect Q4 revenue of EUR 267m (7.5% growth y/y, of which LFL 4.0%) and adj. EBITDA of EUR 31.0m (EUR 28.6m y/y). We expect a dividend of EUR 0.45, which corresponds to ~70% EPS payout and yields 5.6%. Our rating and target price (“Buy”, TP EUR 9) remain intact ahead of Q4 earnings.

Tokmanni - CMD: strategy and targets reaffirmed

05.12.2018 | Company report

Tokmanni’s CMD provided an update into the company’s strategic focus areas and targets. The CMD reaffirmed that the sourcing improvement potential, which has been key to our investment case, remains intact and is of high importance in management’s agenda. We continue to expect margins to improve in upcoming years and hence retain “Buy” rating with TP of EUR 9 for the shares.

Targeting EUR 1bn in sales by 2020E

Tokmanni targets EUR 1bn in sales by 2020E with further store network expansion and LFL growth. After the recent Ale- Makasiini acquisition the store count is now 186 stores vs. the target of 200 stores. At the targeted expansion pace (12,000m2 or ~5 stores annually) the target of 200 stores will be reached within the next few years. Growth plans beyond this were not addressed.

EBITDA to 10% via improved sourcing and OPEX scalability

Tokmanni continues to target 10% adj. EBITDA margin. This does not include impact of upcoming IFRS 16. The target implies 2- 3% margin improvement compared to the level reached in recent years. 1-2% of this is to come from the gross margin, which is to improve primarily driven by increased direct sourcing and by increased share of private label products in the mix. The targeted gross margin improvement is in line with what we had already incorporated into our estimates and it reaffirms the validity of further sourcing improvement potential. OPEX scalability should contribute the remaining 1-1.5%. Positive LFL growth is expected to be a key driver behind OPEX scalability.

Maintaining “Buy” on margin improvement potential

We have included the acquired Ale-Makasiini into our estimates, but for other parts our estimates remain broadly intact. We expect earnings to improve in 2019-2020E driven primarily by gross margin improvements via more efficient sourcing. We consider valuation moderate against the margin improvement potential and hence retain “Buy” rating for the shares.

Tokmanni - Delivering LFL growth

25.10.2018 | Company update

Despite adj. EBITDA miss Tokmanni’s Q3 report looked quite good overall, with solid LFL growth, upgraded guidance and stable gross margin. Sourcing did not improve, but work continues. More efficient sourcing remains key to our investment case in the mid-term. We think valuation looks attractive against the margin/sourcing improvement potential, and hence retain “Buy” rating with TP of EUR 9.

Continued LFL growth prompted a revenue guidance upgrade

Tokmanni delivered 4% LFL growth in Q3 vs. our 2% expectation, and thereby continued good performance from H1. Assortment improvements and investment in prices were mentioned as positive contributors, as earlier. Continued LFL growth improves trust on own actions yielding results and prompted a revenue guidance upgrade for 2018E.

Adj. EBITDA missed due to OPEX

Despite a sales beat adj. EBITDA missed estimates in Q3, driven by OPEX. Store refurbishments and changes to the store network burdened OPEX, which increased slightly as % of revenue in Q3 vs. decreased in H1. Management was not happy with the development and seeks to turn the trend.

More efficient sourcing remains key to our investment case

Tokmanni’s gross margin improved slightly in Q3 and was broadly as we expected. Yet the share of direct imports and PL products of sales was flat in Q3. More efficient sourcing remains key to our investment case in the mid-term, as without this Tokmanni is unlikely to meet the gradual gross margin improvement we have incorporated in our estimates for 2019-2020E.

Estimates largely unchanged – “Buy” retained, TP EUR 9

Our estimates remain largely unchanged after Q3. On our estimates Tokmanni is valued at par to its Nordic peers in FY19- 20E on EV/EBITDA, but at a discount on EV/EBIT and EV/FCF. Our DCF model yields fair value of EUR 11, but this is with a 6.5% terminal EBIT margin assumption that has not been reached historically – using 5% our DCF model would yield a fair value of EUR 9 per share (company has reached ~6% each year in 2013- 2016). We retain “buy” rating with TP of EUR 9.

Tokmanni - Adj. EBITDA miss despite revenue beat; upgrades guidance

24.10.2018 | Earnings Flash

Tokmanni beat estimates on revenue, but missed them on adj. EBITDA. Stronger revenue is driven by LFL growth of 4.0% vs. our 2.0% expectation, whereas the adj. EBITDA miss is driven by higher than expected OPEX. Tokmanni upgrades its guidance after the third quarter for revenue: revenue growth will be “strong” (prev: “good”) in 2018, based on new openings and “good” (prev: “low single-digit”) LFL growth. Adj. EBITDA margin guidance is intact. The change in guidance wording improves trust for seasonally strong Q4, in our view. Despite the adj. EBITDA miss we consider the report to be fairly good, due to stronger LFL growth and stable gross margin.

  • Q3 revenue was EUR 211m vs. EUR 207m/208m Evli/cons, 1-2% above estimates. Revenue grew by 7.8% y/y, driven by 4.0% LFL growth (Evli exp. 2.0%) and new openings. Good LFL growth is attributed to assortment improvements and investments in prices.
  • Q3 adj. gross margin was 34.2% vs. 34.4% Evli estimate. the share of direct imports and PL products of total sales remained flat y/y.
  • Q3 adj. fixed costs in total were EUR 54.9m (26.1% of revenue) vs. EUR 52.6m (25.4% of sales) Evli view.
  • Q3 adj. EBITDA was EUR 18.2m (8.6% margin) vs. EUR 19.6m (9.5%) Evli and EUR 19.2m (9.2%) consensus.
  • 2018 guidance upgraded: revenue growth will be “strong” (prev: “good”) in 2018, based on new openings and “good” (prev: “low single-digit”) LFL growth. Profitability (adj. EBITDA margin) is expected to increase in 2018E (intact). CAPEX will be at the level of depreciations in 2018.

Tokmanni - LFL growth should normalize

11.10.2018 | Preview

Tokmanni will report its Q3 business review on October 24th. In Q3 comparables no longer provide tailwind as in H1, which should make the quarter more normal and better representative of how assortment improvements and other development actions yield results. Our estimates, rating and TP are intact ahead of the Q3 report.

Non-grocery market growth figures indicate softer demand

PTY statistics indicate the non-grocery market grew by -4.2% in July and by -1.4% in August. Still in H1 non-grocery market grew by +1.5%. PTY statistics thus seem to indicate somewhat softer demand in the market in Q3 vs. H1.

We expect positive LFL growth to continue from H1

Tokmanni delivered 7.0% LFL growth in H1, supported by weak comparables, better weather, assortment improvements and somewhat more active take on campaigning and their better management. In Q3 comparables no longer help and hence LFL growth should normalize. We have incorporated LFL growth of +2.0% for Q3.

Estimates, rating and TP intact ahead of Q3

We expect revenue of EUR 207m (6.1% growth y/y, of which LFL 2.0%) and adj. EBITDA of EUR 19.6m (EUR 16.1m y/y) in Q3. Our “Buy” case and TP EUR 9 remain intact ahead of the Q2 report, as valuation remains attractive against the sourcing improvement potential and related gross margin improvement potential, in our view.

Tokmanni Q319 interview with Mika Rautiainen

Tokmanni - Q3/19 video with CEO Mika Rautiainen

31.10.2019
Tokmanni company presentation 13082019

Tokmanni - Company presentation

13.08.2019
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Tokmanni company presentation 13082019

Video presentation

Company Facts

Financial targets

Long-term target: low single digit growth in like-for-like revenue and comparable EBIT margin of approximately 9 percent.

Share price (EUR)


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