Tokmanni Q1’26: Waiting for Dollarstore’s turnaround

Added: 2026-05-26

[00:00:00]Hi everyone, and welcome to Inderes TV.

[00:00:01]Today, we're going to talk about Tokmanni with analyst Arttu Haukka.

[00:00:05]Welcome.

[00:00:11]So, we're going to talk about the Q1.

[00:00:13]Mhm. And it was, to be frank, a bit weak. And the part dragging it down is the group and the group earnings is Dollar Store. What are the biggest problems here?

[00:00:22]Well, if I start from the positive ones, uh Tokmanni segment went quite well. The Q1 went quite well.

[00:00:30]Uh the profit improved. But uh the biggest problems are in the in the Sweden and Danish Dollar Store segment.

[00:00:40]Um the profit decreased and the the EBIT has been decreased for some while.

[00:00:50]Uh the company is making changes in the Dollar Store segment and making changes to the assortment and also to the organizational uh structures, which uh together are now pushing the the EBIT down. And also the the like-for-like revenue and customer flows decreased during the quarter. So, so that is the one key reasons uh why the why the EBIT also decreased. Mhm.

[00:01:20]Yeah.

[00:01:21]So, it's clearly on the Dollar Store side.

[00:01:24]>> Yep. Yeah.

[00:01:25]But Tokmanni repeated its guidance for 2026, but achieving this requires earnings improvement and a Dollar Store turnaround.

[00:01:33]>> Yep. Do you think this is doable?

[00:01:35]Well, I can't directly say, but uh there is some uh if I start from the Tokmanni segment, uh the profit improvement has been uh quite good. They had make They have make made uh right decisions in the in their operations, and we see that the profit will improve uh during the whole year.

[00:01:59]Dollar Store, um we see that the next quarter is also going to be going to be a bit bit slow.

[00:02:09]But towards the end of the year, uh given that that the company has or will be will make changes to the entire concept, we believe that the the changes uh will will um give some uh tail headwinds for the for the segment and the latter part of the year, we we believe that the the Dollar Stores EBIT will improve. Okay.

[00:02:38]And that comes also from the from the improving customer flows and uh and uh revenue in like-for-like stores. So, it will be doable.

[00:02:50]Yeah.

[00:02:51]So far, we think so. Yeah, okay.

[00:02:54]Costs have risen and due to the expansion of the store network and organizational changes, what does the profitability look like?

[00:03:02]Yeah, um uh currently, Tokmanni segment's profitability is at the good level.

[00:03:08]>> Mhm. Uh not not at highest level, but on a good level on based on the Tokmanni history.

[00:03:16]>> [snorts] >> Whereas the Dollar Stores profitability is very very low. Uh it is like under under 1% on our estimates and in history, Dollar Store has made some uh around four four to five percent EBIT margin, so the current situation in in Dollar Store is uh the profitability is is very low.

[00:03:40]>> Very low. Yes, so it seems. And it is due to these changes and uh decreased customer flows and and things like that.

[00:03:48]So, how long will these changes take? Uh the company said that it will take this year. Uh, they are making some some renewals in three phases. Uh, two of the the phases are happening this year and the third phase is happening during the next year. And the company believes that all these changes and they think that the concept is ready uh, during the next year. So, then we'll see. Yeah. Yeah.

[00:04:21]So, management has highlighted the double-digit growth in the SPAR piloted stores in Finland. However, grocery typically has lower margins and higher logistical costs.

[00:04:32]What is your view on this?

[00:04:35]Well, uh, if I start from the from the basics of of grocery business, yes, the margins are low, but uh, they are kind of compensated with the higher inventory return over. So, so with with that the the growth and return on the on the investments are are still on a good level due to the high high in inventory turnover despite the low low EBIT margin.

[00:05:10]Uh, with that if Tokmanni succeeded succeeds in in growing the business and uh, is able to keep the keep the ROIC on on a good level. So, that that makes sense to grow there.

[00:05:26]But, um, of course, when when the volumes that Tokmanni is very very small player in the grocery business right now.

[00:05:36]So, kind of the competitiveness of the entire business is is pretty much lower than the biggest players such as S Group and K Group. So, that is the key question that whether Tokmanni is able to compete with this with these players. And we will see that during the next 10 to 20 years. So, I mean that this is very long-term project. Yeah, a long-term game. So, so how will they be testing this SPAR element in Sweden as well?

[00:06:11]Not at this moment, no. The the SPAR concept, I mean the SPAR license is for Finland only. Okay.

[00:06:21]But, in fact, in Sweden, there is no SPAR SPAR player. So, in theory, theoretically, Tokmanni could be also expanding SPAR to the Sweden, but not at this moment. Yeah, they have a lot of other stuff to do.

[00:06:38]Yeah. So, we already kind of touched upon this one, but when do you expect the earnings performance to improve?

[00:06:44]Yeah. Well, we believe that the that the earnings performance will improve this during this year.

[00:06:51]The main driver is there the Tokmanni segment because it's the highest higher I mean largest segment of Tokmanni and makes the most profit of the profits of the entire group. So, the only minor improvement in the EBIT will also absolutely be much more higher. Yeah.

[00:07:16]>> Yeah.

[00:07:16]So, but in the coming years, we believe that the dollar store segments renewals of the concept will also bring more bring bring more EBIT and but still I mean our estimates for the dollar store are kind of relatively low for the coming years. And if the company succeeds in the in the entire changes, it could be much more higher, but at this moment we cannot kind of ex- expect very high EBIT growth in the in the dollar store segment because of kind of poor poor performance during last one or two years.

[00:08:05]>> Mhm. Yeah.

[00:08:06]So, but in the years to come at least.

[00:08:09]>> Mhm. Yeah.

[00:08:11]So, talk about its leverage. Is it on a high Mhm.

[00:08:15]>> alarming high level or not? Not that alarming high, but it's it's relatively high, but not not alarming. Yeah. If the company able is able to, you know, keep the EBIT flat or improve. If the EBIT goes down, then the situation is much more alarming. Mhm.

[00:08:38]Right now, the net debt to EBITDA figure is at 3x and we see that 3x kind of is kind of um not the limit, but is nearing the limit of of covenant boundaries, but uh the company has improved its its inventory turnover and cash flow, so with that we believe that the leverage is coming down.

[00:09:09]Uh in the coming years. Okay.

[00:09:12]>> Yeah.

[00:09:13]So, not alarming in any way.

[00:09:16]Well, I cannot say in any way, but not not right now.

[00:09:21]>> Yeah.

[00:09:22]So, what about valuation and our recommendation?

[00:09:25]Well, absolutely all the absolute valuation figures seems pretty low.

[00:09:36]Ex- especially the PE ratio.

[00:09:39]>> Mhm. But uh when we take into account the kind of poor performance and the high high leverage, we see that we have to give more emphasis on the EV EV based multiples and with EV EBIT uh multiples, the valuation is not uh I mean, it's rather neutral.

[00:10:04]And given all the risks uh related to the Dollar Store turnover um turnaround, I mean, we think that the uh risk-reward ratio is currently quite poor and uh we we we we are currently in in reduce reduce recommendation, but I have to say that if the company succeeds in the in the Dollar Store turnaround, uh I mean, the uh the returns can be can can be also quite high. So, it's very much dependent on the on the Dollar Stores performance during these uh coming years. Yeah.

[00:10:51]Thank you, Arttu, for all these comments. Dependent on Dollar Stores turnaround. Yeah. Yeah.

[00:10:57]And if you want to know more, go to inderes.se. And if you have more questions to Arttu, sign in to our forum. Welcome.