Translation: Original published in Finnish on 12/18/2024 at 8:39 am EET.

Lindex announced yesterday that it is continuing to investigate strategic alternatives for its department store business, which was initiated in the fall of 2023, and expects this to be finalized during H1'25. Initially, the company had expected the evaluation to be finalized this year. In our view, it still seems likely that the company is trying to exit the department store business, although it is not certain that this will be successful. The delay may be related to the ongoing restructuring, which could be completed in the near future. We do not see this news as materially changing our previous estimates.

Results of the strategic assessment delayed until next year

The company announced over a year ago that it would launch a strategic review of its department store business, the Stockmann division. The results were promised to be announced this year, but now the timetable has been extended to H1'25. The new timetable may be partly related to the restructuring disputes, where the last disputed case was decided by the district court only a couple of weeks ago. Lindex may therefore want to wait until the end of the restructuring process is clearly in sight before publishing the results of the strategic assessment. However, we do not believe that the completion of the restructuring is critical to the sale of the department stores, but it would facilitate the process. In practice, we believe that the continuation of the review means that the process of selling the department store operations is in progress. If the company planned to keep its department store operations within the group, it would probably not need any more time to announce the decision. In addition to the restructuring timeline, the main question is likely to be whether Lindex can find a buyer/taker for the department stores on terms suitable for Lindex. We believe that a strong candidate for this is Lindex's current major shareholder, Nordic Retail Partners. We continue to believe that the most likely outcome is an exit from the department stores, although of course this is far from certain.

At least some more information on the latest restructuring dispute expected later this year

Lindex has only one disputed debt remaining from the restructuring. In this context, at the end of November, the District Court decided to uphold an earlier arbitration decision which ordered Lindex to pay a total of 19 MEUR to LähiTapiola for the termination of the lease. Of this amount, just over 3 MEUR has already been paid and the remaining 16 MEUR has been recorded as a provision in Lindex's results but has not yet been paid. However, the payment is factored into our forecasts. Any appeal of this decision to the Court of Appeal must be filed before the end of this year, so further information will be available soon.

We believe that Lindex will try to complete the restructuring as soon as possible and will be willing to pay the additional 16 MEUR to LähiTapiola. The restructuring supervisor must also approve the solution, so it is not entirely in the hands of the company. It is also possible that Lindex and LähiTapiola could agree to transfer the disputed amount to an escrow account, which would allow the restructuring to be terminated while the dispute continues. It is indeed possible that Lindex will appeal the recent decision to the Court of Appeal just to be on the safe side but in any event will seek a solution in the near future that would put an end to all disputes and thus the restructuring process. This would also facilitate the publication of the results of the strategic review of the department store business and the possible realization of the sale of the department store operations.