Lindex Q1 morning result: Earnings slightly missed, progress in restructuring disputes

Translation: Original comment published in Finnish on 4/26/2024 at 9:21 am EEST.

Lindex Group's Q1 results were weaker than expected in both divisions, but in the Stockmann division only due to the timing of the Crazy Days. The full-year adjusted EBIT guidance of 70-90 MEUR was reaffirmed. In addition, the company announced that it had settled another restructuring dispute after the reporting period, leaving only one remaining. In our view, this will allow the restructuring to be completed this year and facilitate a possible reorganization and is therefore positive. 

Revenue slightly lower than expected

The Lindex Group's revenue fell by 3%, slightly missing our estimates. Lindex's revenue was up 3%, but Stockmann's was down nearly 15%, although the company says this was mainly due to the timing of the Crazy Days (in Q2 this year). The timing change was known, but we may have underestimated its impact.

Earnings deteriorated in both divisions

The Lindex Group's adjusted EBIT decreased to 6.5 MEUR, whereas we expected the result to be flat. Both the Lindex division, mainly due to higher freight costs, and the Stockmann division, mainly due to lower revenues as a result of the timing of the Crazy Days, posted lower earnings. The Lindex division's gross margin decreased to 62.7% (Q1'23: 65.1% Inderes: 63.5%) and the Stockmann division’s gross margin increased to 42.7% (Q1’23 41.2%, Inderes 44.0%). Fixed costs were close to our expectations.

Guidance unchanged, slight downward pressure on forecasts, but positive news on restructuring process

Lindex reiterated its guidance and expects revenue to grow by 1-3% in local currencies and adjusted EBIT to reach 70-90 MEUR in 2024. Our adjusted EBIT forecast of 77 MEUR is under slight downward pressure after a weaker-than-expected Q1. However, the impact of the timing of the Crazy Days may have been greater than expected, which could support Q2 forecasts.

On a positive note, another restructuring dispute was resolved, leaving only one dispute with LähiTapiola. Again, we believe that some form of settlement is possible that would allow the company to complete the restructuring process this year. This would also facilitate a possible reorganization, i.e., the spin-off of the Stockmann division, and we believe that the company will also seek to settle the Lähi-Tapiola dispute before the results of the strategic review are published. The results of the strategic review are expected later this year.