Translation: Original comment published in Finnish on 1/31/2024 at 9:24 am EET.

The target market for Kesko's daily goods trade, Tokmanni and Stockmann grew by 2% to 984 MEUR in December. A decline was seen in consumer goods (-3%), while revenue in food grew by 5%. Within consumer goods the decline was driven by clothing (-7%) and home and leisure (-2%). The trend in consumer goods is unfavorable for both Stockmann and Tokmanni, as their important clothing category has fallen for the second month in a row.

The daily goods market continued to grow and was up 4% year-on-year. Daily goods inflation has already slowed to 3%, and the market has already been driven to some extent by volume growth. In daily goods trade, the same trend continued as consumers increased their shopping in hypermarkets and supermarkets, where prices are known to be lower than in convenience stores. This signals a continuation of price-driven consumption, which Tokmanni and Kesko, for example, have been communicating about for a long time.

Kespro's target market unexpectedly fell by 4% in December. One major factor in the decline was having two fewer delivery days than in the comparison period. However, we see the trend below as downward, as the full-year growth rate was 7%.

Declines in important product groups for Tokmanni

We believe Tokmanni's internal challenges weakened the company's performance during Q4, and December's weak daily goods development supports our forecast of flattish comparable growth. In addition, we believe that competitors have temporarily captured market share in the daily goods sector with their large campaigns. Tokmanni's actualized revenue in Finland will be boosted by store openings, and the group's revenue will be significantly increased by the Dollarstore acquisition. There is no immediate pressure to revise our forecasts for Tokmanni.

Kesko developed more slowly than the market

Kesko’s daily goods trade developed poorly in December. Overall, daily goods trade fell by 2%, driven by both Kesko wholesale and home and specialty goods retail sales. Compared to the market, Kesko lost market share in these product groups, while on Kespro's side, Kesko continued its strong sales and gained market share with sales at the level of the comparison period (vs. -4% market). The trend in consumer trade has remained the same for a long time and we expect it to turn positive within the next two years as consumers' purchasing power improves and Kesko expands its store network in growth centers, where one hypermarket can have a major impact on market shares.

The importance of Crazy Days is highlighted in Stockmann's clothing category

Clothing, which is an important market for Stockmann, fell sharply in December. However, we were somewhat prepared for this, judging by the figures from the fashion industry. What is worrying for Stockmann is that the trend in clothing has been sluggish for the second month in a row. We expect Stockmann's department store sales to grow by 5% in Q4, which according to our preliminary estimates will come under some downward pressure. However, growth will be supported by the unusual timing of the Crazy Days in Q4.