Trade developed steadily in July

Translation: Original comment published in Finnish on 9/2/2024 at 7:07 am EEST.

The target market of Kesko, Tokmanni and Lindex’ Stockmann, i.e., the department store and hypermarket chains, remained at the level of the comparison period (+0.4%) in July. The development was positive for food (+2%), but revenue in the consumer goods market continued its downward trend (-3.3%). Within consumer goods, the decline was driven by both a weak month for apparel (-6.8%) and lower sales of home and leisure products (-2.2%). The target market of Kesko's food service business (Kespro) grew by 4.4% year-on-year, helped by an increase in delivery days.

Kesko developed faster than the market

Based on Kesko’s already reported July figures, the company’s daily goods trade gained market shares during July. Although Kesko's food wholesale figures (+5%) were supported by a higher number of delivery days than in the comparison period, its sales were also growing on a delivery day-adjusted basis. Kesko's difference to the market has clearly turned in a more positive direction compared to the previous year, and the performance in July gives little confidence in the credibility of Kesko's investments in price image. However, we believe that there is still a lot of work to be done to increase customer confidence in the low-price shopping basket offered by Kesko, which we believe would increase customer traffic to the chain. Kespro also continued its strong performance, growing 2 percentage points ahead of the market. This seems to be a consistent trend month after month, year after year, which we believe is a signal that Kespro's holistic, customer-centric service model is superior to that of its competitors.

Product categories important to Tokmanni declined at market level

Market developments for Tokmanni were mixed. On the one hand, the 2% increase in the daily goods market supports the company's performance to some extent, but the other half of Tokmanni's sales comes from consumer goods, which declined by 3% at market level. The company said in its Q2 report that it would focus more than usual on lower prices, the impact of which remains to be seen for the rest of the year. The market figures are quite in line with our forecast for Tokmanni’s Q3 revenue (+1%) and comparable LFL revenue (0%), but if the FMCG market continues its strong downward trend in August-September, our forecasts may be a bit too optimistic. This dynamic is also affected by the increase in the VAT rate on "consumer goods" that will take effect in September, although market news suggests that discount retailers will not raise prices but will pass on the cost of the increase either to suppliers or to the retailers themselves.

Lindex's department store business had a miserable start to the quarter

The apparel market, an important market for the Lindex Group, declined sharply in July (-7%). For the rest of the year, we had expected a slightly positive revenue development at Stockmann department stores, so the start of the quarter was clearly below our expectations and poses a negative risk to the forecasts. Of course, this was only the first month of the quarter, which is also typically driven by sales campaigns, so the decline in revenue may also reflect less promotional activity than in the comparable period. However, we believe it also reflects weak demand.