Strong growth in revenue but decrease in adj. gross margin
Tokmanni’s Q3 revenue outpaced the expectations but adj. EBIT was below our and consensus estimates. Revenue grew by ~13% y/y, amounting to EUR 262m (vs. EUR 253m/255m Evli/cons). Growth was good especially in sales of yard and garden furniture, sports and leisure, detergents and home cleaning, paper products and groceries. Apparel sales have faced headwind due to the coronavirus and the company decided to boost apparel sales with discount sales in Q3. This impacted negatively on adj. gross margin which was 34.0% (35.4% in Q3’19). Tokmanni’s Q3 adj. EBIT totaled EUR 24.0m vs. EUR 25.8m/27.3m Evli/cons. Adj. EBIT was weighed down by weakened gross margin but on the other hand, strong revenue growth and strict cost control had a positive impact on profitability.
Towards the most important quarter
Tokmanni has benefited from the uncertain times as low prices and broad product assortment attract consumers. Despite of the current situation, customer numbers have increased in stores (LFL, Jan-Sep’20: +2.8%) and at the same time the size of average basket has increased (LFL, Jan-Sep’20: +8.7%). During Q3, Tokmanni’s online sales increased by ~155%, though the share of online sales is still marginal (~1% of revenue). We expect the growth in online sales to continue during Q4E, driven by the campaign season. The final quarter is the most important for Tokmanni in terms of both, revenue and profitability. In retail, the Christmas season has started earlier than normally this year and Tokmanni is also well prepared for the upcoming season as the Christmas products have arrived and some of those are already in stores.
“BUY” with TP of EUR 18.4 intact
Tokmanni expects strong growth in revenue and LFL revenue in 20E. Adj. EBIT margin is expected to improve from ‘19. We have made only small adjustments into our estimates. We expect 20E revenue to grow by 11% y/y (EUR 1046m) and adj. EBIT of EUR 89m. On our estimates, the company trades at 20E-21E EV/EBIT multiple of 13.0x and 12.4x which translates into ~30% discount compared to the int. discount peers. We keep our rating “BUY” with TP of EUR 18.4.
Lähde: Finwire News