Lindex Group: Much to look forward to in the coming months

Translation: Original published in Finnish on 11/29/2024 at 7:34 am EET.

We expect a lot of news flow from Lindex in the near future, as the results of the strategic review of the department store business should be published later this year, the latest restructuring dispute will be decided by the court and, on top of that, the company's guidance is, in our view, susceptible to a profit warning. 

Decision on restructuring case possibly today

Lindex has only one disputed debt remaining from the restructuring. A decision by the district court may be expected later today. Although this decision is still subject to appeal, we believe it to be significant as there is a possibility that Lindex will accept the district court's decision in order to complete the restructuring process. Of course, the counterparty, LähiTapiola, can also appeal further and the restructuring supervisor must also approve the decision. In addition, we believe that the court's decision provides a good basis for reaching an amicable settlement with LähiTapiola. The dispute is therefore not yet resolved by (even) this court decision, but we believe that it sets the stage for the completion of the restructuring in the coming months. At worst, the case will proceed through the courts, which could take another year or so. This is something that Lindex will certainly try to avoid by all efforts.

Strategic review results promised this 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 of this review are expected to be announced later this year. The timing may be partly related to the above dispute, i.e. Lindex may want to wait until the end of the restructuring process is in sight before publishing the results of the strategic review. However, we do not believe that the completion of the restructuring is critical to the sale of the department stores. In practice, we believe the review means that the process of selling department stores is in progress. 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 the company will announce the divestment of the department stores in the coming months, which should have a clear positive impact on the stock. However, we think that the final outcome of the review may be delayed until early next year, as this year is already running out of days.

Profit warning possible

Lindex expects 2024 revenue to change by -2-0% in local currencies and adjusted EBIT to be in the range of 70-80 MEUR. In January-September, revenue decreased by 2.2% in local currencies and adjusted EBIT decreased by 11 MEUR (adj. EBIT was 80 MEUR), so the guidance suggests/requires a relatively better performance in Q4 than in the first half of the year. We expect adjusted EBIT to be below guidance at 68 MEUR and also significantly below the comparison period (80 MEUR). As such, we consider it likely that the company will have to issue a profit warning in December-January. The company updated its guidance in the Q3 report, after which the Swedish clothing market figures for October have been received, showing that sales were in line with the comparison period. It is therefore largely dependent on the Black Week/Friday in November and Christmas sales to ensure that the guidance is met. The November figures for the Swedish market will be available in a couple of weeks.