Translation: Original published in Finnish on 8/4/2025 at 7:52 am EEST.

The target market of Kesko’s grocery trade, Tokmanni and Lindex’s Stockmann division, i.e., the department store and hypermarket chains, increased 1.5% in June. Growth was supported by food and consumer goods trade with increases of just over 1%. Within consumer goods, sales increased for the home and leisure product categories, but sales of the apparel product category, which suffers from a weak cycle, decreased by about 1%. In our view, June sales have been negatively affected by the cold weather in Finland, which several retail sector players have already lamented in connection with their Q2 results. Thus, moving into July, inventory levels for seasonal goods may be slightly elevated, which in turn would create pressure to accelerate inventory turnover. We estimate that July sales will develop rapidly for seasonal products due to more favorable weather, albeit with a weaker margin structure than planned.

Kesko lagging behind the market at group level

Kesko's consumer sales in the grocery trade decreased by 1% in June. Thus, Kesko underperformed the market in both daily consumer goods and durable goods. In connection with its Q2 result, Kesko reported that it had gained market share in hypermarket stores, which, together with the reported market statistics, suggests that the negative development is purely due to the weak attractiveness of supermarket and/or convenience store concepts. It is therefore possible that Kesko and the retailers will have to increase measures in these store segments in order to turn the entire group/retail chain to growth in terms of market share. In B2B trade, Kesko (i.e. Kespro) developed slightly faster than the market, as both the company's sales (2.6%) and the market (2.0%) grew.

Tokmanni had a challenging quarter

Overall, market development in June was slightly positive for Tokmanni, as sales of groceries and home and leisure product categories developed positively. However, the company was forced to issue a negative profit warning in July, and at the same time, it announced that Q2 sales and earnings had developed weakly, especially in Finland, due to weak seasonal sales, among other things. In our assessment, Tokmanni has therefore lagged market development, especially regarding like-for-like stores, which in our opinion signals either temporary internal challenges (e.g., internationalization or SPAR expansion has caused a lapse in day-to-day execution) or more long-term structural challenges (e.g., something wrong with the concept's appeal). Key to the investment story would be to turn the performance of the somewhat volatile Tokmanni segment back to at least market-like growth and, through this, ensure earnings growth for the group despite the slowing effects of the Dollarstore integration process.

Stockmann department stores' performance outpaced the market

The Lindex Group already reported earlier in July that Stockmann department stores' revenue in Finland developed approximately in line with the comparison period in Q2. In June, the apparel market, which is important for the Lindex Group, declined by 1%, and for the entire Q2, it remained over 6% below the comparison period. The performance of Stockmann department stores has therefore been clearly stronger than the market.