Lindex Group Q2’24 preview: A small cut to revenue guidance ahead of the result

Translation: Original comment published in Finnish on 07/16/2024 at 7:10 am EEST

Lindex Group cut its full-year revenue guidance yesterday but maintained its adjusted operating result guidance, i.e. 70-90 MEUR, our updated forecast is 75 MEUR. The company will report its Q2 results on Friday at 8:30 am EEST. We expect the Group’s Q2 adjusted operating result to decrease slightly from the comparison period as the result of the Lindex segment will decrease and that of Stockmann will rise. In connection with this comment, we lowered our 2024 forecasts by 1-3% due to the weak market development this spring and the profit warning. 

The timing of the Crazy Days campaign supports revenue growth

We expect the company’s revenue to grow by 2% from the comparison period. For the Lindex division, we expect zero growth, as market development in its main market in Sweden was around the same as last year and the company cut its revenue guidance due to weak market development. The growth of the Stockmann division is supported by the timing of the Crazy Days campaign, which correspondingly was negative in Q1. We expect the impact of exchange rates to have been minimal in the quarter.

We expect the result of the Lindex division to decrease from the strong comparison period

We expect the Lindex division’s adjusted operating result to fall to 31 MEUR, compared to a very good EUR 36 MEUR in the comparison period. In our forecasts, this is mainly due to a decrease in the exceptionally strong gross margin in the comparison period (66.8%) to 64%. In the Stockmann division, we expect cost efficiency and revenue growth to support the result returning to zero. The Group’s earnings forecast is set at 30 MEUR, i.e. slightly below the 31.6 MEUR of the comparison period

Guidance revised ahead of the result

Yesterday, the company cut its revenue guidance and now expects revenue in comparable currencies to grow by +/-2% compared to last year while the company previously expected 1-3% growth. Thus, the mid-point of the guidance decreased from 2% growth to zero while the guidance widened from earlier. However, the company reiterated its guidance for the adjusted operating result, which is still expected to be 70-90 MEUR. The company commented that the change was due to the challenging market situation and especially the volatility of the fashion market. On Friday, we reported that the Lindex segment's development in the main Swedish market remained subdued, especially in June and thus throughout Q2, so the comment did not come as a surprise to us, although it indicates that Lindex is preparing for the subdued and volatile market environment to continue. With this comment, we lower our 2024 forecasts by 1-3% due to Q2’s subdued market development and the profit warning. We now forecast full-year revenue growth of 1% (in both reported and local currencies). Even though the company reiterated the guidance on the result, we believe weaker revenue development also puts pressure on the result. Our adjusted operating result forecast is now 75 MEUR.

Since the Q1 report, the company has had only one controversial dispute related to the restructuring process. To our understanding, this dispute with LocalTapiola is in court proceedings, and therefore it is unlikely that anything new about will be reported in the Q2 report. However, we believe that the dispute will be settled later this year, after which the restructuring process will be concluded. This will also enable the possible structural change (i.e. the sale of the Stockmann division) to proceed. However, we do not expect any relevant new information on these issues in connection with the Q2 report.