Puuilo Q4'24 flash comment: Expected guidance, shareholders rewarded with an additional dividend

Translation: Original published in Finnish on 03/27/2025 at 09:26 am EET

The strong key figures in Puuilo's Q4 report, published this morning, were already known in advance, as the company issued a positive earnings revision and preliminary Q4 figures in early March. Revenue growth was driven by new stores, while like-for-like sales growth remained around zero. The EBITA that exceeded the guidance was, in turn, boosted by a record-high relative gross margin and good cost control. The basic dividend proposed by the Board of Directors was in line with expectations, but the surprise was the additional dividend. The guidance for the current financial year was very much in line with expectations, so we believe that post-report estimate changes will be minor. 

The number of customers increased in both new and old stores

Puuilo's Q4 revenue grew by 12% year-on-year to 86 MEUR. The main growth driver was the new stores, as the Puuilo network had expanded by seven stores from the comparison period. Revenue growth in comparable stores was hard to come by (0%) despite the increase in the number of customers (4%). We believe this discrepancy is explained by a decrease in the average basket, which, in our view, stems from consumption shifting towards lower price point products. Correspondingly, consumption of higher price point consumer goods has been weak, which we suspect is explained by the challenging market environment and tightened consumer spending power. This trend has been visible in the company's figures throughout the year, although we believe that the basket will turn back up as the market environment improves during 2025-26. Thus, comparable revenue growth should also pick up during that period.

Record earnings and gross margin

The EBITA reported by the company also increased from the comparison period to 14 MEUR. This corresponds to a margin of 16.6%, which exceeded the corresponding levels (same period, i.e. Q4) achieved during the hot COVID years (~15.5%). The strong profitability was driven by a high relative gross margin of 38.5%, which was boosted by the sales distribution focusing on low-price-point products and the increase in the share of private labels, which apparently was heavily weighted towards Q4. The margins on these products are more attractive than those on higher-price-point products. Fixed costs also grew more slowly than revenue. In our view, this has been explained by the company's measures to improve the efficiency of underperforming stores. We also estimate that the introduced shift planning has contributed to the improved margin. The earnings per share that had not yet been reported was EUR 0.12 as expected (Inderes 0.12 and consensus 0.10). In addition to the basic dividend of EUR 0.46 per share, the Board of Directors proposes an additional dividend of EUR 0.24. The basic dividend was as expected, but the additional dividend surprised us and the consensus (Inderes EUR 0.45 and consensus 0.47).

Guidance in line with expectations

Puuilo expects revenue for the financial year 2025 to be 425-455 MEUR and EBITA to be 70-80 MEUR. The new guidance is fully in line with our expectations, as the mid-points of both revenue and EBITA (revenue 440 MEUR and EBITA 75 MEUR) are at the level of our 2025 estimates (revenue 438 MEUR and EBITA 76 MEUR). Consensus expectations (revenue 446 MEUR and EBITA ~74 MEUR) are also in line with the guidance. Based on the mid-points of the guidance, revenue would grow by some 15% in 2025, and earnings would correspond to 17% of revenue, which is in line with the company's long-term target level (>17%) but slightly weaker than the completed fiscal year (17.5%). This may reflect the fact that Q4 was unusually good for the company and achieving that again requires another excellent year. With the guidance being well anticipated, we do not expect significant change pressure on consensus earnings estimates.

In addition, the company announced that it has signed a financing agreement of 100 MEUR, of which the credit facility accounts for 30 MEUR. The funds will be used to repay existing loans (50 MEUR), finance working capital and for the Group’s other general financing needs.