Revenue of Finnish department store and hypermarket chains grew in November

Translation: Original comment published in Finnish on 1/1/2024 at 9:38 pm EET

The revenue of department store and hypermarket chains of PTY (Finnish Grocery Trade Association) member companies grew by 4% in November 2023 year-on-year. Within this, the sales of daily goods (incl. groceries) product groups grew by 4%. Inflation in daily goods trade remained around 4%, indicating that volumes remained at the level of the comparison period. However, grocery price inflation has been on a downward trend since spring, which is naturally positive for daily goods trade as purchasing power improves in relative terms. Sales of product groups in consumer goods trade remained at the level of the comparison period. In consumer goods, clothing sales decreased by 4% and sales of home and leisure product groups increased by one per cent. We believe the reason behind the drop in clothing sales was that consumption focused on October, as sales in early fall was slowed down by warm weather. Contrary to the previous quarters, sales of the food service market that is essential for Kesko remained at the level of the comparison period.

Market development in line with our Tokmanni expectations

Market development was broadly in line with our Tokmanni expectations. We believe that Tokmanni’s comparable sales will be somewhat below market development due to internal slowing factors. For Tokmanni’s operations in Finland, we expect good 2% growth in Q4. We expect that the Finnish store network has expanded by three stores from the comparison period, which means comparable growth in our forecasts will be thin. However, we note that Tokmanni as a group will grow strongly during Q4 with the Dollarstore acquisition that took effect in August.

Stockmann's Christmas (December) sale needs to be good

We expect Stockmann department stores to grow by 5% in Q4. The growth is partly supported by the abnormal timing of the Crazy Days campaign (in Q3 in 2022 and in Q4 in 2023), but will, on the other hand, decrease due to the drop in the floor space in Itis last spring. Although clothing market sales rose significantly in October (17%), achieving our growth forecasts requires Stockmann to have active Christmas sales due to the weakish market development in November. For the time being, however, we do not see any pressure for forecast changes for Stockmann's department stores.

Kesko’s daily goods trade to consumers developed slower than the market

Sales of Kesko’s daily goods trade decreased by one per cent in November, despite price inflation. 2023 has been a difficult year for Kesko’s daily goods trade to consumers, mainly due to competitors’ new store openings, but also due to the weak position of consumers. Price inflation has caused a natural shift of price-sensitive customers to other retail chains, but we estimate that Kesko has had greater difficulty keeping up with the price competition of competitors. Compared to the market, the performance in November was quite subdued. The food service business of Kespro continued on the same trend of conquering market shares, as its sales grew by 5% while the market remained stable. The unstable restaurant market has not affected Kespro’s performance, as its sales mainly consist of defensive lunch, personnel and public sector restaurant customers.