Revenue of Finnish department store and hypermarket chains grew in October

Translation: Original comment published in Finnish on 11/30/2023 at 9:49 pm EET.

The revenue of department store and hypermarket chains of PTY (Finnish Grocery Trade Association) member companies grew by 6% in October 2023. Within this, the increase in clothing was surprisingly strong (17%), with home and leisure accounting for 4%. We believe that the strong growth in clothing was due to a warm/weak September (sales were postponed from September to October), but also to the fact that Stockmann's Crazy Days sales took place in October, which was different from the comparison period. Overall, the value of the home and specialty goods trade grew by 7%, a clear improvement on the 5% decline in the previous month. Considering price inflation for consumer goods, volumes remained roughly flat. As in previous months, growth in food continued at an annual rate of around 6% (~2% volume growth).

The grocery market grew by 4%, while prices rose by 5% in the same period. The growth in grocery sales was increasingly concentrated in hypermarkets, which we believe is a sign of price-driven consumer spending. Typically, consumers may find bargains that are cheaper than in local shops.

Total food service wholesale sales grew by 4% during October. During the period under review, there was one delivery day more than in the comparison period, which typically has a positive impact on realized growth.

We forecast Tokmanni to develop slower than the market

We forecast Tokmanni's comparable Q4 growth in Finland to remain sluggish and the 2% overall growth in revenue will be driven by the store network, which has grown by three stores since the comparison period. Tokmanni faced internal challenges during Q3, and we would not be surprised if these continued into Q4. We therefore assume that Tokmanni's sales will continue to be below the market also in Q4. Investors should note that the group's sales figures are boosted by the Dollarstore acquisition in August.

Strong start to Q4 looks promising against our Stockmann forecasts

Our expectation for Q4 growth in Stockmann department stores is 5%, supported by the timing of Crazy Days in Q4 this year. However, sales are slightly depressed by the downsizing of the Itis department store last spring. We see strong growth in the clothing market in October and winter weather in November supporting Stockmann's Q4 sales. Thus, recent market developments are mildly positive relative to our forecast. Department stores (Stockmann division) account for just under 40% of our Q4 revenue forecast.

Kesko's grocery sales stronger than the market, driven by the food service business

Kesko's grocery sales grew at an annual rate of around 6% in October. Faster-than-market growth by a 10% increase in the food service business, while wholesale to Kesko franchise retailers developed more or less in line with the market. Our forecast of 1.4% Q4 growth seems moderate compared to actual market figures. However, the trend has been a modest loss of market share in consumer grocery sales due to competitors' new stores and a difficult purchasing power environment.