Stockmann investigates strategic alternatives for department stores and is changing to Lindex

Translation: Original comment published in Finnish on 9/25/2023 at 9:02 am EEST

Stockmann announced today that it is planning to change the name of the company to Lindex and is investigating strategic options for the Department Stores business. The investigation is expected to be completed in 2024. Stockmann also announced a capital markets day to be held in November. We feel selling the department stores would be clearly positive for the value of the company and believe that this announcement will lead to a clear positive share price reaction.

Operations changing to Lindex, role of department stores is considered

Stockmann announced that it is planning to change its name to Lindex, which is already the company’s most important business and produces all of the company’s results. After the changes in management in recent years, the Group’s and Lindex’s CEO and CFO are the same. In addition, the company will launch a strategic assessment of the Department Stores business. According to the company, the options include increasing the independence of the Department Stores business within the Group, considering possible ownership changes or strategic partnerships, or continuing under the current structure. We believe that a strong option is some sort of arrangement with the Peek & Cloppenburg retail chain, which became the company’s main owner at the end of last year. We note that the clearest value creation would take place by removing the Department Stores business completely from the Group, while other options would not, in our opinion, create value in the same way.

CMD on November 16

Stockmann also announced that it will organize a CMD on November 16. As the strategic assessment is expected to be completed in 2024, it is unlikely that any answers concerning the faith of the Department Stores business will be given at the CMD. Nothing new was said about the restructuring process today, so it does not seem to be coming to an end yet. However, we believe this does not prevent the possible sale of department stores or any other arrangement.

Clearly positive for the share, even though there are still uncertainties

Releasing value through structural arrangements has long been a clear positive scenario in Stockmann. We have outlined these sum of the parts values in our previous reports and in our latest report, the sum of the parts values were approximately EUR 3.5-4 per share. Based on today’s release, we still do not know with certainty whether and when the Department Stores business will be sold, but the probability has clearly increased and has also come closer in time than the 2-5-year horizon we outlined for structural arrangements. Thus, we consider today’s news clearly positive for the share.