Trade growth in January relied on daily goods

Translation: Original comment published in Finnish on 3/1/2024 at 6:54 am EET

The target market for Kesko’s daily goods trade, Tokmanni and Stockmann (department store and hypermarket chains) grew by 3.5% in January. A decline was seen in consumer goods (-1%), while revenue in food grew by 5.5%. In consumer goods, the decline was just like in November-December driven especially by clothing (-5%), although the revenue from home and leisure time also decreased slightly (-1%). The trend in consumer goods is unfavorable for both Stockmann and Tokmanni, as their important clothing category has fallen for the past three months.

The daily goods market continued to grow and was up 3.5% year-on-year. Daily goods inflation has slowed to 2%, and the market is already to some extent driven by volume growth. In daily goods trade, the trend of previous months continued as consumers increased their shopping in hypermarkets and supermarkets, where prices are known to be lower than in convenience stores. This signals a continuation of price-driven consumption, which Tokmanni and Kesko, for example, have been communicating about for a long time. Kespro’s target market, i.e. food service wholesale, grew by 3% in January. This was supported by one more delivery day compared to last year.

In Q1, trade figures are 'structurally' affected by the additional day in February due to the leap year and the timing of Easter at the end of March, when last year it was in April in Q2.

Declines in important product groups for Tokmanni

January market development was quite well in line with our expectations, as we expect Tokmanni's Q1 revenue in Finland to remain roughly at the level of the comparison period. In other words, this means a slight decrease in comparable (like-for-like) revenue, considering the expansion of the store network. One of the drivers of the decline is the continuing weak clothing market. On the other hand, the comparable decline is also justified by a relatively strong comparison period, when Tokmanni’s like-for-like growth was 3%, and we do not believe the market environment provides substantial tailwind for the upcoming quarter. At Group level, however, the company’s growth will be fierce thanks to the inorganic growth from the Dollarstore integration.

Kesko’s daily goods trade developed faster than the market

Kesko’s daily goods trade developed excellently in January, reflecting its recent development. It also grew slightly faster than the total market (4%), although we believe the overshoot was driven by the food service business, whose trend-like sales growth was two percentage points faster than the total market. Overall, the market figures strengthened our view of Kesko starting out the year more strongly. However, we emphasize that the trend should continue for us to make broader conclusions on the improvement of the competitive position of Kesko’s daily goods trade among consumers. We expect Kesko's revenue from daily goods trade to grow by 2% in Q1.

For Stockmann’s department stores, the year started poorly on the market

The clothing market, which is important for Stockmann, fell clearly in January. Stockmann’s Q1 development from the comparison period is also weakened by the timing of the Crazy Days campaign and the decrease in the floor area of the Itis department stores, which was realized last spring. Our revenue forecast for Stockmann department stores is a 5% decrease in Q1. Considering the above negative impacts, the market development in January was slightly weaker than we expected.