Translation: Original published in Finnish on 5/11/2026 at 7:10 am EEST.

Overall, we found Tokmanni’s Q1 report to be lackluster, with Dollarstore dragging down the group’s earnings. Short-term earnings improvement hinges on Dollarstore’s turnaround, which we view as carrying significant risk, given the company’s recent performance. We consider the expected return on the share to be too narrow, which is why we reiterate our Reduce recommendation. At the same time, the target price decreases to EUR 6.7 (was EUR 7.5), in line with the downward revisions.

Challenges abroad continued

The group's earnings development in Q1 was very mixed. Strong sales development in Finland and strict cost control enabled a slight improvement in the Tokmanni segment's earnings. Abroad, however, the result continued to decline due to Dollarstore's concept changes and related costs. Ultimately, the group's operating loss increased by around 2 MEUR year-on-year to -13.7 MEUR, which also fell short of expectations.

Pressure to boost earnings concentrated towards year-end

Tokmanni reiterated its 2026 guidance, which expects revenue to be 1,780–1,860 MEUR (2025: 1,728 MEUR), while adj. EBIT is expected to be 85–105 MEUR (2025: 85 MEUR). Achieving this guidance requires an earnings improvement and Dollarstore turnaround, the timing of which is uncertain. Consequently, the risk of a negative profit warning remains elevated this year as well. We lowered our earnings estimates for the coming years by a little over 10%. The decline in the forecast was largely due to Dollarstore’s weak progress and the year-long process of renewing its product assortment, which we believe will maintain a high cost structure. Despite sluggish earnings growth and downward revisions to forecasts, we expect the company to reach the lower end of its guidance range. We emphasize that our forecast (2026e adj. EBIT 87 MEUR and 89 MEUR adjusted for PPA depreciation) assumes Dollarstore's earnings performance will improve in H2. However, there is a risk associated with this considering the recent negative developments. We expect the company’s earnings performance to improve starting in 2027–28, when the additional costs associated with Dollarstore’s renewal program will diminish and the wider product range in stores will boost the segment’s comparable growth. Nevertheless, this assumes that Dollarstore’s like-for-like customer visits will not continue their current sharp decline. Overall, we forecast that the group's EPS will rise by approximately 9% per year.

Expected return too narrow relative to risks

From a P/E ratio perspective (2026e 10x), the stock appears cheap, but the EV/EBIT multiple (2026e 14x and 11x when adjusted for IFRS 16 items), which accounts for the balance sheet, is at best neutral or slightly elevated in our view. The discrepancy in the multiples is explained by Tokmanni's elevated net debt and, in particular, large lease liabilities. We do not expect a significant change in net debt, as the free cash flow generated by the company is partly used to finance growth, i.e., working capital, and also for dividend distribution. For this reason, we believe the P/E ratio should be low in absolute terms. Peer analysis likewise supports a weak expected return on the share. The limited upside of the DCF value (EUR 6.9) indicates that Dollarstore's medium-term earnings turnaround is already priced into the current share price and thus does not serve as a significant driver of expected returns. However, for an investor who believes in a rapid turnaround for Dollarstore, the share price decline could offer a good buying opportunity, though we see the associated risks as elevated, which limits the stock's short-term positive price drivers. This is emphasized by the fact that Dollarstore's turnaround is still ongoing, meaning a continued decrease in comparable store customer numbers cannot be ruled out. Without the stabilization of customer numbers in mature stores, it is likely that Dollarstore's profitability will continue to decline, even though the comparable figures for 2026 are "easier." So far, the evidence suggests a slower turnaround for Dollarstore, which is why we believe that investors can join the story later with more attractive risk/reward.