Tokmanni Q4'25: Promised earnings improvement materialized in Q4

Translation: Original published in Finnish on 3/3/2026 at 7:10 am EET.

Tokmanni will post its Q4 results on Friday at 8:00 am EET, which we will follow in a live webcast starting at 7:50 am (ln Finnish). Earnings improvement promised for Q3 seems to have materialized, as the company has not issued a profit warning for 2025. In our view, this also increases the probability of earnings growth starting in early 2026. In light of this, we believe the stock's valuation is moderate and the risk/reward ratio is attractive, which is why we raise our recommendation to Accumulate (was Reduce). In our view, the uncertainty related to the earnings turnaround has decreased, which is why we are raising the target price to EUR 9.0 (EUR 7.7).

Earnings turnaround materialized

We expect Tokmanni's Q4 revenue to have grown by 6% to 524 MEUR (consensus 519 MEUR), driven by both segments. The company's promised earnings turnaround appears to have materialized, as the company hasn't issued a profit warning. We believe this indicates that the company has exceeded the lower end of its guidance by a sufficient margin. Therefore, we slightly raised our earnings estimates. We expect adjusted EBIT to have increased to 52 MEUR (consensus 49 MEUR) due to volume growth, cost control in the Tokmanni segment, and an improved gross margin in the Dollarstore segment. This corresponds to a profitability of 10.1%, which is slightly better than the previous year (9.7%). While the earnings turnaround shown by the company in Q4 is significant for Tokmanni's investor story, the main value of the report lies in the guidance and the drivers of earnings growth. It would be especially important if the trend in Sweden had been reversed or if the company could provide clear evidence of a future turnaround. This would further alleviate the uncertainty regarding earnings growth. We forecast the 2025 dividend to be EUR 0.40 per share. We significantly lowered our dividend estimate (was EUR 0.44) as we expect the company to continue to repair its balance sheet.

The earnings growth outlook has improved slightly

We estimate the company will guide for growth in both sales and earnings for 2026. The earnings guidance could be in the form of an adjusted EBIT of 80-120 MEUR (Inderes 101 MEUR and consensus 99 MEUR). In our view, revenue growth will be driven by the expansion of the store network and an increase in average transaction value, especially internationally. Regarding earnings, much depends on how the company resolves the challenges in its Swedish operations. According to our calculations, Dollarstore's earnings have at least remained unchanged in Q4, which would suggest that the earnings decline in the beginning of the year has stabilized. We estimate this will create the conditions for Dollarstore's earnings growth during 2026, considering the weak figures of the comparison period. The year 2026 also involves discontinuities (e.g. CEO change), but we would be very surprised if the current management's promise of "full focus on profitability" did not ultimately improve the group's earnings.

Sufficient return against elevated risks

We believe the stock's valuation is justified by current earnings (2025 P/E 12x and IFRS 16 adj. EV/EBIT 12x), meaning the earnings growth expectations priced into the stock are minimal. We would be very surprised if earnings declined for the second consecutive year, considering the positive outlook for domestic retail and the company's improved earnings trend in Q4'25. The key uncertainty relates to the rate of earnings growth in the coming years and its sustainability. Even if Dollarstore's earnings remain at their current level, we believe the company will succeed in improving the Tokmanni segment's earnings during H1'26 using the same strategies as in H2'25. The 2025 dividend proposal is dependent on the company's balance sheet, but if earnings growth continues, the dividend yield would be 5% according to our estimates. Thus, the 6% earnings growth and dividend we forecast for the Tokmanni segment alone are sufficient for a good expected return. We believe that investors who tolerate risk and believe in Tokmanni's internationalization can currently acquire the stock at an attractive risk/reward ratio. We estimate the return potential to be very high if the company manages to sustainably turn the tide abroad. However, we need more evidence for a bolder view, as developments in recent years have been volatile and difficult to predict.