Lindex Group Q2'25: Restructuring and strategic assessment ending in H2

Translation: Original published in Finnish on 7/18/2025 at 6:38 pm EEST.

Although Lindex's Q2 result was weak, the company reaffirmed its guidance to achieve an adjusted EBIT of 70-90 MEUR for the full year. We expect 66 MEUR, so we anticipate a reduction in guidance. However, the company's restructuring process and strategic review will finally conclude during H2, which could potentially increase the stock’s value. Supported by the potential of reorganization, we reiterate our Buy recommendation and EUR 3.5 target price. 

Q2 result was weak

Lindex Group's revenue grew by 1%, reaching the level of the comparison period in comparable currencies. We expected 3% growth. The Lindex division's adjusted EBIT fell to 23 MEUR, compared to 31 MEUR in the comparison period and our 29 MEUR expectation. The drop was largely due to a weaker gross margin, though revenue and fixed costs were also below our forecasts. The Stockmann division's result improved slightly to positive territory from -1 MEUR in the comparison period, although we expected somewhat better, i.e. 1 MEUR. The Lindex division's adjusted EBIT was 22 MEUR, well below the 31 MEUR of the comparison period and our estimate of 29 MEUR.

Guidance unchanged, but our estimates predict a reduction

Lindex reiterated its guidance and expects the change in revenue to be 0-4% in local currencies and adjusted EBIT to reach 70-90 MEUR in 2025. For H1, revenue decreased by 1% and EBIT decreased by some 10 MEUR. This means reaching the guidance requires a better performance in H2 than last year. Lindex expects consumer demand to improve by the end of the year as well as increased efficiency from progress on the logistics center relocation, which supports its guidance. In addition, Lindex's Q3'24 result was burdened by logistical problems, so the comparison figure for that quarter is slightly easier than at the beginning of the year, for example. We lowered our estimates mainly due to the weak Q2 result and now expect adjusted EBIT to be 66 MEUR. Thus, we expect Lindex to have to issue a profit warning later this year. We also lowered our 2026 estimates by 4% at the adjusted EBIT level.

Restructuring and strategic review to be completed this year

In June, Lindex announced that it had settled the last dispute regarding the restructuring debt and expected to finish the restructuring process during Q3. This allows for payment of dividends and financial arrangements, among other things, and facilitates reorganization in our view. In the same release, Lindex stated that the results of the nearly two-year strategic assessment of its department store operations will be issued before the end of the year. We believe Lindex intends to sell the department stores, a move that would likely have a highly positive impact on the stock. After completing the process of restructuring and potentially selling the department stores, we anticipate that the company will pursue a listing in Sweden and consider selling its logistics center property. These possible changes may also support the share in the future.

Potential of structural change still offers good expected return

As Lindex conducts a strategic assessment of its department store business, we believe that the sum-of-the-parts model is the best valuation method, valuing the company at just over EUR 4 per share. However, this should consider the related uncertainties of the manner and schedule of possible department store structural changes. While this year's weaker result for the Lindex division may temporarily weigh on the stock's valuation, we believe next year's earnings growth at the latest will support it at our estimated level. Overall, however, we think the expected return is good. With the current structure, Lindex's 2025 EV/EBIT (adjusted for lease liabilities) is around 12x, which we think is quite high, so the upside is mainly in potential restructuring.