Tokmanni - Boom in store openings in Q2

Tokmanni will report its Q2 result on next week’s Thursday, August 8th. The company has opened and relocated stores in a good pace in Q2 and therefore the company should clearly exceed its annual expansion targets in 2019. We expect Q2 LFL growth of 2.5% and continued profitability improvements. We keep our rating “HOLD” with TP of EUR 9.0 ahead of Q2.

New store openings in Q2

Tokmanni’s target is to increase its store network to above 200 stores and to increase its retail space by some 12,000 square meters annually which means approximately five new store openings per year. During Q2’19, Tokmanni has reopened the old Ale-Makasiini stores under the Tokmanni brand in Central Finland, which the company acquired in Q4’18. The company has also relocated stores and opened new stores in Tesoma and Loppi in Q2. Due to the active opening pace in H1, Tokmanni will exceed its annual target of approx. five new store openings/year.

Improving profitability in 2019E

Tokmanni is focusing towards improved profitability in 2019E. The company aims to reach ~9% adj. EBIT margin in long-term. Profitability improvements will be made through gross margin and operational efficiency improvements such as pushing OPEX as % of sales down. Some results were shown already in Q1’19 and we expect the same trend to continue in Q2. We expect 2019E EBIT of EUR 62m (~19% growth y/y), while consensus is at EUR 61m.

We keep our rating “HOLD” with TP of EUR 9.0

We have kept our estimates intact and expect Q2 revenue of EUR 236m (cons. EUR 234m) and gross margin of 35.5%. Tokmanni’s LFL growth was exceptionally high in Q2’18 (7.7%). We have taken a more conservative view for Q2’19 LFL growth and expect LFL growth of 2.5%. We foresee Q2 EBIT of EUR 16 (cons. EUR 15m) and EBIT margin of 6.7%. On our estimates, Tokmanni trades at 19E-20E EV/EBIT multiple of 13.8x and 11.8x (~2-5% premium compared to the peer group). We keep our rating “HOLD” with TP of EUR 9.0 ahead of Q2.

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