In this stock analysis, I focus on Tokmanni, a Finnish company that sells low-cost goods across various segments. They have typical segments such as toys, car accessories, pet food, kitchenware, and more.
Much of what they offer resembles Europris' product mix, which aligns with their joint acquisitions to lower product prices.
Areas of Focus
We will look into Tokmanni's financial situation to see if they can manage their fixed costs. We'll also discuss their strategy, recent acquisitions, and strengths, weaknesses, and key points to watch in the stock.
Strategy
Tokmanni aims to have a network of over 360 stores in the Nordic region by the end of 2025. In 2024, they plan to establish 14 new stores (4 in Denmark, 6 in Sweden, and 4 in Finland).
Their financial goal is to reach €150 million by the end of the period (up from €98.8 million in 2023). They plan to achieve this through:
Very broad product ranges (more products/product areas in stores)
Low prices
Friendly and knowledgeable assistance
Quick and good shopping experiences
Efficient purchasing methods
Effective transport/shipping methods
Good digital solutions
In short, they want every type of customer to be able to come in and buy almost anything, leading to additional sales, good experiences, and repeat visits.
Growth Hormones
Increase the number of stores
Increase B2B sales
Acquisitions like Dollarstore
Develop and expand Miny
Overall, Tokmanni has aggressive guidance and has made interesting choices, entering markets in Sweden and Denmark. They have also revised and increased their targets since setting them in 2021.
Financials
Tokmanni forecasts revenues of €1,660 - €1,760 million for 2024 and EBIT of €110-130 million. They have promised significant growth by the end of 2025.
Price Concerns
From my perspective, their financial situation seems somewhere between okay and precarious. Like many retail stores, they rely heavily on leasing costs and the associated expenses.
The level they have set seems quite risky. With low margins and price pressures, they need to ensure that money comes in quickly because it goes out just as fast.
Financial Statement Review
Looking at Tokmanni's financials, both the top and bottom lines have increased significantly since 2014. They, like Europris, saw a substantial revenue boost in the 2020-2021 period.
I believe they have underperformed since 2021 and need to improve their margins. One of Tokmanni's efforts in this regard is to enhance their logistics.
I generally expect margins above 5%, but margins are often low in these segments. Tokmanni struggles to keep their margin above 5%, which is not a good sign.
Net Income | Operation profit | Loan Result | Resultat | EBIT margin | Margin | |
2014 | 737.8 | 43 | 20.8 | 16.6 | 5.83% | 2.25% |
2015 | 759.3 | 39.1 | 18.2 | 14.8 | 5.15% | 1.95% |
2016 | 779.2 | 49.2 | 34 | 27.2 | 6.31% | 3.49% |
2017 | 800.4 | 38.8 | 32.9 | 26.3 | 4.85% | 3.29% |
2018 | 874.4 | 50.2 | 44.7 | 35.7 | 5.74% | 4.08% |
2019 | 948.5 | 69.4 | 58.9 | 47.1 | 7.32% | 4.97% |
2020 | 1077.2 | 98.5 | 88.5 | 70.8 | 9.14% | 6.57% |
2021 | 1145.4 | 107.7 | 97.6 | 77.9 | 9.40% | 6.80% |
2022 | 1172 | 84.1 | 73.3 | 58.7 | 7.18% | 5.01% |
2023 | 1396.9 | 93 | 68.4 | 54 | 6.66% | 3.87% |
Balance Sheet
With more than a doubling of debt, it's worth noting that most of it goes towards leasing costs. They have significantly increased their equity value and assets over time, ending the year with fairly good liquidity.
In general, I think they have high debt and hope to see more control in this area.
Debt | Equity | Total Assets | Cash | Debt+Leasing | |
2014 | 413.1 | 33.3 | 446.4 | 52.4 | 305.9 |
2015 | 407 | 48 | 455 | 48.9 | 293.8 |
2016 | 292 | 166.6 | 458.6 | 57.6 | 173.5 |
2017 | 299.6 | 162.9 | 462.5 | 42.5 | 176.6 |
2018 | 305.7 | 174.5 | 480.2 | 37.9 | 173 |
2019 | 546.2 | 184.7 | 730.9 | 29.1 | 409.2 |
2020 | 563.2 | 216.4 | 779.6 | 78.1 | 406.4 |
2021 | 571.9 | 244.6 | 816.5 | 81.2 | 395.6 |
2022 | 546.8 | 247 | 793.8 | 9.1 | 392.4 |
2023 | 1144.9 | 265.4 | 1410.3 | 133.7 | 864.2 |
Cash flow
With extremely strong growth in operating profit, I am seeing much higher costs on the financing side.
Tokmanni itself provides good dividends, but the leasing costs exceed the dividends by almost twice as much. I find this quite worrisome, especially during periods when the operating profit is not as strong.
The leasing costs amounted to 74 million in 2023, and there have only been three years since 2014 where the operating profit exceeded 100.
That said, Tokmanni is much larger now than before, and this shouldn't pose problems. However, this trend continues and sets a requirement for Tokmanni to deliver good results over time.
cash flow | Investment | Finance flow | Dividend | Leasing | |
2014 | 34.7 | -13.2 | -15.8 | ||
2015 | 35 | -8.9 | -29.5 | ||
2016 | 62.5 | -9.8 | -44.1 | ||
2017 | 27.1 | -8.1 | -3.7 | -30 | |
2018 | 44.9 | -21.7 | -27.8 | -24.1 | |
2019 | 84 | -15.6 | -77.2 | -29.4 | -47.7 |
2020 | 151.1 | -13.3 | -88.8 | 0 | -50.1 |
2021 | 126.8 | -21.3 | -102.3 | -50 | -52.3 |
2022 | 86.3 | -54.7 | -103.7 | -56.5 | -57.2 |
2023 | 220.2 | -167 | 70.7 | -44.7 | -74 |
Key Ratios
Comparing Tokmanni with Europris, I feel that Tokmanni doesn't come out very strong.
margin Tokmanni | margin Europris | EBIT margin Tokmanni | EBIT margin Europris | Debt-to-EBITDA Ratio Tokmanni | Debt-ebitda Europris | |
2014 | 2.25% | 3.51% | 5.83% | 7.89% | 5.41 | 3.4 |
2015 | 1.95% | 6.00% | 5.15% | 11.50% | 5.45 | 2.7 |
2016 | 3.49% | 8.13% | 6.31% | 11.60% | 2.70 | 2.5 |
2017 | 3.29% | 7.15% | 4.85% | 10.18% | 3.33 | 2.6 |
2018 | 4.08% | 7.38% | 5.74% | 10.09% | 2.67 | 2.4 |
2019 | 4.97% | 6.02% | 7.32% | 9.28% | 3.13 | 3.7 |
2020 | 6.57% | 10.03% | 9.14% | 14.55% | 2.49 | 1.9 |
2021 | 6.80% | 12.77% | 9.40% | 17.48% | 2.27 | 1.7 |
2022 | 5.01% | 11.56% | 7.18% | 15.98% | 2.50 | 1.8 |
2023 | 3.87% | 9.60% | 6.66% | 13.68% | 4.55 | 1.9 |
ROA Tokmanni | ROA Europris | ROE Tokmanni | ROE Europris | |
2014 | 3.72% | 3.96% | 49.85% | 12.39% |
2015 | 3.25% | 6.78% | 30.83% | 18.22% |
2016 | 5.93% | 9.32% | 16.33% | 24.21% |
2017 | 5.69% | 8.53% | 16.14% | 22.01% |
2018 | 7.43% | 9.02% | 20.46% | 23.99% |
2019 | 6.44% | 5.13% | 25.50% | 18.98% |
2020 | 9.08% | 11.04% | 32.72% | 36.30% |
2021 | 9.54% | 12.78% | 31.85% | 38.20% |
2022 | 7.39% | 11.29% | 23.77% | 31.74% |
2023 | 3.83% | 9.76% | 20.35% | 25.16% |
Strengths of the Stock
Promises significant growth
Increasing EBIT to 150 million indicates a 50% growth on the EBIT line from 2023.
Performs well in tough times
They show that during rough economic periods, consumers turn to Tokmanni, a low-price chain. As an owner, this provides a "safe haven" even though the stock price has fallen significantly since 2022.
Dividends over 5%
Consistently good dividends over time, with expectations for further increases.
Prepared to enter Denmark
New country, new opportunities. No direct competitor in their segment, which could lead to good growth opportunities.
Improved targets and becoming more international
They have started comparing themselves with larger companies, indicating a willingness to proceed with their strategy and growth.
Weaknesses of the Stock
High financing costs
Leasing costs are concerning for me.
Higher risk
Debt, leasing, and general economic improvement could put pressure on Tokmanni in the future.
Key figures are not as strong compared to similar chains
See the example of key figures above for a comparison with Europris.
Will Tokmanni perform as well when household economies improve?
Generally, consumers turn to other chains rather than low-price chains when the economy is better. I don't think all sales will disappear, but it might slow down.
What to Watch
Leasing costs versus operating profit
Changes in consumer behavior
Entry into Denmark (Tokmanni claims they have no direct competitor in their segment)
Short Summary
In short, I own a small portion of Tokmanni. I find the acquisition of Dollarstore extremely interesting and look forward to seeing where Tokmanni stands in a few years.
I see some dark clouds regarding financial costs and hope some growth can come from owning property.
Tokmanni is aggressive in growth, and if they maintain/improve margins, we should see a nice increase in the bottom line.
They are well-positioned for further growth, and the dividends are strong in my view.
Their Q1 report will be released on May 17, 2024, and we can then see how things are progressing.
For anyone looking to invest in Tokmanni, I strongly recommend looking at their CMD report; it is very readable!
If you want to dive deeper into the numbers, you can find the stock on my index page, where I have provided Google Sheets read access for those interested.
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