Swedish And Danish Store Openings Will Unlock Secular Retail Opportunities

Key Takeaways

• Aggressive store expansion, private label rollouts, and digital loyalty initiatives are set to accelerate growth and deepen market share in non-grocery categories.
  
• Operational integration, direct sourcing, and automation investments will drive efficiency, cost savings, and margin improvements across the group.
  
• Heavy dependence on physical retail, rising costs, and competitive and demographic pressures threaten Tokmanni's profitability and long-term growth as digital and sustainability trends accelerate.

Catalysts

Operates as a variety discount retailer in Finland, Sweden, and Denmark.

• While analyst consensus expects store network expansion to gradually drive revenue growth, the robust pace of openings in both Sweden and Denmark, combined with Tokmanni's proven playbook for rapid private label rollouts, could deliver market share gains and top-line acceleration well ahead of expectations, especially as non-grocery categories outperform.
  
• Analysts broadly acknowledge synergy savings from the Dollarstore integration, but the full operational integration, consolidation of supply chain and sourcing functions, and adoption of a unified One Company model are likely to unlock far greater cost savings and efficiency gains, setting the stage for sustainable improvements in net margins over the next several years.
  
• Tokmanni's successful launch of Tokmanni Club and app-based membership, with a significantly higher average basket size among app users, signals that digital engagement and omnichannel investments could drive higher customer loyalty, repeat visits, and incremental revenue far beyond current projections.
  
• The group's move toward direct sourcing and away from wholesalers, particularly at Dollarstore, positions Tokmanni to capitalize on industry-wide demand for value and supply chain resilience, further enhancing gross margins while deepening customer trust in affordable, responsibly-sourced products.
  
• Ongoing investments in digital supply chain automation, data analytics, and inventory optimization across the group provide a foundation for structurally lower OpEx and working capital needs, supporting consistent earnings growth and improved free cash flow well into the future.

Tokmanni Group Oyj Future Earnings and Revenue Growth

Assumptions

• This narrative explores a more optimistic perspective on Tokmanni Group Oyj compared to the consensus, based on a Fair Value that aligns with the bullish cohort of analysts.
• The bullish analysts are assuming Tokmanni Group Oyj's revenue will grow by 5.9% annually over the next 3 years.
• The bullish analysts assume that profit margins will increase from 2.2% today to 4.6% in 3 years time.
• The bullish analysts expect earnings to reach €92.7 million (and earnings per share of €1.58) by about August 2028, up from €37.4 million today. The analysts are largely in agreement about this estimate.
• In order for the above numbers to justify the price target of the more bullish analyst cohort, the company would need to trade at a PE ratio of 15.6x on those 2028 earnings, up from 14.3x today. This future PE is lower than the current PE for the GB Multiline Retail industry at 27.3x.
• Analysts expect the number of shares outstanding to grow by 1.96% per year for the next 3 years.
• To value all of this in today's terms, we will use a discount rate of 11.03%, as per the Simply Wall St company report.

Tokmanni Group Oyj Future Earnings Per Share Growth

Risks

• Tokmanni's continued high reliance on physical stores and relatively modest digital presence exposes it to long-term risks from the secular shift toward e-commerce, which could erode future revenue growth as consumer preferences move online.
  
• The company faces persistent margin pressure, as highlighted by lower gross margins and increased operating expenses due to salary inflation, new system implementations, and higher personnel and marketing costs, which together could suppress net earnings over time.
  
• Intensifying competition from both domestic and international discount retailers and supermarkets, such as Lidl and online entrants, risks sparking price wars or market share losses in key regions like Finland, Sweden, and Denmark, negatively impacting overall profitability.
  
• Tokmanni's discount-oriented business model may become increasingly challenged by consumer expectations and regulatory pressures around sustainability, potentially requiring more expensive sourcing or operational changes that could elevate costs and reduce margins.
  
• The store network strategy, while showing no immediate plans for downsizing, may become less effective in the face of demographic shifts such as an aging population and urban migration in Finland, ultimately limiting long-term addressable market growth and putting downward pressure on revenue expansion.

Valuation

• The assumed bullish price target for Tokmanni Group Oyj is €17.0, which is the highest price target estimate amongst analysts. This valuation is based on what can be assumed as the expectations of Tokmanni Group Oyj's future earnings growth, profit margins and other risk factors from analysts on the bullish end of the spectrum.
  
• However, there is a degree of disagreement amongst analysts, with the most bullish reporting a price target of €17.0, and the most bearish reporting a price target of just €8.2.
  
• In order for you to agree with the bullish analysts, you'd need to believe that by 2028, revenues will be €2.0 billion, earnings will come to €92.7 million, and it would be trading on a PE ratio of 15.6x, assuming you use a discount rate of 11.0%.
  
• Given the current share price of €9.08, the bullish analyst price target of €17.0 is 46.6% higher.
  
• We always encourage you to reach your own conclusions though. So sense check these analyst numbers against your own assumptions and expectations based on your understanding of the business and what you believe is probable.