Tokmanni Group Oyj (TOKMAN) Earnings Call Transcript & Summary

Good morning. And thank you for joining Tokmanni Group's Fourth Quarter 2023 Result Presentation. My name is Mika Rautiainen and Tapio -- Tokmanni Group's CFO, Mr. Tapio Arimo will join me later on with deeper insight on the financial figures. After our presentation, there will be time for questions. First of all, I'd like to thank the teams and the colleagues in Finland, Sweden and Denmark for almost 8 months of great cooperation. The start has been really positive with working together. Obviously, we have a lot in front of us, a lot of work in front of us, but the start has been excellent. So, thank you very much. And then the actual figures from the fourth quarter. The group revenue grew by 39%, obviously, with the support of Dollarstore and the revenue was EUR 471.2 million. Like-for-like revenue increased with the group by 1%. Take into consideration the market situation in the Nordic countries, this was, well, not satisfying, but it was still okay level, especially due to the fact that non-food business was not doing that well during the last quarter. Comparable gross profit or, let's say, comparable gross margin was 36.5%. This is also due to the support from Dollarstore, clearly higher compared with previous year and the comparable EBIT amounted to 46.2% (sic) [ EUR 46.2 million ], representing 9.8% of total revenue. Record high cash flow from operating activities amounted to EUR 116.5 million, and earnings per share diluted was EUR 0.44. Then about Tokmanni segment, which is basically the business in Finland, including Tokmanni and Click Shoes. Consumer sentiment was still slow and shopping behavior cautious. Revenue increased by 3.7%, and like-for-like by 0.6%. Sales of grocery products grew by 4.8% year-on-year. And this is, of course, it's approximately 50-50 with groceries and non-groceries for Tokmanni in Finland. So, obviously, this means that the non-groceries business was clearly slower compared with previous year. And that's, of course, because of the consumer confidence and also due to the buying power of our customers. Comparable gross margin was slightly lower, 34.9%, which is, of course, also caused due to the lower sales of non-groceries. During the fourth quarter, we launched 125 Click Shoes shop-in-shops in Tokmanni stores. This was a great success, a big operation and obviously, very successful as well. Operating expenses for Tokmanni segment were very well in control, 19.4% of revenue compared with previous year's 19.8%. And inventories, which basically have been a bit of a problem during the end of '22 and '23, now we were able to reach a very healthy level with a level of EUR 248.8 million compared with previous year's EUR 281.3 million. And then about the Dollarstore segment, which includes Dollarstore in Sweden and Bigdollar in Denmark. In Sweden, the shopping behavior was also slightly cautious. And it also showed with the business, especially with the non-food products. Revenue with Dollarstore segment increased by 5.2%, and like-for-like by 2.1% in local currencies. Sales of grocery products grew by 7.5% in local currencies, so very nice growth for grocery products. But on the other hand, the non-groceries were not doing that well in Sweden and in Denmark either. Comparable gross margin was on a very good level, 41.3%, and value of inventories for Dollarstore segment, EUR 94.1 million. During the fourth quarter, we activated in Denmark, 2 store openings in Denmark, Bigdollar store in Holbaek and Hjorring. So, this was about the Dollarstore segment. And then if we look at the Tokmanni Group's highlights for 2023, obviously, the acquisition of Dollarstore was one of the biggest things in Tokmanni Group's history where Tokmanni Group became one of the leading variety discount retailers in the Nordic with the help of Dollarstore acquisition. Obviously, it's very, very important for our future growth and expansion. The integration work, as I already mentioned in the beginning, started very well, exactly as planned. Synergies for the beginning, till the end of last year, they were approximately EUR 2.4 million. And we actually said that the target for synergy savings is the net savings, EUR 15 million by the end of 2025. We are, at the moment, well on this way. And obviously, the synergies are proceeding very nicely. As already mentioned, inventories was one of the big issues, especially for Tokmanni during 2023. And we're very happy that we were able to make the inventories level healthy again, maybe a little bit too healthy during the fourth quarter. Some of the non-food categories would have been selling even more if we would have had more inventories for the Christmas period. But at least, it's going to be a very good season next year with completely new products. And, of course, the second biggest investment during the Tokmanni Group's history, the new logistics center, Moreeni. It was a very successful execution of this project. And Moreeni is, at the moment, in full use. So, we're very happy about this development, because basically, especially in Finland, it means that we're able to get more efficient supply chain and get rid of the external warehouses, which are actually already done by now. So, Tokmanni Group's Board of Directors proposes to the Annual General Meeting to pay a dividend of EUR 0.76 per share in 2 installments. And I think, Tapio, please, can you please join me with key figures for Tokmanni Group and the segments? Maybe you should also tell something about the segments.

Yes. I will do that.

Because we launch that also. Thank you.

Yes, so as you may have seen from the press release, we changed our reporting structure a little bit. And we now have -- instead of one reporting segment, which used to be Tokmanni, we have now 2 reporting segments; Tokmanni segment and Dollarstore segment. And the Tokmanni segment includes the Finnish business, so Tokmanni stores, Click Shoes, Shoe House stores and then the Miny stores. And the Dollarstore segment includes our Dollarstore stores in Sweden and our Big Dollarstores in Denmark. So with that, let's dive into the figures a little bit deeper. So as Mika said, our revenue growth during the fourth quarter was very good, 39%. And the total net sales for the fourth quarter were EUR 471.2 million. And as Mika also said, our like-for-like revenue increased during the fourth quarter by 1%, and that's a good step-up from the year before, where we actually had a slight decline of 1%. And then in the fourth quarter, Tokmanni segment's revenue grew by 3.7%. That was also quite good growth and totaled EUR 351.5 million. Our online sales were also doing quite nicely, increase in sales of 15.1%, and accounted for 1.9% of Tokmanni's revenue. And our business-to-business sales, unfortunately, decreased a little bit by 11.7%, and they accounted for 3.1% of Tokmanni segment's revenue. And as for Dollarstore, in the fourth quarter, Dollarstore's revenue grew to EUR 119.8 million, which is a growth of 5.2%, measured in local currencies, so Swedish and Danish krone, respectively. Then a little bit about our product mix. And as you probably remember, our product mix is well balanced between grocery and non-grocery products. And also both of our segments, Tokmanni and Dollarstore have very similar product mixes. In Tokmanni in Q4, the grocery sales percentage was 49.2% of total sales and non-grocery therefore, 50.8%. And in Dollarstore segment, the grocery business is a little bit bigger in Q4, 51.9% and the non-grocery then correspondingly 48.1%. Moving on to our comparable gross profit. So the comparable gross profit for the group in fourth quarter was EUR 172 million, and our comparable gross margin was 36.5%. And the increase in the gross margin was driven mainly by the Dollarstore acquisition. And in the fourth quarter, Tokmanni segment's comparable gross margin was 34.9%, slight decline from a year ago and Dollarstore's comparable gross margin was 41.3%. Then looking a little bit at Tokmanni segment's product labels. So in the fourth quarter, the product labels managed by Tokmanni decreased slightly from 36.3% a year ago to 35.9%. But within that, our private labels actually grew from a year ago, while the white label and the brands where Tokmanni has exclusive rights declined slightly. And looking at the full year, our product labels managed by Tokmanni clearly grew from 32.5% to 33.5%. Our direct imports declined slightly also in the fourth quarter from 32.1% to 30.6%. But on a yearly comparison, also the direct imports grew slightly from 27.2% to 27.6%. Then looking at the comparable operating expenses for the group. Our total comparable operating expenses in 2023 in the fourth quarter were 20.4% of revenue, a slight increase from a year ago to EUR 96.2 million. And that increase, obviously, again affected by adding Dollarstore's operating expenses to the group figures. And the Tokmanni segment's operating expenses as a percent of net sales actually declined slightly from 19.4% a year ago to 19.3% in the fourth quarter. And Dollarstore's comparable operating expenses are a little bit higher than Tokmanni's. So in the fourth quarter, they were 23.3% of net sales. And then for the period of August to December, the Dollarstore's operating expenses percentage was 23.9%. So with that, we're going to move on to the EBIT figures. And in the fourth quarter, the group's comparable EBIT was EUR 46.2 million, obviously, a clear growth from a year ago. And the comparable EBIT margin was 9.8%, a slight decline from a year ago. And, of course, the increase in operating expenses had a significant impact on the result. And in the fourth quarter, Tokmanni segment's comparable EBIT was EUR 36.1 million, a slight increase from a year ago. And in the fourth quarter, Dollarstore's comparable EBIT was EUR 10.7 million. And for the full year, the comparable EBIT margin of the group was 7.1%, which is a slight decline from a year ago of 7.3%. And that, again, driven partly by the Dollarstore acquisition. Then looking at our inventories. So, our total group inventory level at the end of the year was EUR 342.9 million at the end of December, which is a significant increase from a year ago. But obviously, a year ago, there was no Dollarstore. So looking at the Tokmanni segment's inventory, that declined significantly to EUR 248.8 million from a year ago and also a Dollarstore inventory adds then the EUR 94.1 million in inventory to the group inventory total. Looking at our financing. At the end of December, our total interest-bearing debt was EUR 864.1 million. And out of that, the IFRS 16 lease liabilities were EUR 565.1 million, so almost or around 2/3 of total debt is the lease liabilities. And out of our financial debt, EUR 245 million is non-current loans from financial institutions and EUR 55 million is current commercial paper and loans from financial institutions. And our net debt to comparable EBITDA, excluding IFRS 16 impact was 1.6 at the end of the year compared to 1.1 a year ago. And that is clearly under our new stated target, which is the ratio, should be under 2.25. And at the end of our -- end of December, our financial position was good. And our net debt, excluding IFRS liabilities, was EUR 165.3 million. And impacting that, obviously, was the new logistics center sale and leaseback in mid-December, and that released cash of about EUR 52.7 million. Then moving on to our cash flow from operating activities. And, obviously, this is one of the things we are very happy with for the quarter and also for the full year. So for the full year, our cash flow from operating activities totaled EUR 220.2 million, which compared to last year is about almost EUR 140 million more. And the cash flow from operations was positively impacted by both the decreases in inventory and also the increases in accounts payable, obviously, from the other normal profit generating. And also for the fourth quarter, we had very good cash flow from operating activities of EUR 116.5 million compared to about EUR 92.2 million a year ago. And looking at our capital expenditure. For the fourth quarter, it was EUR 17.5 million, down slightly from a year ago. And obviously, for the full year, the CapEx is on a very high level, driven by our acquisition of Dollarstore and other investments. So the total CapEx for the year is EUR 238.7 million compared to EUR 54.3 million a year ago. And besides Dollarstore, we also acquired Click Shoes and Shoe House companies and then, obviously, spent CapEx also on the development and maintenance of our store network, our digital services and the Moreeni logistics center. So, we had a very -- full year of investments last year. And the total value of the logistics center investment was EUR 59 million. Then finally, just a brief look at our new segment reporting. So, this kind of data you will see in our financial reporting going forward. So, we have the Tokmanni segment, the Dollarstore segment and Group functions and eliminations, and then, obviously, the total from the 3. And we have constructed, I would say, very full P&L, so that we have very little group function costs in the reporting, so that the investors get a, let's say, full view into our profitability. So, we are disclosing the revenue, then the like-for-like revenue growth. Then we look at comparable gross profit and comparable gross profit margin, then comparable EBIT and comparable EBIT margin. Then we look at the return on capital employed for the rolling 12 months. And obviously, there then for the Dollarstore, we have to wait a few more quarters until we get the full 12 months picture. But for the total, we include Dollarstore for the period that it has been in our ownership. And then inventories at the end of the period, capital expenditure and then the number of stores at the end of the period. So with that, I'll invite Mika back to the stage to talk a little bit about our future.

Sure. Thank you very much, Tapio. A little bit of the outlook now. It's already end of March. So, a couple of words how the year start has been. First of all, approximately 5 weeks ago, a bit over 5 weeks ago, we had the Capital Markets Day. We basically gave an update on the strategy period, 2021-2025. Basically, obviously, the situation has changed with Dollarstore and Tokmanni Group being real Nordic variety discount retailer. But the main focus is on systematic work to improve customer trust and customer loyalty. So this is, of course, very, very, very important for us in this current market situation. Now, good news for our customers, both in all countries, in Finland, in Sweden and in Denmark, the purchase and sale prices continued to decline. So, basically, now with the spring season, the selling prices, for example, the seasonal products for the spring, they will be clearly lower compared with previous year. This is, of course, very good news. And I would say that this will continue throughout the year with -- also with the coming summer, fall and Christmas seasons. So that's, of course, hopefully, very happy news for our customers in all operating countries. Now, obviously, we will continue with focusing on Tokmanni, Dollarstore integration and synergies. The start has been excellent. We've noticed that there is so much to -- so many benefits to be gained with working together. So it's very interesting to do business together and find all the time new synergies with our operations. Now, as already mentioned several times, Dollarstore is the spearhead of our expansion and Dollarstore continues. Dollarstore in Sweden and Big Dollar in Denmark, they continue to expand the store network in Sweden and Denmark. This year, altogether, 10 new stores. And if I remember correct, today is -- out of these 10 new stores, today will be the first one to be opening and then others coming up. Actually, altogether, 6 in Sweden and 4 in Denmark. Yes, we've been working on making the supply chain much more efficient with the help of Moreeni, our new logistical center and obviously, a steady flow of goods. Unfortunately, there are some disturbances. First of all, in the Red Sea, which basically the situation in Red Sea. Red Sea caused a 3- to 4-week delay with deliveries. That's something that we were able to handle pretty well. But, obviously, the political strikes now in Finland, they slow down the product deliveries to our stores. And both of these, the containers traveling around Africa and then the political strikes in Finland. They actually, altogether, they cause additional costs for our supply chain, unfortunately. We estimate at the moment that it's already over EUR 1 million additional cost per container and which is, of course, very unfortunate in this situation. Even so, we have slightly positive expectations for the start of the spring season. As already mentioned, the price level is clearly lower compared with previous year, which is, of course, good news for our customers. We also have, like for the spring season, products like a completely new set of products in our assortment. So that's, of course, very interesting also. And I'm sure it's going to be very positive reaction for our customers. And we prepared better than ever with our spring roadshows and so on. And so we're basically ready to welcome customers to start the spring season in Tokmanni stores and in Dollar stores, Dollarstore in Sweden and Bigdollar in Denmark. Some other positive things. At the moment, Tokmanni Club, our customer loyalty program is working very well. At the moment in Finland, almost 70% of Tokmanni sales come from our club members. So we have, at the moment, more than 3.4 million club members, very satisfied club members with the club offers and benefits that we're offering. And we can see this share of sales for club members going higher at the same time. That's very good news for our future in Tokmanni Finland. The group guidance, as already mentioned during the Capital Markets Day, Tokmanni Group expects its revenue to be EUR 1,660 million to EUR 1,760 million. And comparable EBIT is expected to be EUR 110 million to EUR 130 million. Thank you. That's it. And operator, now it's time for questions. And Tapio, please join me answering the tough questions coming up, hopefully. Thank you.

[Operator Instructions] We will now take our first question from Svante Krokfors with Nordea.

Svante Krokfors from Nordea. I hope you can hear me.

Yes, Svante.

Great. I have first question about the Dollarstore. Like-for-like growth was slowed down a bit from the August, September period when you had -- I think it was 7% like-for-like. Was there any particular that explains that? Are there some seasonal impacts?

Well, it's not actually the seasonal impact. The seasonal impact may be on the non-groceries. It was clearly slowing down a little bit in the Swedish market. But it's basically -- you have to take into consideration the Dollarstore situation in the previous year. I think it was in -- Tapio can confirm me whether I'm correct with this. But Dollarstore introduced a new ERP system in 2022, and there were some difficulties in the beginning of the year. And by the third quarter, there were still some....

Availability challenges, I would say.

Availability challenges in '22. So, '23 figures during the third quarter, they were very positive, take into consideration the previous year occasions. But for the fourth quarter, there was no availability issues in '22 or in '23. But the non-food market, obviously, it's been a little bit slower in the Nordic countries.

Then on Dollarstore also, could you give some color on other like-for-like development than sales development, for example, gross margin change year-on-year and inventory?

Well, we don't disclose that, unfortunately. We don't have the exact comparison figures computed in the same format. But I would say that the profitability level in Q4 was quite good at Dollarstore. So, I think we are fairly happy with that. And obviously, as you know, the operating expense level is clearly higher relative to Tokmanni segment. So that is a, let's say, a fact at the moment. So, we obviously have actions to see how much we can close the difference.

Tapio, is it correct to say that we haven't converted all the previous figures of Dollarstore into comparable IFRS standard?

Yes. Exactly, that's one thing. And obviously, when Dollarstore was a, let's say, a privately owned company, they were not, let's say, focusing that much on monthly or quarterly reporting. And as you may remember, they also had a different year-end than Tokmanni. So, they were closing at the end of January before. So, we just don't have the exact comparison figures, unfortunately. And that's why we don't disclose those. So the revenue, we have been able to reconcile to, let's say, on a month-to-month basis for the, let's say, IFRS figures and comparable period, so we can disclose that. And that's unfortunately all we can disclose on the P&L at the moment, so in addition we have some operational data that we do disclose, but it's quite limited. So, you have to be a little bit patient and wait another 3 quarters before we have the full like-for-like comparisons for Dollarstore.

That's clear. And perhaps a question on your accounts payable, increased quite significantly and supported your cash flow. Could you give some color on that?

Yes. So, obviously, as you may remember, we had some, let's say, quite high inventory levels at the end of 2022. So, we were obviously ordering less products at that time. So, that's obviously one big reason for the higher accounts payable now at the end of 2023. So, we are now back to normal inventory levels. So, we are ordering normal amount of goods again. And then obviously, Dollarstore came in the middle of the year, so that also has some impact there.

And then on synergies, you now have a run rate of EUR 2.4 million at the end of the year. Should we look at the trajectory to reach EUR 15 million -- or at least EUR 15 million by the end of '25 as a relatively linear path?

Absolutely. We're very confident on getting those net synergies. And yes, there's still a lot to be gained, but we're actually very happy at the moment with development of the synergies. So, we're very confident with getting the EUR 15 million by the end of 2025.

And the last question on your guidance. I mean, in relative terms, your top line guidance is relatively narrow compared to the EBIT guidance. Could you give some color on what kind of assumptions you have for reaching the low end of EUR 110 million and high end of EUR 130 million in EBIT?

Yes. Obviously, well, the way I look at it, if the net sales come in, then actually the marginal operating profit from additional sales is actually obviously significantly higher than the average. So, I don't fully agree with your assessment on the relative, let's say, width of the guidances. But, of course, we make certain assumptions on net sales, certain assumptions on the margins, certain assumptions on the operating expense. So obviously, operating expense, mainly the store operations, they adjust relative to the sales. But then, of course, we have a number of fixed expenses as well, namely the lease costs on our properties, the headquarters, personnel and so on. So it's a mix of things. And obviously, then the product mix also impacts the, let's say, the relative profitability. So, typically, the fast-moving goods have a lower relative gross margin than the slower moving goods. And the fast-moving goods are typically grocery products and the slower moving goods are non-grocery. So there is, let's say, a very large number of assumptions that we do. And operating expenses, like I said, you can adjust to a certain extent based on your sales performance. But obviously, a part of it is relatively fixed.

Operator, any other questions?

Yes, we do have next -- we'll have from Miika Ihamaki with DNB Markets.

It's Miika from DNB. Couple of questions. First one, in the last conference call, you described that Christmas season had started very strong. Now, like-for-like group growth of 1%, but we see slight decrease in visits. It sounds a little bit slightly disappointing. So, can you explain what happened?

Well, the business slowed down a little bit during the -- coming closer to the Christmas season. There are no other explanations. We had a very good start. And obviously, something which was affecting the good start was the launch of Click Shoes, shop-in-shops in our stores and Tokmanni stores. But I have to say that we were basically missing the non-food customers. Groceries were doing very well during the whole quarter, but non-food, unfortunately, let's say, the last, especially December clearly showed that the customers were buying non-food products in Tokmanni. They were basically skipping their visits. That's it. From what we were, of course, asking also from our customers, it was mainly due to the -- well, the confidence and the buying power, less money in our customers' pockets in the end of the year.

And do you have expectation for like-for-like growth into this year? Do you expect it to be positive?

Yes, we do.

And then just on the financing costs, so -- at least were higher than what I expected. And I recall that you said earlier that you gave a level of EUR 20 million to EUR 25 million to this year, including the IFRS 16 impact. So does that still hold?

I think that might have been -- if that was what was said, I think that was a misrepresentation a little bit. So, I think the Q4, about EUR 10 million in financing cost. That's, at the moment, roughly the run rate of the financing cost. So multiply that by 4. And I think that is something we are expecting in the current interest environment. Of course, should the interest go down, it will be lower and should the interest go up, it could be higher. But at the moment, the run rate is roughly EUR 10 million for the combined. I think the IFRS leases are in the range that you mentioned. So maybe there was some miscommunication.

We will now take our next question from Maria Wikstrom with SEB.

This is Maria Wikstrom from SEB. I still have few questions. And I wanted to touch upon the Dollarstore like-for-like customer visits, which were down 2.6%. Could you give a color that in Q3, when you had this 7% like-for-like sales growth, what -- did you -- I don't know, recall that you had disclosed the like-for-like customer visit in Q3. So what was the figure at that time?

I don't have that figure, unfortunately, on the top of my head, but I think the 7% you're referring to Dollarstore, right?

Yes.

Yes. So as Mika mentioned the -- so, obviously, there's been some inflation in Sweden as well on average prices. So the customer visits are -- I don't remember that figure on top of my head, but I think I can safely say that they are clearly lower than the like-for-like sales growth, but still positive. And like I said, the 2022 was a, let's say, a little bit challenging year for Dollarstore due to the ERP system implementation. They did have quite a bit of logistical challenges in getting goods to their warehouse and to the stores. So, that impacted the sales figures for 2022. So the like-for-like growth in 2023 is perhaps a bit higher than would have been under -- if both years have been completely, let's say, challenge-free from the internal issues.

Maybe continuing on here that if the like-for-like customer visits were negative for both segments in Q4, what you have seen in the traffic figures in the beginning of the year?

Unfortunately, I don't think we are in a position to disclose that at the moment. So, we will disclose that then with the Q1 results announcement in about 2 months' time.

Okay. Then you had a good growth in grocery sales in Finland and Sweden. And if you don't mind, I mean, disclosing the figures, again, I think I missed writing them down. But I wanted to get a little bit of color that how much is price and how much is volume? I would guess the price stands for quite a bit of that.

It is. It is, let's say, price driven, obviously. So the inflation has been little bit higher on the grocery products and the non-grocery products have started to come down earlier.

Yes. But actually, not that many price increases with groceries. So it is a very good growth, or it was also growth in volumes as well. The only -- in grocery, the only products which were like a price increase, it was like a sugar-related products, well, for example, chocolate and candies and things like this. But others, other grocery products, there were no price increases.

Okay. And then finally, I'm not sure if you -- you might have answered this already, so sorry if it comes again. But you reported reaching EUR 2.4 million synergies from the acquisition in Q4. So, can you specify, I mean, where do these synergies come from?

Well, yes, in the beginning of -- so in the end of last year, it is actually Tapio and Nancy, Tapio's colleague in Dollarstore were able to get the first synergies. But, obviously, we started right away, the purchasing department started right away discussing on the buying prices and also on negotiation, joint volumes and so on. So in the beginning, more on the administrational part and then until the end of the year and especially in the beginning of this year, most of the synergies come from negotiating the new buying prices with new volumes and so on, so with mainly the purchasing department. But at the same time, I have to say that we can find a lot of areas in almost like every function where we can find synergies, but just needs a bit of work.

And then, obviously, there are longer term -- or longer lead time items in synergies are things like the assortment. We then switch suppliers on both sides to a single one and start shipping to both companies. So those take longer. So those you start seeing then maybe a little bit more at the end of this year and then obviously next year.

Okay. And then finally, you said in the Capital Markets Day that you drive these gross sales synergies that are put in some of the products that currently are in Tokmanni's assortment also to Dollarstore's assortment. So driving it probably in a few stores first. So, have you already put some Tokmanni products in Dollarstores? And how has that process been in the beginning?

Unfortunately, not. That's due to the fact that the -- well, basically, especially with the non-food products, the containers were 3 weeks to 4 weeks late due to the Red Sea disturbances. And at the moment, it's slightly difficult with the ports in Finland being closed. It's the transportation of Tokmanni goods to Sweden is -- or it would be extremely expensive. So we're going to -- we need to wait for the political strikes first to end, and then we can start testing different Tokmanni products in Dollarstore. Some of the joint buying that the teams have been doing, these -- there are already some -- the first products are now already in Finland and in Sweden. These are the joint-buying operations, the first ones. But directly from Tokmanni assortment towards Dollarstore assortment, there we still need to wait for a while, at least the political strikes to end up so that we are able to start full transportation of the goods.

[Operator Instructions] And we will now move on to our next question from Arttu Heikura with Inderes.

It's Arttu Heikura from Inderes. I have a few questions. Let's start with gross margin in Finland. It declined somewhat, and you said that sales mix was one of the factors behind that. So, is there any other factors affecting gross margin in Finland?

Product mix is obviously one, so slightly higher grocery sales.

Exactly.

So the grocery business is clearly lower gross margin on average than the non-grocery business. So, that's obviously one driver.

But no dramatic changes with that. No dramatic changes with the gross margin in Finland otherwise.

Okay. So, there was not a dramatic price competition or something like that.

The price competition is always dramatic. So, yes, of course, there were. And especially in groceries, I think that most of the retailers were suffering from the lower traffic and let's put it this way, the lower buying power. So, obviously, there was like a dramatic price competition. But for us, it was mainly due to the slightly smaller non-food sales during the fourth quarter. Some of the product groups were basically sold out, for example, seasonal lights and this kind of big product groups during the fourth quarter, that also had an effect on this one.

Okay. You said that buying synergies started to realize in the start of this year. So, should we expect to see an improvement in gross margin in Q1?

Yes. Well, first of all, the buying synergies were the first ones, were already a previous year. And obviously, it's like, yes, I'd say that the biggest synergies where obviously, we are negotiating with, for example, with the private labels and the full Christmas season. I don't know. I don't think that we're going to disclose anything regarding the gross margin during the first quarter of...

Or we will disclose that in a couple of months.

That's true. That's true. But obviously, that's definitely something where we do see potential with the buying synergies. So, obviously, it's either very competitive selling prices and improved gross margin, either/or or both. Let's see how the teams succeed.

Okay. That's clear. And then in general, the competitive environment, so there are multiple discount retailers that are likely to increase their store network. So, have you seen from Tokmanni's perspective, any changes in the competitive environment?

Yes, of course, we do see and we observe the competitive environment basically daily. And a lot of things happening when the buying power and customers' confidence is on a lower level. There is always like very tough competition with all retailers. And yes, we can see that very well. But we're, at the moment, quite confident on the situation. We've been preparing together with Dollarstore, for example, already the some of the spring season products. And we feel that we're -- well, we're at the moment, slightly positive regarding the spring season. Obviously, Tokmanni in Finland, we are the market leader with garden, for example, the garden category. So obviously, this is a very, very interesting period for us. The second quarter is the second biggest quarter for Tokmanni. And obviously, Dollarstore has been very interested in learning more about the garden business via Tokmanni. So, yes, we're, at the moment, feeling quite okay even though the competition is very hard.

Okay. Okay. In CMD, you said that you are waiting some containers of springs season products to come, and you are basically hoping that spring season doesn't start early. So, what is your situation now? Have you got the spring items already? Or do you still basically have enough spring products for the season?

Yes, we do. During the CMD, I think it was like -- I might have said 700 containers coming towards Finland. At the moment, in Europe, we have approximately 200 containers. Or actually, it's like this, that in Europe, waiting for the end of political strikes is, I'd say, something like 170 containers. And in Finland in the Vaasa port, we have 30 containers waiting to come to our warehouse. Unfortunately, we are not able to get them from there. But otherwise, we were able to get the 500 containers to Finland. Unfortunately, due to this Red Sea and political strikes, we had to pay additional cost per container, but it was very -- it's very important for us to get the goods. So, we decided to do it. And we're good right now.

There are no further questions in queue as well. I will now hand it back to the studio. Thank you.

Yes. Thank you one more time for joining the result presentation and see you next time in 2 months' time. Thank you.

Thank you, everyone.