Tokmanni Group Oyj (TOKMAN) Earnings Call Transcript & Summary

Good morning and thank you for joining Tokmanni Group's First Half 2024 Result Presentation. My name is Mika Rautiainen. And today, together with me, Tokmanni Group's CFO, Mr. Tapio Arimo, will present the results for the second quarter and the first half of 2024. I will first go through the key points for the second quarter and Tapio will then give a little bit more light on the financial figures, then couple of words regarding the outlook for the rest of the year and then it's time for questions. This time we've changed the setup for the questions a little bit. So we ask you to join Teams on the broadcast page and when there are the chance for questions, please raise your hand, open your mic and we'll continue from there. Thank you very much for your cooperation regarding this. Let's start with the presentation. So tight market and late start of the spring season impacted revenue and EBIT. Tokmanni's store number 377 at the end of June this year. Dollarstore segment 25% of the total revenue and Tokmanni segment 75%. So let's look at the group's key points. Customers were cautious when making purchase decisions. The tight economic situation continued during the second quarter actually in both countries in Finland and in Sweden. Number of comparable customer visits decreased in all operating countries and the biggest effect actually came in April. April was very difficult in Finland and in Sweden due to the late start of the spring season. In Finland, April was, let's put it this way, even worse. We were still having actually a little bit problems with shelf availability in April due to the happenings in the beginning of the year in Red Sea and then due to the 4-week strikes in Finland. So actually the worst hit due to these 2 things we took actually in April and at the same time, a very late start that was very difficult especially for Tokmanni segment, but also for Dollarstore in Sweden. Anyway, gross margin was at a good level. Fixed costs remained well under control. And of course the integration of Tokmanni and Dollarstore is still progressing as planned. When we look at the key figures for the second quarter. If I first go through these figures and then couple of words about it. The revenue grew by 32.5% and that's of course due to Dollarstore bringing 25% of the revenue to the group. But like-for-like revenue decreased by 2.4%. Comparable gross profit, the margin was 36.7% compared to previous year's 36.1%. And comparable EBIT amounted to EUR 27.9 million compared with last year's EUR 28.5 million, representing 6.6% of revenue compared with previous year's 8.9% so clearly lower. Cash flow from operating activities amounted to EUR 43.9 million compared with last year EUR 79.8 million. Earnings per share diluted was EUR 0.25 compared with previous year's EUR 0.33. So obviously we're not happy with the results, especially with the revenues. But at the same time, I have to say that Tokmanni Group has been on a, let's say, transition -- going through transition period with this integration process. First of all, the Swedish team has been doing an excellent job by establishing a lot of processes and standards to act as a part of a listed company and at the same time in Tokmanni segment, the team has been really putting a lot of resources also into the integration and so on. And obviously it's taking a little bit time, but at the same time I have to say that this is something that we have to do and I'm pretty sure that we will be also much stronger in future when we get the transition period done. Regarding Tokmanni segment, I already spoke about it. Weak purchasing power continued to affect consumer behavior. Consumers were very price sensitive. Market in Finland was actually quite flat and of course tight competition, a lot of price competition, new competitors. So of course the market is tougher and obviously we need to take this into consideration when we now prepare to the latter part of the year. Tokmanni segment's revenue decreased by 0.9% and like-for-like revenue decreased by 2.9%. The biggest effect, as mentioned, came from April. Comparable gross margin was 36.2% so basically on the same level compared with previous year. Operating expenses were 21.7% of revenue compared with previous year's 21.1%. Comparable EBIT 8.4% compared with previous year's 9% so EUR 26.5 million compared with EUR 28.8 million. Inventories EUR 285.4 million. This is on a normal level. New Tokmanni stores were opened in Soderkulla, in Sipoo and in Palkane in Finland. In Helsinki, we closed 1 store in Columbus shopping center due to the end of the rental contract. And in addition, new Click Shoes stores were opened in Kouvola, Tampere and Lahti. Now let's look at the Dollarstore segment. Also in Sweden market confidence was low. Consumers were also cautious. So in Sweden Dollarstore customers, basically it's low income customers so when the market is very tight and the confidence low, it shows of course with the revenue figures. Revenue increased by 2.1%, but like-for-like decreased by 1.1% in local currencies. Comparable gross margin for Dollarstore, 38.3%. Operating expenses, 25.5% of revenue. Comparable EBIT margin was 2% and EBIT was EUR 2.1 million. Value of inventories for Dollarstore, EUR 105.4 million. We opened a new Dollarstore in Linkoping in Sweden during the second quarter and in addition, a new big Dollarstore was opened in Frederikshavn in Denmark. So we've been working very hard with this transition to become a Nordic variety discount leader, Tokmanni and Dollarstore together, and the strategic rationale is still very valid. Dollarstore is the spearhead of our expansion. We need to establish certain processes and standards to be able to really take the next step with the company's development. There are potential new markets. We will have 5 new openings in 2024 so during the rest of this year. Actually 3 new openings in Sweden and 2 new openings in Denmark. And actually in Finland, we will open 3 new Tokmanni stores also during the rest of this year. So it will be very active second half of 2024 for Tokmanni Group altogether. And in addition to Dollarstore expansion, we're focused on developing the concept, for example, by expanding the product assortment especially with Tokmanni private labels, which will be in a key role during the coming months now during this year. The first private label products were sold during the summer season, some outdoor furniture, joint buyings with Parco private label. And of course when it comes to the fall season and especially Christmas season, we have a lot of common assortment in Finland and in Sweden. Achieved synergies, EUR 9.9 million on annual basis at the end of June. So this shows that the run rate is very good. Of course the results will come as soon as we start selling the joint buying products or products which have been bought jointly and of course we'll continue the good work of combining purchases at the group level. Our goal is to attract new customer groups to Dollarstore and strengthen the offering for current customers with new assortment, with new products and so on. At the moment, it looks very good especially when it comes to the start of the fall season. And then it's time for Tokmanni Group's key figures. And Tapio, please join and take over sharing some light on the key figures.

All right. Thank you, Mika, and good morning on my behalf as well. So let's dig a little bit deeper into the figures. In the second quarter, Tokmanni Group's revenue grew by 32.5% obviously driven by the Dollarstore acquisition and totaled EUR 422.5 million. Our like-for-like revenue decreased by 2.4 percentage points (sic) [ 2.4% ] and that was driven by a quite tough market combined with few unfortunate things that Mika mentioned like the strikes and the Red Sea situation. And in the second quarter then, the Tokmanni segment's revenues decreased by 0.9% and obviously that was compared with a very strong work in the previous year where we grew 4 percentage points (sic) [ 4% ] and the sales totaled EUR 316.1 million. Our online sales also decreased slightly by 6.4% and accounted for approximately 1.6% of Tokmanni segment's revenue and our B2B sales increased by 2.2% and accounted for 3.2% of Tokmanni segment's revenue. And Dollarstore revenue grew by 2.1% as measured in local currencies during the second quarter and the total sales amount to EUR 106.6 million. Looking at our sales mix. Still the grocery business was performing better than the nongrocery business during the second quarter and Tokmanni's share of revenue was 52.9% in groceries and Dollarstore's share of gross revenue was 56.1%. And looking at our comparable gross profit. So the gross profit in the second quarter, EUR 155.2 million and the comparable gross margin was 36.7%, which grew 0.6 percentage points from the previous year and overall, the gross profit obviously also impacted by the addition of the Dollarstore segment into the group. And regarding Tokmanni segment, also the gross profit margin was steady during the second quarter, actually a slight increase of 0.1 percentage points to 36.2% while Dollarstore's segment comparable gross margin was 38.3%. Our own managed product labels and direct import. So as you can see from the graph, Tokmanni's share of sales of own managed product labels fairly constant, slight decrease from last year; but an increase from 2 years ago at 32.6 percentage points (sic) [ 32.6% ] and Dollarstore at the moment is very low at 4.9 percentage points (sic) [ 4.9% ]. But as Mika pointed out, we have very solid plans to increase that share as we roll out Tokmanni's private labels into the dollar store assortment over the next coming quarters. And Tokmanni's direct import was 25.9% during the second quarter. And then looking at our comparable operating expenses. So Tokmanni Group's comparable operating expenses totaled 22.8% of sales or EUR 96.4 million and again the increase driven by the Dollarstore addition to the group. And also in the Tokmanni segment, the share of operating expense relative to revenue increased slightly from 21.2 percentage points (sic) [ 21.2% ] to 21.7 percentage points (sic) [ 21.7% ] and totaled EUR 68.4 million. And the Dollarstore segment's comparable operating expense as a percentage of sales was 25.5 percentage points (sic) [ 25.5% ] and totaled EUR 27.2 million in the second quarter. And looking at our comparable EBIT. So our group's total comparable EBIT was EUR 27.9 million, a slight decrease from the previous year's EUR 28.5 million and our comparable operating margin was 6.6 percentage points (sic) [ 6.6% ], a decrease from the previous year of 8.9 percentage points (sic) [ 8.9% ]. And this was really driven by the increase in operating expenses as well as the, let's say, relatively slow or flat sales during the quarter. And group functions and eliminations also increased to EUR 0.8 million during the quarter from the previous year of EUR 0.3 million and that's again driven by the Dollarstore acquisition. And Tokmanni segment's EBIT, EUR 26.5 million in the second quarter compared to EUR 28.8 million a year ago and Dollarstore segment's comparable EBIT in the second quarter was EUR 2.1 million. Our inventories remained well under control. At the end of the second quarter, our total inventory value was EUR 390.9 million, an increase of about EUR 99 million and again that was driven by the Dollarstore acquisition. And Tokmanni segment's inventories actually declined slightly from a year ago and were EUR 285.4 million and the value of Dollarstore inventory in Sweden and Denmark at the end of the second quarter was EUR 105.4 million. Our financing position remains stable. So total interest-bearing debt at the end of the quarter, EUR 838.1 million as compared to a year ago EUR 461.9 million. And again that was driven by the increase in both bank loans as we funded the Dollarstore acquisition with bank loans and also the increase in the IFRS 16 lease liabilities, which totaled EUR 574.2 million at the end of Q2. Our net debt to comparable EBITDA obviously also increased from a year ago driven by the increase in net debt and the ratio, including the IFRS 16 lease liabilities, was 3.8 and excluding the IFRS 16 liabilities was 2.4. And total net debt excluding IFRS liabilities at the end of quarter 2 was EUR 250 million, an increase of approximately EUR 130 million from a year ago. And then to our cash flow from operating activities. So January-June the total cash flow from operating activities was around EUR 4 million and the cash flow in Q2 was about EUR 43.9 million. And let's say the most impact during both the first half and the second quarter was the change in the inventories compared to the comparison period where the inventories declined significantly and this year they have been fairly stable. Our capital expenditure is on a good level. So our total for the second quarter EUR 12.8 million and out of that, EUR 10.5 million due to Tokmanni segment and EUR 2.3 million related to Dollarstore segment. And the CapEx is mainly related to store network expansion, development and maintenance of the store network and development of the digital services. So then I'll invite Mika back to present the outlook for the group.

Thank you, Tapio. And please don't go too far because right after couple of words regarding the outlook, we'll go to the questions. But anyway about the outlook, Luckily enough during the last days and the last weeks, there have been some good news for our customers. First of all, the interest rate is coming down or has come down a little bit in Finland and it's also expected to come down also in the inflation. In Finland, we're already on the almost like 0 level. So that's good news for our customers and for the buying power, also the consumer confidence so to speak. Unfortunately, there will be a hit in 2 weeks' time in Finland due to the increase of the VAT of 1.5% unit. We estimate that this will have an impact on the consumer confidence and a little bit like shopping behavior, shopping sentiment, at least for a short period like September, October. That's due to the fact that obviously in the media, there will be a lot of probably talk about the increase and so on. But later on obviously, we expect that to be -- well, the effect will be going away. But for the first maybe 1, 2 months, there will be an impact regarding this. Anyway, we expect the revenue for Tokmanni Group to be in the range of EUR 1.65 billion to EUR 1.73 billion and at the same time, we expect Tokmanni Group's comparable EBIT to be in the range of EUR 98 million to EUR 118 million. So that's about the outlook. And now it's time for questions.

So we ask you to join Teams on the broadcast page and please raise your hand and open the microphone. And if I see correct from here, and Tapio correct me if I'm wrong, but it's Arttu Heikura as the first one.

It's Arttu Heikura from Inderes. Firstly, could you elaborate more deeply the assumptions behind the lowered guidance I mean preferably segment by segment?

Would you like to talk about it?

Yes. So obviously both of our operating segments have faced a tough economic climate in the first half and we expect that to continue in the second half as well. Obviously, like Mika said, in the last few days there's been a lot of good news. But at the same time, the unemployment rate both in Finland and Sweden are unfortunately increasing so that will also dampen those consumers spending who suffer from that. So it is, let's say, a similar picture at the moment for both segments in the sense that we do not see a very good recovery in the second half unfortunately. Hopefully, of course we all hope that things will get better sooner than later.

Okay. I had some technical issues at the start of the session so you might have already answered this question. But Dollarstore's comparable customer visits were down by 4%. So what were the main drivers behind less customers?

Well Dollarstore's a little bit of a victim in this transition period. Obviously, as mentioned, there will be new products, new assortment, there will be like Tokmanni private labels. But at the same time, Dollarstore needs to get rid of some of the old assortment and so on. So they're actually a little bit in the middle of the phases basically where they cannot really take the new products so much or haven't been able to take the new product so much in yet and at the same time they need to get rid of the old product. So of course it shows to the customer that there is like a transition period going on. Now already I think it's already in September when there will be quite a lot of Tokmanni new -- for Dollarstore, new Tokmanni private labels in the assortment that it's like starting to change the setup a little bit. But unfortunately, during the second quarter especially, Dollarstore was a little bit in between the 2 phases.

So this is a phase which should pave the way?

We have high ambitions for the segment and I think it's also fair to note that the core consumer of the Dollarstore is one that has quite little money to spend. Unfortunately, those have been impacted the most by this sort of a tough economic climate. So in Finland, I think every single Finn has visited a Tokmanni store. In Sweden, it is a little bit different. So the core customer in Dollarstore is typically one with a very low income. So they are unfortunately impacted a bit more by the economic downturn.

Okay. You said that the VAT increase in Finland would impact the growth potential, but at the same time you said that you are going to focus on increasing your customer visits and revenue. So does this imply that you are putting more aggressive price campaigns in H2?

We're not satisfied with the Tokmanni sales in Finland so yes, we will be much more aggressive also during the second half of the year.

Okay. Then about Dollarstore's gross margin so could you elaborate was it increasing or decreasing from the last year?

Again we don't have the exact comparison figures, but I would say it hasn't been increasing at least. So I would estimate it to be flat to slightly down a percentage point. So we don't have the IFRS figure.

Exactly. The second quarter figures from last year, they are not converted to IFRS so they are not really comparable. But as Tapio said, slight.

If we would have the figures, they will probably be flat to slightly down.

Exactly. And that's due to also getting rid of the old assortment.

Sure. Then lastly, how do you see how has the Q3 started and do you see possible that given the VAT increase in September, you could see some pickup in sales in August and then sales decrease in the latter part of the quarter?

Well, August as a month basically it's right after the summer holidays. So no, we don't expect August to be like so that the customers would think like okay, let's now do all the buying, all the shopping in August and then quit this in September. Obviously we will be very aggressive also in September to make sure that we get the customers in. But still we're talking about for both companies, but in this case for Tokmanni, we're talking about groceries. So customers usually don't do like grocery shopping for months ahead or something like this. So no, we don't expect there to be like a peak in August for that purpose and then coming down in September. Our aim is to prove to customers that they can still trust our price level also in September. And if I see correct, the next one is Maria.

This is Maria from SEB. And Arttu asked quite a few of my questions, but I still have few left. So I wanted to touch upon the balance sheet as you are currently a bit above your own target on the net debt EBITDA excluding the IFRS. So what is your plans to get back to the levels, which is below this 2.25?

Our target is to be at the end of the year below the 2. So I would say that we are clearly on a path to get there. So we have a fairly cyclical business and typically at the end of the Christmas season, we have the least debt. So we sold the Christmas sales and gotten all the money in from that at the end of the year. So we're not in that sense outside of our target by any means. So we're very comfortable with the current debt position.

And then the second question is you hosted the Capital Markets Day in May when we already knew that the April sales was weak given the very slow start of the season and I think you were quite ambitious on the targets. This adjusted EBIT EUR 150 million, I think that's the run rate when we come out of the '25. So please just specify is that actually for the year 2026 or how do you see the EUR 150 million? And then given your lowered guidance that in '24 your adjusted EBIT is going to be EUR 110 million to EUR 130 million. So do you think that still would be reachable within your strategy period?

That was a lot of questions. But let's start from actually the first fact. You mentioned that we had CMD in May. I think it was February. At least we were keeping the CMD in February. Hopefully we were in the same CMD.

But I guess the EUR 150 million was still the new long term or the long-term target that was mentioned in the CMD.

Yes, and we're still having that as a target. At the moment, it's a lot of work together with Tokmanni and Dollarstore. We have a lot to do with basically all areas. We will all the time -- we will be working more efficiently together with all areas and obviously this is like the transition period as mentioned several times. Yes, of course we will target -- we are thinking that by the end of this year, we will be already on a very, let's say, much better position to compete within the market together with Dollarstore and Big Dollar and Tokmanni. So yes, we will have the EUR 150 million as our target for 2025.

And is that the run rate when you come out of the '25 or should that be the EBIT for the year '25? How should we read it?

The target EBIT for 2025 as we've said so. But again that's a strategic target so it's a little bit different than what the guidance is.

Probably we're not giving guidance for 2025.

No, not yet. So we will give the guidance in due course then for 2025. But it's a strategic target and we stick to that strategic target of course.

Okay. And then my final question, if you can a little bit highlight the Big Dollar performance in Denmark where the like-for-like as well as comparable traffic, is that similar to what we see in Sweden or is Denmark isolated from this soft performance?

Well, in Denmark obviously because it's not that many stores so they have a little bit different market situations, but it's in a way typical in that sense that some of the stores are doing very well. Some of them are having some issues with lot of things. But basically we see this Danish market very tempting and we will be investing in the Danish market as well. I mean 2 more openings this year. I think that we informed already about altogether 8 new openings in Denmark by the end of next year. So yes, we will be very active. Obviously if you look at the market itself with 5 stores, it's a little bit difficult when it comes to marketing and things like this. But according to their performance, we stick to the plan adding a lot new stores in Denmark and we really look forward to having like a real Big Dollar chain in Denmark.

Actually it's a little bit different market because there's not so much history having discount retailers in Denmark. So there's a little bit more consumer education work in Denmark than maybe Finland and Sweden where the discount retailer is a fairly known concept for decades.

And next question comes from a phone number from U.K. I guess.

Miika from DNB Markets. Apologies, I might have missed something due to the Teams not working well. But I would start with a question that your H1 clean EBIT was clearly down despite consolidation of Dollarstore figures. But now your '24 guidance midpoint anticipates a clear improvement year-over-year while the outlook is not particularly great further negatively impacted by the VAT increase in Finland affecting from September onwards and presumably the drag from increased shipping costs is said to continue. So what makes you confident that you're able to increase profits in the second half to the extent that your base scenario of EUR 108 million in adjusted EBIT will be less not even mentioning the upper end of your guidance?

Yes, you're absolutely right with the customer sentiment regarding the VAT increase. Now doing the nonfood purchases the buying and sourcing, actually it's a long process so basically at the moment, we are finalizing the deals for next year 2025 summer products. So actually now in the end of August both companies, Tokmanni and Dollarstore, will be getting the new products, the new joint buying products. And we have quite a lot of lead in this setup because now we are able to start collecting the synergies like for real from the joint buys. And obviously we think that first of all, our buying price level will be or it's very good due to the increased volumes. So we are able to also compete with the prices when it comes to the market and that's what we're going to do. So that's why we are believing that the rest of the year will look slightly better compared with the first half. But especially with Dollarstore, Dollarstore is definitely wanting the new products in their assortment and luckily enough they will be also getting. At the same time, Tokmanni will launch a couple of new assortments or product groups. So yes, it's going to be very interesting.

Okay. And then secondly, so Dollarstore like-for-like visits continued to decline and although you noted earlier that you actually saw some positive signs for better trading conditions in Sweden. So of course I understand April was difficult due to the late spring. But can you open up if Dollarstore like-for-like visits were also negative in May and June?

No, we don't unfortunately give that level of detail out. I think the sort of quarterly level is fine.

Yes. But also let's put it this way. With Dollarstore and the Swedish market, if we have understood correct the Swedish numbers, April was quite difficult month for retailers in Sweden.

Okay. And then finally, so on the increase in VAT. How do you expect this to impact your competition? What I'm interested in is do you believe that you have disadvantage against some of the other players in the markets due to this?

Sorry, Miika. Did you say disadvantage?

Yes.

No. I'm not sure whether I'm understanding the question correct. But it's the same story for everyone.

Of course if you always have a few different line items, it's less of a hassle. And of course we have a very wide selection, but so do many of our competitors. So competitive situation will not dramatically change because of the increase in VAT if that's what you mean. I think it won't impact the competitive situation as such.

And the next one is Calle Loikkanen.

It's Calle Loikkanen from Danske Bank. I have a few questions. Starting off with Dollarstore. Dollarstore has been with you now for roughly 1 year or pretty exactly 1 year. I was wondering that has the financial performance been in line with what you expected when you did the acquisition or has it been better or a bit weaker than you had anticipated?

Well, I think it's almost according to the plan. Maybe the transition period with getting rid of the old assortment and expecting the new assortment to come? And so maybe I mean the effect on the sales, that's probably something that we actually didn't think that it would be this tight market for Dollarstore. But now it's actually quite understandable when we look at the situation. But this of course was something that was quite difficult to estimate when making the deal that like when we will do this kind of transition, it will have an effect on the sales in the stores.

Yes. I think, Mika, you're absolutely right that of course the market situation impacts the expectations. And similarly in Finland, of course the market has impacted our performance. But I think for the acquisition, I would say we have to look a couple of years ahead and look at the situation where we are in maybe 2 years' time. And I think that's the right time then to really analyze the performance because by then we have gotten the synergies out and hopefully, the assortment is there what we want it to be and so on.

That was a very good answer.

That makes a lot of sense. And then regarding the assortment or the changes in assortment in Dollarstore, can you elaborate a bit on how big changes you are doing? Are you kind of completely revamping the assortment? Are you replacing 20% on the assortment? Could you open up a bit what you are exactly doing and how the assortment will actually change?

Not a total change with the assortment. There will obviously be like a local assortment, local products, Swedish products for Swedish customers. That's for sure. But the change will be, Dollarstore has been using quite a lot of middlemen with the buyings and now since Tokmanni has like this direct imports through our channels in Far East countries so we're basically skipping the middlemen especially in the nonfood products and then taking the Tokmanni assortment directly through direct imports. So that's it. But when it goes towards groceries like candies, soft drinks; actually in candies, we already have some same suppliers or we combined the suppliers in some of the areas, but it's still a little bit slightly different market in Sweden. Soft drink, it's very much different. However, Coca-Cola and Pepsis and things like this are of course the same, but otherwise it's a little bit different. Snacks they are different. So we go basically through every product category, but at the same time it's extremely important to take the local consumers to consideration. So we will definitely -- Dollarstore won't be full of only Tokmanni private labels. It will have a lot of Swedish products as well. But there are no percentages or anything and actually the percentages will be like based on the customer behavior like how they will start shopping. [Technical Difficulty]

That's more like fine-tuning the assortment rather than completely changing it.

In some areas, I think that it's like -- it's still August and sun is still shining, but we're getting ready for the fall season. So for example if I pick up the 1 product with candles, which is very big both in Tokmanni and in Dollarstore. So we will have like a joint assortment with candles. So that's 1 example. It's going to be like almost full 100% the same.

Yes, sure. That makes a lot of sense. And then finally on Finland. You mentioned earlier in the call that you will be a bit more aggressive on pricing in Finland in the second half. Does this mean that the gross margin in H2 should be lower than in H2 '23 in Finland or will you get the benefits from this joint sourcing that you also mentioned earlier? How do you think about kind of the margin versus then the price competition?

Well, I think that the performance in Finland with gross margin has been actually quite okay. So yes, obviously we have quite some plans due to a slight change due to the VAT increase for the market. But I wouldn't like to start opening that up in this situation because basically it's going to be a lot of competition. There will be quite a lot of changes. I could imagine that a lot of retailers are thinking quite a lot at the moment the VAT increase in Finland like what to do with that and we are very much alert with that. So we'll act according to the market and we'll see about that. But for sure it will be more aggressive, first of all, due to the fact that we still want to prove our customers that it's worthwhile coming to Tokmanni to do their shopping with very competitive prices. But actually I wouldn't be able to estimate the exact figures regarding the gross margin. Tapio might be able to do that.

Yes, of course. I mean it's very hard to predict in advance because obviously we are in a very dynamic industry and to some extent every day we, let's say, review the competition and sometimes we are the ones acting and sometimes we are then reacting. So I would say it's impossible to predict exactly what the gross margin will be in the next 6 months. But I would say we target at least, let's say, similar levels than last year as a percentage. Where we end up then is another question. But we're not expecting big changes to the gross margin percentage.

And the next one is Svante Krokfors.

I hope you can hear me. Couple of questions there. First one, you mentioned that Dollarstore is a bit in between products. And has it been more a revenue issue or a margin issue or both? And is there -- will you need to lower the prices for Dollarstore also in H2 in order to clear out the situation?

Well, first of all, it has been the both. The hit is in revenues and in margins a little bit. First of all, it's the first time I think in Dollarstore history when they've had like a summer sale to get rid of the old assortment and so on. So yes, there was at least a little bit lower gross margin. And then when you get rid of the products, then there will be like a little bit less products and so on so less products to be sold. So yes, I take it as like it has been an effect for both revenues and gross margin. At least with the first time summer sale, obviously it's something to do with that. Personally, I mean I don't know enough yet. I don't know the Swedish customers well enough yet. But I would say that it's going to be extremely interesting for Dollarstore to introduce the new private label ranges, which are coming from Tokmanni. They will be completely new products, completely new ranges, completely new price level, quality level with Dollarstore private labels -- with Tokmanni private labels, Dollarstore can even give like a 2-year guarantees, something that they haven't ever done before; things like this. So obviously the price level in Sweden has to be competitive with Swedish competitors. But I think that the setup is very good already from the beginning, it looks very promising. For example we just take it as an example this Parco outdoor furniture for summer season, it was very, very competitive price. There was a joint buying from both Tokmanni and Dollarstore. It was very competitive price, very well sold products. So I think that for the new assortment for Dollarstore, it's not absolutely the most aggressive price level. It's more about the offer, the quality offer and the good products of course with a good price, but it's not that they need to start somehow very aggressive operations with this. I hope I was able to share a little bit light with that.

Yes. That was very helpful. Then regarding logistics and sourcing, could you open up a bit how you're sourcing for the important Q4 period has developed and what should we expect?

If I understood your question right. First of all, when it comes to logistics. Due to all this Red Sea issues and during the beginning of the summer there was a big lack of containers all around the world; so first of all, we decided to invite all the for example already next year products to Finland and Sweden a little bit earlier already during this year to make sure that we have the products in time. Some very unpleasant experiences from this year. And the second thing is that obviously we're really looking forward to, for example, the fourth quarter of this year because, as I mentioned earlier, it takes quite a lot of time when you do the joint buying to have the products in all the stores. So now after almost 13 months and actually -- joint 13 months together with Dollarstore and Tokmanni. So actually all the products, for example the Christmas products. They are not 100% same assortment, but a lot of the Christmas season products are exactly the same. So when we have been doing these purchases that obviously we have negotiated with much bigger volumes and Dollarstore is skipping the middlemen. So yes, we have very high expectations regarding this. We are very competitive with our buying prices and I would say that Dollarstore is very competitive with their selling prices. But Christmas will be like the first time, first season with, let's say, the joint buys as a real season. Last year after the summer season, we didn't have time to combine this year's like spring/summer season products. But Christmas, that's the real first time.

And the last question regarding competition. I don't know if you want to specifically comment on your competitors, but correct me if I'm wrong, it seems like NORMAL is squeezing both when it comes to assortment and locations. I don't know if you want to comment that. And do you have any comments on the larger players like S Group?

First of all, we don't want to comment competitors. The competition is hard. As mentioned, the market has been flat and then of course it's a tough competition. And yes, definitely we have to improve our performance in this market and I think that we're quite capable in doing that. Now some of the competitors are located in shopping malls, in city centers and so on. We're not that much in shopping malls and city centers. Yes, we do have some of them; but the major part of our store network is outside shopping malls. But yes, it's always competition and we have very good competitors that obviously in flat market, they're also trying to do their best to gain market share. That's how it is. And if you look at our first half figures, yes, we need to improve and we have the actions in place. And if I see correct, there are no more questions, correct? So thank you very much and see you on our third quarter results presentation. Thank you and have a nice weekend.