Tokmanni Group Oyj (TOKMAN) Earnings Call Transcript & Summary

Good morning, and welcome to Tokmanni Group's First Quarter 2025 Result Presentation. My name is Mika Rautiainen. And today together with me is our Group CFO, Mr. Tapio Arimo. Tokmanni Group's result for the first quarter 2025 was a disappointment. So, there is a bit of an explanation to do. First of all, the biggest effect on the bad results for the first quarter came from Dollarstore, but I will explain it a little bit more in the coming slides. This is a familiar slide or picture. As you can see, the major change with this slide is that Dollarstore share of sales for Tokmanni Group was record high, 29%, which is, of course, a positive thing. But now the key facts for the Tokmanni Group and the first quarter. First of all, timing of Easter affected sales negatively for the first quarter. Obviously, the timing of Easter, especially affected the April sales very positively. So it's just -- this Easter thing is basically a calendar issue. But then less sales came from 1 sales day less due to the leap day last year. So that, of course, had an effect on the total sales. And then especially in Finland, the sales of winter-related product groups declined due to very mild winter. During the first quarter, the consumer confidence remained weak in Finland and actually, it weakened also in Sweden. But this, of course, I have to say that we can already see some effects on the more positive side. I think there are quite a lot of salary increases starting from the 1st of May. So, these kind of things are, of course, affecting positively, while the interest rates are on a pretty low level and inflation also on a pretty low level. So these are, of course, very positive effects for customer confidence. So, we expect customer confidence also to improve during this year. Now then, as mentioned, the biggest effect for the whole group's result was the low gross margin percent impacted of Dollarstore, low gross margin percentage and it affected the group's EBIT very negatively. I'll come back to that when talking about Dollarstore segment. Positive things, of course, are that the joint assortment development for Tokmanni and Dollarstore progressed well. Actually, Kotikulta products and yes, especially right now, Barbecue King private-label products and Parco, Garden private-label products are selling very well in Sweden and in Denmark. These are, of course, joint private-label ranges, together with Tokmanni. The annual synergy run rate was EUR 16.2 million at the end of March. And we also set a new annual synergy target of over EUR 20 million at the end of 2025. Something which is, of course, affecting the whole group quite a lot is this renewed management model. We call it One Company. And I will come back to this One Company idea also a little bit later. From these key facts, let's move towards the segments. And the first is Tokmanni segment. And the segment's first quarter like-for-like customer visits decreased by 2.2%. And as already mentioned, Easter had a pretty strong effect on this. At the moment, I can say that by the end of April, the cumulative like-for-like customer visits is actually -- for Tokmanni segment, it's on positive figure. So that's, of course, very good news. Then, of course, regarding the whole of second quarter, that's all about the spring season, how it develops. Of course, the beginning of May has been quite cool and a little bit difficult for spring seasonal products. But anyway, we're very confident that spring and summer will come to Finland as well at a certain point of time. Like-for-like average basket size decreased by 1.4%. This is, of course, -- this shows that the customer confidence is still on a very low level. But of course, the low sales of higher-priced winter products affected on the like-for-like average basket. Product groups like heating, winter car accessories and winter snow tools, the sales were on a very, very low level compared to previous years and of course, they're now in our inventory. But this kind of products are good to be sold also during the next winter season. But for the past winter, it was a clear loss with low sales of these products. Surprisingly enough, we had like, with retail brands, we had a strike, 1-week strike in February. And even if we were able to keep almost all our stores open during the whole week, the strikes had a double-digit negative impact on 1-week sales. It's only 1 week, but when it's double digit, it was very, very negative for us. Good news for Tokmanni segment. Comparable cross margin was 1 percentage point better than last year, even though the non-food products, the non-groceries products were selling less. Actually, the groceries were selling very well. But still we were able to improve the comparable gross margin for the segment. Now, we were already -- by the end of last year, we were kind of -- we took to consideration the potential strikes in Finland and also the uncertainties in the global supply chain. So, we actually -- we basically called all the spring/summer products to Finland before the end of the first quarter. And that, of course, shows in our inventory figures. This was the earliest call for these products for basically the whole inventory. This was the earliest timing ever. But we just wanted to make sure that when the spring/summer season starts, we won't have any issues regarding the supply chain in any ways. And then the Dollarstore segment. Like-for-like customer visits increased by 0.8%. Like-for-like average basket size increased by 1.8%, so positive sales for Dollarstore. And actually, we can see that the average basket is also like -- it's growing very well. It has something to do, also with new joint private-label products sold in Dollarstore, as already mentioned, Kotikulta private-label range, Barbecue King, Parco, Energy+. These are all very positively -- they all have a very positive sales effect in Dollarstore segment at the moment. But as mentioned, the biggest issue was this 3.7 percentage points lower comparable gross margin in Dollarstore during the first quarter. There was a lot of clearance campaigns. We, of course, are basically making some assortment changes, as already mentioned, regarding the private-label ranges and of course, it also changes the Dollarstore concept. And of course, these clearance campaigns were very, very strong during the first quarter. There were seasonal discounts and very, very aggressive pricing. Now, these clearance campaigns and renewing the Dollarstore concept is actually part of the plan. But, of course, at this point of time, after having a 3.7 percentage points lower gross margin, we have to say that the pricing decisions were too aggressive. But I think that this part is now already -- or the decisions are already now behind and now we can go forward with this. Another issue affecting the results negatively, operating expenses were clearly higher compared to previous year. So yes, sales during the first quarter and as mentioned for the whole group, the sales during April -- well, yes, Dollarstore sales for the first quarter, they were positive. And the positive direction also got stronger during April, but it was basically a huge disappointment, this negative impact of the lower gross margin and of course, the operating expenses. Now, we made some changes. In the first part of March, Timo Heimo was appointed as a new Managing Director for Dollarstore. And Timo has been working for Tokmanni for almost 7 years. And during his career, Timo has also been living in Sweden and actually in Goteborg for a couple of years. So, he's familiar with the retail business in Sweden and also is Swedish speaking. So that's, of course, very good. With Timo's new position, we're also able to tighten the cooperation between Tokmanni and Dollarstore a lot. And I have to say that ever since these changes were made, I think that Timo and the whole Dollarstore team has taken very good action points regarding the improved sales and regarding the improving results as well. But, of course, this will take some time, but at least the direction looks very good at the moment. One Company, as I already mentioned that this is basically the name for the tightening of the integration of Tokmanni and Dollarstore. As mentioned, we already launched the new management model for Tokmanni Group, which is basically called One Company, explains quite a lot. We have 2 variety discount retailers with the group. And now it's time to put these 2 segments or 2 retailers more together. One of the biggest issues, of course, is combining the buying and sourcing organizations of Tokmanni and Dollarstore into one because, basically, this will make sure that we will get all the synergy savings by joint -- from joint buying, especially products from outside Nordics and outside Europe. And this, of course, is progressing already. This combining is progressing very well. We will start also building a joint retail concept. As already mentioned, we have 2 variety discount retailers. And obviously, to become stronger, we need to be more towards one concept. But obviously, Finnish, Swedish, Danish customers are different, and there will be always some local aspects on the concepts. But part of the concepts will be joint. We will be able to improve the store efficiencies by using the same processes. This will be especially with -- in Sweden and in Denmark, but also Tokmanni will be able to improve the store efficiencies. One very important thing is also to creating a common operating model for the supply chain. Actually, Timo was in charge for the Tokmanni Group supply chain, and we already hired a new person, Nina Anttila, for this position. Nina will start after summer holidays. And one of the first things she will take over is this, building the new operating model. However, it's already proceeding when it comes to, for example, the sea freights and so on. Now in January, we said that we basically signed a license agreement together with SPAR International, and that was, of course, Tokmanni Finland. But I have to say that already now after a couple of months of working together with SPAR International, Tokmanni is -- I would say that Tokmanni Group is able to see how -- like world-class processes, world-class functions via SPAR International. And that's, of course, improving the expertise, I would say, in both in -- or in all operating countries in Finland, in Sweden and in Denmark. And this is, of course, a very valuable thing. We've started to -- in the beginning of May, we started to sell these SPAR products, some of the SPAR products, I would say, 20 to 30 SPAR products in Finland. And they, of course, had a very positive impact from the customers' point of view. But I would say that it's something, which is very important when it comes to the SPAR cooperation is also the expertise what Tokmanni Group is able to get from the whole cooperation. So, these were the key facts from the first quarter, and then it's time for the key figures. And Tapio will actually come over here to explain a little bit more about the key figures. However, as I already mentioned, they are a disappointment, but Tapio will explain a little bit more about it.

All right. Thanks, Mika.

Thank you.

Welcome, everybody, to the call on my behalf as well. So let's jump straight into the key figures. So, our group revenue grew slightly during Q1, and the growth was really driven by Dollarstore segment. And the total sales were EUR 341.8 million, so growth over last year a little bit. But of course, the like-for-like revenue was negative during the first quarter at 1.9% to be exact, compared to 1.7% plus last year. Our comparable gross profit was on par with last year, so EUR 115.4 million. And that means that the comparable gross margin percent declined slightly to 33.7% from 34% a year ago. And as Mika pointed out, our comparable EBIT was very disappointing. I think it was the largest loss we have made as a company, at least in the known history. And it was a negative EUR 11.2 million as compared to a negative EUR 5.1 million a year ago. And also our cash flow, typically negative in Q1, was also negative this year, and it was a negative EUR 73.9 million. And of course, with the EBIT being negative and then you add taxes and interest, that means our net income was also negative and our earnings per share diluted was EUR 0.32 or EUR 0.32. Then when we look at the revenue composition a little bit more in detail. So our Tokmanni segment, the total revenue decreased by 2.2% and the like-for-like revenue decreased by 3.6%. So, clear negative growth in the Tokmanni segment. Dollarstore segment, that was a very different story. So, we had good growth there, 7.4% in local currencies and the total sales of Dollarstore hit EUR 99.2 million. And also the like-for-like sales growth at Dollarstore was positive at 2.6%. Moving on to our sales mix. So again, we have a little bit different story. So at Tokmanni segment, the share of the grocery business continued to grow, and it was 56.6% in quarter 1 and an increase of 0.5 percentage points. And that just, let's say, driven by, of course, like Mika explained, we had a mild winter, very mild winter in Finland. So, some of the non-grocery categories did especially poorly during Q1, such as winter clothing, winter car equipment, so on. And of course, the grocery business is then fairly robust. In that, it's not cyclical. And it is growing as a, let's say, total in Finland. For Dollarstore, we had actually a different trend. Of course, the Dollarstore mix is still more geared towards the grocery business. But there, we managed to increase the non-grocery business, which is obviously a sign of the assortment changing, whereas the market also in Sweden was very similar to Finland in the sense that overall, the non-grocery business is not growing in Q1. But we managed to share -- increase our share really due to the fact that we had a clearly better mix in terms of the non-grocery products at Dollarstore and really driven by the increase of the joint assortment, which obviously continues also in the future as our assortments grow closer together over time. Then when you look at the gross profit, again, it was extremely flat year-over-year total, but a very different story again in terms of segment. So at Tokmanni, we had quite good relative profitability on the gross margin side, so we managed to increase that by 1 percentage point. And then as Mika explained already, Dollarstore comparable gross margin was, let's say, very disappointing and driven by, of course, several factors. There was, of course, the, let's say, normal end-of-season sales at Dollarstore after Christmas, which were quite heavy. Then we have the assortment changes. So when you bring in the new assortment, you typically try to get rid of the old. And there, I think we did make some, let's say, not so wise choices in the sense that we probably were too aggressive in the trying to shift the mix. And then, of course, Dollarstore has increased their marketing campaigns a lot, and we had very, very, let's say, consumer-friendly campaigns during Q1, for example, with coffee that were driving down the margin on partly as well. So the end result is what you see. And I think we have, let's say, learned our lesson there and we will, let's say, put a lot more focus on ensuring that the gross margin stays at a reasonable level at Dollarstore in the future. But of course, there will be variations over months and quarters. So it's natural that it varies a little bit. And then when you look at our comparable operating expenses, of course, when you have low sales, that means that the share of operating expenses as a percent of sales increases. So especially this Q1, you can see the, let's say, increase in the percent of sales on the operating expenses side in both segments as well as the company as a whole. And really, for Dollarstore, it's been a little bit of a step change in that we've been building the competencies up there during last year. And now we see that, let's say, the operating expenses are at the level where they should not grow much more like they have grown in the, let's say, past 12 months. So, of course, with the sales hopefully continue to increase quite rapidly at Dollarstore, we'll start to see the positive impacts of that leverage going forward. And in Tokmanni, of course, you have -- even though we are keeping a, let's say, a fairly tight ship on operating expenses, of course, you have the annual salary increases and the index increases in the rents and other services that drive up the operating expenses slightly. And then when you have a decrease in sales, the percentage goes up, unfortunately. And the result, of course, is what you see here. So again, a very, very disappointing result on the EBIT, both absolute and also on the relative EBIT and also the group functions have increased quite a bit since last year. And there, it really shows a lot of the work that we have been doing, especially on the, let's say, on the ESG items, for example, our first official reporting on the responsibility areas and all the work that we are doing there, especially Dollarstore started from, let's say, quite low beginning. So, a lot of hard work there to get them up to speed, and that shows a little bit in the group functions. But if you look at the Tokmanni segment EBIT, that was actually, given the, let's say, seasonal and yearly variation in terms of the Easter and the leap day last year, the actual EBIT actually was quite okay. So it was a slight decline from last year. But if you would take the Easter, if Easter would have been in Q1 also this year, we would have had a, let's say, better result than last year. So the Tokmanni's EBIT is actually not that concerning. Of course, the Dollarstore is then really concerning. And there, again, the key reasons have been discussed already, but the EBIT basically almost tripled, the negative EBIT tripled from last year. And that, of course, is not acceptable. Then when you look at the inventories, we are still running, let's say, quite high inventories. There's, let's say, some inventory build-up, but we are nowhere near the situation we were after COVID. So, there's no need for huge alarm there. Of course, we will, let's say, do a little bit more now to make sure that they don't grow any further. And of course, there's, of course, always seasonality. So, they will go down a little bit during the summer and then again pick up for the Christmas season. So, expect a normal seasonal variation, and we will, let's say, manage that a little bit tighter also during the rest of the year to make sure that it doesn't grow anymore. And if you look at Dollarstore, especially the increase is relatively very high and there you see the, let's say, impact of the change in the assortment and also the change in the business model where we have more and more products now coming to Dollarstore from Asia. And of course, those products then are a lot longer in our own ownership versus if we buy from local distributors and ship them directly to the stores. Now the products come by ship from Asia and then go to the central warehouse at Dollarstore and then are delivered to retail locations from there. So, that shift in itself means that we have, let's say, the normal level of inventory will be significantly higher in Dollarstore compared to the old business model. And then when we look at the financing, of course, when you make a loss in the quarter and your inventory goes up, that also means that the net debt goes up. So, our total net debt is up about EUR 114 million from a year ago. And basically, out of that, EUR 365.3 million is what we call bank debt or financial institutions debt, real debt and then the EUR 575 million, which is the -- of course, the large majority is from the IFRS 16 lease liability calculation. And the net debt to comparable EBITDA, this number, of course, has still creeped up, but it's not yet, let's say -- it's, of course, nearing closer to our debt covenants, but there's still, let's say, a fair amount of room there. So, we are not worried about reaching the covenant. I know some have asked about that, but that's not the situation yet at least. So -- and of course, we will make sure that we don't hit the covenant. And then the cash flow from operating activities. As said, of course, the build-up of inventory and the low financial results, then they both affect operating cash flow negatively. So, we had a quite large negative cash flow in Q1. Of course, Q1 is usually always negative, but here, it's a little bit more than, let's say, normal seasonality. So, I would say last year was, let's say, average quarter and then '23 was a very, very positive number when we were still ramping down the high inventory after COVID. And then looking at our capital expenditure. So there, we are, let's say, still at normal levels. So, that varies a little bit naturally depending if we do some store network expansion more or less and especially at Tokmanni, we've built a few stores into our own balance sheet. So, that has tied up a little bit of capital or CapEx. And now that shows that we are not -- in Q1, we haven't done much of that activity. So most of this is, let's say, maintenance related and IT and digital services development-related CapEx. So with that, I invite Mika back on stage to talk about our guidance.

Yes. But please, Tapio, join me or don't go any place because next one is the questions. So, we keep the guidance unchanged, and the guidance is that we expect the revenue to be EUR 1.72 billion to EUR 1.82 billion, and we expect the EBIT to be EUR 100 million to EUR 130 million. So, that's about the guidance, unchanged.

And next, actually, it's time for questions. And you will find the link under the video player. So, please join in and raise your hand for the questions, and we start answering. And I think that we will be having there already the questions. Actually, we are able to see the second one maybe some -- okay. Yes. Now, we do have the whole list. Thank you very much. And the first one to make the question is Miika Ihamaki.

This is Miika from DNB Carnegie. Can you hear me?

Yes, we can.

Excellent. So it looks a little bit of tornado in Sweden Dollarstore at the moment. So, can you just discuss about your current strategy for Dollarstore? It seems to be -- and please correct me if I'm wrong, but my interpretation is that Dollarstore is now becoming less like how Dollarstore used to be and more like Tokmanni Finland in terms of how assortment, marketing and pricing is run. And this differs in my view, quite a lot what was communicated in your most recent CMD. So, can you talk about what is the reasoning? And how do you expect this will impact your target demographic?

Yes. Well, first of all, I think what we've been all the time telling is that Dollarstore has this history of, let's say, selling the lowest prices products in the market, which means basically that the products are like entry-level products. And it's basically the biggest part of the sales is coming from -- in Swedish SEK 10, SEK 20 and SEK 30, which is like EUR 2.70 and less. So the biggest part of the sales comes from very low-priced items. It's quite difficult to increase the sales with only this kind of products. And that's why we will be like widening the assortment towards, well, basically Tokmanni private labels, which are already the next level and then also some A-brand products, coming in as well to improve the trust from customers and so on. And we actually feel and we think that this will, of course, increase the sales. And we -- especially now with the start of the spring season, we can already see the positive reactions from customers. So yes, it is a slight change towards, let's say, more towards a joint concept. At the same time, I have to say that we can see that there are very, very good, let's say, very, very good low-priced products in Dollarstore, which actually Tokmanni should have in Tokmanni's assortment as well to show the lowest prices in the market. So yes, it's like tightening this cooperation. And yes, it's going towards one because we feel that we will receive and we -- already now, we have some proven results that when we are doing things together as One Company, it will show some positive results. Hopefully, this wasn't -- it was a bit of a long answer to you, Miika, but hopefully, you got a little bit the point.

Second one is on the raised synergy target, now specified more than EUR 20 million by the end of this year. Can you specify the sources? And can you also explain why the synergies realized so far has had minimal impact on the bottom line?

First of all, I would say that we have some positive effects with Tokmanni segment due to the fact that we've been able to increase the volumes and lower the sales -- lower the buying prices. With Dollarstore segment, as already mentioned by Tapio and myself, there was this -- a bit of too aggressive pricing action point with the clearance sales and so on. So obviously, when it comes to the synergy savings, of course, when we make the buying, of course, it takes some time before we sell the products where actually improved gross margin can be seen. But for example, right now, we already see some positive results from that. But of course, the clearance was quite strong. So the effect of that was much stronger than the positive side regarding the joint buying.

Okay. And lastly, on your guidance, which is quite broad for this year. So now with Q1 starting meaningfully lower, can you talk about what are the moving components there, your confidence to get and reach the midpoint? What are the positives and negative factors? And should we expect still some negative surprises going ahead, especially on the Dollarstore side?

Well, of course, the guidance is the guidance. So, that's what we aim to achieve. I think we hope to see also positive surprises in Dollarstore in the coming quarters. Of course, it's not, let's say, completely smooth sailing yet. So whenever you do big changes, you're changing a large part of the assortment. You're putting up a lot of new processes, tools, people. So there are -- of course, there can be also negative surprises, but I think we will try to manage that, let's say, very carefully now. And as Mika said, we are deepening the cooperation between the companies on many fronts. So, of course, the front office, they are more independent, but all the support functions, we are, let's say, tightening the cooperation very rapidly and putting together the organization so that will enable also more effective management of the group as a whole and also better visibility into what's happening in the operating segments. Of course, the market is unfortunately something that is driving, especially Tokmanni because we are such a large player in Finland. So the market sentiment does have an impact on us. And let's say, the consumer confidence has been on a quite low level in Finland now. And we, of course, hope with the positive, let's say, developments in the -- money in the consumers' hands should result in the improved confidence and the improved confidence then especially impacting the non-grocery business. So, we do expect to see as that improves, that will have a clearly positive impact also on our sales, especially on the non-grocery side. I think Dollarstore has more, let's say, things in their own hands as they are clearly a small player in the Swedish market still. So, there's more to be gained in taking good action in our own activities there. And of course, Denmark, even more so where we are just starting up the operation really with, I think, 7 stores today.

I think 8.

Or 8 today, actually. Yes, we opened, the latest one was in beginning of May. So now 8. So there are -- of course, it's always a combination of things that are in our control and then things that are driven by the marketplace. But the weights, I would say, are such that Finland is more dependent on the overall consumer sentiment and then Sweden and Denmark. Of course, they are also, but to a lesser extent than there, we have more opportunity with our own actions to take market share and drive the sales and also profitability, of course.

Thank you, Miika. Then the next one is Joonas Hayha.

It's Joonas from OP. So, a couple of questions. Firstly, regarding the inventory in Dollarstore, that seems to be quite high at the end of Q1, even though you had the clearance sales during the quarter and you explained some of the reasons behind that. But how is the inventory composition? And will there be further clearance sales in Q2 or upcoming quarters?

We, of course, when we are changing the assortment, we need to clear out old stuff from the stores to make room for the new. But I think we will be more careful with the pricing so as not to, let's say, over clear in a sense that we try to make sensible decisions. And of course, it's very careful play and you have to almost look at it product-by-product that how much of this do we have and what's the current sell-out rate and what kind of a price elasticity does that product and product type have. So it's, let's say, a lot of analytics work, but let's say that we will have more emphasis on ensuring that the profitability stays at a reasonable level. So it doesn't completely tank.

Okay. And then the second one is on the costs in Dollarstore, which grew. Can you elaborate a little bit further why did operating costs grow so much even though you didn't have that many new stores versus last year?

Well, we did have quite a few more stores compared to last year at Dollarstore. So of course, that's one component. And then as I said, we've beefed up the functions, many functions in the central office. And of course, the warehouse, you need more personnel to operate it because a lot more product is going through the warehouse now. So it's a mix of different things. And still, I would say, last year, we were in the building phase. So now, I would say the, let's say, the head office personnel, for example, we don't expect to grow that much further. But now we start to leverage the, let's say, when the sales continue to grow and the gross margin continues to grow and, let's say, central office doesn't grow, then we start to see the positive impact of the leverage.

Yes, if I can continue from there. Actually, there were -- there won't be any more personnel in the office. But, of course, it was like a change with Dollarstore setup, which, actually we needed a lot more hands with the change with the assortment change. Before we used to use a lot of traders in between. So, products coming from the traders, the wholesalers. And now we basically -- we did the same thing with Dollarstore. We invited basically the whole spring/summer products by the end of March. But it was like a change because it was like direct imports to the warehouse. And that, of course, caused a lot more work, especially with the warehouse, where actually I think that it was the biggest part of additional costs coming from the warehouse, where basically it's a totally new way of working for Dollarstore. Obviously, the direct imports compared with using traders, wholesalers should bring clearly higher gross margin. But that, of course, is something that we couldn't see during the first quarter due to these action points we've been talking about already several times. Yes.

Yes, actually, we do see in the products that are in the Tokmanni private labels, we do see that the profitability is on a very good level. But then when you have these large discounts in other areas and selling very cheaply to get rid of some inventory, then the overall effect sort of is negative. And of course, the inventory build-up is also partly due to that we are now selling more expensive things. So when you have more expensive things sitting in inventory, that also drives up inventory partly.

Okay. And finally, can you please comment on Q2? How has that started so far in each of the segments and especially Dollarstore?

Well, first of all, as mentioned, Easter in April was, of course, very positive from Tokmanni perspective. As already mentioned, the like-for-like customers were in a cumulative 4 months, they were on positive. Dollarstore has been in sales on a very positive side. In Finland and partly in Sweden, of course, this, let's say, the slow spring coming up has been affecting. It's been pretty cold in Finland and at least in part of Sweden, but Sweden is -- I think it's much better compared to Finland. But of course, we hope for the good weather. And usually, it goes like this with Tokmanni segment that the spring starts either early or late, but it will have a very positive effect. If the spring part starts late, it will still bring a very positive effect on the sales. So at the moment, after -- especially after April, we're quite confident. But, of course, I have to say we hope for the warmer weather as quickly as possible. Thank you, Joonas. And the next one is Svante Krokfors.

Most of the questions have been already answered, but a couple. Could you just confirm, did I understand correctly that the cost base in Dollarstore should be more stable going forward and that you have built up now the kind of organization that you need for that?

Especially for the, let's say, headquarters. Of course, let's say, the warehouse lives on activity and also as we increase the store network, of course, that increases the store network costs. But let's say, the head office, we don't expect to see further increases.

Yes. As Tapio mentioned, I think that there are on the line still this year, there will be at least approximately 10 new openings, of course, this will have an effect. But based on the latest opening, which was basically happening on the 30th of April in Aalborg in Denmark, the opening was very, very successful. So, we're pretty confident. But always when opening new stores, they will bring some additional costs as well, of course, additional sales.

And then coming back to the synergies. Can you give some guidance on what the split between the booking of synergies between Tokmanni segment and Dollarstore?

The bookings are done in a very similar way. But of course, these synergies are run-rate synergies. So -- and most of them are coming, of course, from sourcing from now already in the past, but especially now on. So when we, let's say, get lower prices, of course, it takes time. If we negotiate some local prices lower, that's a bit quicker. But if we -- let's say, now we are negotiating late Q1, Q2 deliveries next year. So if we now -- let's say, we get EUR 1 cheaper T-shirt for next summer, then that, of course, shows up in the P&L next summer. But the run rate that we calculate, we start to include that once the contract is signed.

And yes -- and if I may continue, it's basically with, let's say, the joint buying of -- especially with private-label products. That's the, let's say, the -- in a way, the easiest part. But of course, we've been -- we didn't know that well, like how customers in Sweden and Denmark will take, for example, Kotikulta products. Already now, we can see that they are selling very well. So, we can actually go further with this kind of joint buying. The second thing is that we already actually spoke about is a little bit more expensive products. Like for the private-label range for barbecue is this BBQ King. These are very good quality products, which Tokmanni has been selling for years and developing for years. Now they are for sale in Sweden and in Denmark. The price points are clearly higher compared to the other assortment or, let's say, the traditional assortment of Dollarstore. And of course, we've been a little bit like -- or let's say, very curious to see how customers are taking these products, how they're buying these products. And with this -- the first good results, of course, it gives us more confidence with basically enlarging the joint buying of private labels and other products as well.

And then a question on the inventory, which was impacted by -- partly by winter products not being sold and also early spring preparation. Can you give some split between that and perhaps also tell a bit about what do you believe a normal inventory level will be going forward? I mean, obviously, it will be higher in Dollarstore due to the change in product mix. But should we assume that the normal inventory level should be EUR 50 million lower than the current level or something like that?

Well, that's a very good question. What is normal? Of course, we plan to grow all the time. And as we open new stores, those stores eat up then somewhere around EUR 1 million per store inventory on average. So that, of course, increases the inventory over time. But let's say, today's situation, what would be a normal inventory, I would say it's somewhere between EUR 30 million to EUR 50 million lower than what we had at the end of Q1, if you say, we would have operated in a, let's say, optimal way. And of course, there are different levels of inventory. You can run clearly lower levels of inventory, especially in stores and then you have a little bit less of sales and they are being impacted by empty stores. So then you can run, let's say, very full stores. And I think we have learned that, let's say, balance is more towards the full stores to optimize the sales. So, let's say, the cost of the additional inventories at least to quite high level, it's still less than what we get on the extra sales. But of course, it's always a balancing act, and there is no such thing as an optimal level as such. I think it's a range. I think we are on the, let's say, higher end of the sort of optimal inventory at the moment. But I wouldn't -- we're not in a situation such that we would be forced to do some drastic actions to lower, like we did after the corona. We had drastic actions. But of course, we are managing it very carefully, and we don't want to see it grow further, let's put it that way.

And last question to Tapio regarding net financials in Q1. Was there some one-off nature related like FX or something that impacted that?

No, there shouldn't be much one-off. Of course, there's some natural variation with the FX and so on, but no one-off effects in Q1 on the financials. There's, of course, if you look at the enlarged P&L, you can see the impacts on the assets. They are quite big, but they don't show in the normal net income.

Thank you, Svante. And then the next one is Arttu Heikura.

I hope that you can hear me.

Yes.

Yes, we can.

Okay. One question about the clearance sales in Dollarstore sales and maybe related to the consumer sentiment that how large impact do you think that the clearance sales had in Dollarstore sales? Because I think that the growth would not have been that high without the clearance sales. So, could you maybe just elaborate this dynamic?

Well, actually, it's -- I think it's the other way around. As already mentioned, the biggest part of Dollarstore sales comes or it's been in the history, it's coming from less than SEK 30. It's SEK 10, SEK 20 and SEK 30. And this is probably -- it's been almost like 80% of the sales. So it's very low. It's EUR 0.90, EUR 1.80, EUR 2.70 or something like this. Now when the clearance was being done, the discounts were really, really strong as we can now say that they were even too strong. When they were like on their highest level, they were minus 70%. Now, when you have like very, very low-priced products and you're giving 50% or even 70% discount from them, it doesn't bring that much of sales. So actually, the sales could have been actually much higher with a little bit less -- with a little bit smaller discount percentages.

Okay. Maybe just one question regarding the One concept. So, could you maybe elaborate on the big picture and perhaps to like 5 years to 10 years? So is this -- does this mean that then you have only one concept, I mean, Tokmanni or Dollarstore? Or do you still operate with different concepts?

Yes. Well, let's say that since you -- Arttu, since you asked about the big picture, the big picture is, of course, like this that when we do direct imports from Far East, it means basically that, let's say, the consumer habits are pretty similar with the Nordic countries when it comes to -- well, at the moment with barbecues and garden furniture and things like -- products like this. And of course, these will create like a joint concept for the whole Tokmanni Group. And that's, of course, it's beneficial. It's efficient to have exactly the same things. But then there will be always like local parts in the concepts. For example, in Finland, we have a little bit more of groceries. We do sell even alcoholic drinks like beers and long drinks and so on. And this doesn't happen actually in Dollarstore. In Dollarstore, the grocery sales is more like soft drinks, snacks and candies. So, there will be always like a local effect in every market or a local concept in every market. But for sure, part of the concept will be joint in every operating country. Hopefully, this gave you a little bit -- yes.

So basically, you will have different kind of concepts in the future also?

Yes. Yes, of course. Even if you think about Tokmanni and Tokmanni One concept, we do have like one of the smallest stores are under 1,000 square meters. And then when we talk about, let's say, one of the biggest concepts or biggest stores, it's approximately 8,000 square meters. So the difference in the concept is actually quite big. So, this kind of effects will be there like in between all operating countries in future as well. Thank you, Arttu. And if I've understood correct, there is one more question from Miika.

So, can you just still talk about whether there are any impacts from the recent currency moves and whether the recent tariff environment and especially the tariffs on China could impact your cost performance, specifically, I mean, your sourced goods from China and their input cost in overall?

You go for the currency. I go for China.

Yes. Of course, the currency has been a little bit more volatile now in the past, let's say, couple of months. And of course, let's say, the weaker the dollar, the more beneficial it is for us as we source a lot more in dollars than we obviously sell 0 in dollars. For Sweden, it's a little bit same thing. So, a stronger Swedish crown is good in a way because then they also source from Asia more and more. Of course, they source also a lot in SEK and some in euro. But overall, the swings haven't been so huge yet that they would massively impact. But of course, let's say, if there's a, let's say, 10% depreciation or appreciation, that, of course, then starts to show. And we do, of course, hedge. So, we have a rolling hedge, let's say, 6 months to 12 months out that we try to hedge a large part, not all, but a large part of the, let's say, secured purchases at the time that we purchased roughly. So that way, the impacts have less short term than, of course, if the long term, the currency settles to a different level, then it, of course, shows over time.

And when it comes to China and Far East, actually, before President Trump started, actually, we could see quite a lot of shortage, especially with the sea freight capacity due to the fact that the U.S. retailers were basically calling as much as possible products to U.S. But actually, we were able to handle that pretty well. Then, of course, when there were some -- well, all these discussions regarding the tariffs and the trade war, of course, we were looking for some stock lots going to U.S., whether they could be bought on a very low price. But actually, the suppliers and retailers -- suppliers from Far East, from China and the retailers in, for example, in U.S., they've been quite calm with this and waiting for solutions because, I mean, as we all know, there has been like every day, a little bit different setup for the whole situation. So, no big decisions made. Actually, we see a very stable picture at the moment with Chinese and Far East markets. We are having exactly the right product capacity that we need as well as the sea freight capacity. And there are no -- not big price changes. If there are some changes, they are towards lower buying prices, but only slightly, no dramatic drops. Hopefully, Miika, that was a good answer for you. There are no other questions. So thank you very much, and see you next time in August. Thank you.

Thank you.