Good morning, and thank you for joining Tokmanni Group's Fourth Quarter 2024 Result Presentation. My name is Mika Rautiainen, and today I will be telling about the highlights of the fourth quarter in the beginning. Then Mr. Tapio Arimo, Tokmanni Group CFO, will come and talk about the numbers a little bit more. Afterwards, we will tell about the guidance for 2025 and a couple of words about SPAR collaboration as well. Of course, in the end, there is a possibility to ask questions. For the questions, I will actually ask you to, under the stream, there is the Teams link, so please join the Teams link to present the questions. Then we'll, of course, answer all the questions. Let's get started. During the fourth quarter, Tokmanni had strong growth in customer visits. Comparable EBIT growth was 2.7% during the fourth quarter.
A couple of words about the store networks. The store network in the Nordics, by the end of the year 2024, we had 380 stores altogether. Of course, especially in Sweden and in Denmark, we're looking at very active expansion with the stores, but that's also happening in Finland with Tokmanni. A couple of examples from the store network. First of all, as you can see, there were three new Tokmanni stores, or actually like the growth of Tokmanni store network was with three stores, Click Shoes with four, and actually with Miny, there are no standalone Miny stores anymore at the moment. We decided to continue with Miny as a shop-in-shop in Tokmanni stores. Actually, a couple of weeks ago, we just launched Miny also, the Miny range also in Sweden and Denmark with very successful sales figures.
There will not be like Miny stores, standalone stores anymore. We are concentrating on Tokmanni, Click Shoes, and then in Sweden, three new Dollars tore stores, and in Denmark, three new Big Dollar stores. Altogether, 380 stores. About the highlights for the fourth quarter, Tokmanni Group's like-for-like customer visits increased by 5.3%, which we consider a very good figure, a very good growth. We had very ambitious plans and also aggressive campaigns for the fourth quarter, both in Finland and in Sweden, and in Denmark as well. For the fourth quarter, starting with the Halloween season, we had very successful product ranges and also marketing for the high season. The fourth quarter is always extremely important for discount, variety discount retailers like Tokmanni and Dollars tore and Big Dollar.
We really wanted to ensure the sales for the fourth quarter with very strong campaigns. However, the customer purchasing behavior, let's say the consumer confidence was on a very, very low level, especially in Finland. That's why the shopping was cautious and discount-driven. Actually, in Finland, there were almost like one product less in customers' shopping basket during the fourth quarter, which clearly showed that the confidence and also the buying power is still on a very low level. Shelf availability was very good during the whole quarter. In August 2023, we said that one of the targets with Dollars tore, Tokmanni, joining together basically with all the synergies, the synergy savings target for 2025 was EUR 15 million by the end of 2025. The run rate basically in the end of 2024 was already EUR 13.3 million.
This was, of course, a very good success. Of course, we're continuing with this since we can see that there is a lot of potential as well. About the group's key figures, revenue grew by 5.5%. Like-for-like revenue increased by 3.6%. The gross profit was clearly lower on a clearly lower level, 35.7% compared with previous years, 36.5%. That, of course, was due to the campaigns and also sales, especially in Finland, concentrating on the groceries. Maybe over here, a couple of words regarding the freight costs, because they actually affected also Dollars tore's gross margin. Basically, in 2024, Tokmanni as a group, we had more than EUR 7 million additional freight costs due to Red Sea and also like the peak season surcharges. Basically, the biggest part was pointed to the fourth quarter.
That's especially with Dollars tore, a slightly difficult part because most of the products, imported products, they are like attached with price tags already in the manufacturers, factories, and so on. There were no possibilities in changing the selling prices, unfortunately. Of course, the fourth quarter for Dollars tore was the first time in this in a large scale direct imports. I'll come back to this a little bit later with the Dollars tore segment. Now the EBIT, comparable EBIT amounted during the fourth quarter to EUR 47.5 million, representing almost the same level as last year, 9.3% of revenue. Cash flow from operating activities amounted to EUR 76.5 million, and earnings per share diluted was EUR 0.50. About first the Tokmanni segment. Tokmanni segment's like-for-like customer visits increased by 5%. We consider ourselves this as a very, very good result.
The product ranges, the campaigns, the marketing, the store operations, everything was very, very successful. As said, the customer confidence in Finland was still on a very poor level in the end of last year. The like-for-like average basket actually decreased by 2.5%, which is actually quite a high figure for the average basket decrease. Revenue increased by 4%, and like-for-like revenue was at 2.4% level. Gross margin was 34.6%, slightly lower compared with previous year. This was mainly due to the campaigns, the aggressive campaigns for Tokmanni. Tokmanni actually was able to take into consideration with the pricing, also the higher freight costs. The effect on gross margin was not as big as it was for Dollars tore. Operating expenses were well in control. It was 19.2% compared with previous year's 19.3%. Comparable EBIT, 10.1%, ending with EUR 37 million compared with previous year's EUR 36.1 million.
Inventories were on a clearly higher level compared with previous year, EUR 298.9 million, and this was well planned ahead. First of all, we had the Chinese New Year stopping basically all the manufacturing, the production, and also like the shipping of products. This was already earlier this year, meaning in the end of January, and we wanted to make sure that we get the products already on the way before the beginning of the Chinese New Year. This was one of the main reasons. I have to say that we also wanted to make sure that we have the spring season products in Finland early enough before the possible strikes in the ports of Finland. Luckily enough, there's been agreements with the union, so there won't be any strikes.
At the moment, I have to say that it's also pretty good at the moment. I guess in Finland, it's today plus it's going to be + 10 degrees. For example, with barbecue season, all the Tokmanni stores in Finland are ready to start selling barbecue products, which is of course a very good thing since the spring seems to be a little bit early. About Dollars tore segment, like-for-like customer visits increased by 6%, and the like-for-like average basket also increased in Sweden by 1.2%. It's very clear that the economic situation in Sweden is, yeah, it's clearly better compared with Finland, which is of course good. Revenue increased by Dollars tore by 11%, a very high number, where also of course the new stores are affecting the figures. Like-for-like revenue increased also by 7.3% in local currencies.
Now Dollars tore had its 25th anniversary campaigns, extremely strong campaigns during the fourth quarter, which of course was affecting the comparable gross margin, which was clearly lower. It was like 38.9% compared with 41.3% previous year. The 25th anniversary campaigns and all the other campaigns, which are not that familiar for Dollars tore in previous years. Of course, as already mentioned, the freight, additional freight costs coming from the new large scale direct imports was affecting the gross margin since the products were already like priced in the origin. Operating expenses also well in control during the fourth quarter in Dollars tore, 22.3% of revenue compared with previous years, 23.3%. Comparable EBIT was EUR 11.4 million, slightly higher compared with last year or year 2023, but relative EBIT level was a bit lower, 8.6%.
Inventories were EUR 129.5 million, also clearly higher compared with previous years. There are actually several things which are also explaining the higher inventory level. First of all, Dollars tore is moving from wholesalers to direct imports. This has an effect on the inventories at the end of last year and during the whole of this year because the change from wholesalers to direct imports will affect the inventory level of Dollars tore. At the same time, we are growing the Dollars tore assortment. That is bringing also more value to inventories. We are increasing Dollars tore assortment with slightly more valuable products, for example with Tokmanni Best Value Private Labels. That is increasing the inventory value as well.
New stores, six new stores, that is of course increasing the inventory value as well. A couple of words about Tokmanni and Dollars tore. It is continuous growth according to the original strategy. In 2024, the focus was on synergy savings. As already said, we were very successful with this. The run rate is up to EUR 13.3 million by the end of last year. It is continuing. Of course, we are all the time seeing a lot of potential, especially with joint buying and sourcing. This year the focus will be heavily on one company model. Obviously, the customer surface is being managed by the local business, Tokmanni obviously in Finland, Dollars tore in Sweden, Big Dollar in Denmark. Let us say the back office functions, it is very good to move together to achieve even more synergy savings and efficiencies.
For example, basically the common supply chain function has already started. At the moment we're, for example, negotiating the sea freight agreement, actually starting. I hope that we will be able to finalize the negotiations by the end of this month. Starting from the beginning of April, we're able to then hopefully have clearly better terms with the sea freights, for example. Of course, we also will benefit from the capabilities and competencies with the Nordic buying organizations. Obviously, there are like fantastic things both in Sweden and in Finland regarding the buying and sourcing. We will put these things together and get more benefits out of it. The target is to have 360 stores in Nordics by the end of 2025.
If we add the Click Shoes stores, the figure will be almost 400 stores in the Nordics for Tokmanni and Dollars tore segments. That is it. I will invite Tapio to join me and to start telling more about the key figures for Tokmanni Group on the fourth quarter. Tapio, please go ahead.
Thank you, Mika, and good morning on my behalf as well. Looking a little bit more at the figures, first the revenue. As Mika said, we had a very successful Q4 in terms of sales growth, total sales growth of the group about 5.5%. The total number was almost EUR 500 million at EUR 496.9 million. Also, our like-for-like revenue growth increased very nicely, a total of 3.6% during the fourth quarter. If you look at the sales mix a little bit, the Tokmanni segment's revenue increased by 4%.
Dollars tore's revenue increased by 11%. From the Tokmanni segment, our B2B sales were 3.2% of total sales and our online sales were 2%. In total, those two represent just over 5% of the Tokmanni segment's net sales. Of course, on an annual basis, our revenue grew very strongly due to Dollars tore being in our books for the whole year this year versus five months last year. Our revenue growth was 20.3% during 2024. When you look at the sales mix, it is a little bit mixed. For the Tokmanni segment, as Mika pointed out, the consumer is still very cautious in Finland. That results in, let's say, necessity buying being more in focus. For us, that means mostly the grocery products.
The grocery product sales continued to increase as a percent of total sales in the Tokmanni segment. They resulted in 49.8% in the fourth quarter. Dollars tore, the trend as such is also visible there. For Dollars tore specifically, due to the fact that we had now more Tokmanni private labels on sale there compared to last quarter, which are more in the non-grocery side of the business. In Dollars tore, actually the sales mix was a little bit more favorable towards the non-grocery business during the fourth quarter. The percentage of non-grocery increased slightly to 49.3% compared to 49% a year earlier. When you look at the group's comparable gross profit, we had of course a record year in the absolute gross profit. Also, the fourth quarter, we had record gross profit despite the slightly lower gross profit margins.
For Tokmanni, the gross profit margin decreased slightly to 34.6%. As Mika pointed out, that is mainly due to the, let's say, campaigning and then the mix being slightly more favorable for the grocery business, which has on average a lower gross margin. For Dollars tore, the margin dropped, I would say, significantly. As Mika pointed out, there were a number of reasons. The biggest one being the 25th anniversary sales and also other sales campaigns, which Dollars tore started to do just last year. The comparison period in 2023, Dollars tore did not actually have any campaigning in the fourth quarter. Also, we had slightly more turnover in the, let's say, assortment during the fourth quarter. That resulted in slightly higher write-downs in the products compared to a year ago. In terms of the whole year, of course, the comparable gross profit grew significantly.
It grew by more than EUR 100 million. Also, on a full year basis, the comparable gross margin percent grew slightly to 35.6%. That again was driven by Dollars tore being in the figures for the whole year this year compared to five months last year. When you look at our operating expenses, we started to see a good trend during the fourth quarter this year. For basically both segments and also for the whole group, the operating expenses as a % of revenue decreased. That was driven partly by, of course, the sales growth, but also, let's say, good control of the expenses. The expenses were growing pretty much in line with the, let's say, inflationary adjustments in the cost levels. When you look at our comparable EBIT, there again we reached record levels during the fourth quarter.
Our total comparable EBIT for the fourth quarter was EUR 47.5 million. The relative comparable EBIT was 9.6%. Also for the full year, we reached a number that we have not seen since the COVID times in the group. The total comparable EBIT was EUR 99.7 million and the comparable EBIT margin was 6%. For the full year, obviously the comparable EBIT margin especially was impacted by the acquisition being in the books for, or the Dollars tore acquisition being in the books for the full year. What I am really happy about is that both segments managed to increase their EBIT during the fourth quarter. For Tokmanni, it was EUR 37 million compared to EUR 36.1 million last year. For Dollars tore, it was EUR 11.4 million compared to EUR 10.7 million last year. Looking at our inventory levels.
As Mika said, we had a fairly high growth of inventories during last year. Also, like Mika pointed out, they were mainly due to actions we decided to take during the year. If you remember, at the end of last year, we ran our inventories to very low levels because we wanted to have high focus on cash flow during 2023, which we were still sort of impacted by the, let's say, challenges in the inventory management post-COVID. We cleaned that inventory. Now this year, we turned our focus to growth again. One of the levers of growth, obviously, is having high shelf availability and having the products in the stores at the right time.
We made decisions to increase the inventory in the stores and also ensure that all the products are at our warehouse and in the stores in due time. Normally in the end of the year, we do not ship the spring assortment. This year, we made a deliberate choice to do that before the end of the year. That was mainly due to the, let's say, challenges in the global logistics at the late fall last year and also the timing of the Chinese New Year, which was a little bit earlier than usually. We basically shipped all of the spring selection out from China before the end of last year. That obviously resulted also in the, let's say, increase in the inventory at year end. The segment values, so Tokmanni EUR 299 million and Dollars tore EUR 129 million.
Also, as Mika pointed out, especially for Dollars tore, the increase is also driven by the change in the business model moving from this wholesale model to direct import through Asia and through the Tokmanni Europris Shanghai Joint Office. Looking at our financing, our net debt, total interest-bearing net debt declined last year. At the end of the year, it was EUR 832.2 million compared to EUR 864.1 million. Also, our debt and loans for financial institutions declined compared to last year, from EUR 299 million- EUR 271.2 million. At the end of last year, we refinanced our loan portfolio with the banks. We have a new EUR 325 million financing agreement with two one-year extension options.
Looking at our net debt to comparable EBITDA, that number, if you remember, we have a target at the end of each year to have the net debt to EBITDA without lease liabilities at 2.25 or less. Due to the actions we took at the end of last year, this number is now a little bit more than our target at 2.39. It is actually only EUR 15 million of, let's say, less inventory or other actions. It is a very small miss and we are not concerned about that. Of course, we still target to be below this number next year. Looking at our cash flow, our cash flow again is, let's say, without the inventory movements, quite steady.
Here you can see both on the quarter level and also on the full year level, you can clearly see the, let's say, impacts of the levels of inventory. End of last year, we drove our inventory, as mentioned, to very low levels. That resulted in extremely high cash flow in 2023 compared to 2022 when we were still suffering a little bit from the, let's say, post-COVID inventory challenges. Now this year, it's, I would say, very different reasons for the high inventory. It's really actions that we have taken rather than having, let's say, ordered too much stuff or having a significant sales drop compared to forecasts like we had post-COVID. The inventory is, let's say, well in control and the inventory health is very good despite it being on a quite high level.
Of course, that is a totally different situation than what we had two years ago. All in all, our full year cash flow last year was EUR 89.1 million. As you can see, most of that cash flow came from Q4. Q4, we had a total cash flow of EUR 76.5 million. With that, we look a little bit at the capital structure. Sorry, capital expenditure. I would say that this year we had a fairly normal capital expenditure after two years of, let's say, quite heavy investments, both in acquisitions and also our new logistics center in Mäntsälä. Our total capital expenditure was slightly less than EUR 40 million. I would say that's a fairly normal level for us excluding any sort of one-off investments.
Of course, as we continue to grow, we expect that to increase slightly. It is depending on what kind of, let's say, major investments we do, whether those have an impact. The 2024 CapEx is, I would say, mostly sort of, I would not call it only maintenance, but maintenance and normal development expenditure. With that, I invite Mika back to talk about our outlook and dividend.
Thank you very much, Tapio. Please do not go too far because we will start talking about the, we will start answering the questions later on. A couple of words about the outlook and dividend. In 2025, Tokmanni expects the revenue to be in the range of EUR 1.72 billion-EUR 1.82 billion. Comparable EBIT, we expect to be in the range of EUR 100 million-EUR 130 million.
Also about the dividend of last year, Tokmanni Group's board of directors proposes to the annual general meeting to pay a maximum dividend of EUR 0.68 per share in two installments. That is it. Some of you might remember that Tokmanni strategy period is ending this year. We are having the strategy period from 2021 to 2025. Let us quickly check how the figures from the strategy period look like. With revenue, we have been quite successful. The original target that we set was EUR 1.5 billion. Of course, due to the Dollars tore acquisition, we were able to reach that and exceed that as well. Of course, we lifted the target as well. This, of course, looks very good. On the EBIT side, the original target for 2025 EBIT level was EUR 150 million.
Most probably, we won't be reaching the EUR 150 million target for the strategy period. I have to say that, the situation in the beginning of 2021 was completely different compared with today, with inflation, with the war. At that time, it was also like pandemic. I'd say that especially for the Tokmanni segment, only from the real estate costs, they increased during the inflation, I would say, more than EUR 25 million per year. It has been quite difficult in that sense to reach the profitability. Of course, as said, we most probably won't reach the EUR 150 million level, but we will be working extremely hard to get as close as possible with that target. Yes, a couple of words about the license agreement with SPAR. The main target with the SPAR collaboration is to increase the competitiveness of Tokmanni in Finland.
I just spoke about the inflation. During the inflation, after the Ukraine war broke out, the non-food sales have been clearly lower, the groceries sales have been increasing. The importance of groceries has been getting stronger for Tokmanni in Finland. That is why we want to improve the competitiveness for the groceries business. Of course, the non-groceries have been extremely volatile. Tokmanni, for example, in Finland, we have been very successful, actually very strong, for example, with winter products. As most of you know, we have not really had a decent winter this time. Obviously, the focus is even stronger on the groceries. The cooperation with other SPAR retailers is bringing some very good things for Tokmanni. First of all, it is all about the products, the SPAR products. The joint buyings with other SPAR retailers is extremely important.
I'd say that we are able to bring into all Tokmanni stores the first SPAR products, I'd say latest in May, but hopefully already in the end of April. That's, of course, a very, very, very big thing for us. It's a little bit like a slow start because the products, they don't have like Finnish and Swedish product descriptions and the packaging, but we're working on it. Of course, the first SPAR branded fresh food department will be opening in summer, the coming summer. Of course, all the 20 fresh food stores that Tokmanni has will be also like converted to SPAR food departments. Already at the moment, we have new store locations and standalone SPAR stores on the planning table. We'll see. Luckily enough, we've had extremely positive feedback from our customers regarding the SPAR cooperation.
Of course, we're so very convinced that the SPAR cooperation will also bring synergies in, especially in procurement and other functions as well. Yes, here are the product ranges for SPAR International own brand. They're growing strong. That's why we're also interested. Let's say the fighting brand is number one by SPAR. Then, of course, the best value private label is SPAR products. The special products are called SPAR Natural. There is the Taste of World Premium product range. We will be probably introducing products from all these categories in Finland in the coming years. As said, we will start slowly due to the packaging issues. I'm sure that already by the end of this year, we'll have some interesting results out of this. That's it. It's time for questions.
As mentioned, please join the Teams link under the stream. We can start answering the questions. If I see correctly, it's Mikko, Mikko Ihamäki first on the line. Please, Mikko, go ahead.
Hello, Mikko.
Let's see, we have some technical difficulties here. Bear with us.
Mikko, we'll take you a little bit later if you're not there right now. We can continue with the next one. The next one is Arttu Heikura from Inderes. Arttu, go ahead, please.
Thank you. Hi. Maybe a question relating to your guidance. Could you describe the assumptions behind your guidance and what should happen in order for your result to fall at the lower part of the guidance?
Yeah, this is, of course, a difficult question. Last year, 2024, was full of surprises in several areas.
One of them, as I mentioned, was the additional more than EUR 7 million freight costs, but also like the whole geopolitical situation is affecting in weird ways the business at the moment. Of course, it's difficult to know like, okay, or let's say that, for example, we were expecting the customer, the consumer confidence and also the buying behavior or the buying power to improve during 2024, but it didn't happen. Of course, the same expectations we have now, especially in Finland, but definitely in Sweden. Nowadays, you cannot be so sure about it, even though all the expectations are pretty good. We are being quite careful with that part due to many issues. Tapio, would you like to add something, please?
Yeah, I mean, as Mika said, we live in pretty uncertain times at the moment. Hence the fairly wide guidance.
As you know, a large majority of our result is coming from the second half. It is really critical for us what the second half will look like. Of course, for the high end, we expect the sort of confidence to improve and the consumers to, let's say, spend a bit more, especially on the sort of non-grocery business. If things continue in the current setup where we have, let's say, much uncertainty and the consumer confidence is still very low in Finland and Sweden has been improving somewhat, but even in Sweden, it is still, let's say, quite low levels historically. If things do not improve or worse go even lower in the sort of spending behavior, we will end up in the sort of lower end of the range.
Hopefully, we can, of course, then specify the guidance after, let's say, the summer, maybe during the Q2 earnings announcement when we know a little bit more what the world looks like. Right now, it's very difficult to say what the world looks like even three months down the line, much less eight, nine months.
Yeah, if I can add on that, there's always like surprises. Like, yeah, okay, we kind of were able to expect, for example, strikes come in February. Of course, they all have effect. There are like things which are we cannot do anything ourselves with that. That's why being a little bit careful with the guidance. Hopefully, this was a good enough answer for you, Arttu.
Yeah, yeah, yeah, it made sense. I was asking this because the guidance seems to me a bit of cautious.
I'm thinking about if new Dollars tore stores, which are this year coming quite heavily, and thinking about the SPAR expansion. Could these also affect your margin kind of diluting way?
No, this is something that we're not really expecting with SPAR. Actually, the purpose is to get lower purchasing prices with the SPAR products compared with our current assortment. It's not like a lower margin issue with the SPAR products. Obviously, let's say that in 2025, we're not able to really, or we won't be like a launch SPAR fresh food stores like big time. It will be like we're planning for two to three stores this year. That doesn't have an effect. Neither will the new Dollars tore openings. They're not affecting. They're not.
No, it's business as usual. I mean, Dollars tore is opening many stores per year.
That's what they do. Especially the SPAR, the potential dilution will come only after several years when we have, let's say, if the grocery part of the business then continues to grow when we have multiple SPAR stores, it might affect slightly dilutively because obviously the grocery business has a lower margin. For the first couple of years, we're mainly focused on converting the existing Tokmanni fresh food stores into SPAR. That should, like Mika said, actually be helpful to our margins because we expect to get lower input prices.
Okay, yes. About the private labels, which decreased in share despite the Dollars tore had a first full scale month with Dollars tore, I mean, Tokmanni's private labels. Could you elaborate why the share of private labels decreased?
Do you want to take that or should I?
You can start.
I'll add on that.
Of course, some natural fluctuation there. I mean, some percent, first cent points, it's natural fluctuation. And then obviously also the sales mix. Some of the product groups in the non-grocery are very heavily private label driven, while then some groups in the grocery business, there's more, let's say, branded goods and less private labels. As the grocery business grows, especially on the Tokmanni segment, you can expect the share of private label sales also to decline slightly.
All right. Then about Dollars tore and the increased price costs. You said that Dollars tore wasn't able to offset the impact of increased price costs this quarter. Is Dollars tore now ready to adjust the prices or increase the prices going forward?
Yeah, so like Mika said, the current Dollars tore business model is that most of the stuff that they themselves import, the prices are labeled at the manufacturing plant. And then from manufacturing plant to when the product is sold, it typically can take easily six to nine months from Asia. In that time, you can't adjust. Of course, the new products that are being manufactured today, there we, of course, set the price based on today's conditions. There is some natural fluctuation. If, let's say, the Swedish crown, for example, appreciates as it's been doing now, then that will, obviously, all other things being constant, help the pricing. Yeah.
Without the currency changes, you meant that, or do you mean that the prices are matched to increased price cost levels in six to ten months? So there wouldn't be positive impacts.
Exactly.
Basically, on average, of course, when you purchase the product and you decide the price, you have a set of assumptions there. If things change, like the price cost increased significantly, then the products that have been priced and the tags are there, you cannot change. Tokmanni does not do that except for some clothing items. Exactly. We can adjust the price much later in the process.
Yes. Of course, it will be in future more like joint buyings with joint private labels with no price tags on. Obviously, it will help us a little bit with that part. Also to take into consideration if there are new costs coming in for, for example, freight.
Okay.
My conclusion from that is that in H1, there would not be a major increase in your gross profit or gross margin level in Dollars tore. Am I correct?
From the freight costs and the price?
Yeah. Yeah.
No, I do not see any additional cost from that part, no.
Hopefully not. Yeah, we are right now concluding a new freight agreement that will be hopefully in effect from Q2. We are trying to, let's say, negotiate very heavily so that we would not get these negative surprises.
All right. Thank you.
All right. The next one comes from Maria Wikstrom. Maria, please go ahead.
Yes, thank you. This is Maria from SEB. I had a few questions. First, wanted a little bit of touch about how the year has started, given there is two months done already for 2025.
Is there any changes in the consumer behavior if you compare the trends now that what was reported for Q4?
No major trends or no major changes in trends. Obviously, now there has been like an agreement with salary increases. First of all, from our perspective, it's fantastic that the unions have been able to make an agreement on the salary increases because always like strikes, even though we were able to keep most of our stores open, it affects customers. Customers kind of feel that, okay, it's no need to, no use to start going to the stores because all the media is saying that the stores are closed, even though we're keeping them open. This kind of the effect that comes from the striking is always very, very negative. Luckily enough, now the situation actually looks much better when there are the agreements.
Another thing regarding the, yes, we do expect also the buying power to improve, to clearly improve, of course, the salary increases, for example, in trade. They will start from the 1st of May and things like this. We expect them to have like a positive effect. Of course, I'll be very honest with that. The one week was really difficult when it was the strikes. Of course, it affects the sales.
I had a follow-up question.
I mean, given I think we talked a lot about the impacts on gross margins on campaigning during the Q4. Given that you ended the year with, I mean, what looks to me a quite high inventory level, has there been unusual campaigning now in the first quarter?
I wouldn't say unusual. I think we obviously have clearance sales always after Christmas that go into January.
It is not unusual as such, I would say. I think for Dollars tore, it was maybe, I think they are being more, let's say, aggressive in their inventory management now than maybe in the past. They have been, let's say, slow to, let's say, renew their offering in the past. Now we are, let's say, working with them to have a, let's say, fresher selection overall so that they clear out their old inventory more aggressively. I think for Dollars tore, that might have a slightly negative impact on Q1 compared to a year ago. On the other hand, we hope that that also is visible in the customer visits and, let's say, higher sales.
Thank you. My final question, I think you announced today that you have a new incentive program extending to 2027.
Part of the compensation was based on Tokmanni performance compared to a certain defined peer group. I would be interested to hear that, I mean, what is your definition of the peer group?
We do not disclose that, but I would say it is stocklisted companies. There is about a dozen stocklisted companies that are mostly, let's say, discount retail from, let's say, Europe and a few outside Europe.
Yeah, but mostly from the Nordics, actually, but also some European retailers.
Do you look top line or the margin performance?
That is actually that we look at the total shareholder return for the peer group. There are three components. The component with the peer group is the total shareholder return, meaning the change in share price plus paid dividends during that three-yea r period.
Perfect. Thank you. I do not have further questions.
Thank you, Maria.
Thanks, Mika and Tapio, for a good presentation. Maybe a short follow-up on the strikes. Could you give any quantification on the strike impact from this one-week strike in Finland?
We're not going to the
exact figures, but you could say one week was quite negatively impacted for the stores. Of course, we had also a few days of strike in our logistics centers. That always causes a little bit of hassle with the deliveries and so on.
Even though we were able to, with the office personnel, work in both the warehouses and the stores, we were able to keep most of the stores open. Unfortunately, it was the mindset for our customers that the stores are closed due to the strikes.
That is why there was, from my perspective, a dramatic drop with the customer visits.
Okay, thanks. That is clear. Maybe a question related to the guidance. I will come back to this price cost. You said that these were up EUR 7 million in 2024. How much of, I think you have some kind of assumption what these will be for this year. How much of these have been baked in, let's say, baked into your guidance?
We expect several million lower costs this year. Yes. If we had the same amount of containers, of course, if the container number changes, that affects it. With the similar cost level, it is going to be several million lower. Not the EUR 7 million, but maybe somewhere between, let's say, around half of that maybe.
In the end of last year, for example, there was surcharges because of lack of containers and lack of vessel space. I think that nowadays, especially, and this year will be much easier when it comes to the containers and vessel space. There is like a lot more availability. No, we do not expect any surcharges from here. Hopefully, we can also skip as soon as possible the additional costs going around Africa, which is still happening. We expect that the vessels will start going through the Suez Canal, hopefully as soon as possible.
Okay, thanks. Maybe a question on higher price point products in Dollars tore, how these have been taken from customer point of view. It is not long history, but how the sales of these have started.
Very positive. Very positive.
First of all, I probably told a couple of times before that I had a little bit of doubts myself, like for example, how Kotikulta, private label of Tokmanni, will perform in Sweden. It looks very good. At least the slight surprise for me is that Finnish brands, private labels, of course, Finnish brands like Fiskars and Iittala are very, very, very well performing in Sweden. Also, we've been positively surprised how well, let's say, the Finnish Tokmanni private labels are performing in Dollars tore. Obviously, there is like a transfer period. There is still like the old stock with the old private labels or like they're like unbranded products or something like this. We are changing it with the Tokmanni private labels. That's happening all the time. Luckily enough, they are also performing well, the Finnish private labels in Sweden and in Denmark.
Also, I mean, if you think about the very expensive products, though, this spring will be very interesting because now we are bringing the sort of garden offering. We will have like garden furniture and barbecue grills for the first time in Dollars tore. It will be very exciting to see how they sell. Yes.
Okay. Lastly, maybe to Tapio about the inventories and the working capital level, you are now still increasing the direct imports in Dollars tore. What is the reasonable working capital level when you are complete with this shift? When should we expect these levels to become more?
Yeah. In a normal, of course, it fluctuates over the year quite a lot. I would say that this year we had a little bit higher inventory than normal.
I would say maybe EUR 30 million-EUR 40 million we could have taken out quite easily if we wanted to. As I said, we had, let's say, business reasons to do it the way we did it. That varies by year end. It is market-driven in a way, especially the freight situation. Some years we might have to take things a little bit earlier. If things are more stable, then we can, let's say, time it better so that we have less, let's say, free or less free time. This just-in-time inventory management is more effective in a sort of calm market situation. When there is a lot of uncertainty and volatility, you want to play it a bit more safe so that you do not miss the selling season or even part of it.
It's hard to say what is normal, but I would say this year, everything being calm, we probably would have had EUR 30 million-EUR 40 million less inventory at the end of the year. Of course, as we grow, also the inventory grows, hopefully less than the sales growth, of course, but still grows as we add more stores. Every store needs its inventory, of course.
Okay. Thanks. That's all from me.
Thank you, Joni. The next one is Calle Loikkanen. Kalle, please go ahead.
Yes. Thank you very much. This is Calle from Danske Bank. Just a couple of questions left for me. First of all, the synergies from the acquisition of Dollars tore, I think it was now at EUR 13.3 million at the end of the year. Originally, I guess you targeted some EUR 15 million.
I was just wondering that have you along the way found any additional savings that has come kind of as a surprise? Could we see that EUR 15 million actually be a bit higher in one or two years?
Of course, we continue to hunt for the combined savings. Of course, we will not stop at EUR 15 million once we reach those. Definitely we will continue to look for them over the years. It is a question of when do you sort of stop saying that they are synergies of the acquisition and when does it become business-as-usual synergies? Is that two or three years down the line? That is a very good question. I would say once our sort of, let's say, organization is in a way fully complete and all the processes are working, then I would say the integration is in a way complete.
You can sort of, you move the business as usual in that sense. The synergies, I mean, you always look for synergies. More volume means cheaper average price.
Exactly. Basically, the biggest potential is with, of course, with joint buying. We have started with very, very obvious products like joint private labels. Of course, we go further all the time. Actually, next week, we are spending a couple of days in Sweden, the buying departments, going through the plan for even making the joint private label setup even wider. It is also a little bit like learning. I think that from the Dollars tore perspective, they are, of course, they are trying with these more valuable products.
As Tapio mentioned, it's extremely interesting to see how the BBQ King, which is the barbecue private label for Tokmanni, now it's going to be launched in Sweden in Dollars tore. It's clearly more valuable products, better quality products. Of course, it's a learning curve as to see how the Dollars tore customers are taking these new products and how successful they are. The more we learn about the customers' behavior in Sweden and how we can draw new customers to Dollars tore, that brings the potential for joint buying as well.
Okay. Thank you. That makes a lot of sense. Lastly, regarding the SPAR Corporation, I was wondering that are you mainly looking to add growth or to add profitability from this corporation? Kind of which one is it? Or probably it's both, but which is the number one here?
Yeah, I'd say that in the beginning, personally, I was thinking about maybe the profitability part and to make Tokmanni, to be able to make Tokmanni more competitive with our competitors, especially in the groceries product categories. I have to say that based on the positive feedback that we've got from our customers, I could imagine that it will be also a matter of growth. Also, when getting to know the SPAR products a little bit more, we will be launching also some new products which are not available in Finland at the moment. Obviously, we're looking for growth as well. That's the product part. When we move towards the food departments, even the current food departments, the 20 stores that we have at the moment and converting them under SPAR brand, there we definitely expect to get some growth as well.
Okay. Perfect. That's helpful.
Thank you. That's all for me.
All right. Thank you, Calle. Then it's Joonas Häyhä still on the line. Joonas, please go ahead.
Yes. Hi, it's Joonas from OP. Just maybe one question left regarding this SPAR arrangement. I think you've said earlier that the financial impacts in 2025 will be limited. I'm just looking for an update perhaps on the OPEX and CapEx impacts. Have those changed? Does the start of these SPAR conversions have any kind of role in your earnings guidance, perhaps due to upfront or licensing costs that are coming this year?
Yeah. First of all, the license costs are, I'd say, limited.
Yes.
Limited. We don't see there any major effects on the results. Yes, of course, with the first food department.
If the first action point is the SPAR products, that's of course not causing any additional costs in that sense. When it comes to converting the current stores, as I said, we're only talking about two to three stores this year. They are existing food stores, so we don't need to add new or, let's say, the equipment that we will add over there is still limited. We don't see that many new costs at least for this year. Of course, the planning and the working will be over there, but with the whole scale, I would say that the effect will be very limited. Tapio will, of course, direct me if I'm not.
No, Mika is absolutely right. It's mainly work that we do in the planning phases. Those teams then, they are doing less something else.
It is a cost in a way that they would be doing maybe converting existing Tokmanni stores or doing something else. In terms of extra cost, it is in a way just diverting your existing cost base into something new a little bit. The CapEx investments into equipment are, I would say, very moderate this year. We have not decided finally exactly what we will renew. Even if we would renew every single machine there, it would be still for two to three stores this year. We are talking a few hundred thousand EUR of CapEx, not millions.
Yeah. Okay. Thank you. If we think about the longer-term picture regarding the SPAR arrangement, are you planning to communicate any targets for that during the fiscal year 2025?
No. No.
I think we will give more guidance on that in our new strategy launch at the end of the year.
Yeah. The end of this year.
All right. Thank you very much.
Thank you, Joonas. I guess we have an additional question. Please, Maarit.
Yes. We have a couple of additional questions. The first one goes, I think, for Tapio. With aspect to the recent weakening of the US dollar to Euro and even more to the SEC, how exposed are you to the US dollar in your purchases?
Of course, we purchase a large number that we purchase from Asia in US dollars. We are exposed. Of course, we hedge that. We have a hedging strategy that we hedge some part of that. We have, of course, some flexibility, but we try to, let's say, limit the exposure to some extent.
Of course, a weaker US dollar is in a way good for us because we purchase then the goods cheaper in EUR terms or SEC terms.
The second question related to Tokmanni and Dollars tore synergies. How confident we are that we achieve the EUR 15 million synergies, especially now the pace of realized synergies slowed down meaningfully in the last quarter. What are the areas you will think to harvest more synergies?
We are very confident that we will achieve the EUR 15 million target and exceed that as well. As already mentioned with the earlier questions, we see that there are potential with joint buying, but we just need to learn a little bit more about the Dollars tore customer behavior. How well do they accept the Finnish private labels and so on?
We are very confident that we will exceed the run rate target. Of course, we also see the potential with joint buying.
Thank you. That was all from my side.
Thank you very much. The springtime has started in the Nordics, so it is time to start doing some barbecues outside. The most perfect and best priced products you will obviously find in Tokmanni and Dollars tore stores. Thank you very much.