Good morning, and warm welcome to Tokmanni Group's third quarter result presentation. My name is Mika Rautiainen, and today, together with me, presenting especially the financial figures, is Tokmanni Group's CFO, Mr. Tapio Arimo. Now, this is actually the first time Tokmanni will be reporting financial figures together with Dollarstore. The transaction was closed on the last day of July, so we have from Dollarstore August and September figures. Actually, we're very excited about this new chapter together with Tokmanni and Dollarstore. But first, some guidelines regarding the terminology. When I will be referring to or when talking about Tokmanni, I will be referring to the Finland operations, meaning Tokmanni, Click Shoes, and Miny stores.
While talking about Dollarstore, I will be referring to the Dollarstore operation in Sweden and Big Dollar in Denmark. Together, this is Tokmanni Group, and today, or actually by the end of September, the total number of stores was 369 stores. But actually today, the total number is already 371 due to one Click Shoes store opening in the fantastic city called Lahti. And actually today, there is the fourth store opening happening in Denmark in Holbæk. So the number today is 371 stores. And over here with revenue, you can see that Dollarstore share is 18%. That's due to the fact that there's one month, meaning July, missing from the third quarter sales. It's approximately 25% of the total.
So, some highlights for Tokmanni Group for the third quarter. First of all, it's been an excellent start for Tokmanni and Dollarstore combined operation. Obviously, sales growth of 23.6%. Personally, I had very high expectations for the cooperation between Finns and Swedes for this joint operation of Tokmanni and Dollarstore, but I have to say that my expectations were exceeded, and that's what I'm very happy about. Obviously, the both companies share a very similar discount retail culture, and that's very important for the cooperation. We have the same mindset of low prices and good quality products for our customers, whether they are in Finland, Sweden, or Denmark.
We have a very active steering group with synergy teams running the collaboration, targeting with synergies across all functions, and this work has started very, very well and very actively. The first synergy benefits already they've been agreed in several functions, but obviously the realization of the benefits will be on 2024 due to the agreements, which will partly end in the end of this year. So the benefits will be more towards the year 2024. And now, best practices sharing has been one of the best things with the started cooperation. It's been already resulting in concrete improvements, for example, in store operations, supply chain, and private labels. Couple of examples with store operations.
My personal opinion is that, Dollarstore is actually a world-class store concept, a discounter, world-class store concept. So Tokmanni has been very, very happy to basically copy with pride some of the commercial ideas for, well, of Dollarstore, and these already show very good results, especially in our stores. And on the other hand, Tokmanni, as an Organization, is it has been there a little bit longer and is a little bit more mature with some of the functions. For example, at the moment, especially we have some experiences with the supply chain, with a new warehouse or distribution center in Mäntsälä.
Obviously, Tokmanni also has a wider private label range compared with Dollarstore, so we can definitely benefit from the strengths of each company. The preparation of joint strategy revision for 2024- 2025 is well underway. Maybe here I should also say that Tokmanni has the strategy period of 2021-2025, and obviously, this one is now a revision for the last two years of the strategy period. We will tell more about it in the beginning of next year. I'll come back to that. Regarding Tokmanni Group, we've done several acquisitions, actually, this year, and I have to say that all acquisitions done this year, they've performed extremely well, especially Click Shoes. It's been very, very good results.
We're very happy of this acquisition. About the group's key figures, as mentioned, already mentioned, the group revenue grew by 23.6%, and it was EUR 364.3 million during the third quarter. Like-for-like revenue increased by 0.3%. Comparable gross profit was EUR 126.9 million, a clear growth compared with last year. And the comparable gross margin was 34.8%, compared with last year's 33.2%. Comparable EBIT amounted to EUR 26.4 million, so almost EUR 3 million improvement compared with previous year, 7.2% of revenue. Cash flow, very positive.
Cash flow from operating activities amounted to EUR 36.8 million, and this is due to the inventory levels. Tapio will soon tell you a little bit more about the inventory levels of Tokmanni and Tokmanni Group. Earnings per share diluted was EUR 0.21. This was mainly... This is lower compared with previous year, and it has mainly something to do with interest. Tapio will also tell you a little bit more about it very soon. Then, some Tokmanni highlights during the third quarter. First of all, revenue grew by 1.7%. Unfortunately, like-for-like decreased by 1.1%. Comparable gross margin was clearly better, 34.1%, compared with previous year's 33.2%.
In Finland, consumer sentiment was still low, and the shopping behavior cautious. The daily goods were of much more higher interest for our customers compared with durables. We actually, during the third quarter, the decision was made already the second quarter, we basically, today, we have with Tokmanni Klubi, almost 3 million members, which is a fantastic result. So we decided already to take a step during the third quarter towards a more digital marketing for our club members. But I also have to say that it didn't work yet that well. So we from the beginning of October, we basically increased again the printed marketing leaflet distribution.
Of course, we already noticed that our customers really they like the marketing leaflet that we distribute to the households in Finland. However, we will be developing the digital marketing part very heavily in future because we could already see some very good signs of how the digital marketing for our club members work. The private labels the sales were very good during the third quarter. The freight costs they were clearly lower compared with the previous year. These all contributed to gross margin improvement with Tokmanni. The operating expenses for Tokmanni Finland they were well in control, take into consideration salary increases and higher real estate costs.
Today, it's the seventeenth of November, so we can already say that the start of Christmas season for Tokmanni has been successful, so it looks good at the moment. Some words about the Dollarstore for August, September, two months. First of all, happy to say that, and happy to congratulate the colleagues in Sweden regarding the record-high sales of EUR 64.3 million. Revenue growth, 12.1% in local currencies. Comparable gross margin level for Dollarstore, very good level, clearly higher compared with Tokmanni, 38.3%. Dollarstore, what we've learned during the last months is that Dollarstore is extremely good with this kind of seasonal commercial occasions, like, for example, Halloween.
I'm not sure, but I could imagine that Dollarstore is the number one retailer for Halloween products in Sweden. Dollarstore's Halloween season started very well, which is, of course, an extremely good thing and something that we over here in Finland can easily be learning also from. In Sweden, the consumer sentiment is getting a little bit weaker. Dollarstore is very well positioned due to the fact that Dollarstore, according to our studies, Dollarstore has one of the best price images in Sweden. So in this kind of markets Dollarstore has a very strong position. And of course, there is a lot of sales and quality improvement potential for Dollarstore with Tokmanni private labels, which are already well-established, and that's what we're basically working daily with.
So that was the first part regarding the Dollarstore highlights. Then we move to the key figures for Tokmanni Group, which includes Tokmanni Finland and Dollarstore in Sweden and in Denmark. Tapio will come to tell you a little bit more regarding the financial figures. Tapio.
Thank you, Mika.
You're welcome.
Good morning on my behalf as well. So diving a bit more deeper into the numbers, first, we look at revenue. So in the third quarter, as Mika said, our group's total revenue grew by 23.6% and was EUR 364.3 million. Tokmanni's revenue grew by 1.7% and was exactly EUR 300 million in the third quarter. Our online sales increased slightly, 1.1%, while our B2B sales decreased by 13.8% in the third quarter. And as Mika mentioned, Dollarstore's revenue in the August-September timeframe grew by 12.1% in local currencies and were EUR 64.3 million. Then a little bit looking into our product mix. So both Dollarstore and Tokmanni have quite similar product categories, and also the product mix is fairly similar.
Here you see the totals split between grocery trade and non-grocery business, and it's almost 50/50. So this quarter, 51.1% was grocery and 48.9% was non-grocery sales. And among the non-grocery sales, the sales of cleaning and storage products, as well as apparel categories increased, while the sale of home improvement, leisure time, and home electronic sales decreased. And among the grocery trade, especially pet food, snacks, and candy sales increased. And like Tokmanni, also Dollarstore and Big Dollar chains have dry food and beverages in all their stores, while only Tokmanni carries fresh food offerings in approximately 20 Tokmanni stores in Finland today. Moving on to profitability. Our comparable gross profit grew in Tokmanni Group to EUR 126.9 million in the third quarter, and our comparable gross margin also improved to 34.8%.
The gross margin was impacted mainly by an increase in private label sales and a decrease in freight costs. Tokmanni's comparable gross margin increased to 34.1% from 33.2% a year ago. Dollarstore's comparable margin in the August-September timeframe was 38.3%. Then looking at our private label business and white labels and non-branded products, we managed to increase those portions during the third quarter this year. So the product labels managed by Tokmanni Group grew from 27% last year to 28.1% in this year's third quarter, and also during the first nine months of the year, the portion increased from 29.1% to 30.3%.
Our direct imports of the group also increased during the third quarter and also during the first nine months of the year. So then looking at a little bit at the operating expenses. So for the whole Tokmanni Group, the operating expenses during the third quarter were 20.6% of revenue, or EUR 75 million, and the corresponding figure last year, of course, without Dollarstore, was 19.2% or EUR 56.7 million. And the relative increase obviously affected by the increases in real estate costs, and those were linked to our CPI Index. Our personnel expenses were in the third quarter a total of EUR 44.4 million, an increase over the corresponding period of EUR 31.4 million. And also as a proportion of net sales, they increased to 12.2% from the 10.7% last year.
When you look at the Tokmanni, then the operating expenses were EUR 59 million, an increase of EUR 2.3 million from last year. The Dollarstore's comparable operating expenses in total for the August-September timeframe were EUR 16 million. Looking at our comparable EBIT numbers, as Mika mentioned, our total comparable EBIT grew from EUR 23.5 million last year to EUR 26.4 million this quarter, and the comparable EBIT margin was 7.2%. Tokmanni managed to grow its EBIT from the third quarter last year, about EUR 1 million to EUR 24.5 million. Dollarstore's comparable EBIT for the two-month period of August-September was EUR 1.8 million. The increase in operating expenses obviously had an impact on the result of the third quarter.
Looking at our inventories, the total value obviously increased from a year ago and was EUR 375.8 million at the end of September, while the inventory of Tokmanni, we are very happy that that decreased by almost EUR 50 million and was EUR 283.4 million as compared to the EUR 332.3 million a year ago. And the Dollarstore inventory value at the end of September was EUR 92.5 million. And looking at our financial situation, obviously, the acquisition of Dollarstore and the related increase in interest-bearing debt means that our total debt has increased quite a bit from a year ago.
So our total debt at the end of third quarter was EUR 839.7 million, and of that, about EUR 305 million is bank loans, and EUR 539.2 million is this IFRS 16 lease liability related debt. Out of our bank loans, about EUR 245 million is non-current loans, and about EUR 55.2 million is current loans from financial institutions and commercial paper. Our ratio of net debt to comparable EBITDA was 4.7 and compares to 2.7 a year ago.
As some of you probably remember, our long-term target is 3.2, and we are obviously over it now for a little while due to the acquisition, but our long-term target remains unchanged, and we will bring the ratio under that target over the next couple of years. At the end of September, our financial position remains solid. We have about EUR 216 million in withdrawable funds, consisting of loan agreements with financial institutions and a commercial paper program. Also impacting our net debt will be the imminent sale and leaseback of the new logistics center, which is estimated to be around mid-December, with a cash impact of approximately EUR 57 million.
Then looking at our cash flow from operating activities, so both in the third quarter as well as the first nine months of the year, we have had very good operating cash flow, driven by our profitability and also to a large extent, our ability to manage our inventory effectively and bring down the level in Tokmanni. The total cash flow from operations in the third quarter was EUR 36.8 million, and for the first nine months of the year, EUR 103.6 million. Then looking at our net capital expenditure, obviously with the acquisition of Dollarstore, the net capital expenditure has risen to levels not seen in a few years at Tokmanni. So for the third quarter, the total net capital expenditure was EUR 187.9 million.
Of course, the majority comes from the acquisition of Dollarstore, with the other, other components being store network expansion, development and maintenance of the store network, and development of digital services. The total value of the investment in our new logistics center in Finland is expected to be approximately EUR 65 million. As mentioned before, about 57 of that we expect to, to receive back in the sale and leaseback of the facility. At the end of September, that total of the estimated total 65 was EUR 52.4 million. That was, in short, the financial part of the presentation, and now, Mika, please join me and present the outlook for the rest of the year.
Thank you, Tapio. Please be ready to come and answer some questions afterwards. Today, it's the seventeenth of November, so some words regarding the outlook for the end of this year. It's been a very active start for Tokmanni Group for the fourth quarter. First of all, Tapio already mentioned regarding the investment of Tokmanni's new logistics center. It was actually taken into full use this week, Wednesday. I have to say, this is very good job done with the new logistics center. The schedule or the agenda for the opening or taking it to the full use was next spring. So we're very much early regarding the agenda for the logistics center, and it was done exactly according to the budget.
So very good job, and of course, this has a great meaning for the efficiency in our supply chain, especially here in Finland. Now, yeah, logistics center, that's of course been during this week a big thing. In October, we launched around 120 Click Shoes shop-in-shops in Tokmanni stores in Finland. That was a very, very nice success. And obviously, it was done quite quickly after the acquisition, so next spring we are able to bring the full assortment of shoes to these 120 Tokmanni stores. In Sweden, Halloween season was already mentioned regarding Dollarstore business. Now, Halloween season is, of course, already gone, and Christmas season is on at the moment.
Dollarstore had a very successful Halloween in Sweden, which is, of course, a great thing. We opened, a couple of weeks ago, a new mega-sized Tokmanni store in Hämeenlinna, Finland, about 9,000 square meters. We're very happy to say that it was the record-high opening sales for this store. So actually, the concept development has been doing a good job with this kind of larger size stores as well, due to the sales success. And as already mentioned, there is a big Dollarstore opening today in Holbæk, Denmark. There was a Click Shoes store opening in Lahti, Finland, and in two and a half weeks' time, there will be a new Tokmanni store opening in Kouvola, Finland, as well.
So after that, the total number of Tokmanni stores will be 201. And already, as already mentioned, the Tokmanni Group's most important season for both Dollarstore and Tokmanni has begun very well. Obviously, there are still a bit over 5 weeks to go and very important days, but we're ready for the Christmas business. And at the same time, while serving our customers, we have the full focus on the synergies between Dollarstore and Tokmanni. The guidance for 2023 is unchanged. Revenue, we expect to be EUR 1,370 million to 1,440 million.
nd the Comparable EBIT, we expect to be between EUR 90 million and EUR 110 million.
Tokmanni Group Corporation's Board of Directors has decided of the payment of the second installment of the dividend for the financial year which ended 31st December 2022. The dividend to be paid is EUR 0.38 per share. The second dividend installment will be paid on the last day of November 2023 to the shareholders listed in the company's shareholder register, maintained by Euroclear Finland, on the record date of 22 November 2023. Thank you very much. Operator, now it's time for questions, and Tapio, you'll join me, yes?
Yes.
Please, you can, come on this side. Thank you.
Thank you. If you would like to ask a question, please signal by pressing star one on your telephone keypad. If you are using a speakerphone, please make sure your mute function is turned off to allow your signal to reach our equipment. Again, press star one to ask a question. We will take our first question from Svante Krokfors from Nordea. Your line now has been opened. Please go ahead.
Yes, good morning, Mika and Tapio. Thank you for the presentation.
Good morning, Svante.
Good morning.
I have a couple of questions. Can you tell a bit about, I mean, Dollarstore's quite good gross margin and EBIT of EUR 1.8 million? Also the inventory, can you tell a bit about how that developed year on year?
Yeah, actually, we don't-
We unfortunately don't have the historical figures available for Dollarstore in the same quality that we have for Tokmanni, so we unfortunately can't make any year-on-year comparisons for the first 12 months. So I think what we can say is that the-
Understood
... current margin of Dollarstore, you know, the gross margin is a tad higher than Tokmanni's, and we believe that that is, in a way, a let's say, quite normal level for Dollarstore. And the, let's say, operating profit level is somewhat lower than Tokmanni's at the moment. And of course, we will try to increase that over time, work together with Dollarstore, and help them achieve some operational efficiencies, as well as then realizing some of the synergy potential, so.
Okay, thank you. And then, how should we expect the synergy timing throughout 2024?
Sorry?
Well, I think-
How should we expect the synergy timing throughout 2024?
Yeah, obviously, we said that there is a minimum EUR 50 million synergies for the first 30 months. When it comes to, for example, marketing or financials or other... this kind of supportive functions, the synergies we'll start realizing from the first of January 2024. Obviously, when it comes to the synergies regarding buying and sourcing, that's also something to do with the ongoing agreement. And obviously, we have finalized already some agreements regarding the buying and sourcing synergies. But especially when it comes to non-food products, if we now make the orders regarding the non-food products, the season, the selling time will be next fall. So this is, of course, something to do with the product groups.
Especially with non-food, it takes a little bit more time when it comes to the buying and sourcing synergies. With daily goods, obviously, we're ready to start in several categories, achieving the synergies, starting from first of January.
I would say it's a sort of a-
Okay. Thank you.
Yeah, I would say the synergies follow a sort of typical S curve over time. So if we have, let's say, full synergies running in 30 months, then, you know, it's a little bit starts slow, and then it picks up, and then at the last, last quarter or 2 quarters, it slows down.
Exactly.
Thank you. And then regarding the logistics and investment, so EUR 65 million, and you will have a cash impact of EUR 57 million. Has there been some changes in the pricing of that, or-
No, no.
I understand.
It just... Maybe we're giving a bit more detail. So obviously, the difference there, about EUR 8 million, is then Investments that will remain in our balance sheet.
Exactly.
So the biggest, biggest item is the racks and shelves, and then you have, you know, forklifts and trucks and things you need to invest in to make the-
Exactly
... warehouse run, and they stay on our balance sheet.
All the equipment regarding the logistics center, that's they stay in our balance.
That's very clear. Then last question regarding your guidance, especially on EBIT remains quite wide, although knowing that 40% or typically 40% of your earnings is generated in Q4. But what kind of should happen for you to reach the low or high end of the guidance?
Well, of course, I think we have very high confidence that we will hit those thresholds. So, it would have to be a very significant change in the market should we go over or under the guidance, let's put it that way. So it's I would say it's a very high confidence level that we will hit the guidance.
At the moment, we're also working together with Dollarstore for the first time for the most important season. Obviously, at this time, we also need to be a little bit careful to see how everything works together with Dollarstore and Tokmanni.
Okay. Thank you. That's all from me.
Thank you. Operator, any more questions?
Sure, we will take our next questions from Arttu Heikura from Inderes. Your line is open, please go ahead.
Hello, it's Arttu from Inderes-
Hello
Thank you for your presentation. Could you give an update on the Dollarstore synergies? I mean, which kind of synergies have you already materialized?
Well, if I will first tell something about the marketing, you could actually tell something about the banking, yes?
Yeah.
Okay. So for example, both companies, we do have marketing leaflets. The distribution is quite wide in both Finland and Sweden. And by basically doing the joint buying of paper and printing, we were able to basically close the first synergies. But of course, this will take... This will start from the 1st of January of 2024. But for marketing, due to the fact that it's pretty big investment for both companies, by combining the paper volumes and printing volumes, we were able to achieve actually quite remarkable savings. And you can also tell about-
Yeah, just an example on the support function. So in finance, we're in the process of consolidating our... Let's say, for example, foreign exchange hedging, combining them instead of doing them separately, so that will result in clear savings. We're consolidating our accounts into one provider that will drive savings and also enable more effective use of cash and debt. With that will result in savings. We're also consolidating our credit card payments provider into one company that will provide clear savings.
Mm-hmm.
These savings, once they are, let's say, annualized, you know, they result in pretty significant six-figure savings over a 12-month period.
Yes, something regarding the buying and sourcing. Obviously there are already first orders for non-food products for Far East, but obviously these products will be delivered to Finland and Sweden during the springtime. So, the sales will happen during the spring, summer season. So, that will of course take some time, but obviously combining volumes means better prices.
Okay. Thank you for the clarification. How do you view the current market environment? The market growth seem to be pretty stronger than Tokmanni in Finland, especially. So what were the reasons of Tokmanni underperforming the market?
Well, yeah, first of all, as already mentioned, we have almost 3 million club members with Tokmanni club, and we were kind of hoping that we could actually benefit from replacing some of the marketing leaflet distribution by digital marketing, and it didn't work out as well as we expected, unfortunately. So actually, we came back to the wide distribution of the marketing leaflet from the beginning of October, and it made a clear difference with customer visits in Tokmanni, a positive change. To be very honest, I have to say that, obviously, the commercial decisions are made during the second quarter for the third quarter. They're being finalized for the third quarter. They're finalized during the second quarter.
I have to say that obviously some of the management's attention during the second quarter was drawn into this transaction between Dollarstore and Tokmanni. Obviously, now the full focus is on the commercial success also in Finland. Happy to say that, as already mentioned during the presentation, the Christmas season has started very well.
Yeah, thank you. How about the competition? Do you see some upward trend in the higher competition, or how do you feel that?
Well, when the market is suffering a little bit, when the customers— The customer confidence is still on a low level, and the buying power still on a clearly lower level, obviously, there the competition is harder. I think the same goes also in with the Swedish market, for example, with the interests regarding the mortgages and so on. Yeah, obviously, there is a hard competition. But on the other hand, in Finland, we still— we do expect actually the Christmas season to be slightly better compared with last year.
There is no discussion regarding the electricity costs, for example, for the households, not at all as much as last year this time. And that had a clear effect on the retail business last year. This year, there is no such thing, but obviously, the buying power is still lower due to also the, for example, the higher interest costs for households.
Okay. Then my last question goes, your financial income was up by EUR 2.4 million. So could you explain what items impacted this role?
Tapio, would you like to-
Ah, financial income?
Yeah, 2.-
I mean, there's basically the, let's say, translation differences with the, with the Swedish krona that come into play now. So the majority of the financial income is there. Financial expenses, of course, grew as well, quite remarkably from a year ago due to the higher interest rates.
All right. Thank you.
Thank you, Arttu. Operator, any more questions?
Yes. We will take our next questions from Nicklas Skogman from Handelsbanken. Please go ahead.
Yes, good morning, everyone.
Good morning, Niklas.
A couple of questions from my side, please. So you talked about the lack of sort of good historical comparable data for Dollarstore, but would you say the... It was at least in line with your expectations or even better, what you saw in Q3?
I think we can say that was in line with our expectations.
The sales growth of 12.1%, that's in retail, it's, as you know, it's actually very good.
Yeah, I was thinking more on the earnings side as well.
Yeah.
Yeah, it was in line with our expectations.
Okay, good. Second question is on this attempt on doing more digital marketing versus the leaflets. Are you able to quantify the impact on the like-for-like sales?
Well, unfortunately, not. Obviously, we lost some customer visits during the third quarter. And it's quite difficult to say exactly how much was due to the cut of the volumes in our marketing leaflet. It was a significant cut. Let's put it this way, that if the digital marketing would succeed for our club members, of course, we would be doing very good savings regarding the marketing costs. But yeah, according to the customer feedback, well, basically, they were saying that they definitely want to have our marketing leaflet every week. Of course, that's very, in a way, positive news, but unfortunately, cost-wise, we were not able to make longer-term savings on this one yet.
But to say exactly like what kind of effects it has is it's slightly difficult. But yes, we lost some customer visits during the third quarter.
Okay. Okay, good. And then I'll go back to the guidance again. I mean, it's still very wide. You report later than normal, and we only have a month and a half left of the year. And you also say that the Christmas season has started very well. So why are you keeping the low end of the guidance, which then only implies 4% EBIT growth in Q4?
Yeah, first, first of all, the, let's say, the five, six last weeks regarding the Christmas season, plus the New Year season, as the sixth or seventh week, it has a significant meaning regarding the final success of the Christmas season. And of course, it has a strong profit meaning for us. So from that perspective, it's... Yes, of course, we're already able to expect something from Tokmanni Finland, but for us, it's the first time with Dollarstore, and we... Of course, we don't know exactly how it will turn out in Sweden, and how it will turn out for Dollarstore.
So that's why a little bit careful with tightening the guidance. Tapio, would you like to add something on this one?
Yeah, I mean, it was the decision to keep the guidance unchanged for now. And like Mika said, the last six weeks of the year are, you know, by far the biggest sales weeks, and of course, we still don't know exactly what's gonna happen. So just to be prudent, we kept the guidance at the current level.
Okay. Two more questions on debt and the finance cost. So you'll be receiving EUR 57 million in Q4 for the divestment of the logistics center. So where do you expect to end up in terms of net debt, EBITDA ratio at the end of this year? And perhaps also if you have some guidance for next year.
Well, obviously, the end of the year is typically the lowest point for our net debt, so it's going to be obviously clearly lower than the current. Of course, that refers only to the, let's say, bank debt and commercial paper. The lease liabilities are fairly stable over time, and they obviously now will increase as we sell and lease back the facility. So there's gonna be a little bit of a shift also. There's gonna be more lease liabilities and less bank debt due to this sale and leaseback. But of course, we expect that overall net debt to be clearly lower than in the end of Q3.
Okay, and at what point do you expect to be back to your target?
Well, that obviously has depends on a number of factors, how many investments we do in the coming years and, and how much we pay dividends, how well we do operationally, and so on. So I, it's impossible to say the exact timing, but I would say, you know, we expect to be there by the end of the strategy period.
Okay, last question. Net financial costs for next year, do you have any rough estimates?
Well, that again depends on the interest rates, how they go. But if interest rates stay roughly at the current levels, I expect the total interest expense, including the IFRS lease, to be somewhere between EUR 20 million and EUR 25 million.
Including the IFRS.
Including the IFRS, yes.
Yeah.
Okay. Very good. Thanks a lot.
Thank you, Niklas. Operator, more questions?
Thank you. We will take our next questions from Kalle Leikinen from Danske Bank. Please go ahead.
Thank you and good morning. Good morning, gentlemen.
Good morning, Kalle.
I just wanted to follow up... Yeah, good morning. I just wanted to follow up on the, maybe on the Dollarstore discussion here. I understand that the way Dollarstore has been calculating the numbers is perhaps a bit different than what you as a stock limited company in a different country are doing. But any thoughts on the EBIT margin? I mean, you when you announced the acquisition, you mentioned that the EBIT margin last year for Dollarstore had been 4.1%. So how are you seeing that developing this year, either year to date or for the full year? And I get that perhaps calculations are done a bit differently, but any sort of color on that side?
Yes. Well, first of all, we're talking about August, September for Dollarstore, and yes, first of all, there might have been some additional cost during the first months, and with the start of the cooperation. But... And it's good to keep in mind that Dollarstore in that sense is similar company with Tokmanni. Third quarter is actually the third biggest quarter. So fourth quarter is number one with the sales and result, and then the second quarter is the number two. So we're still talking about, you know, in a way, a little bit lower level of sales and EBIT for also for Dollarstore on the third quarter.
Dollarstore gross margin is clearly better compared with Tokmanni, so there is, like, a lot of potential regarding the profitability level. Obviously, the target for Dollarstore is to increase the sales per store, which, of course, affects directly towards the better profitability. I'm sure that Tokmanni will be supporting Dollarstore with this one, with, for example, new private label ranges and so on. So there's clearly opportunities and potential regarding the better profitability for Dollarstore, and we're working very hard regarding this to achieve better profitability for Dollarstores, Dollarstore together with Tokmanni.
Okay.
Do you-
Okay, thank you. Thank you. That's helpful. Then my final question on you mentioned there that the freight costs have been coming down. So how do you see this impacting your pricing? I mean, do you want to keep or do you want to lower prices further or are you more looking at keeping the prices as where they are now and therefore improve margins? Or how do you think about the dynamics between the lower costs and the selling prices?
Now, Tokmanni Group, together with Dollarstore and Tokmanni, we are a low price discount retailer, so it's... Everything's all about the price level for us. We want to give our customers the lowest price level we can, and at the moment, we can see that due to, for example, raw material prices, especially the non-food products, the buying prices, they've already come down. And we obviously will also start lowering the prices for our customers because we, of course, want to keep the lowest price level. But the situation is in a way very positive for everybody, due to the fact that the buying prices are coming down. The inflation is not as high anymore.
So obviously, there are a lot of potential for a lower price level to start with. Yes, we will always make sure that we offer our customers the lowest price level. Obviously, we take good care of the gross margin, but at the moment, there is potential for keeping the gross margin level and offering lower prices to our customers.
Okay. Okay, that makes, that makes a lot of sense. Thank you very much. That's all for me.
Thank you, Kalle. Operator, what's the situation?
Certainly. We will take our next questions from Miika Iham äki from DNB Markets. Please go ahead.
Good morning, it's Mika from DNB Markets.
Good morning.
I would like to ask on your synergy targets. You said that you feel quite confident about reaching it. So should we now expect synergies more in the ballpark of, say, 16-18 or even more? And what could possibly make you to, say, upgrade your synergy targets?
Well, first of all, it's still a very, very early start for this cooperation for Dollarstore and Tokmanni, and there are a lot of negotiations going on, a lot of projects for both companies' buying and sourcing departments are working at the moment very hard. Basically, combining the certain SKUs, combining the suppliers, and using same private labels and so on. So there is actually a lot of things happening at the moment. It's a little bit too early stage to start commenting anything regarding the potential regarding the, let's say, additional potential regarding the EUR 50 million, but it looks... In the beginning, it looks very good.
But still, too early to start giving out the synergies.
Thanks. And then, so Dollarstore saw an increase of 7% in like-for-like sales, and you saw total number of customers growing by roughly 5%. What was the like-for-like customer growth for Dollarstore?
I don't think that we have that figure.
I don't think we have that figure disclosed, unfortunately.
Well, could you maybe comment verbally-
Yes, of course it was-
What that was?
Of course, it was positive, yes.
According to your expectations?
Yes.
Okay, thanks.
Thank you. Operator, any more questions?
It appears there are no further questions at this time. I would like to turn the conference back to our speakers for any additional remarks. Please go ahead, sir.
Okay, thank you very much for this, and obviously, we will be very happy to be reporting then the fourth quarter results. Unfortunately, it will be slightly.
Delayed
... delayed.
From our normal schedule.
Due to the fact that we need to convert the Dollarstore figures to IFRS calculations, so that will take a slightly longer time period. But thank you very much, and goodbye.
Goodbye!