Stockmann to sell its Delicatessen business in Finland to S Group – Stockmann Delicatessen stores will remain in all department stores
Stockmann plc, Stock Exchange Release, 30 June 2017 at 8:30 EET
Stockmann plc and S Group have signed an agreement on the sale of the Stockmann Delicatessen business operations in Finland to S Group’s regional cooperatives. The Stockmann Delicatessen business operations in the Baltic countries will remain with Stockmann. The Stockmann Delicatessen stores will continue to provide customers with first-class service and a unique, high-quality selection in all Stockmann department stores.
The transaction includes all Stockmann Delicatessen business operations in Finland. The six Delicatessen stores will be transferred to the HOK-Elanto, Turku and Tampere Regional Cooperatives. The Delicatessen chain operations will be transferred to SOK and the Stockmann Delicatessen kitchen, which prepares Stockmann Meals foods, will be transferred to Meira Nova, a subsidiary of SOK. Stockmann Delicatessen has around 800 employees in Finland. They will transfer to S Group as existing employees. The regional cooperatives will become a major partner of Stockmann Real Estate, when they start as tenants in facilities owned by Stockmann and as a subtenant in facilities rented by Stockmann.
The transaction is subject to approval from the Finnish Competition and Consumer Authority. If approval is granted during 2017, the transaction can be completed on 31 December 2017. The debt-free transaction price, EUR 27 million, will be paid in cash at the time of closing, and the transaction will have a positive cash flow effect of around 20 million. Stockmann will recognise a one-time capital gain of around 3 million on the transaction. The transaction will improve the Stockmann Group’s profitability from 2018 onwards.
“To generate profitable growth, Stockmann must make strategic choices. Changes particularly in the food procurement and logistics market in Finland have affected Stockmann Delicatessen’s competitiveness. The Delicatessen business will join forces with S Group, which has the willingness and resources to further develop Delicatessen and to ensure that our customers will continue to have access to the best grocery stores in Finland,” says Lauri Veijalainen, CEO of Stockmann.
“Our goal is to develop the Delicatessen stores into S Group’s flagship stores. We are aiming for the top level in Europe, and the Delicatessen stores’ highly competent employees will play a crucial role in this respect. We have a great deal to learn from them,” says Arttu Laine, Executive Vice President at SOK.
Stockmann Delicatessen’s revenue in Finland, excluding the Oulu store, was EUR 127 million in 2016, with an operating loss of EUR 11 million. The stores represented 25% of Stockmann Retail’s merchandise sales and 12% of the Stockmann Group’s merchandise sales in 2016.
Stockmann Retail to focus on fashion, beauty and home products
The Stockmann Retail business operations consist of six department stores and the stockmann.com online store in Finland and two department stores in the Baltic countries. In line with its strategy, Stockmann cooperates with partners to complement its own selection of products and services. The partners offer a product mix of e.g. electronics, books, toys, jewellery and in the future, also food products in the Stockmann department stores.
“After careful consideration, Stockmann has decided to focus on fashion, beauty and home products in its own store operations in Finland. We are among the best in Finland in these segments and have an opportunity to further strengthen our market position. This decision will help us achieve a positive operating result for Stockmann Retail in 2018,” says Veijalainen.
Stockmann Retail will continue to run the Delicatessen Stores in the Baltic countries as before. In the Baltic countries, the proportion of food in the total sales is larger than in Finland, and the Delicatessen operations are profitable there. Local units operating as part of the department stores in Riga and Tallinn are responsible for food buying and other business operations in respective markets.
Outlook for 2017 remains unchanged
Stockmann expects the Group’s revenue for 2017 to decline due to changes in the store network and product mix. Adjusted operating profit is expected to improve, compared with 2016.
Press and analyst conferences
Stockmann and S Group will hold a Finnish-language press conference at the Restaurant Savoy on Friday, 30 June 2017 at 10.30 a.m. (EET). Lauri Veijalainen, CEO of Stockmann, and Arttu Laine, Executive Vice President at SOK, will provide information about the transaction at the event. Other management representatives of the companies will also be present. Advance registration is not required.
Stockmann will hold an English-language audiocast for analysts and investors on Friday 30 June 2017 at 1 p.m. (EET) where CEO Lauri Veijalainen and Nora Malin, Director, Corporate Communications, will be present. To participate in the webcast, please dial one of the numbers below 5–10 minutes before the webcast begins. The presentation can be followed on the address stockmanngroup.com. The recording and presentation material are available on the company's website after the event.
Finland: +358 (0)9 7479 0404
Sweden: +46 (0)8 5065 3942
United Kingdom: +44 (0)330 336 9412
United States of America: +1 719 457 1036
Confirmation code: 1546697
Lauri Veijalainen, CEO, tel. +358 9 121 5062
Nora Malin, Director, Corporate Communications, tel. +358 9 121 3558