Translation: Original published in Finnish on 4/30/2025 at 8:29 am EEST.

Lindex's Q1 result was weak as logistics issues weighed on the Lindex division. Full-year guidance was reiterated, but we lowered our forecast towards the lower end of the range. We believe the structural changes still offer good expected return and reiterate our Buy recommendation and target price of 
EUR 3.5.

Q1 result weak due to Lindex division

The Lindex Group's revenue decreased by 3% in local currencies, roughly the same for both divisions. For the Stockmann division, this was in line with our forecasts, but we expected better for the Lindex division based on the positive development of its main market (Sweden). According to the company, the Lindex division would have grown in Q1 without the logistics issues and the one extra day in the comparison period due to the leap year. The group's adj. EBIT deteriorated to -9 MEUR, whereas we expected a slight improvement to -4 MEUR. The Stockmann division's result improved slightly more than we expected, but the Lindex division's result was at zero compared to our expectation of
5 MEUR (Q1’24: 4 MEUR). We understand that this was largely due to temporary challenges in ramping up the logistics center, so a small earnings disappointment will not have a material impact going forward.

Guidance unchanged, forecasts closer to lower end of range

Lindex reiterated its guidance and expects the change in revenue to be 0-4% in local currencies and adjusted EBIT to reach
70-90 MEUR in 2025. The performance in Q1 was significantly weaker, with revenue down 3% in local currencies and earnings down from the comparison period. We lowered this year's forecasts mainly due to the weak Q1, meaning that we did not make any significant changes to the estimates for the rest of the year. However, after the weak start of the year, the company's guidance looks rather optimistic, as we expect only slightly positive growth in local currencies and an adj. EBIT of 74 MEUR, i.e. close to last year's level. Our forecasts are therefore at the lower end of the company's guidance ranges, so a slight downward revision at some point would not be surprising.

Restructuring process drags on, no news on strategic review

The report did not provide any new information on the restructuring process. In our view, it is unlikely that the parties will reach an agreement on the amount of compensation in the last restructuring dispute (with LocalTapiola) and it is therefore likely that the litigation will continue to the end. This will likely mean that final decisions will not be made until 2026 at the earliest. The end of the restructuring would, among other things, allow the company to operate more freely, distribute dividends and make financial arrangements. In our view, it would also facilitate the potential sale of the department store business, although we do not think that the restructuring itself would directly prevent a sale. As expected, the Q1 report did not provide any new information on the strategic review of the department store business, i.e. the Stockmann division. Before Christmas, the company extended the timetable for the process until the end of June and has not provided any update on the progress of the review. We continue to believe that Lindex is looking to divest the department store business, which we think would be very supportive for the stock.

The potential of a structural change still offers a good expected return

As the company undertakes a strategic assessment of its department store business, we believe that the sum-of-the-parts model is the best valuation method, which values the company at just over EUR 4 per share. However, this should consider the uncertainties related to the manner and schedule of the possible structural changes in department stores. Overall, however, we think the expected return is good. With the current structure, the company's 2025 EV/EBIT (adjusted for lease liabilities) is around 12x, which we think is quite high, so the upside is mainly in potential restructuring.

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