Description

Should not be considered investment advice. May contain errors and includes subjective views. Author is long Stockmann Oyj.

Main sources: Stockmann Oyj Restructuring Plan dated 01-Feb-21, Company Websites, Company Filings, Company Earnings Calls, Dagens Industri, Hufvudstadbladet, CapIQ as of 30th March 2023. Sources for market outlook commentary: Statista – Internet Penetration in Selected Nordic Countries in 2021, Worldbank on GDP per Capita, Deloitte Report on Nordic Retail Industry.

STOCKMANN OYJ

When Covid-19 started to sweep across the world in Q1 2020, many brick-and-mortar stores faced unprecedented difficulties as countries went into lock-down without a visible end-date. One such troubled company was Stockmann Group, arguably the most storied retailer in Finland, dating back 160 years. Ultimately, the uncertainty of the once-in-a-lifetime pandemic led Stockmann Group to pursue a very careful restructuring, which the company is now completing.

The restructuring was a prudent choice to manage uncertainty brought about by an extrinsic, extraordinary factor, not an insolvency caused by poor operating economics. By the same token, the restructuring did not wipe out the equity but has created a situation where the stock is grossly undervalued.

Stockmann Group ticks all the boxes of a lucrative investment case: a simple, predictable business with a substantial gap between intrinsic value and price, currently missed by the market due to the restructuring. I hope you enjoy my analysis below.

COMPANY OVERVIEW
Stockmann Oyj (or Stockmann Group) is a retail group founded in Helsinki in 1862 with a rich history, having sold multiple different products from cars to soda. It has been listed on the Helsinki Stock Exchange since 1942. The company has had various subsidiaries and franchises, but today comprises two divisions:

1) Stockmann department stores (“Stockmann”) (€321m revenue in 2022)
- Namesake department store chain, retailing fashion items, cosmetics and home furnishings
- Premium profile, comparable to Sak’s, Barneys or Bergdorf Goodman in the US or Selfridges and Harvey Nichols in the UK
- 8 brick and mortar stores (6 in Finland and 2 in Baltics)
- Online store

Stockmann is one of Finland’s most well-known store chains with iconic warehouses. Not least the flagship store in Helsinki, which is a widely recognized landmark.

2) Lindex (€661m revenue in 2022)
- Designs and sells its own brand of fashion items and cosmetics for women and children
- Not defined as a premium brand, but not especially focused on competitive prices either
- 436 stores across 18 countries (404 own stores and 32 franchise stores), mostly in the Nordics, but also EU, UK, Qatar, Tunisia
- Online store in EU, Norway and UK
- Also on 3rd party stores (for example Zalando)

Lindex is a long-standing, well-known brand in the Nordics and abroad, founded in 1954 in Alingsas, Sweden, as a lingerie retailer. Lindex was acquired by Stockmann through a public takeover in 2007.
             

WHAT IS GOOD ABOUT STOCKMANN GROUP’S BUSINESS?
Stockmann department stores is one of Finland’s best known retailers with iconic warehouses, the first of which was gradually acquired from 1911 onwards. These warehouses have an unmatched positioning in their primary market: there are no other premium department stores of scale in Finland. Many other markets have more saturated competitive landscapes (for instance London, Paris and Stockholm all have several competing large premium warehouses), whereas Stockmann dominates as alone with great city center locations with premium amenities, large premium product offerings and services in Finland. As the only sizeable premium department store in Finland, Stockmann thus enjoys unique procurement advantages, overhead economies of scale, and scale marketing. The company is also harnessing its positioning by focusing on customer loyalty, with a long-standing customer loyalty programme (company reported gaining 88,000 members in 2022).

Lindex is a long-standing, well-known brand in the Nordics and abroad, as manifested by its ~5.7m registered customers. The company retails products with an idiosyncratic Scandinavian style and has in-house design, a well-established organisation with economies of scale and procurement expertise. Moreover, Lindex has a top tier omnichannel approach with a vertically integrated online store and 3rd party online sales (for example available on Zalando).

To summarize, the iconic brand names, built on high-quality offerings, provide robust moats around Stockmann department stores and Lindex.

The proof is in the pudding: the Stockmann brand has been around for 160+ years and Lindex has been around for almost 70 years.

WHAT DOES THE MARKET LOOK LIKE?
On a macro level, Stockmann Group’s core geographies, representing 83% of sales, are in the Nordics (Sweden, Finland, Norway and Denmark), which is a particularly strong setting for retail. Nordic countries are among the world’s wealthiest with extremely high standards of living and high consumer demand for branded fashion. Moreover, internet penetration in the Nordics is among the highest in the world at 94-98%, offering a large opportunity in online retailing, which Stockmann Group is seizing.
It is also worth to highlight that there is high visibility of disruption from only-online retailers (e.g. Amazon already established), as retailers already face this competition.

All-in, it seems the retail market which Stockmann Group operates is quite stable and quite favorable.

RECENT YEARS
In the early 2010s, Stockmann Group suffered from poor management of its financial structure and capital allocation. The group undertook large increases in debt to fund investments into brick-and-mortar stores (such as extensions and renovations in Helsinki), aggressive growth plans and investments (in particular in Russia), as well as the acquisition of Lindex for €867m at peak bull cycle in 2007.

Simultaneously, the group lacked operational discipline. The department stores were in particularly poor shape, with an outdated offering and continuous discount campaigns, leading to Stockmann department stores’ becoming annually unprofitable in 2014. The group as a whole also suffered, as the absence of online channels led to a loss of market share while a high fixed-cost base remained – not least in above market expensive fixed leases and under-priced subleases. Management was near-sighted and only exacerbated issues, for example by selling the loss-making food departments and thereby reducing footfall in the stores overall.

This series of issues came to an end in 2019, when new group CEO, Jari Latvanen, came onboard along with other management team changes. The new executive team has demonstrated decisively better judgement than their predecessors, leading a re-focus on Stockmann Group’s core businesses.

As part of the 2019 improvement agenda, Stockmann Group sold its Russian operations, fashion chain Seppala, the Hobby Hall stores, and its Book House business, along with other non-core subsidiaries. Additionally, some real estate was sold in 2019, partially de-leveraging the balance sheet. Stockmann Group also implemented large operational improvements, with large investments into Stockmann department stores’ and Lindex’s online channels, improved distribution systems, right-sized workforce with reduced headcount, focus on improved customer service with increased touchpoints and benefits to its loyal customer base.

These steps worked well, and Stockmann Group returned to profitability in Q4 2019. Then, as we all know, Covid-19 came…

In March 2020, Stockmann Group’s sales declined by ~50%, with knock-on effects as the first lockdown in Finland coincided with Stockmann department stores’ annual recurring “Crazy Days” campaign. Immediately, management instituted some temporary layoffs, but uncertainty around the future and the cost base was still extremely high.

EXTRINSICALLY DRIVEN RESTRUCTURING
Covid-19 hit the business hard in a very untimely way - although Stockmann Group had been rejuvenated, the de-leveraging was still underway. The Board and management thus applied for a corporate restructuring on April 6th 2020. This was a very prudent measure to safeguard the business and it is worth noting that, at end of March 2020, all covenants were still fulfilled.

On February 1st, 2021, the Helsinki District Court Approved a finalized restructuring plan comprising:

• Class A and B shares combined into one class

• The Sale & Leaseback of department store properties with proceeds used to pay down secured debt

  • Tallinn in 2021 and Riga in 2022 for total €87m

  • Helsinki city centre in 2022 for €400m

• Secured debt holders (€186m banks and €248m noteholders) repaid 100% using proceeds from real estate

• Unsecured creditors (€119m), excluding intra-group creditors, entitled to

  • 80% repayment until 2028 or conversion into 5-year 0.1% fixed rate secured bond

  • 20% optional equitization (or cut) at €0.9106 subscription price per share

• Unsecured intra-group creditors to be repaid in full after everyone else

• Hybrid bond creditors of €108m entitled to 50% repayment through equitization

Subsequently:

•  In June 2021: 79.3m shares were issued at a subscription price of €0.9106 per share, in a directed issue to unsecured creditors and hybrid bondholders

  • Corresponds to €72.2m equitized debt

• In Jul 2022: A 0.1% secured bond was issued

• Through Jan-Jul 2022: 3 directed share issues at same subscription price for total of 1.4m shares

  • Corresponds to €1.3m equitized debt

As such, the restructuring is almost complete.

It is also worth noting that these directed share issues did not wipe out shareholders but diluted them heavily, in particular the first one, and changed the ownership structure significantly (the first directed share issue increased the NOSH from 75.1m to 154.4m).

The only outstanding parts of the restructuring that remain are disputed and conditional debts, primarily related to landlords and subtenants that raised claims when the restructuring made Stockmann sell its real estate. These are expected to be settled over the course of 2023. All undisputed debts have already been settled (per above).

All in, there is still €61.3m outstanding disputed amount that claimants argue for, plus €8.8m undisputed conditional debt. The restructuring administrator rejects the disputed claims and courts have dismissed a large amount of similar disputed claims already.

These disputed and conditional debts, once amounts are decided, will be treated like other unsecured debt per the Restructuring Plan:

• 80% repayment until 2028 or conversion into 5-year 0.1% fixed rate secured bond

• 20% optional equitization at €0.9106 price per share (or cut)

Stockmann Group views these disputed and conditional debts as likely to result in €30.8m settlement and made a provision on the balance sheet for this amount (Q4 2022). This corresponds to 6.8m additional shares (20% equitization at €0.9106) and €25m incremental debt (80% converted into secured bond).

If instead, the max amount of disputed and conditional debt (€61.3m + €8.8m) is assumed to be settled, there would be 15.4m additional shares (20% equitization at €0.9106) and €56m incremental debt (80% converted into secured bond).

Thus, even in the worst case scenario, there is a clear and limited potential fallout from the outstanding disputed and conditional debts. For context: pre-dilution NOSH as of Q4 2022 is 155.9m.

It is worth to make a note of the company’s balance sheet here:

Importantly, the restructuring also saw incremental operational improvements in Stockmann Group.

The group simplified its structure, merging some subsidiaries into ParentCo, while also appointing a new Group CFO (former Lindex CFO), as well as shaking up the Board of Directors with a new Chairman and other new members.
The department stores have undertaken a strategic reformulation with increased focus on online sales, while also improving the offering and adding more premium services. The department stores have increased their focus on data driven decisions and increased tailored communications with customers. As such, Stockmann is positioned towards more full-price sales and serving a loyal customer base. Importantly, old unfavourable leases have been re-negotiated to better terms, changing some to revenue based.

Throughout the restructuring, Lindex continued going strong, partnering with 3rd party online store Zalando and launching a new underwear brand.

All the improvement measures constitute an emphasised focus on growth, profitability and cost discipline, which is working. 2022 saw strong operating performance across the group, not least the department stores, which gained market share in Finland over the year.

Thus, emerging from the restructuring, Stockmann Group is a deleveraged company with Net Cash and a strong competitive positioning with unique brands and loyal customers. The company is now primed for cash profitability following its significant operational improvements and new financial structure.

Upon reflection, the Stockmann Group restructuring has been far from normal, as the company is 160+ years old, has iconic brand names, had assets greater than liabilities going into the restructuring, was cash generative the year before the restructuring and instigated the restructuring for an extrinsic reason: a once-in-a-century pandemic. A typical restructuring is markedly different.

FINANCIALS
Drawing on the above, for valuation purposes Stockmann Group has a net cash position of between €44.3m and €75.8m (excluding lease liabilities), while the corresponding fully diluted NOSH is between 171.3m and 162.6m (there are no in-the-money options outstanding).

Balance sheet lease liabilities under IFRS 16 amount to €554.8m, of which €267m are for Lindex and €288m are for Stockmann department stores. Contrary to IFRS 16, I believe leases should not be capitalized as these cannot be paid off while continuing operations as normal. IFRS 16 accounting also opens up for misrepresentation of leases, as accountants can use too short, finite lives and use too high of a discount rate to value them. For this reason, most valuation metrics used here will use the lease cash outflow into the multiple metric or the DCF calc, giving an EV excluding lease liabilities.

Looking at operating performance (adjusted to reflect only the current lines of business), the group saw revenue contraction in 2019 and 2020, before picking up pace and growing again. Adjusted EBITDA margins (excluding gains on disposal of assets and restructuring costs) have been somewhat stable at 15-19% over the past 4 years, while lease cash outflow also is relatively consistent at 10% of sales.

Capex has historically been at around 2-4% of sales, while 2022 saw the beginning of large investments into Lindex’s distribution system. For the Lindex logistics, the company estimates c.€110m will be invested until 2025, with the bulk done upfront. I estimate run-rate Capex at 3.5% of sales, which is also in line with peers.

Working capital decreased massively during the restructuring, as trade payables ballooned, which is now being normalized. As such, Stockmann Group saw large increases in NWC over 2021 and 2022, but this should be considered extraordinary.

In 2022 Stockmann Group would be FCF positive, were it not for the expansion Capex and NWC normalization, and overall it seems to be positioned for robust cash generation over time.

 
Moreover, it is worth noting that the consolidated group figures hides the Stockmann department stores’ underperformance and Lindex’s overperformance.
Segment reporting per below:

(NB: My guess is that the group overhead is attributable to Stockmann Department Stores)

My takeaways from this are:
1) Stockmann Group should be valued on a Sum-of-the-Parts basis
2) Lindex is likely worth more on a standalone basis, than as part of Stockmann Group

VALUATION CALCULATIONS
To value Stockmann Group I see a combination of publicly listed peer multiples metrics and a DCF as appropriate gauges.

Noting that Stockmann Group comprises two distinct lines of business, two sets of peers, for Stockmann department stores and Lindex, respectively, would be most appropriate.

Stockmann Peers

For Stockmann department stores I see the below Nordic retail groups as reasonable publicly listed peers (there are no other listed Finnish retail chains of size) (per CapIQ and company filings as of March 30th 2023):

• Musti Group, listed in Helsinki

  • Omnichannel pet retailer and service provider present across the Nordics

  • EV of €724m, EV excl. leases €643m

• Tokmanni Group, listed in Helsinki

  • Large Finnish general discount retailer

  • EV of €1,238m, EV excl. leases of €950m

• Puuilo, listed in Helsinki

  • Large chain of discount retail stores across Finland

  • EV of €666m, EV excl. leases of €622m

• Kid , listed in Oslo

  • Pan-Nordic homeware group under brands Kid and Hemtex, own designs and large store footprint

  • EV of €455m, EV excl. lease of €432m

Summarising these peers’ multiples lowest to highest:

• EV incl. leases using LTM EBITDA multiple: 6.6x – 10.1x

• EV excl. leases using LTM EBITDA – Lease Cash Outflow multiple: 9.2x – 13.5x

• EV excl. leases using LTM EBITDA – Lease Cash Outflow – Capex multiple: 11.4x – 21.3x

Lindex Peers

For Lindex I see the below Nordic fashion businesses as reasonable publicly listed peers, as they all have their own-designed brands and brick-and-mortar store footprints (per CapIQ and company filings as of March 30th 2023):

• H&M, listed in Stockholm

  • International fashion and home design group with global store network

  • EV of €26,297m, EV excl. leases of €20,825m

• Fenix Outdoor, listed in Stockholm

  • Outdoor products business with several brands across omnichannel platform

  • EV of €1,177m, EV excl. leases of €1,054m

• Marimekko, listed in Helsinki

  • Home design and fashion brand with global store footprint

  • EV of €427m, EV excl. leases of €395m

Summarising these peers’ multiples lowest to highest:

• EV incl. leases using LTM EBITDA multiple: 7.8x – 9.8x

• EV excl. leases using LTM EBITDA – Lease Cash Outflow multiple: 9.0x – 12.0x

• EV excl. leases using LTM EBITDA – Lease Cash Outflow – Capex multiple: 11.3x – 16.8x

Group Peers & Valuation

The group as a whole can be valued on these two peer groups combined. As such, on a Group level, using metrics for above peers, the below valuation ranges can be ascribed to Stockmann Group:

• EV incl. leases using LTM EBITDA multiple: 6.6x – 10.1x

• EV excl. leases using LTM EBITDA – Lease Cash Outflow multiple: 9.0x – 13.5x

• EV excl. leases using LTM EBITDA – Lease Cash Outflow – Capex multiple: 11.3x – 21.3x

Using the LTM financials per above (with the exception for Capex which I use a Maintenance Capex estimate of 3.5% of sales for), this gives the below valuation ranges for Stockmann Group:

• EV incl. leases using LTM EBITDA multiple, then subtracting lease liabilities: EV excl. leases: €658m – €1,291m

• EV excl. leases using LTM EBITDA – Lease Cash Outflow multiple: EV excl. leases: €762m – €1,145m

• EV excl. leases using LTM EBITDA – Lease Cash Outflow – Capex multiple: EV excl. leases: €566m – €1,071m

Sum-of-the-Parts Valuation

Moreover, as mentioned above, Stockmann Group can be valued on a Sum-of-The-Parts basis, adding the values of Lindex and Stockmann department stores.

NB: segmental lease cash outflow is not reported, but estimated using % share of lease liabilities per division.

On a standalone basis, using above peers and the LTM segment reported figures (with the exception for Capex which I use a Maintenance Capex estimate of 3.5% of sales for), Lindex would be valued at:

• EV incl. leases using LTM EBITDA multiple, then subtracting lease liabilities: EV excl. leases: €1,033m – €1,363m

• EV excl. leases using LTM EBITDA – Lease Cash Outflow multiple: EV excl. leases: €1,076m – €1,430m

• EV excl. leases using LTM EBITDA – Lease Cash Outflow – Capex multiple: EV excl. leases: €1,085m – €1,618m 

Stockmann department stores could also be valued on a standalone basis, but considering the chequered past and large lease cash outflows the stores have, I prefer to be conservative and assume a 0 valuation. Nonetheless, it is likely that Stockmann department stores will improve further, and their weak performance likely does not mean they are worthless, but I want to be very conservative.

Summarizing the group and SOTP multiple-based valuation, Stockmann Group’s EV excluding leases should be in the range of €566m - €1,618m.

DCF Valuation

To cross-check the multiple-based valuations, I have done a deliberately conservative DCF analysis, using conservative projections with more negative assumptions than both management guidance and the (limited) CapIQ broker consensus.
All projections are done 2023 – 2032, thereafter a terminal value is calculated using the Gordon Growth model:

• Revenue: (3)% contraction in 2023E, thereafter 1.0%, 1.5% and then hitting 2.0% in 2026E onwards

• Operating profit of 6.3% in 2023E (vs. 15.8% in 2022A), thereafter incremental steps to 7.6% in 2029E onwards

• D&A constant at (10.5)% of sales

• Taxes assumed at (20)% of EBT per the Finnish statutory rate

  • Ignoring Stockmann Group’s sizeable tax assets

• NWC assumed to increase at 15% of change in sales, but limited to NWC build-up

  • No NWC decreases accreting to FCF

• Capex assumed in line with guidance at €65m in 2023E and €40m 2024E, before hitting run-rate of (3.5)% of sales in 2025E onwards (c.€35-40m)

• Leases assumed per guidance at (7.5)% of sales, corresponding to c.€71-85m

With a discount rate of 10-11% and assuming a perpetual growth rate of 2-3%, this DCF gives an EV excl. leases of €470m - €580m for Stockmann Group.

Valuation Summary

Of all valuation methods, the EV excl. leases range is thus €470m - €1,618m.

Plugging in the worst-case net cash figures mentioned above (max payout for disputed and conditional debts), the below EV-to-Equity bridge summarizes Stockmann’s equity value:

• EV excl. leases range €470m - €1,618m

• Less: reported Gross Debt of €(68)m

• Less: max disputed and conditional debt payout of €(56)m

• Plus: balance sheet cash of €168m

• Equals equity value of €514m - €1,663m

Dividing this by the diluted NOSH under max disputed and conditional debts payout / dilution, the intrinsic value per share is somewhere between €3.00 - €9.71.
Comparing this to the closing price of €2.05 as of March 30th 2023, the worst case valuation, based on deliberately conservative assumptions, still means a 47% upside.
The median valuation method of an €929m EV implies a 177% upside with the same calculation, while the high end of the valuation range implies a 374% upside.

The low-end valuation of €470m EV, but assuming the company’s provision plays out instead of the max disputed and conditional debts payout, offers a 64% upside. The high end of the valuation range implies a 408% upside in this scenario.

From any standpoint Stockmann Group is priced materially below its intrinsic value.

WHY IS THE MARKET MISSING STOCKMANN GROUP?
As my valuation differs markedly from the that of the market, there are a few potential explanations for the mispricing that give me confidence in my thesis.

First and foremost, the stigma of a restructuring could drive public market investors into irrationally undervaluing Stockmann Group. Understandably, the dilutive restructuring has disappointed investors and while the restructuring is practically done, it has severely damaged Stockmann Group’s equity story. The market misunderstands that Stockmann’s issues were extrinsically driven and misses the economic reality of the business. Making sense of the outstanding restructuring items is also complex, and can be missed by the market, driving underpricing.

Moreover, as part of the restructuring, there was a large equity conversion (20% of unsecured debt and 50% of hybrid bond) leading to indiscriminate selling, unrelated to business fundamentals, and a continued overhang.

As 80m+ shares (out of c.156m total) were distributed to creditors since June 2021, the supply / demand dynamics of the Stockmann Group shares have been affected. The credit investors who received shares are not interested in owning stocks and sometimes even forbidden from doing so - they must sell at some point, and there have indeed been large shifts in the ownership base (looking at the company reported ownership statistics archives), which I believe have been holding the price down. For example: NorthWall Capital, a specialized credit investor, still owns ~10%, which I believe they must sell in the mid- to near-term, this potentially creates overhang as the market expects supply to increase, if NorthWall are not already offloading.

Lastly, the small and relatively obscure nature of Stockmann Group’s shares allows the aforementioned issues to persist and, on its own, exacerbates the undervaluation. The company has a market cap of ~€320m, meaning a lot of institutional / sophisticated investors do not look at the share, while the analyst coverage is limited to a few local banks (Inderes, SEB, OP), allowing the market mispricing to continue.

SO HOW WILL THE VALUE BECOME AVAILABLE?
While the market’s mispricing of Stockmann Group can be explained by some typical irrationalities, there are also some clear paths to value realization that back my conviction that this is a lucrative investment case.

Soft Catalysts
The most obvious are soft catalysts: the end of indiscriminate selling and a market re-rating. As of now creditor ownership of equity remains, but this will end and a new, more stable, ownership base will evolve. The market should then be unencumbered to reflect the economic reality of Stockmann Group.

Hard Catalysts
Better yet, there are also some hard catalysts materializing as the only outstanding part of the restructuring, the disputed and conditional debt, is expected to be settled in 2023.

Not only does the end of the restructuring remove outstanding complexity dragging down the stock, meaning the market can appreciate Stockmann Group as a fresh company with net-cash on the balance sheet, it also opens up doors for very tangible value distribution.

During the restructuring, Stockmann Group has been unable to pay dividends or buy back shares, which it can soon do, realizing value for shareholders.

Similarly, Stockmann Group has been unable to sell Lindex (as I understand it, due to a commitment early on in the restructuring process), which it can soon do. Based on the above SOTP valuation, this would unlock at least €1,000m in EV, perhaps more if sold to a synergistic strategic buyer, implying a near 200% upside to the current share price. Importantly, Stockmann Group is currently looking into selling off Lindex. Per the 2022 Financial Statements Bulletin, the company is “evaluating strategic options” and the 2023 Capital Markets Day has been rescheduled due to this (as covered on the Q4 2022 Earnings Call).

In addition to these catalysts, it is also worth highlighting that one of Europe’s largest department store chains recently took a material stake in Stockmann Group. On 12th December 2022, it was announced that JC Switzerland Holding (a subsidiary of Peek & Cloppenburg) had bought 5.02% of Stockmann Group. Peek & Cloppenburg (“P&C”) is a large German department store chain founded in 1900 with 140 stores across 15 countries across Europe (DACH, Nordics, Benelux, Eastern Europe).

P&C previously acquired Danish department store chain Magasin du Nord from Debenhams in 2021, and the company is not in the business of taking public minority positions, which suggests a buyout could materialise. As P&C have pooled votes in a JV with the current largest shareholder, Konstsamfundet (owning ~10%), at least ~15% of all votes would support a buyout. The fact that Northwall (owning ~10%) needs to sell at some point soon, would play well into a take-private deal too.

However, even if there is no buyout, P&C’s investment is a vote of confidence in Stockmann Group by a sophisticated trade buyer and offers potential strategic benefits and increased operational oversight. P&C is the only large strategic shareholder in Stockmann Group and can hold the Board and Management accountable, and likely push for a Lindex sale and/or dividends/buybacks, thus realizing value in one way or another.

The longstanding largest shareholder, Konstsamfundet, is an old, non-profit organization. They have been invested for several decades and did not stop the mismanagement during the early 2010s. As such, P&C’s investment means Stockmann Group is truly better than ever, with increased owner oversight in addition to the operational turnaround. Substantiating this idea, a P&C representative was quoted in Finnish newspaper Hufvudstadsbladet saying “I think it is important for Stockmann to have a retail expert among its shareholders. That is what we want to bring. We want to help drive certain strategic decision through the board.”.

In conclusion, it appears Stockmann Group shares’ intrinsic value is substantially above the market price, and that this unrecognized value will materialize over time.

Catalyst

Soft catalysts:
1. End of creditor sell-off -> market re-rating

Hard catalysts:
1. end of restructuring -> re-rating, dividends or buybacks, sale of Lindex
2. potential buyout by P&C