Operating environment

This page contains information on the impacts of the coronavirus epidemic on Kesko’s businesses.

The COVID-19 coronavirus epidemic began to affect our operations significantly from mid-March 2020 onwards. Despite ongoing worldwide efforts to stop the epidemic, we must prepare for the possibility that exceptional circumstances will last for some time, and all our businesses have adapted their operations accordingly.

Key measures taken:

  • Ensuring the safety of customers and personnel
  • Ensuring functioning purchasing and supply chains under all circumstances
  • Growing online sales services fast
  • Postponing development projects, focus on dealing with the situation
  • Securing cash flow:
    • Savings in personnel costs 
    • Cuts to other fixed costs
    • Cutting cash flows from investing activities below €200 million in 2020
    • Efficient management of credit risk and amounts due from customers
  • Ensuring the availability and sufficiency of financing
  • Growth strategy execution continues, but right now our focus is on crisis management 

Read the Half year report 1-6/2020

Positive profit warning on 17.9.2020:
Kesko Corporation issues a positive profit warning thanks to stronger than anticipated sales and improved outlook for the remainder of the year 

Kesko raises its guidance for the 2020 comparable operating profit for its continuing operations. Kesko now estimates that the comparable operating profit for continuing operations will be in the range of €510-570 million in 2020. The guidance upgrade is based on better than anticipated sales development in all divisions, improved cost efficiency, and a more positive outlook for the remainder of the year.

On 17 September 2020, Kesko issued a release concerning a change in the consolidation method of Kesko Senukai and impacts of the change. In the operating profit guidance issued now, Kesko Senukai is treated as a joint venture from July 2020 onwards. This change in classification has an approximately €20 million negative impact on the operating profit guidance. The change in classification does not have an impact on Kesko’s comparable earnings per share or Kesko’s dividend distribution.

Before, the company estimated that the comparable operating profit for continuing operations would be in the range of €430-510 million. In the previous guidance, Kesko Senukai was treated as a subsidiary for the full year 2020.

Guidance upgrade rationale

Retail sales have continued strong in the grocery trade, while the foodservice business has recovered well after the exceptional circumstances of last spring. In the building and technical trade, growth has continued better than anticipated in both B2B trade and B2C trade. At the same time, the company has managed to improve cost efficiency. Expectations for the remainder of the year in the grocery trade and building and technical trade are more positive than before with, for example, household consumption more focused on domestic purchases than previously estimated.

So far, the epidemic situation has remained stable in Kesko’s operating countries. However, concerns over the expansion of the Covid-19 epidemic and general economic weakening remain high. A worsened epidemic situation would have a negative impact on Kesko’s businesses and, for example, Christmas sales. Therefore, the range for the guidance given on comparable operating profit for 2020 is still wide. Read the stock exchange release.

Positive profit warning July 10, 2020

In the second quarter of 2020, net sales for continuing operations totalled approximately €2,815 million (Q2/2019: €2,781.4 million) and the comparable operating profit totalled approximately €155 million (Q2/2019: €122.5 million). Net sales and the comparable operating profit increased especially in the building and technical trade division. In the grocery trade division, net sales and profitability have developed well despite the decrease in sales in the foodservice business. The figures are based on preliminary unaudited information. Kesko will publish its 2020 half year financial report on 23 July 2020.

Guidance upgrade rationale

The profit guidance upgrade is based on better than anticipated net sales development in the building and technical trade division in various operating countries as well as in the grocery trade. Consumer sales have developed better than anticipated during the exceptional circumstances surrounding the epidemic. B2B sales have also continued stronger than anticipated in both building and home improvement stores and Onninen. Retail sales for all the grocery trade chains have developed better than anticipated, compensating for the decrease in sales in the foodservice business.

In addition to the foodservice business, net sales have clearly decreased in the car trade. Adjustment measures carried out have enabled the company to manage the situation and costs in its various business operations under the challenging circumstances.

Although conditions surrounding the coronavirus have improved in Kesko’s operating countries, it is hard to predict the development of the epidemic situation and its economic impact. Therefore, the range for the guidance on comparable operating profit for 2020 is still wide. Read the stock exchange release.

Positive Profit warning on March 18, 2020

Due to covid-19 and global economic uncertainty, we issued a stock exchange release for a profit warning, in which we cancelled the previous net sales guidance and changed our operating profit guidance. Read the stock exchange release.

 

 

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Megatrends affecting trading sector (as published in the Annual Report 2019)

Megatrends

The trading sector is affected by various global megatrends ranging from digitalisation to climate change. By identifying the trends that affect K Group’s operations, we can effectively anticipate future challenges and opportunities and
better respond to them.

Globalisation

  • Intensifying price competition
  • Global supply

 
 
 
 
  

Digital trade and services

  • Growth in international and Finnish online trade
  • Seamless online and mobile customer experience
  • Impactful marketing that addresses individual needs

 

Increasingly individual customer behaviour

  • Customers value convenience and quality
  • Urbanisation
  • Changes in purchase habits, individualisation
  • Customers looking to optimise their lives

Customers hold the power

  • Conscientious consumers seek information as the basis for their choices
  • Peer experiences have a big impact on choices
  • Customers want to affect selections
  • Transparency in pricing, availability and the supply chain
  • Responsibility and smart consumption significant criteria

Sustainability and strong brands as preconditions for success

  • Good corporate governance
  • Responsible operating principles
  • Climate change and circular economy
  • Transparency of purchasing chains
  • Open dialogue with stakeholders
  • Responsible investment
     
     
     

Climate change

  • Sustainable lifestyle: food, living and mobility
  • Renewable energy
  • Circular economy solutions
  • Minimising food waste
     
     
     
     

 

 Read more about opportunities and risks in our operating environment in Annual Report for 2019.

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