Finland Kesko Sells Furniture Business

Daniel Johansson (Retail Analyst)
21 June 2017

Kesko is to sell its furniture subsidiary Indoor Group Oy, which operates the banners Asko and Sotka in Finland and Estonia. There are three buyers; a company owned by Sievi Capital Oyj; three franchising entrepreneurs from the Sotka chain; and Etera Mutual Pension Insurance Company. The debt-free selling price is EUR67mn.

Kesko’s CEO, Mikko Helander explained that the divestment follows the retailer’s strategy to focus on the Finnish grocery market, DIY and the car trade going forward.

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Daniel Johansson (Retail Analyst)
Daniel Johansson (Retail Analyst)

Opinion Growth Lies Elsewhere

21 June 2017

Kesko has indeed been busy slimming down its organisation recently. After selling off its department and electronics stores in 2015; its agriculture division, parts of the machinery trade and the Russian grocery subsidiary this year; the furniture business is now the next to go.

Even if Asko and Sotka recorded turnover growth in 2016 to EUR241.8mn the banners offered little in the way of synergies with the rest of the business since the sale of the department stores and with the hypermarkets increasingly focusing on groceries. It is evident that the retailer sees more potential to grow in its core categories and is on a mission to free up resources to support this strategy. This becomes evident when considering recent moves such as the acquisition of minimarket specialist Suomen Lähikauppa; the planned drugstore joint venture with Oriola; and the forecourt store co-operation with Neste.

We have seen its main competitor S Group doing the same by divesting its Latvian and Lithuanian grocery operations. A real clash of the titans, preparing for a Finnish economic turnaround is clearly in the making. Even so it should be said that S Group has focused its efforts on lowering prices recently, with impressive organic growth to show for it in 2016, as evidenced by LZ Retailytics numbers.

Given CEO Helander’s statement, it’s likely Kesko is also reconsidering the continuation of its sports and footwear chains. Both businesses have basically stood still in recent years, although we should remember that they present stronger synergies with the retailer’s hypermarkets than other recently off-loaded divisions.

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