Puuilo accelerates growth to a first ever 100 M€ quarter
Puuilo reported a very strong Q2/2023 with the first ever quarter of over 100 M€ in revenue and Like-for-Like growth accelerating to 8,1 %. This goes against the sluggish overall retail market in Finland. Alongside the robust growth, Puuilo was able to improve both Gross and Profit margins. Gross margins grew by 0,7%-points, whereas profit margin grew by 0,5%-points. A really robust result when considering both the growth rate of the company
The company reported that customer numbers grew more than the revenue. This indicates that customers buy slightly less than previously. However, growth in customer numbers is always a healthy sign. It is easier to turn the increasing customer numbers into higher sales than to get more money from the decreasing customer base.
Inventory levels for Puuilo have also gone down, helping to improve the free cash flow position even more.
Online representing a missed opportunity
Online is something that the discount sector traditionally does not do at all. In the short term, that is understandable as there are no clear benchmarks for profitable discount online concepts. It is more about thinking about online from a fresh perspective without the mental burdens of the physical world.
Online does provide ample opportunities for discount retailers also. It is more about finding the right model to operate. Additionally, brick-and-mortar retailers need to understand the customer and product groups where online would reinforce growth instead of cannibalizing the stores.
Strong growth runway - an opportunity and a threat
However, Puuilo has such a long growth runway in Finland ahead in opening new stores that there is no big pressure to look for growth from other areas.
Puuilo is in such a strong place currently that possibly the biggest threat for the company is the company itself.
Puuilo has been able to carve a niche between the other discount operators where it is different enough from Tokmanni, Motonet, and others. As the growth continues strong, there is always a lurking threat that the company becomes complacent or greedy. This often leads to cutting corners in operations, cutting costs from the wrong places, or giving into the pressures of ever-faster growth.
The ”at least 3-4 new stores” (5 new stores since Q2/2022) that Puuilo plans to open yearly is enough to continue the rapid growth and maintain the quality of locations. It is all too often when fast-growing companies from Starbucks to Tesco realize that they have grown at the expense of quality locations and need to start closing down recently opened locations.
All-in-all, Puuilo seems to be managed well and is in a good place with plenty of room to grow and open new stores. With 39 stores, Puuilo is far behind Tokmanni, which operates almost 200 stores. Tokmanni also indicates the future challenge that Puuilo will eventually face: where to go after the growth in Finland is saturated? Tokmanni’s bold move to go into Sweden is hopefully encouraging for Puuilo.
