Finland’s Kesko posts strong results as retail sector recovers


HELSINKI, Aug 3 (Reuters) – Finland’s second-largest retailer Kesko Oyj reported higher than expected quarterly profit as the economy shows signs of recovery and tough competition in the country’s grocery market starts to ease.

Following years of stagnation, the Finnish economy grew 0.6 percent in the first quarter from the previous three months and that has allowed retailers to pull back from a price war.

Kesko’s core operating profit rose to 79.1 million euros ($88.7 million) in the three months to the end of June from 76.4 million a year earlier, ahead of market consensus of 76.8 million euros in a Reuters poll. Shares in Kesko rose almost 6 percent to 41.87 euros by 0800 GMT.

Finland’s retail sector is highly concentrated, with market leader S Group having a grocery market share of about 46 percent in 2015 while Kesko had around a third.

Profit at the grocery division rose slightly from a year earlier, suprising analysts who had on average expected a 14 percent drop.

“The competitive situation has eased up somewhat and consumers are a bit more positive. Kesko has also managed to push some price pressure down to the value chain,” said Sauli Vilen, analyst at Inderes Equity Research, with ‘reduce’ rating on the stock.

“Investors have been pessimistic on the grocery business, but this report shows that (Kesko’s grocery) margin is recovering. The market estimates will be lifted,” Vilen said. ($1 = 0.8923 euros) (Reporting by Jussi Rosendahl; Editing by Keith Weir)

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