Translation: Original published in Finnish on 1/22/2025 at 7:28 am EET. At the end of 2024, we expected Lindex to provide solutions to both the final restructuring dispute and the strategic review of the department store business. However, neither has seen substantial progress, and there is currently no clear timeframe for when something significant will happen. On the other hand, there was no profit warning, as we had expected, suggesting that Q4 performance may have been better than expected. This year, we expect a small improvement in results. This year will also see the opening of a new logistics center, which is important for the Lindex division. Last restructuring dispute taken to the Court of Appeal Lindex has only one disputed debt remaining from the restructuring. In this context, the District Court decided in November to uphold an earlier arbitration decision which ordered Lindex to pay a total of 19 MEUR to LähiTapiola for the termination of the lease. Of this amount, just over 3 MEUR has already been paid and the remaining 16 MEUR has been recorded as a provision in Lindex's results but has not yet been paid. However, the payment is factored into our forecasts. Contrary to our expectations, Lindex appealed this decision to the Court of Appeal at the turn of the year. We expect a decision by the Court of Appeals to take at least until the end of this year and possibly into 2026. Lindex is still trying to reach a negotiated settlement with LähiTapiola, but we would have thought it prudent for the company to pay the agreed amount and stop the restructuring. As a settlement solution, we believe that an arrangement could be envisaged whereby, for example, 16 MEUR would be deposited in an escrow account to await the conclusion of the litigation, but the restructuring could still be completed earlier. We do not believe that LähiTapiola will agree to less than the 19 MEUR awarded by the Arbitral Tribunal and confirmed by the District Court and it would be a waste of time for Lindex to negotiate. Strategic review extended to this year The company announced back in September 2023  that it would launch a strategic assessment of its department store business, the Stockmann division. In practice, we believe the review means that the process of selling department stores is in progress. The results of this were originally promised to be announced in 2024, but in December the company announced that the report would be delayed and the new deadline would be the end of H1'25. The company has not publicly disclosed any of the steps of the assessment. The timing may be partly related to the above dispute, i.e., Lindex may want to wait until the end of the restructuring process is in sight before announcing the results of the strategic assessment, although the company has not said so directly. If this is the case, we find it all the more remarkable that the company was not satisfied with the latest court decision, which would have allowed the restructuring to be concluded. In addition to the restructuring timeline, the main question is likely to be whether Lindex can find a buyer/taker for the department stores on terms suitable for Lindex. With both the strategic review and the restructuring dispute dragging on, we are not convinced at this point that the current timeline will even hold, but we still believe that some solutions will have to be found during the course of this year. We believe that Lindex is looking to divest the department store business in one way or another, which we think would be very supportive for the stock. Q4 may have been better than expected, we expect earnings growth in 2025 Lindex has guided for an adjusted EBIT of 70-80 MEUR in 2024. After a weak Q3, we consider this to be too optimistic and our forecast is 68 MEUR for the year and 29 MEUR for Q4. However, the December figures for the Swedish clothing market were good and the entire fourth quarter for the Swedish market was roughly in line with our expectations. Since the company has not yet issued a profit warning, it is starting to look possible or even likely that the company will meet its guidance, which would mean a slightly better-than-expected Q4 result. For this year, we expect an adjusted EBIT of 75 MEUR, which would be an improvement compared to 2024, unless the company surprises with a significantly positive Q4. However, the level is slightly lower than 2022-23 results (80 MEUR). During 2025, Lindex will introduce the new logistics centers of the Lindex division and close the old ones. According to the company, this will result in savings of 10 MEUR (at EBITDA level, i.e., excluding the impact of increasing depreciation) from 2026 onwards.  Lindex announced late last year that the center would be operational in November. Commissioning/ramp-up is scheduled for H1'25. If it goes well, we think we can start to see savings towards the end of the 2025. Increased capacity, particularly in e-commerce delivery, will also provide Lindex with better growth opportunities from 2026 onwards.

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