Marimekko Corporation, Interim Report, 9 May 2018 at 8.30 a.m.
INTERIM REPORT OF MARIMEKKO CORPORATION, 1 January – 31 March 2018: Both net sales and earnings improved
This release is a summary of Marimekko’s interim report for the January-March period of 2018. The complete report is attached to this release as a pdf file and it is also available on the company’s website at company.marimekko.com under Releases & publications.
The first quarter in brief
Financial guidance for 2018
The Marimekko Group’s net sales and comparable operating profit for 2018 are forecast to be at the same level as or higher than in the previous year.
|(EUR million)||1-3/2018||1-3/2017||Change, %||1-12/2017|
|% of net sales||51||47||46|
|Comparable operating result||1.2||1.1||3||8.6|
|Operating result margin, %||4.8||3.9||8.2|
|Comparable operating result margin, %||4.8||5.0||8.4|
|Result for the period||0.6||0.6||11||5.7|
|Earnings per share, EUR||0.08||0.07||11||0.70|
|Cash flow from operating activities||-1.9||-1.1||64||9.8|
|Return on investment (ROI), %||20.9||20.0||21.6|
|Equity ratio, %||66.9||62.5||65.2|
|Personnel at the end of the period||416||414||0||446|
|proportion of international sales, %||71||64||62|
|Number of stores||158||160||-1||161|
The change percentages in the table were calculated on exact figures before the amounts were rounded to millions of euros.
* Brand sales are given as an alternative non-IFRS key figure. Brand sales, consisting of estimated sales of Marimekko products at consumer prices, are calculated by adding together the company's own retail net sales and the estimated retail value of Marimekko products sold by other retailers. The estimate, based on Marimekko’s realised wholesale sales and royalty income, is unofficial and does not include VAT. The key figure is not audited.
Tiina Alahuhta-Kasko, President and CEO, in conjunction with the report:
"In the first quarter of 2018, our net sales grew by 7 percent and our international sales by 14 percent, mainly thanks to wholesale sales and royalties in the Asia-Pacific region.
“In the January-March period of 2018, our operating profit grew to EUR 1.2 million (0.9). The result was boosted by growth in net sales, which was generated primarily by wholesale sales in Finland as well as wholesale sales and royalties in the Asia-Pacific region. The growth in Finnish wholesale sales was accounted for by nonrecurring promotional deliveries. Retail sales declined in Finland, which was due to a change in the timing of our annual spring sales promotion. This year, the promotion took place entirely within the second quarter, whereas it was held last year at the turn of March and April. A drag was exerted on results by a decline in relative sales margin; this was mainly due to wholesale sales accounting for a larger share of net sales than in the comparison period.
“The present year started in style. The period under review saw the worldwide launch of two limited-edition collaboration collections, one of which was created together with the Japanese clothing brand Uniqlo and the other with the cosmetics brand Clinique. Both are renowned and prestigious global operators, and partnerships of this kind are particularly valuable for us as they enable us to raise our international profile and to reach new target groups. The exceptionally broad international visibility conferred by these brand collaborations was complemented by the positive reception we received at Paris Fashion Week in March.
“In the past few years, we have focused in particular on improving our profitability and our international competitiveness. In the current strategy period 2018–2022, we are continuing our long-term work and seeking markedly stronger growth than before. Expanding the customer base, enhancing operational efficiency and utilising the new opportunities afforded by digitisation play a central role in this work. The key drivers of our growth are e-commerce, partner-led retail in Asia, and boosting sales per square metre in Marimekko stores. It is gratifying that in the first quarter of 2018, we are already able to report positive news about the trend in our international sales, particularly in the Asia-Pacific region.
“After the end of the period under review, we announced that we have sold our head office building in the Herttoniemi district of Helsinki to a fund of OP Financial Group. At the same juncture, we signed a long-term lease and we will continue to operate in our current premises. We are pleased with this arrangement as the sale and leaseback of the head office building increases our financial flexibility and provides us with the opportunity to focus fully on building growth in the years ahead. The cash and debt free selling price of the building was EUR 10.4 million. We will book a nonrecurring taxable capital gain on this transaction in the amount of roughly EUR 6 million for the second quarter of 2018; the estimated cash flow impact before taxes will be about EUR 9 million. OP has also pledged to invest in renovating the building. As a result of the transaction, our expenses are forecast to grow by roughly EUR 1 million and depreciation is estimated to decline by about EUR 0.5 million annually."
Market outlook and growth targets for 2018
Uncertainty in the global economy is forecast to continue, partly because of the unpredictability of the political situation. Consumer demand forecasts vary among Marimekko’s different market areas.
Finland, Marimekko’s important domestic market, represents about half of the company’s net sales. Growth in retail trade is forecast to be at a fairly good level. Sales in 2018 will be impacted positively by nonrecurring promotional deliveries; about half of the deliveries are due in the second quarter and the remainder is fairly evenly distributed over the other quarters of the year. In 2017 there were no similarly large deliveries. Marimekko’s sales in Finland are expected to grow in 2018.
The Asia-Pacific region, Marimekko's second-biggest market, plays a significant part in the company's internationalisation. Japan is clearly the most important country in this region to Marimekko; the other countries' combined share of the company's net sales is still relatively small, as operations in these markets are in fairly early stages. Japan already has a very comprehensive network of Marimekko stores, and new ones are being opened at a rate of a few stores per year. Sales are supported by enhancing the operations of stores and by optimising the product range. Sales in the Asia-Pacific region this year are forecast to grow. The company sees increasing demand for its products in this area especially in the longer term.
In 2018, the main thrust in expansion remains on openings of retailer-owned Marimekko stores, and continuing growth is expected in the company’s own e-commerce and other online sales channels. The aim is to open around 10–15 new Marimekko stores and shop-in-shops. The company will continue the enhancement of the operations of Marimekko stores opened in recent years.
Royalty income is forecast to be roughly on a par with the previous year.
The expenses of marketing operations in 2018 are forecast to be higher than in 2017 (EUR 4.5 million). The total investments are estimated to grow relative to the previous year (EUR 1.2 million).
Due to the seasonal nature of Marimekko's business, the major portion of the company's net sales and earnings are traditionally generated during the last two quarters of the year. The share of holiday sales in particular of the company’s net sales for the last quarter is considerable and the outcome of the holiday season has a significant impact on results for the whole year.
Tiina Alahuhta-Kasko, President and CEO, tel. +358 9 758 71
Elina Aalto, CFO, tel. +358 9 758 7261
Tel. +358 9 758 7293
Nasdaq Helsinki Ltd
Marimekko is a Finnish design company renowned for its original prints and colours. The company’s product portfolio includes high-quality clothing, bags and accessories as well as home décor items ranging from textiles to tableware. When Marimekko was founded in 1951, its unparalleled printed fabrics gave it a strong and unique identity. Marimekko products are sold in about 40 countries. In 2017, brand sales of the products worldwide amounted to EUR 193 million and the company's net sales were EUR 102 million. Roughly 160 Marimekko stores serve customers around the globe. The key markets are Northern Europe, North America and the Asia-Pacific region. The Group employs about 450 people. The company’s share is quoted on Nasdaq Helsinki Ltd. www.marimekko.com