Source: Marimekko Oyj

HALF-YEAR FINANCIAL REPORT OF MARIMEKKO CORPORATION, 1 January – 30 June 2018: The second quarter was strong; net sales grew by 24 percent and comparable operating profit improved markedly

Marimekko Corporation, Half-year Financial Report, 9 August 2018 at 8.30 a.m.

HALF-YEAR FINANCIAL REPORT OF MARIMEKKO CORPORATION, 1 January – 30 June 2018: The second quarter was strong; net sales grew by 24 percent and comparable operating profit improved markedly

This release is a summary of Marimekko’s half-year financial report for the January-June 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 second quarter in brief

  • Net sales grew by 24 percent to EUR 28.2 million (Q2/2017: 22.8). The growth was generated primarily by retail and wholesale sales in Finland and by wholesale sales in the Asia-Pacific region. In Finland, retail sales growth was partly attributable to a change in the timing of the annual spring sales promotion; wholesale sales rose due to nonrecurring promotion deliveries. About half of the full-year nonrecurring promotional deliveries took place in the second quarter. In the Asia-Pacific region, wholesale sales grew by 32 percent. Part of the growth was due to deliveries for the third quarter being transferred to the period under review.
  • Operating profit grew to EUR 9.1 million (0.7). Operating profit included a EUR 6.0 million nonrecurring taxable capital gain from the sale of the company’s head office. Comparable operating profit was EUR 3.1 million (0.7).
  • Earnings were boosted by growth in net sales. A drag was exerted on results by a decline in relative sales margin, which was mainly due to wholesale sales accounting for a larger share of net sales than in the comparison period.
  • The sale of the head office strengthened the company’s financial position, and in the autumn the Board of Directors will examine various options to use the funds obtained from the transaction.

January-June in brief

  • Net sales grew by 16 percent and were EUR 52.3 million (1–6/2017: 45.3). Sales rose in all market areas. In Finland, retail sales grew by 11 percent and wholesale sales by 27 percent. The growth in wholesale sales came from nonrecurring promotional deliveries; of the full-year promotional deliveries, part took place in the first quarter and roughly half were in the second quarter. In the Asia-Pacific region, wholesale sales rose by 22 percent. Part of the growth was due to deliveries for the third quarter being transferred to the preceding quarter.
  • Operating profit improved to EUR 10.3 million (1.6) with the capital gain from the sale of the company’s head office. Comparable operating profit was EUR 4.3 million (1.8).
  • Operating profit was boosted by growth in sales, particularly in Finland and the Asia-Pacific region. A drag was exerted on results by a decline in relative sales margin, which was mainly due to wholesale sales accounting for a larger share of net sales than in the comparison period. Fixed costs were also higher and depreciation lower than in the comparison period.

Financial guidance for 2018 (specified)

Marimekko specifies its net sales estimate for 2018: net sales are forecast to be higher than in the previous year. The estimate of comparable operating profit remains unchanged.

The specified estimate in full is as follows: the Marimekko Group’s net sales for 2018 are forecast to be higher than in the previous year and comparable operating profit is forecast to be at the same level as or higher than in the previous year.

In its interim report of 9 May 2018, the company estimated that the Group’s net sales and comparable operating profit for 2018 would be at the same level as or higher than in the previous year.

Key figures

(EUR million) 4-6/
2018
4-6/
2017
Change,
%
1-6/
2018
1-6/
2017
Change,
%
1-12/
2017
Net sales28.222.82452.345.316102.3
International sales12.110.41724.221.01546.6
  % of net sales4345 4646 46
EBITDA9.81.5 11.73.3 11.7
Comparable EBITDA3.71.51425.73.56111.9
Operating result9.10.7 10.31.6 8.4
Comparable operating result3.10.7 4.31.81368.6
Operating result margin, %32.43.1 19.73.5 8.2
Comparable operating result margin, %11.13.1 8.24.0 8.4
Result for the period7.30.1 7.90.7 5.7
Earnings per share, EUR0.900.01 0.980.08 0.70
Cash flow from operating activities5.6-1.6 3.7-2.7 9.8
Return on investment (ROI), %   45.917.4 21.6
Equity ratio, %   68.954.0 65.2
Gross investments0.40.400.80.7151.2
Personnel at the end of the period   4564521446
  outside Finland   104109-5122
Brand sales*85.540.9109143.085.667192.7
  outside Finland65.424.6166106.553.1101118.6
  proportion of international sales, %7660 74 62 62
Number of stores   156163-4161

The change percentages in the table were calculated on exact figures before the amounts were rounded to millions of euros.
Reconciliation of key figures to IFRS can be found in the table section of this half-year financial report.

* 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:

“Our net sales grew by 24 percent and our international sales by 17 percent in the second quarter of 2018. Our comparable operating profit improved markedly. I think we can be quite pleased with the positive trend in our net sales, which was also partly strengthened by timing-related factors.  

“In the April-June period of 2018, our net sales rose to EUR 28.2 million (22.8). Growth in retail and wholesale sales in Finland and a favourable trend in wholesale sales in the Asia-Pacific region were key factors behind the strong quarter. Our operating profit grew to EUR 9.1 million (0.7), which included a EUR 6.0 million nonrecurring taxable capital gain from the sale of our head office. Our comparable operating profit was EUR 3.1 million (0.7). We reported in April that we had sold our head office to a fund of OP Financial Group. As a result of this transaction, our expenses will grow by roughly EUR 1 million and depreciation will decline by about EUR 0.5 million annually. The sale of the head office strengthened our financial position, and in the autumn the Board of Directors will examine various options to use the funds obtained from the transaction.

“In the January-June period of 2018, our net sales grew by 16 percent and our operating profit rose to EUR 10.3 million (1.6) with the capital gain from the sale of our head office. Our comparable operating profit was EUR 4.3 million (1.8). All in all, the first half of the year was strong and our net sales grew in all market areas. In Finland, the general recovery in retailing continued. Our retail sales grew by 11 percent, and I think it is excellent that this growth was faster than the overall trend in the sector. Our wholesale sales in Finland were positively affected by nonrecurring promotional deliveries. Of the full-year promotional deliveries, roughly half took place in the second quarter and the remainder is spread fairly evenly throughout the rest of the year. Wholesale sales in the Asia-Pacific region also showed gratifying growth. Part of the growth was due to the fact that deliveries for the third quarter were transferred to the preceding quarter.

“In the first half of the year, signs were visible that the new direction for our collections and our brand was working well. This encourages us to continue the long-term work by which we seek clearly stronger growth than before. Our core objective is for our products to appeal to a wider customer base. The key drivers of our growth are e-commerce, partner-led retail in Asia, and boosting sales per square metre in Marimekko stores. I am pleased that we have taken steps in the right direction in all these areas. The worldwide launch of the limited-edition collaboration collections with the clothing brand Uniqlo and the cosmetics brand Clinique has this year increased our international visibility and brand sales to an exceptional degree.

“Towards the end of the year, we will enhance our own investment in marketing and raising our brand profile in China. Our aim is to start online selling of Marimekko products so that we can, together with our local partner, offer our customers an omnichannel experience in this market as well. For this reason, we set up a subsidiary in China in July. China is one of the world’s most advanced and rapidly developing online marketplaces. Launching online sales there will give us a real vantage point and provide valuable lessons for all our online operations in the future development of digital business.”

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 are positively impacted by nonrecurring promotional deliveries; about half of the deliveries took place 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. In 2018, net sales and earnings for the second quarter were to some extent boosted by timing-related factors. Sales growth in Finland was partly attributable to a change in the timing of the annual spring sales promotion, in addition to nonrecurring promotional deliveries, and part of the growth in wholesale sales in the Asia-Pacific region was due to deliveries for the third quarter being transferred to the preceding quarter. 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.

Further information:

Tiina Alahuhta-Kasko, President and CEO, tel. +358 9 758 71
Elina Aalto, CFO, tel. +358 9 758 7261

MARIMEKKO CORPORATION
Corporate Communications

Piia Kumpulainen
Tel. +358 9 758 7293
piia.kumpulainen@marimekko.com

DISTRIBUTION:
Nasdaq Helsinki Ltd
Key media

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

Attachment

Attachments: