Marimekko Corporation, Interim Report, 1 November 2018 at 8.30 a.m.
INTERIM REPORT OF MARIMEKKO CORPORATION, 1 January – 30 September 2018: Net sales grew by 10 percent and comparable operating profit by 44 percent in the third quarter
This release is a summary of Marimekko’s interim report for the January-September 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 third quarter in brief
January-September in brief
Acceleration of profitable growth, improvement of capital efficiency, additional dividend and revised financial goals
Financial guidance for 2018 (as revised on 21 September 2018)
The Marimekko Group’s net sales for 2018 are forecast to be higher than in the previous year; comparable operating profit for 2018 is expected to be higher than in the previous year, amounting at the most to approximately EUR 12 million.
In its half-year financial report of 9 August 2018, the company estimated that the Group's net sales for 2018 would be higher than in the previous year and that comparable operating profit would be at the same level as or higher than in the previous year.
|(EUR million)||7–9/2018||7–9/2017||Change, %||1–9/2018||1–9/2017||Change,%||1–12/2017|
|% of net sales||42||45||45||46||46|
|Comparable operating result||6.3||4.4||44||10.6||6.2||71||8.6|
|Operating result margin, %||20.7||16.2||20.1||8.2||8.2|
|Comparable operating result margin, %||21.2||16.2||12.9||8.6||8.4|
|Result for the period||4.9||3.3||48||12.8||3.9||224||5.7|
|Earnings per share, EUR||0.60||0.41||48||1.58||0.49||224||0.70|
|Cash flow from operating activities||2.8||3.6||-24||6.5||0.9||9.8|
|Return on investment (ROI), %||48.5||18.3||21.6|
|Equity ratio, %||73.3||61.9||65.2|
|Personnel at the end of the period||421||417||1||446|
|proportion of international sales, %||60||60||71||61||62|
|Number of stores||150||166||-10||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:
“The third quarter was exceptionally strong, as expected. Our net sales grew by 10 percent and our comparable operating profit by 44 percent. We can be very pleased with our recent progress, and this is a good basis for continuing our long-term work by which we seek markedly stronger growth than before. Earlier today, we announced decisions made by Marimekko’s Board of Directors regarding acceleration of profitable growth and improvement of capital efficiency.
“In the July-September period of 2018, our net sales rose to EUR 29.8 million (27.2). Growth in retail and wholesale sales in Finland plus a favourable trend in wholesale sales in the Asia-Pacific region were key factors behind the strong quarter, as was the case also in the second quarter. In Finland, our retail sales growth once again outpaced the overall trend in the sector; wholesale sales grew primarily due to nonrecurring promotional deliveries. Our comparable operating profit was EUR 6.3 million (4.4).
“In the January-September period, our net sales grew by 13 percent and growth was seen in all market areas. Our operating profit rose to EUR 16.5 million (6.0) with the capital gain from the sale of our head office in the second quarter. Our comparable operating profit was EUR 10.6 million (6.2). Our recent favourable trend has certainly been contributed to by a general recovery in Finnish retail trade, but I believe that the greatest impact has been from the effectiveness of the new direction in our collections and our brand.
“On 21 September 2018, we revised our estimate of full-year comparable operating profit. At the same juncture, we estimated that this year most of our earnings will, contrary to the normal situation, be generated during the second and third quarters. According to our estimate, more costs than in 2017 will occur in the fourth quarter. We also reported that, during the second half of the year, a somewhat larger part of wholesale sales will be generated in the third quarter.
“We have earlier today announced that Marimekko’s Board of Directors has now completed its evaluation regarding the use of the funds obtained from the sale of our head office. Through the planned actions, we seek to accelerate profitable growth and to improve capital efficiency. The Board of Directors has decided that part of the funds will be used for the development of strategically important business areas. In addition, the Board has decided to propose to the Annual General Meeting to be held in spring 2019 the payment of an additional dividend as well as to revise our long-term financial goals. Today we also announced that we will arrange a share issue directed to our personnel in Finland – the Board will decide on the detailed terms and conditions as well as schedule of the share issue in early 2019.
“One of the main events of the period under review was the reopening at the end of August of the Marimekko flagship store in the popular Omotesando district of Tokyo after a total makeover. Our Sydney flagship store is currently undergoing a revamp, and it will open in a new location around mid-November. Earlier this year we also revamped our flagship store in Stockholm. These investments in the store network are important as the flagship stores play a central role as the embodiment of our brand in the world. In China, we will enhance our investment in marketing and in raising our brand profile. 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. Also, we must not forget the year’s most important season, holiday sales, the success of which in our sector typically has a vital impact on the full-year results.”
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 first half of the year and more than half of the deliveries for the second half-year took place in the third quarter. 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, most the company’s earnings are estimated to be generated during the second and third quarters, contrary to the normal situation. More costs than in 2017 are expected to occur in the final quarter of the year. During the latter half of the year, a somewhat larger part of wholesale sales will be generated in the third 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.
Tiina Alahuhta-Kasko, President and CEO, tel. +358 9 758 71
Elina Anckar, 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 150 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