Marimekko Corporation, Financial Statements Bulletin, 27 February 2019 at 8.30 a.m
FINANCIAL STATEMENTS BULLETIN OF MARIMEKKO CORPORATION, 1 January – 31 December 2018: A successful year – net sales grew by 9 percent and comparable operating profit by 42 percent
This release is a summary of Marimekko’s financial statements bulletin for the January-December period of 2018. The complete bulletin 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 fourth quarter in brief
- Net sales were on a par with the previous year at EUR 29.7 million (Q4/2017: 29.8). Net sales were boosted by growth in retail and wholesale sales in Finland. Retail sales were positively impacted by successful holiday sales; wholesale sales included nonrecurring promotional deliveries. A drag was exerted on the period's net sales by the fact that part of the wholesale deliveries to the Asia-Pacific region took place after the beginning of 2019.
- As expected, operating profit fell short of the comparison period, as most of the earnings for 2018 were generated during the second and third quarters, contrary to the normal situation. Operating profit for the period was EUR 1.2 million (2.4) and comparable operating profit was EUR 1.6 million (2.4). The main reasons for the decline in operating profit were a change in the delivery pattern in the Asia-Pacific region and higher fixed costs than in the comparison period.
2018 in brief
- Net sales grew by 9 percent and were EUR 111.9 million (2017: 102.3). Sales rose in all market areas with the exception of North America, where net sales were on a par with the previous year. Growth came primarily from retail and wholesale sales in Finland and from wholesale sales in the Asia-Pacific region. In Finland, retail sales rose by 10 percent and growth was stronger than the overall trend for the sector. The 25 percent increase in Finnish wholesale sales was mostly due to nonrecurring promotional deliveries.
- Operating profit rose to EUR 17.7 million (8.4) with the capital gain from the sale of the company’s head office. Comparable operating profit was EUR 12.2 million (8.6).
- Growth in sales, particularly in Finland and the Asia-Pacific region, as well as a good relative sales margin, which was partly due to a favourable level of regular-priced sales, contributed to the strong comparable operating profit. A drag was exerted on results by higher fixed costs, especially personnel, marketing and rental expenses. Depreciation was also lower.
The Board of Directors’ proposal for the 2018 dividend and for an additional dividend
- The Board of Directors will propose to the Annual General Meeting that a dividend of EUR 0.60 per share be paid for 2018. The Board will also propose the payment of an additional dividend of EUR 1.25 per share. As announced on 1 November 2018, the decision to propose the payment of an additional dividend was made because the sale of Marimekko’s head office in spring 2018 strengthened the company’s financial position.
- The proposal by the Board of Directors is based on earnings per share (EPS) and takes into consideration the total of the proposed dividends, EUR 1.85 per share.
Financial guidance for 2019
The Marimekko Group’s net sales for 2019 are forecast to be higher than in the previous year and comparable operating profit is estimated to be approximately at the same level as the year before.
Key figures
| (EUR million) | 10–12/2018 | 10–12/2017 | Change, % | 1–12/2018 | 1–12/2017 | Change, % |
| Net sales | 29.7 | 29.8 | 0 | 111.9 | 102.3 | 9 |
| International sales | 11.4 | 13.4 | -15 | 48.3 | 46.6 | 4 |
| % of net sales | 38 | 45 | 43 | 46 | ||
| EBITDA | 1.8 | 3.2 | -44 | 20.2 | 11.7 | 73 |
| Comparable EBITDA | 2.2 | 3.2 | -32 | 14.7 | 11.9 | 23 |
| Operating result | 1.2 | 2.4 | -48 | 17.7 | 8.4 | 112 |
| Comparable operating result | 1.6 | 2.4 | -32 | 12.2 | 8.6 | 42 |
| Operating result margin, % | 4.2 | 8.0 | 15.8 | 8.2 | ||
| Comparable operating result margin, % | 5.4 | 8.0 | 10.9 | 8.4 | ||
| Result for the period | 0.9 | 1.7 | -47 | 13.7 | 5.7 | 142 |
| Earnings per share, EUR | 0.11 | 0.21 | -47 | 1.70 | 0.70 | 142 |
| Cash flow from operating activities | 5.8 | 8.9 | -35 | 12.2 | 9.8 | 25 |
| Return on investment (ROI), % | 47.6 | 21.6 | ||||
| Equity ratio, % | 70.0 | 65.2 | ||||
| Gross investments | 0.2 | 0.3 | -31 | 1.3 | 1.2 | 6 |
| Personnel at the end of the period | 445 | 446 | 0 | |||
| outside Finland | 102 | 122 | -16 | |||
| Brand sales* | 50.5 | 58.0 | -13 | 248.4 | 192.7 | 29 |
| outside Finland | 27.6 | 36.2 | -24 | 167.2 | 118.6 | 41 |
| proportion of international sales, % | 55 | 62 | 67 | 62 | ||
| Number of stores | 153 | 161 | -5 |
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 Financial Statements Bulletin:
"The year 2018 was strong for Marimekko. Our long-term work to build international success continues.
“Our net sales grew by 9 percent and our comparable operating profit by 42 percent. The growth figures for the comparison year were also good, so the past year was a strong demonstration of the effectiveness of the new direction in our collections and our brand. However, we are just starting out on our strategy period extending to 2022, and much work needs to be done as we seek markedly stronger growth and profitability.
“As we forecasted previously, most of our earnings for 2018 were generated during the second and third quarters, which was contrary to the normal situation. The last quarter's net sales were on a par with the previous year, and the period's most important season, holiday sales, performed well. In the Asia-Pacific region, part of the period's wholesale deliveries took place after the start of 2019. This change in the delivery pattern and the fact that a substantial portion of our fixed costs occurred in the final quarter were the main reasons why our comparable operating profit fell short of the same period last year. In the October-December period of 2018, our net sales were EUR 29.7 million (29.8) and our comparable operating profit was EUR 1.6 million (2.4).
“Our net sales for the full year 2018 rose to EUR 111.9 million (102.3) and our operating profit to EUR 17.7 million (8.4) with the capital gain from the sale of our head office in the second quarter. Our comparable operating profit was EUR 12.2 million (8.6). Growth in retail and wholesale sales in Finland as well as increased wholesale sales in the Asia-Pacific region were among the main factors behind the strong result. Growth in wholesale sales in Finland was generated mainly by nonrecurring promotional deliveries. It was also gratifying that our relative sales margin was at a favourable level and regular-priced sales performed well.
“All in all, it was a very eventful year. In our sector, boosting international brand recognition is one of the main prerequisites for success. The limited-edition collaboration collections launched in the early months of the year with the Japanese clothing brand Uniqlo and the cosmetics brand Clinique gave us a lot of international visibility alongside our own marketing actions. We also invested in our store network: the Marimekko flagship stores in Stockholm, Tokyo and Sydney were revamped during the year. The flagship stores play a central role as the most prominent embodiment of our brand in the world.
“In November, we announced that part of the funds obtained from the sale of our head office in the spring would be used for development of strategically important business areas. By this we aim to accelerate growth. In the same connection, we also revised our long-term financial goals.
“Towards the end of the year, we devoted greater efforts to marketing and boosting our brand recognition in China. This year, we have taken the first steps to launch online sales of Marimekko products in WeChat and Tmall. Our aim is to so improve the availability of our products and, together with our local partner, to offer an omnichannel experience to our customers in this market, which is strategically important to us. Our partner is responsible for the operation of the Marimekko stores in China and we ourselves are responsible for online sales. Since online sales are still very much in the early stages, it will incur expenses for us this year. I am convinced that we will gain valuable lessons in the future of digital business, as China is one of the world's most advanced and rapidly developing online marketplaces.
“Personnel are a key asset in building our success and in carrying out our international growth strategy. We reported earlier today that Marimekko's Board of Directors has decided on the terms and conditions as well as schedule of the personnel share issue we are going to arrange in Finland. I think that now, in the early stages of our new strategy period, is a logical time for the personnel share issue. I am pleased with the opportunity this offers Marimekko employees to increase their holdings or to become new owners of our company, thus taking part in building our common future also in the role of shareholders.
“In 2019, we will invest considerably more in growth than in the past year. We will revamp our store network and improve IT systems to underpin our digital business. The new owner of our head office has started renovating the building and enhancing its energy efficiency. We will also modernise our work spaces to increase employee well-being. Another reason for the renovation is to provide visitors to our building with a more impressive experience and to attract new customers. The Marimekko house accommodates our company's head office, design functions and textile printing factory as well as two retail stores and a restaurant under one roof. The building already attracts over 100,000 visitors per year.”
Market outlook and growth targets for 2019
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. Sales in Finland are expected to be roughly on a par with the previous year. Wholesale sales in 2018 were boosted by nonrecurring promotional deliveries; there were promotional deliveries in each quarter and the largest deliveries took place in the second and final quarters. There will be no promotional deliveries of comparable size in 2019.
The Asia-Pacific region is Marimekko's second-largest market and it 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 countries are at an early stage compared with Japan. Japan already has a very comprehensive network of Marimekko stores. Sales growth is supported by developing the operations of existing stores, optimising the product range and increasing online sales. This year, net sales in the Asia-Pacific region are forecast to grow. The company sees increasing demand for its products in this area especially in the longer term.
The key drivers of the company's growth are its own e-commerce and other online sales channels, partner-led retail in Asia, and increasing the sales per square metre of existing stores in Finland and the international markets. The main thrust in new openings is on retailer-owned Marimekko stores and other wholesale channels. The aim is to open approximately 10 new Marimekko stores and shop-in-shops in 2019.
Royalty income is forecast to be roughly on a par with the previous year.
The expenses of marketing operations in 2019 are forecast to be higher than in 2018 (EUR 5.8 million). Total investments are estimated to grow significantly relative to the previous year (EUR 1.3 million). Most of the investments will be used to revamp the store network and the company’s headquarter premises as well as to improve IT systems to underpin digital business. The expenses of the personnel share issue and estimated effects of the long-term bonus system targeted at the company’s Management Group are expected to exert a drag on the company's results. The effects will depend on the trend in the price of the company’s share during the year.
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, and this is expected to be the case in 2019 as well. 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 an impact on results for the whole year.
Further information:
Tiina Alahuhta-Kasko, President and CEO, tel. +358 9 758 71
Elina Anckar, 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 lifestyle 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 2018, brand sales of the products worldwide amounted to EUR 248 million and the company's net sales were EUR 112 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
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