Marimekko Corporation, Half-year Financial Report, 15 August 2019 at 8.30 a.m.
HALF-YEAR FINANCIAL REPORT OF MARIMEKKO CORPORATION, 1 January–30 June 2019: Net sales grew by 3 percent and comparable operating profit improved by 18 percent in Q2
This release is a summary of Marimekko’s half-year financial report for the January-June period of 2019. 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 rose by 3 percent to EUR 29.1 million (Q2/2018: 28.2). Growth in net sales was generated primarily by retail sales in Finland and wholesale sales in EMEA. Finnish wholesale sales declined due to the fact that there were no nonrecurring promotional deliveries of corresponding size to those that took place in the comparison period.
- Operating profit was EUR 3.7 million (9.1). Operating profit for the comparison period included a nonrecurring taxable capital gain of EUR 6.0 million on the sale of the company’s head office. Comparable operating profit rose by 18 percent to EUR 3.7 million (3.1).
- Earnings were boosted by improved relative sales margin and sales growth. More moderate discount promotions, product portfolio optimisation and an increase in the share of retail sales of net sales contributed to the improvement in relative sales margin. Higher fixed costs had a weakening impact on results.
January-June in brief
- Net sales rose by 8 percent to EUR 56.3 million (1–6/2018: 52.3). Sales grew in all market areas except North America. Growth came primarily from retail sales in Finland and wholesale sales in EMEA and the Asia-Pacific region. Finnish wholesale sales declined due to the fact that there were no nonrecurring promotional deliveries of corresponding size to those that took place in the comparison period.
- Operating profit was EUR 6.3 million (10.3). Operating profit for the comparison period included a nonrecurring taxable capital gain of EUR 6.0 million on the sale of the company’s head office. Comparable operating profit rose by 47 percent to EUR 6.3 million (4.3). In 2018, most of the company’s earnings were generated during the second and third quarters of the year, contrary to the normal situation.
- Operating profit was boosted by sales growth and improved relative sales margin. Higher fixed costs had a weakening impact on results.
Financial guidance for 2019 (as revised on 22 July 2019)
The Marimekko Group's net sales for 2019 are forecast to be higher than in the previous year and comparable operating profit is also expected to be higher than in the previous year, amounting at the most to approximately EUR 15 million.
In its interim report of 16 May 2019, the company estimated that the Group’s net sales for 2019 would be higher than in the previous year and that comparable operating profit would be approximately at the same level as the year before.
Key figures
(EUR million) | 4–6/ 2019 | 4–6/ 2018 | Change, % | 1–6/ 2019 | 1–6/ 2018 | Change, % | 1–12/ 2018 |
| Net sales | 29.1 | 28.2 | 3 | 56.3 | 52.3 | 8 | 111.9 |
| International sales | 12.4 | 12.1 | 2 | 26.7 | 24.2 | 10 | 48.3 |
| % of net sales | 42 | 43 | 47 | 46 | 43 | ||
| EBITDA | 6.8 | 9.8 | -30 | 12.5 | 11.7 | 7 | 20.2 |
| Comparable EBITDA | 6.8 | 3.7 | 83 | 12.5 | 5.7 | 121 | 14.7 |
| Operating profit | 3.7 | 9.1 | -60 | 6.3 | 10.3 | -39 | 17.7 |
| Comparable operating profit | 3.7 | 3.1 | 18 | 6.3 | 4.3 | 47 | 12.2 |
| Operating profit margin, % | 12.7 | 32.4 | 11.2 | 19.7 | 15.8 | ||
| Comparable operating profit margin, % | 12.7 | 11.1 | 11.2 | 8.2 | 10.9 | ||
| Result for the period | 2.6 | 7.3 | -65 | 4.5 | 7.9 | -43 | 13.7 |
| Earnings per share, EUR | 0.32 | 0.90 | -65 | 0.56 | 0.98 | -43 | 1.70 |
| Comparable earnings per share, EUR* | 0.32 | 0.31 | 4 | 0.56 | 0.38 | 45 | 1.15 |
| Cash flow from operating activities | 7.2 | 5.6 | 30 | 10.2 | 3.7 | 177 | 12.2 |
| Return on investment (ROI), % | 26.3 | 45.9 | 47.6 | ||||
| Equity ratio, % | 35.5 | 68.9 | 70.0 | ||||
| Gross investments | 0.4 | 0.4 | 1 | 0.9 | 0.8 | 16 | 1.3 |
| Personnel at the end of the period | 453 | 456 | -1 | 445 | |||
| outside Finland | 99 | 104 | -5 | 102 | |||
| Brand sales** | 52.9 | 85.5 | -38 | 112.5 | 143.0 | -21 | 248.4 |
| outside Finland | 31.9 | 65.4 | -51 | 71.9 | 106.5 | -32 | 167.2 |
| proportion of international sales, % | 60 | 76 | 64 | 74 | 67 | ||
| Number of stores | 147 | 156 | -6 | 153 |
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.
IFRS 16 had an impact on the change in comparable EBITDA, cash flow from operating activities, and equity ratio. The figures for gross investments do not include the impact of IFRS 16.
Brand sales for the comparison period were boosted by sales of licensed products available worldwide for a limited time.
* Taking account of similar items as in comparable operating profit. Tax effect included.
** 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 growth in Finnish retail sales seen earlier in the year continued in the second quarter, supporting the overall trend in net sales. Our Finnish wholesale figures showed a year-on-year decline due to the absence of the significant nonrecurring promotional deliveries made in the comparison period. Comparable operating profit increased thanks to a stronger relative sales margin.
“In the April-June period of 2019, our net sales grew by 3 percent to EUR 29.1 million (28.2). Sales in Finland increased by 4 percent, boosted by 12 percent growth in retail sales. This growth was supported by our annual springtime promotion, which was very successful this year. At the same time, domestic wholesale sales fell by 18 percent. The reason for the decline was that, in the comparison period in 2018, our wholesale figure for Finland was favourably affected by nonrecurring promotional deliveries, which did not take place on a similar scale this year. International sales grew by 2 percent, with growth achieved particularly in wholesale in EMEA, while the wholesale figures for North America decreased year-on-year. Our comparable operating profit grew to EUR 3.7 million (3.1) due, in particular, to a stronger relative sales margin. More moderate discount promotions, product portfolio optimisation and an increase in the share of retail sales of net sales contributed to the improvement in sales margin.
“Our net sales in the January-June period of 2019 rose by 8 percent to EUR 56.3 million (52.3). Growth was achieved in all market areas except North America. International sales grew by 10 percent. Operating profit for the corresponding period in 2018 included a nonrecurring taxable capital gain of EUR 6.0 million on the sale of our head office in the second quarter. This meant that our operating profit for the January-June period showed a year-on-year decline, but our comparable operating profit improved by 47 percent and amounted to EUR 6.3 million (4.3). It is also worth noting that, in 2018, most of our earnings accrued in the second and third quarters, which represented a departure from the usual pattern. All in all, I feel that we can be satisfied with our performance in the first half of 2019.
“On 22 July 2019, we raised our estimate of the comparable operating profit for the full year. The adjustment was mainly due to higher-than-estimated anticipated licensing income in the Asia-Pacific region.
“With regard to the remainder of 2019, it is good to note that, in 2018, our domestic wholesale sales were boosted by nonrecurring promotional deliveries; this year the total value of promotional deliveries will be lower than last year, and the major deliveries will occur in the second half-year. We also estimate that more expenses will be recognised in the latter half of the year than in 2018. As we have previously indicated, our investments in growth are substantially higher this year than last: we are revamping our store network and our head office as well as improving information systems to strengthen our digital business. This represents the continuation of our long-term commitment to building Marimekko into an even more appealing phenomenon internationally and pursuing our primary goals of reaching a broader customer base and achieving stronger growth and profitability.
“In May, we published our sustainability review for 2018. Sustainability is one of the most transformative megatrends affecting our industry and we believe that, in the future, customers around the world will increasingly incorporate the sustainability perspective into their buying decisions. Marimekko’s operations and design philosophy have always been based on a sustainable approach: we want to provide our customers with timeless, practical and durable products that bring them long-lasting joy and that they will not want to throw away. Going forward, we intend to focus even more on extending the life cycle of our products while continuing our efforts to develop the sustainability of our supply chain and reduce environmental impacts.”
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 total value of promotional deliveries will be lower than last year, and the major deliveries will occur in the latter half of the year.
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.
Marimekko has become aware of cases of grey exports and has taken due action. The control of the cases may have a weakening impact on the company’s sales and earnings.
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.
Anticipated royalty income in 2019 is expected to be higher than estimated and to exceed the figure for the previous year.
More costs than in 2018 are expected to occur in the remaining half of the year. The expenses of marketing operations for the full year 2019 are forecast to be higher than in 2018 (EUR 6.3 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.
* The classification method for marketing expenses has changed in 2019; to maintain comparability, the figures for 2018 have been restated accordingly.
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
Asta Halme
Tel. +358 9 758 7233
asta.halme@marimekko.com
DISTRIBUTION:
Nasdaq Helsinki Ltd
Key media
Marimekko on suomalainen lifestyle-designyritys, joka tunnetaan ennen kaikkea omaleimaisista kuvioista ja väreistä. Yhtiön tuotevalikoimaan kuuluu korkealuokkaisia vaatteita, laukkuja ja asusteita sekä kodintavaroita sisustustekstiileistä astioihin. Kun Marimekko vuonna 1951 perustettiin, sen ennennäkemättömät painokankaat antoivat sille vahvan ja ainutlaatuisen identiteetin. Marimekko-tuotteita myydään noin 40 maassa. Vuonna 2018 tuotteiden brändimyynti oli 248 miljoonaa euroa ja yhtiön liikevaihto 112 miljoonaa euroa. Marimekko-myymälöitä on noin 150 eri puolilla maailmaa. Keskeisiä markkinoita ovat Pohjois-Eurooppa, Pohjois-Amerikka ja Aasian-Tyynenmeren alue. Konsernin palveluksessa on noin 450 henkeä. Yhtiön osake noteerataan Nasdaq Helsinki Oy:ssä. www.marimekko.com
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