Marimekko Corporation, Financial Statements Bulletin, 13 February 2020 at 8.30 a.m.

FINANCIAL STATEMENTS BULLETIN OF MARIMEKKO CORPORATION, 1 January–31 December 2019: A strong year for Marimekko – net sales grew by 12 percent and comparable operating profit improved by 40 percent

This release is a summary of Marimekko’s financial statements bulletin for the January-December 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 fourth quarter in brief

• Net sales grew by 17 percent to EUR 34.7 million (Q4/2018: 29.7). Growth came primarily from retail and wholesale sales in Finland as well as increased wholesale sales and licensing income in the Asia-Pacific region. Wholesale sales growth in the Asia-Pacific relative to the comparison period was mainly due to the fact that a part of wholesale deliveries to the region took place in the first quarter of 2019 instead of the final quarter of 2018.
• Operating profit was EUR 3.0 million (1.2). Comparable operating profit improved by 87 percent and was EUR 3.0 million (1.6).
• Earnings were boosted by sales growth, whereas higher fixed costs had a weakening impact on results.

2019 in brief

• Net sales rose by 12 percent to EUR 125.4 million (2018: 111.9). Sales grew in all market areas. Retail sales in Finland, wholesale sales and licensing income in the Asia-Pacific region as well as wholesale sales in EMEA especially contributed to growth.
• Comparable operating profit rose by 40 percent to EUR 17.1 million (12.2). Operating profit was EUR 17.1 million (17.7). Operating profit for 2018 included a nonrecurring taxable capital gain of EUR 6.0 million on the sale of the company’s head office.
• Operating profit was boosted by sales growth and improved relative sales margin. Higher fixed costs had a weakening impact on results.

The Board of Directors’ proposal for dividends

The Board of Directors will propose to the Annual General Meeting that a dividend of EUR 0.90 per share be paid for 2019. A regular dividend of EUR 0.60 per share plus an additional dividend of EUR 1.25 per share were paid for 2018.

Financial guidance for 2020

The Marimekko Group’s net sales for 2020 are forecasted to be higher than in the previous year. Comparable operating profit is estimated to be approximately at the same level as or higher than the year before.

Key figures

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 the financial statements bulletin. The figure for comparable earnings per share takes account of similar items as comparable operating profit; tax effect included.

* 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.

** Due to the adoption of IFRS 16, the ratio of net debt to EBITDA at year end (one of the company’s long-term financial goals) was reported for the first time at the end of the financial year 2019.

*** 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:

“Marimekko’s strong development continued in 2019. Our net sales increased in all market areas and comparable operating profit improved significantly. We are in a good position to enter the new decade and continue our efforts on the path of our long-term international growth strategy.

“In 2019, our net sales increased by 12 percent and our comparable operating profit grew by 40 percent. Another year of continued strong development shows that we are moving in the right direction and making good progress towards our long-term financial goals of annual net sales growth exceeding 10 percent and an operating profit margin of 15 percent.

“Our net sales for the full year amounted to EUR 125.4 million (111.9). Sales in Finland increased by 12 percent and retail sales in particular showed an especially good trend. In the international markets, growth was achieved particularly through wholesale sales and licensing income in the important Asia-Pacific region and wholesale sales in EMEA. International sales grew by 12 percent in total. During the past few years, we have invested in the long-term development of our digital business, and last year vigorous growth in our online sales continued. Thanks to sales growth and an improved relative sales margin, our comparable operating profit rose to EUR 17.1 million (12.2).

“In the October-December period, our net sales grew by 17 percent to EUR 34.7 million (29.7), partly driven by a successful holiday season. In our strong domestic market, sales increased by 20 percent; international sales were up by 12 percent. Boosted by sales growth, our comparable operating profit rose by 87 percent to EUR 3.0 million (1.6).

“In our strategy period extending to 2022, our goal is to achieve markedly stronger growth and profitability than before. Accomplishing this goal requires an internationally recognised and desirable brand as well as a product portfolio that appeals to an increasingly broad global customer base. As a continuation of our successful partnership in spring 2018, we launched a new limited-edition collaboration collection with the Japanese global apparel retailer Uniqlo in November. The Uniqlo x Marimekko brand collaboration again presented us with a unique opportunity to introduce a very large global audience to Marimekko and so strengthen our core business through increased international brand awareness. The results of our long-term work to modernise our collections were also evident during the year: among our product lines, the strongest growth was seen in 2019 in the categories that spearhead our communication activities, namely fashion (20 percent) and bags (17 percent). This growth was supported by interesting product launches, including the Marimekko Kioski streetwear collection and a new leather bag line.

“In 2020, we will further enhance our investments in international growth, among other things, by increasing marketing to raise our global awareness and by further strengthening our competences in international business. We have also begun planning an experimental omnichannel retail experience of the future while revamping and expanding our store network and investing in the development of digital business, which is an important driver of growth for us. As we continue our work for international growth, at the same time we naturally carefully monitor the development of exceptional circumstances such as the coronavirus and the unstable situation in Hong Kong.

“We started the new year in fully renovated premises. We believe that the new look of our head office will increase the Marimekko house’s appeal as a destination for fans of our brand. Especially, the renovation will support our workplace culture as we build Marimekko’s international success story together with our personnel.

”The year 2020 is historic for Marimekko in another regard as well: thanks to an upward trend in our market capitalisation, Marimekko was moved to the segment of mid-cap companies on the Nasdaq Helsinki stock exchange at the beginning of the current year.”

Market outlook and growth targets for 2020

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. For example the coronavirus epidemic and the unstable situation in Hong Kong as well as other possible exceptional circumstances in the company’s markets may have an impact on consumers’ and partners’ purchasing behaviour and thereby on the company’s sales and profitability.

Finland, Marimekko’s important domestic market, represents about half of the company’s net sales. Sales in Finland are expected to grow on the previous year. Domestic wholesale sales in 2020 will be boosted by nonrecurring promotional deliveries, the total value of which will be substantially higher than last year. A vast majority of the deliveries will take place in the second 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 earlier stage than in 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. The impacts of the coronavirus, at the moment concerning in particular the Asia-Pacific region, are still uncertain, but the epidemic can have a negative impact on sales, profitability and the operational reliability of the global supply chain. Some 15 percent of Marimekko’s products are manufactured in China. However, Marimekko currently estimates that net sales in the Asia-Pacific region will continue to grow this year. The company sees increasing demand for its products in this area especially in the longer term.

In 2019, Marimekko became aware of cases of grey exports and has taken due action. The control of the cases will have a clear weakening impact on the company’s sales and earnings.

The key drivers of the company's growth are e-commerce, increasing the sales per square metre of existing stores in all markets, and partner-led retail in Asia. Nonrecurring promotional deliveries also have a significant impact on the company’s growth. The aim is to open approximately 10 new Marimekko stores and shop-in-shops in 2020. The main thrust in new openings is on retailer-owned Marimekko stores.

Licensing income in 2020 is estimated to be markedly lower than in the previous year.

In 2020, Marimekko will noticeably heighten its investments from before in order to achieve even stronger growth and profitability in the long term. For this reason, fixed costs are estimated to increase significantly relative to the previous year. The company will further strengthen its international business competences, needed for growth, and personnel expenses are expected to be substantially higher than the year before. Marketing expenses are estimated to grow (2019: EUR 7.4 million), as the company will increase its investments in raising awareness to speak to a wider global audience. Total investments are also expected be significantly higher than in the previous year (2019: 2.6 million) due to revamping and expanding the store network as well as developing digital business and IT systems in order to strengthen the company’s international competitiveness. The estimated effects of the long-term bonus system targeted at the company’s Management Group will depend on the trend in the price of the company’s share during the year.

Because of 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 2020 as well, to a particularly large extent especially for earnings due also to the timing of growth investments. In the final quarter of the year, holiday sales make up a significant share of net sales.

Media and investor conference

A conference for media and institutional investors will be held in English on 13 February at 12.30 p.m. EET. A live webcast of the conference can be followed at https://marimekko.videosync.fi/2019-results, and a recording of the webcast will be available at the same address later. To ask questions by phone during the live webcast, please register by email to anna.tuominen@marimekko.com.

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

Anna Tuominen
Tel. +358 40 5846944
anna.tuominen@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 2019, brand sales of the products worldwide amounted to EUR 251 million and the company's net sales were EUR 125 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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• Marimekko_Financial_Statements_Bulletin_2019