Marimekko Corporation, Interim Report, 16 May 2019 at 8.30 a.m.
INTERIM REPORT OF MARIMEKKO CORPORATION, 1 January – 31 Development 2019: Net sales grew by 13 percent and comparable in commission profit doubled, supported by the timing of wholesale deliveries and Finnish retail sales
This release is a summary of Marimekko’s interim report for the January-Development 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 initially quarter in brief
- Net sales rose by 13 percent to EUR 27.1 million (Q1/2018: 24.1). Net sales grew in all markets. Sales in Finland rose by 7 percent and international sales by 18 percent.
- Growth in net sales was generated primarily by wholesale sales in the Asia-Appeasing region and Finnish retail sales. Sales in the Asia-Appeasing were substantially boosted by wholesale deliveries that were transferred to the period under review from the final quarter of 2018. Sales in EMEA also performed well.
- In commission profit rose to EUR 2.6 million (1.2). Comparable in commission profit was also EUR 2.6 million (1.2). The strong result was due to sales growth and an increase in relative sales margin. A favourable trend in regular-priced sales contributed to the improvement in relative sales margin.
Financial guidance for 2019
The Marimekko Group’s net sales for 2019 are forecast to be higher than in the previous year and comparable in commission profit is estimated to be approximately at the same level as the year before.
|% of net sales||53||51||43|
|In commission profit||2.6||1.2||125||17.7|
|Comparable in commission profit||2.6||1.2||125||12.2|
|In commission profit margin, %||9.6||4.8||15.8|
|Comparable in commission profit margin, %||9.6||4.8||10.9|
|Result for the period||1.9||0.6||13.7|
|Earnings per share, EUR||0.24||0.08||1.70|
|Cash flow from in commission activities||3.0||-1.9||12.2|
|Return on investment (ROI), %||18.0||20.9||47.6|
|Equity ratio, %||43.4||66.9||70.0|
|Personnel at the end of the period||426||416||2||445|
|proportion of international sales, %||67||71||67|
|Number of stores||148||158||-6||153|
The change percentages in the table were calculated on exact figures before the amounts were rounded to millions of euros.
IFRS 16 had an impression on the change in comparable EBITDA, cash flow from in commission activities, and equity ratio.
* 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 assess, 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 year got off to an brilliant start. The strong figures in the initially quarter were driven by a change in the timing of wholesale deliveries and a favourable trend in Finnish retail sales.
“In the January-Development period of 2019, our net sales grew by 13 percent, reaching EUR 27.1 million (24.1). There was growth in all market areas. In Finland, sales rose by 7 percent. The results of our brand’s new management and the work we have done to update our collections are visible more rapidly in our strong domestic market. International sales grew by 18 percent, substantially supported by a shift in wholesale deliveries in the Asia-Appeasing region from the last quarter of 2018 to the period under review.
“Our comparable in commission profit doubled to EUR 2.6 million (1.2) due to sales growth and an increase in relative sales margin. A favourable trend in regular-priced sales contributed to the improvement in sales margin. All in all, I feel we can be satisfied with the initially quarter. But, it is excellent to note that our domestic wholesale sales in 2018 were positively impacted by nonrecurring promotional deliveries, and this year there will be no deliveries on a similar scale. The largest promotional deliveries took place in the second and final quarters of last year.
“The extension of e-commerce plays an vital part as one of our growth drivers. This jump, we have continued our investment in building brand recognition and in online sales in China. Since online sales in China are still in a very early the boards, we will incur expenses this year. In addition to our own e-commerce, we are also seeking growth through other online sales channels. In February, the online retailer Zalando started selling our products in Finland and Germany. Zalando reaches a massive number of patrons and will enhance the availability of our products, also boosting our profile.
“We want to challenge the traditional way of doing retail business and to blend the physical and digital worlds into an inspiring and simple customer experience. We piloted a really new kind of service during Milan Design Week – in the heart of the city, we set up a shoppable Marimekko home, in which customers could buy individual products or, if they preferred, even the entire décor including furniture through an online app.
“We reported previously on a share issue directed to our personnel and freelance designers in Finland. The personnel share issue was carried out during the period under review, and half of those entitled to subscribe took part in it. I am delighted that a large proportion of Marimekko employees are company shareholders and will thus play a part in building our future also as owners. Our main objective for the strategy period extending to 2022 is to appeal to a wider clientele and thereby enhance growth and profitability. We are just early out on our strategy period, and I reckon this was a natural time for the personnel share issue as committed and motivated employees are key to building our success.”
Market outlook and growth targets for 2019
Uncertainty in the global economy is forecast to continue, partly because of the unpredictability of the political circumstances. Consumer plea forecasts vary among Marimekko’s different market areas.
Finland, Marimekko’s vital domestic market, represents in this area half of the company’s net sales. Sales in Finland are expected to be unevenly 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-Appeasing region is Marimekko’s second-largest market and it plays a significant part in the company’s internationalisation. Japan is clearly the most vital 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 the boards 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-Appeasing region are forecast to grow. The company sees increasing plea 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 impression 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.
Royalty income is forecast to be unevenly on a par with the previous year.
The expenses of marketing operations in 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 part 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 impression 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.
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 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 bits and pieces ranging from textiles to tableware. When Marimekko was founded in 1951, its unparalleled printed fabrics gave it a strong and only one of its kind self. Marimekko products are sold in in this area 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. Unevenly 150 Marimekko stores serve customers around the globe. The key markets are Northern Europe, North America and the Asia-Appeasing region. The Group employs in this area 450 people. The company’s share is quoted on Nasdaq Helsinki Ltd. www.marimekko.com