Published: 2011-11-10 08:00:28 CET
Marimekko Corporation
Interim report (Q1 and Q3)

MARIMEKKO CORPORATION'S INTERIM REPORT, 1 JANUARY - 30 SEPTEMBER 2011

Marimekko Corporation, Interim Report, 10 November 2011 at 9.00 a.m.

MARIMEKKO CORPORATION’S INTERIM REPORT, 1 JANUARY - 30 SEPTEMBER 2011

During the January-September period of 2011, the Marimekko Group’s net sales grew by 5 per cent. Brand sales* of Marimekko products increased by 17 per cent. International sales rose very strongly, by 22 per cent. The growth was driven by the Asia-Pacific region as well as by Central and Southern Europe. Operating profit decreased as expected, as a result of considerable investments in internationalisation and increased personnel and marketing costs.

January to September

  • Net sales grew by 5.2% to EUR 53.9 million (EUR 51.2 million).
    • International sales rose by 22.0% to EUR 19.7 million (EUR 16.2 million). Growth was strongest in the Asia-Pacific region and Central and Southern Europe. Sales also grew well in North America; when measured in the invoicing currency (mainly the US dollar), sales growth amounted to about 11%.
    • Sales in Finland fell by 2.6% to EUR 34.2 million (EUR 35.1 million). The decline was due to the changes made in the distribution network during the third quarter in accordance with the company’s distribution strategy and a decrease in deliveries for promotions.
  • Operating profit amounted to EUR 1.9 million (EUR 6.0 million). The decrease in operating profit was mainly due to considerable investments in internationalisation and increased personnel and marketing costs.
  • Investments amounted to an exceptionally high figure, EUR 5.5 million (EUR 0.7 million).
  • Brand sales* grew briskly, by 16.7%, and amounted to EUR 121.1 million (EUR 103.8 million).
  • The full-year estimate for 2011 given by the company in its interim report of 17 August 2011 remains unchanged: net sales growth for the Marimekko group is expected to be at the bottom end of the announced range (about 5-10%), close to 5%, and the anticipated decline in operating profit is estimated to be at the top end of the range (about 40-60%), roughly 50-60% compared with the previous year.

July to September

  • Net sales grew by 1.8% to EUR 19.8 million (EUR 19.5 million).
    • International sales rose by 19.5% to EUR 7.2 million (EUR 6.0 million). Sales grew in all market areas. The strongest growth was seen in the Asia-Pacific region and Central and Southern Europe.
    • Sales in Finland decreased by 6.2% to EUR 12.6 million (13.4 million).
  • Operating profit fell as expected and amounted to EUR 2.3 million (EUR 4.2 million).

 

  1-9/2011 1-9/2010  Change, % 1-12/2010
         
Net sales, EUR 1,000 53,861 51,223 5.2 73,297
Operating profit, EUR 1,000 1,883 5,981 -68.5 8,169
Operating profit without non-recurring items, EUR 1,000 2,052 5,981 -65.7 8,169
Profit for the period, EUR 1,000 1,415 4,421 -68.0 6,072
Earnings per share, EUR 0.18 0.55 -67.3 0.76
Cash flow from operating activities,
EUR 1,000
-1,816  922   4,559
Return on investment (ROI), % 7.2 24.8   25.0
Equity ratio, % 65.5 80.4   78.8
         
Brand sales*, EUR 1,000 121,149 103,793 16.7 149,717
Number of retail stores & shop-in-shops** 83 81 2.5 84

* Estimated sales of Marimekko products at consumer prices. Brand sales are calculated by adding together the company’s own retail sales and the estimated retail value of Marimekko products sold by other retailers. The estimate, based on Marimekko’s actual wholesale sales to these retailers, is unofficial and does not include VAT. The key figure is not audited.

** Includes the company’s own retail stores, retailer-owned Marimekko stores (previously “concept stores”) and shop-in-shops with an area exceeding 30 m2. The company’s own retail stores numbered 30 (25). The decrease in the total number of stores in the July-September period of 2011 results from changes in the Finnish distribution network,
made in accordance with the company’s distribution strategy. Store changes in each market will be discussed in more detail in the reviews by business unit below.

Mika Ihamuotila, President and CEO:

“I am pleased with our progress this year: we have taken several bold steps on the way to international growth, and all planned measures, as substantial as they have been considering the company’s size, have been completed on schedule.

I find the development of our business in the January-September period positive and encouraging. Brand sales grew strongly, by 17% to EUR 121 million. International brand sales already accounted for about half of this amount, 49%. Net sales grew by 5%. The investments we have made are beginning to pay off: in international sales a 22% growth was achieved. In the Asia-Pacific region, the excellent trend in sales builds faith in increasing interest in our products. This year the region has replaced Scandinavia as the second largest market for us. We are actively investigating the possibilities of expanding our operations in this growing market. Our objective is to find local partners in certain areas, who would be responsible for opening Marimekko stores and other distribution of our products to high-end department stores, for instance. Sales grew well in Central and Southern Europe and North America, too. In the third quarter, new company-owned stores were opened in Copenhagen and Stockholm and a Marimekko shop-in-shop opened its doors in Boston. Our flagship store, which opened in New York after the review period, has been received enthusiastically and has exceeded our expectations. October also saw the opening of our first own retail store in Oslo; in the Miami area, a Marimekko shop-in-shop was opened.

In Finland, net sales decreased by 3%. However, it is important to bear in mind that this decrease is attributable to changes with which we seek profitability improvement and sales growth in the long term. According to our distribution strategy, stores located in central areas or shopping centres of towns that are significant to us should, as a rule, be owned by the company itself. In the third quarter, five retailer-owned Marimekko stores were closed. In their stead two Marimekko’s own retail stores were opened in October. Cutting down on deliveries for promotions also impaired net sales. In early November, two new stores were opened: one in the centre of Helsinki and the other in Lahti. All in all, 15 new stores have opened in Finland and abroad this year, 7 of which are owned by Marimekko.

In the review period, the trend in our earnings was in line with expectations. Operating profit decreased as a result of considerable investments in internationalisation, increased personnel and marketing costs, higher raw material costs and a rise in the general cost level. For instance, the number of Marimekko employees abroad more than doubled compared with the previous year. However, we expect that the earnings trend will improve when the investments we have made in expansion begin to bear fruit. It should also be borne in mind that, due to the seasonal nature of our business, the major portion of our net sales and earnings are generated during the last two quarters of the year and that, in the last quarter, a significant share of sales is accounted for by retail sales.”

For additional information, contact:
Mika Ihamuotila, President and CEO, tel. +358 9 758 71
Thomas Ekström, CFO, tel. +358 9 758 7261

MARIMEKKO CORPORATION
Group Communications

Piia Pakarinen
Tel. +358 9 758 7293
piia.pakarinen@marimekko.fi

DISTRIBUTION:
NASDAQ OMX Helsinki Ltd
Key media


Marimekko is a Finnish textile and clothing design company renowned for its original prints and colours. The company designs and manufactures high-quality interior decoration items ranging from furnishing fabrics to tableware as well as clothing, bags and other accessories. When Marimekko was founded in 1951, its unparalleled printed fabrics gave it a strong and unique identity. Marimekko products are sold in approximately 40 countries. In 2010, brand sales of Marimekko products worldwide amounted to approximately EUR 150 million and the company's net sales were EUR 73 million. The number of Marimekko stores totalled 84 at the year end. The key markets in 2011 are North America, Northern Europe and the Asia-Pacific region. The Group employs around 400 people. The company’s share is quoted on NASDAQ OMX Helsinki Ltd. www.marimekko.fi

MARIMEKKO CORPORATION’S INTERIM REPORT, 1 JANUARY - 30 SEPTEMBER 2011

MARKET SITUATION

The overall uncertainty about the global economy has increased markedly as a result of the intensified national debt situation in the US and in the European crisis countries, particularly in Greece. Even though it is estimated that the global economy will grow by nearly 4% next year, driven by growth in Asia, increasing uncertainty may impact consumers’ purchasing behaviour in all markets. In the United States and Europe, the economy is expected to grow weakly.

The Finnish economy took a downward turn in late summer and the current economic situation is slightly weaker than average. Increased costs burden the profitability of companies. Consumer confidence has weakened considerably as estimates of the development of the Finnish economy have become significantly more pessimistic (Confederation of Finnish Industries EK: Business Tendency Survey, November 2011). The Federation of Finnish Commerce estimates that the value of Christmas sales will increase by about 4% despite economic uncertainty (the Federation of Finnish Commerce, estimate for Christmas sales in 2011).

From January to September 2011, the value of retail sales in Finland rose by 2.9% (Statistics Finland: Turnover of trade 2011, September, flash estimate). From January to September 2011, retail sales of clothing (excluding sportswear) grew by 2.2% (Textile and Fashion Industries TMA). Sales of womenswear rose by 2.2% and sales of menswear by 4.5%. Sales of childrenswear fell by 1.0%. Sales of bags rose by 7.1%. In the January-August period of 2011, exports of clothing (SITC 84) rose by 33% and imports by 21%; exports of textiles (SITC 65) grew by 7% and imports by 10% (National Board of Customs, monthly review, August 2011).

NET SALES

January to September
In the January-September period of 2011, the Marimekko Group’s net sales rose by 5.2% to EUR 53,861 thousand (EUR 51,223 thousand), thanks to growth in international sales.

In Finland, net sales declined by 2.6% to EUR 34,154 thousand (EUR 35,072 thousand). Retail sales in Finland grew by 2.0%, while wholesale sales fell by 10.7%. Retail sales growth slowed partly due to changes implemented in sales areas in the Helsinki stores in 2010. The decline in wholesale sales was attributable to changes in the distribution network, made in accordance with the company’s distribution strategy, and a decrease in deliveries for promotions. In the third quarter, five retailer-owned Marimekko stores were closed. In their stead two Marimekko’s own retail stores were opened in October. The revenues generated from deliveries for individual promotions were very low compared with the previous year, as estimated earlier. The resulting impact could be seen in the third quarter and will also be seen in the last quarter of the year. Excluding these factors – changes implemented in sales areas in the Helsinki stores in 2010, changes in the distribution network and a decrease in deliveries for promotions – sales grew by about 2%.

International sales grew very well, by 22.0% to EUR 19,707 thousand (EUR 16,151 thousand). International sales represented 36.6% (31.5%) of the Group's net sales. As for brand sales, 48.8% of the sales came from abroad (45.9%). Sales grew vigorously in the Asia-Pacific region, up 53.9%, and in Central and Southern Europe, by 27.1%, mainly thanks to a favourable trend in wholesale sales. New stores opened at the end of 2010 and this year also increased sales in these market areas. Sales in North America grew by 5.8%. When measured in the invoicing currency (mainly the US dollar), sales in North America showed growth of about 11%. In Scandinavia, sales were at the same level as in the comparison period. Consumers’ purchasing behaviour was cautious in Denmark in particular, decreasing sales. Sales were boosted by the stores opened during the third quarter in Copenhagen and Stockholm.

The breakdown of the Group’s net sales by product line was as follows: clothing 38.1%, interior decoration 41.4% and bags 20.5%. Net sales by market area were: Finland 63.4%, Scandinavia 9.8%, Central and Southern Europe 9.0%, North America 5.3% and Asia-Pacific 12.5%.

July to September
In the July-September period of 2011, the Marimekko Group’s net sales rose by 1.8% to EUR 19,812 thousand (EUR 19,468 thousand). International sales grew well, by 19.5% to EUR 7,206 thousand (EUR 6,031 thousand). Sales growth was mainly due to a very favourable trend in wholesale sales to the Asia-Pacific region and to Central and Southern Europe. The stores opened in Berlin and Malmö at the end of 2010 and in Copenhagen and Stockholm in the review period also contributed to the increase in sales. In Finland, net sales declined by 6.2% to EUR 12,606 thousand (EUR 13,437 thousand). This was due to a decrease in wholesale sales, which in turn was affected by changes in the distribution network, made in accordance with the company’s distribution strategy. During the period, five retailer-owned Marimekko stores were closed. In their stead two Marimekko’s own retail stores were opened in October. The revenues generated from deliveries for individual promotions were also very low compared with the corresponding period of the previous year. Excluding these factors, sales developed favourably and grew by about 3%.

REVIEWS BY BUSINESS UNIT

Clothing
In the January-September period of 2011, net sales of clothing rose by 5.9% to EUR 20,534 thousand (EUR 19,387 thousand). Sales grew markedly in the Asia-Pacific region, partly due to purchases by new stores and successful collections. Sales also rose in Scandinavia and Central and Southern Europe. Sales in Finland were at the same level as in the comparison period. In North America, sales fell. International sales accounted for 31.3% of net sales of clothing.

Interior decoration
Net sales of interior decoration products increased by 1.7% to EUR 22,289 thousand (EUR 21,919 thousand). The growth came mainly from the Asia-Pacific region and Central and Southern Europe. Purchases by new stores contributed to the growth. Slight sales growth was seen in North America, while sales in Scandinavia fell a little. In Finland, sales of interior decoration products declined due to changes in the distribution network and a decrease in deliveries for promotions. International sales accounted for 41.5% of net sales of interior decoration products.

Bags
Net sales of bags grew by 11.3% to EUR 11,038 thousand (EUR 9,917 thousand). Sales rose significantly in North America, in Central and Southern Europe and in the Asia-Pacific region. Sales in Finland and Scandinavia increased slightly. In Finland, sales growth slowed due to changes in the distribution network. International sales accounted for 36.5% of net sales of bags.

Finland
In the January-September period of 2011, sales in Finland decreased by 2.6% to EUR 34,154 thousand (EUR 35,072 thousand). Marimekko’s retail sales, i.e. sales by Marimekko’s own retail stores in Finland, rose by 2.0%. Sales growth slowed partly due to changes implemented in sales areas in the Helsinki stores in 2010. Wholesale sales in Finland decreased by 10.7%. The decline was partly attributable to changes in the distribution network, made in accordance with the company’s distribution strategy. The strategy indicates that stores located in central areas or shopping centres of towns that are significant to the company should, as a rule, be owned by the company itself. In the third quarter, five retailer-owned Marimekko stores were closed. In their stead two Marimekko’s own retail stores were opened after a complete revamping in October. Another factor behind the decline in wholesale sales was the fact that the revenues generated from deliveries for individual promotions were very low compared with the corresponding period of the previous year. By cutting down on price-led promotions, the company aims to further improve the average sales margin and the brand’s pricing power. The factors mentioned above particularly affected sales of interior decoration products, which declined somewhat. Sales of clothing were at the same level as in the comparison period, while sales of bags grew slightly. Three retailer-owned Marimekko stores included other brands in their selection and, as a result, these stores are no longer classified as Marimekko stores. This change had no financial impact.

Scandinavia
Sales in Scandinavia (previously “the other Nordic countries”) were at the same level as in the comparison period, EUR 5,294 thousand (EUR 5,284 thousand). Sales of the various product lines were also fairly close to last year’s figures. During the review period, two new company-owned retail stores were opened: one at Copenhagen airport in August and the other in Stockholm in mid-September. Consumers’ purchasing behaviour has been cautious, especially in Denmark, where general distrust with regard to development of national economy and government has increased. Without the new stores, sales trends in Scandinavia would have been considerably weaker.

Central and Southern Europe
In Central and Southern Europe (previously “the rest of Europe”), net sales rose to EUR 4,866 thousand, up 27.1% on the previous year (EUR 3,827 thousand). Bag sales increased strongly, and sales of clothing and interior decoration products also grew well. The growth was partly accounted for by sales in the retail store opened in Berlin at the end of 2010, but other sales in Germany and in the Benelux countries were brisk, too.

North America
Net sales in North America rose by 5.8% to EUR 2,835 thousand (EUR 2,679 thousand). When measured in the invoicing currency (mainly the US dollar), sales in North America showed growth of about 11%. Very strong growth was seen in bag sales. Sales of interior decoration products also grew slightly, while clothing sales fell. Purchases by the six new Marimekko shop-in-shops opened in the United States at the end of 2010 and in this year accounted for a significant part of the increase in sales of bags and interior decoration products. The latest shop opening was in Boston in September.

The Asia-Pacific region
In the Asia-Pacific region (previously “other countries”), net sales grew extremely well, by 53.9% to EUR 6,712 thousand (EUR 4,361 thousand). Strong sales growth in all countries of the region builds faith in increasing interest in the company’s products in this market area. This year the region has replaced Scandinavia as the second largest market for the company. Sales of all product lines rose markedly but growth was particularly strong in clothing sales, thanks to the positive reception of new collections. The increase in net sales was also partly attributable to the initial inventory purchases by the new store opened in Japan in the first quarter of the year as well as the purchases by the store opened in Seoul at the end of 2010.

Production
During the January-September period of 2011, the output of the Herttoniemi textile printing factory increased by 30% compared to the corresponding period of the previous year. In the comparison period, the production volume was reduced by lower-than-normal demand; demand recovered toward the end of the year. Increased staff resources, improved production processes and the fact that some previously outsourced textile printing was re-insourced also contributed to the rise in output. The production volume of the Sulkava factory was at the same level as in the comparison period. The output of the Kitee factory declined substantially due to changes in the production structure; after these changes, the capacity of the factory has been fully utilised.

EARNINGS

January to September
In the January-September period of 2011, the Group’s operating profit decreased as expected and was EUR 1,883 thousand (EUR 5,981 thousand). Profit after taxes was EUR 1,415 thousand (EUR 4,421 thousand) and earnings per share were EUR 0.18 (EUR 0.55). The result was burdened by considerable investments in internationalisation, particularly in the United States, increased personnel and raw material costs and a rise in the general cost level. In addition, marketing expenses were substantially higher than in the comparison period: EUR 3,476 thousand (EUR 1,882 thousand), or 6.5% (3.7%) of the Group’s net sales. The difference was due to exceptionally low marketing expenses in the comparison period as well as costs related to store openings and different events celebrating the company’s anniversary. In addition, the decline in wholesale sales in Finland impaired the result. The decline was attributable to changes in the distribution network, made in accordance with the company’s distribution strategy, and a decrease in deliveries for promotions. The excellent trend in sales in the Asia-Pacific region had a positive impact on the result. Retail sales growth in Finland and sales increase generated by new stores opened abroad also improved the result.

As a result of significant investments, the Group’s depreciation grew to EUR 1,450 thousand (EUR 1,108 thousand), representing 2.7% (2.2%) of net sales. Net financial expenses totalled EUR 47 thousand (EUR 12 thousand), or 0.1% (0.02%) of net sales.

July to September
In the July-September period of 2011, the Group’s operating profit amounted to EUR 2,321 thousand (EUR 4,170 thousand). As expected, profitability was weakened by considerable investments in internationalisation, particularly in the United States, increased personnel and raw material costs and a rise in the general cost level. In addition, the result was burdened by the decline in wholesale sales in Finland, which was attributable to changes in the distribution network, made in accordance with the company’s distribution strategy, and a decrease in deliveries for promotions. Retail sales growth in Finland and sales increase generated by new stores opened abroad improved the result. Furthermore, the strong trend in sales in the Asia-Pacific region also had a positive impact on the result.

INVESTMENTS

The Group’s gross investments amounted to EUR 5,529 thousand (EUR 689 thousand), representing 10.3% (1.3%) of net sales. The majority of investments were directed at the company’s e-commerce project, building new store premises and purchasing new equipment, purchasing a new printing machine and acquiring and improving information systems.

EQUITY RATIO AND FINANCING

The Group’s equity ratio was 65.5% at the end of the period (80.4% on 30 September 2010; 78.8% on 31 December 2010). The ratio of interest-bearing liabilities minus financial assets to shareholders’ equity (gearing) was 6.7%, while it was -21.0% at the end of the corresponding period in the previous year.

The Group’s financial liabilities stood at EUR 5,360 thousand (EUR 0) at the end of the period. The Group’s financial assets at the end of the period amounted to EUR 3,260 thousand (EUR 6,860 thousand).

SHARES AND SHARE PRICE TREND

Share capital
At the end of the period, the company’s fully paid-up share capital, as recorded in the Trade Register, amounted to EUR 8,040,000 and the number of shares totalled 8,040,000.

Shareholdings
According to the book-entry register, Marimekko had 6,858 (6,676) shareholders at the end of the period. Of the shares, 13.6% (14.5%) were registered in a nominee’s name and 15.9% (15.8%) were in foreign ownership. The number of shares owned either directly or indirectly by members of the Board of Directors and the President of the company was 1,150,930 (1,086,440), representing 14.3% (13.5%) of the total share capital and of the votes conferred by the company’s shares.

The largest shareholders according to the book-entry register on 30 September 2011

 

    Number of shares and votes Percentage of holding and votes
1. Muotitila Ltd 1,127,700 14.03
2. Semerca Investment Ltd 850,377 10.58
3. ODIN Finland 404,513 5.03
4. Varma Mutual Employment Pension Insurance Company 385,920 4.80
5. Keva 301,987 3.76
6. Ilmarinen Mutual Pension Insurance Company 265,419 3.30
7. Veritas Pension Insurance Company 218,163 2.71
8. Mutual Fund Tapiola Finland 66,395 0.82
9. Foundation for Economic Education 50,000 0.62
10. Investment Fund SEB Gyllenberg Small Firm 50,000 0.62
  Total 3,720,474 46.27
  Nominee-registered 1,096,249 13.64
  Others 3,223,277 40.09
  Total 8,040,000 100.00


Flaggings
SEB Asset Management S.A.’s share of Marimekko Corporation’s share capital and voting rights declined to 2.05%, or 164,560 shares, due to a stock loan on 19 April 2011 and reverted to 5.77%, or 464,152 shares at the termination of the stock loan on 10 May 2011.


Authorisations
At the end of the review period, the Board of Directors had no valid authorisations to carry out share issues or issue convertible bonds or bonds with warrants, or to acquire or surrender Marimekko shares.

Share trading
During the period under review, a total of 950,707 Marimekko shares were traded, representing 11.8% of the shares outstanding. The total value of Marimekko’s share turnover was EUR 12,799,110. The lowest price of the Marimekko share was EUR 10.50, the highest was EUR 15.90 and the average price was EUR 13.48. At the end of the period, the final price of the share was EUR 10.70. The company’s market capitalisation on 30 September 2011 was EUR 86,028,000 (EUR 90,691,200 on 30 September 2010; EUR 115,776,000 on 31 December 2010).

PERSONNEL

During the January-September period of 2011, the number of employees averaged 393 (372). At the end of the period, the Group employed 405 (378), of whom 47 (18) worked abroad.

RISK MANAGEMENT AND MAJOR RISKS

No significant changes have occurred in the general risk factors since the review presented in the report of the Board of Directors on 7 February 2011 other than the clearly increased general uncertainty in the world economy. The particular risks in the near future are associated with general economic development and the resulting unsteadiness in the operating environment as well as its potential effect on consumers’ purchasing behaviour and purchasing power in all of the Group’s markets. In addition, growth management, changes in raw material and other purchase prices and the rise in the general cost level are emphasised in the risk management of the company. Due to the general uncertainty in the market, the company is also monitoring changes in exchange rates even more carefully. They are, however, not expected to have a significant influence on the financial position of the company. The Group’s main invoicing currency is the euro. The other significant invoicing currencies are the Swedish krona and the US dollar. The US dollar’s share of total invoicing will be increasing as a result of investments made in North America.

RESEARCH AND DEVELOPMENT

Marimekko's product planning and development costs arise from the design of collections. Design costs are recorded in expenses.

THE ENVIRONMENT, HEALTH AND SAFETY

Responsibility for the environment and nature is an integral aspect of Marimekko’s business. In environmental matters, the company’s business supervision is largely based on legislation and other regulations. Environmental, health and safety issues are reported in the 2010 Annual Report.

MERGER OF SUBSIDIARIES

The Board of Directors of Marimekko Corporation decided to merge the company’s fully-owned subsidiaries Marimekko Tuotanto Oy, Marimekko Kitee Oy and Decembre Oy into the parent company. The merger is executed in order to simplify the group structure and administration as well as to enhance the efficiency of business operations and save costs.

In the merger, all assets and liabilities of the merging companies will be transferred to the acquiring company, Marimekko Corporation, without liquidation proceedings. No merger consideration shall be paid to the sole shareholder of the merging companies, i.e. Marimekko Corporation, since the merger is a subsidiary merger. The merger has no implications for personnel. The planned date of registration of the implementation of the merger is 31 December 2011.

MAJOR EVENTS AFTER THE CLOSE OF THE REVIEW PERIOD

New stores
The company’s own flagship store was opened in Manhattan, New York in early October. The store, with a sales floor area of 350 m2, is located in one of the busiest blocks in Manhattan’s Flatiron District at the intersection of Fifth Avenue and Broadway. October also saw the opening of the first company-owned retail store in Oslo; in the Miami area, a Marimekko shop-in-shop was opened. Four new stores have been opened in Finland during late October-early November: in Espoo, Vantaa, Lahti and the centre of Helsinki.

OUTLOOK FOR THE REMAINDER OF 2011

The increased uncertainty concerning overall economic development makes it difficult to forecast market trends and the company’s outlook for the remainder of the year. The uncertainty may affect consumers’ purchasing behaviour and buying power. In the last quarter, Marimekko’s sales are anticipated to stay on the growth track and the opening of new stores is expected to boost particularly international sales. The sales trend in Finland is expected to be good, but the changes in the distribution network, reported earlier and made in accordance with the company’s distribution strategy, are anticipated to have a negative impact on sales. In addition, the revenues generated from deliveries for individual promotions will be very low. By cutting down on price-led promotions, the company aims to further improve the average sales margin and the brand’s pricing power.

Substantial investments in internationalisation, especially in the United States, and in developing business operations and the distribution network are of such magnitude that they will be reflected in a significant growth in fixed costs and continue to burden the operating result considerably during the rest of the year. With these measures and investments, which are exceptionally extensive and of which many occur predominantly during this year, the structure of Marimekko’s business is transformed and a more solid foundation for long-term growth and improved profitability is laid. Moreover, increased raw material costs and the rise in the general cost level put the company under pressure to raise prices.
 
The total investments planned by the Marimekko Group for 2011 are estimated at about EUR 6.5 million. This includes, among others, the roughly EUR 1.5 million investment in machinery for the Helsinki textile printing factory, the roughly EUR 1 million investment in e-commerce, the construction costs for the flagship store and the showroom in New York, and the costs for other new retail stores.

The full-year estimate for 2011 given by the company in its interim report of 17 August 2011 remains unchanged: net sales growth for the Marimekko group is expected to be at the bottom end of the announced range (about 5-10%), close to 5%, and the anticipated decline in operating profit is estimated to be at the top end of the range (about 40-60%), roughly 50-60% compared with the previous 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. In the last quarter, a significant share of sales is accounted for by retail sales.

Helsinki, 10 November 2011

MARIMEKKO CORPORATION
Board of Directors


Information presented in the interim report has not been audited.

APPENDICES
Accounting principles
Consolidated income statement and comprehensive consolidated income statement
Consolidated balance sheet
Consolidated cash flow statement
Consolidated statement of changes in shareholders' equity
Key figures
Consolidated net sales by market area and product line
Segment information
Quarterly trend in net sales and earnings

Accounting principles
This interim report was prepared in accordance with IAS 34: Interim Financial Reporting. The same accounting principles were applied as in the 2010 financial statements.

FORMULAS FOR THE KEY FIGURES

Earnings per share (EPS), EUR:
(Profit before taxes – income taxes) / Number of shares (average for the financial period)

Equity per share, EUR:
Shareholders’ equity / Number of shares, 30 September

Return on equity (ROE), %:
(Profit before taxes – income taxes) X 100 / Shareholders’ equity (average for the financial period)

Return on investment (ROI), %:
(Profit before taxes + interest and other financial expenses) X 100 / (Balance sheet total – non-interest-bearing liabilities (average for the financial period))

Equity ratio, %
Shareholders’ equity X 100 / (Balance sheet total – advances received)

Gearing, %:
Interest-bearing net debt X 100 / Shareholders’ equity

CONSOLIDATED INCOME STATEMENT

 

(EUR 1,000) 7-9/2011 7-9/2010 1-9/2011 1-9/2010 1-12/2010
           
NET SALES 19,812 19,468 53,861 51,223 73,297
Other operating income - 3 2 13 16
Increase or decrease in inventories of completed and unfinished products -1,181 -42 -3,162 -1,072 -1,173
Raw materials and consumables 8,392 7,051 22,809 19,860 28,496
Employee benefit expenses 4,530 3,786 14,145 12,459 17,311
Depreciation 534 385 1,450 1,108 1,478
Other operating expenses 5,216 4,121 16,738 12,900 19,032
           
OPERATING PROFIT 2,321 4,170 1,883 5,981 8,169
           
Financial income 2 3 43 9 83
Financial expenses -32 -40 -90 -21 -29
  -30 -37 -47 -12 54
           
PROFIT BEFORE TAXES 2,291 4,133 1,836 5,969 8,223
           
Income taxes 568 1,075 421 1,548 2,151
           
NET PROFIT FOR THE PERIOD 1,723 3,058 1,415 4,421 6,072
           
Distribution of net profit to equity holders of the parent company 1,723 3,058 1,415 4,421 6,072
           
Basic and diluted earnings per share calculated on the profit attributable to equity holders of the parent company, EUR 0.21 0.38 0.18 0.55 0.76


COMPREHENSIVE CONSOLIDATED INCOME STATEMENT
 

(EUR 1,000) 7-9/2011 7-9/2010 1-9/2011 1-9/2010 1-12/2010
           
Net result for the period 1,723 3,058 1,415 4,421 6,072
Other comprehensive income          
   Change in translation difference -67 -4 -45 -5 8
           
COMPREHENSIVE RESULT FOR THE PERIOD 1,656 3,054 1,370 4,416 6,080
           
Distribution of net result to equity holders of the parent company 1,656 3,054 1,370 4,416 6,080


CONSOLIDATED BALANCE SHEET
 

(EUR 1,000) 30.9.2011 30.9.2010 31.12.2010
       
ASSETS      
       
NON-CURRENT ASSETS      
Tangible assets 11,798 9,184 9,390
Intangible assets 2,540 619 869
Available-for-sale financial assets 16 12 16
Deferred tax assets 197 - -
  14,551 9,815 10,275
       
CURRENT ASSETS      
Inventories 21,449 16,708 17,172
Trade and other receivables 7,884 7,188 6,437
Current tax assets 566 18 -
Cash and cash equivalents 3,260 6,860 9,667
  33,159 30,774 33,276
       
ASSETS, TOTAL 47,710 40,589 43,551
       
SHAREHOLDERS’ EQUITY AND LIABILITIES      
       
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF
THE PARENT COMPANY
     
Share capital 8,040 8,040 8,040
Translation differences -35 -3 10
Retained earnings 23,230 24,586 26,237
Shareholders’ equity, total 31,235 32,623 34,287
       
NON-CURRENT LIABILITIES      
Deferred tax liabilities 633 692 651
Financial liabilities 5,360 - -
  5,993 692 651
       
CURRENT LIABILITIES      
Trade and other payables 10,482 7,274 8,583
Current tax liabilities - - 30
  10,482 7,274 8,613
       
Liabilities, total 16,475 7,966 9,264
       
SHAREHOLDERS’ EQUITY AND LIABILITIES, TOTAL 47,710 40,589 43,551
       

The Group has no liabilities resulting from derivative contracts, and there are no outstanding guarantees or any other contingent liabilities which have been granted on behalf of the management of the company or its shareholders.

CONSOLIDATED CASH FLOW STATEMENT
 

(EUR 1,000) 1-9/2011 1-9/2010 1-12/2010
       
CASH FLOW FROM OPERATING ACTIVITIES      
       
Net profit for the period 1,415 4,421 6,072
Adjustments      
   Depreciation according to plan 1,450 1,108 1,478
   Financial income and expenses 47 12 -54
   Taxes 421 1,548 2,151
Cash flow before change in working capital 3,333 7,089 9,647
       
Change in working capital -4,086 -3,670 -2,452
   Increase (-) / decrease (+) in current
non-interest-bearing trade receivables
-1,646 -1,594 -1,193
   Increase (-) / decrease (+) in inventories -4,276 -1,479 -1,943
   Increase (-) / decrease (+) in current
non-interest-bearing liabilities
1,836 -597 684
Cash flow from operating activities before
financial items and taxes
-753 3,419 7,195
       
Paid interest and payments on other
financial expenses
-90 -21 -30
Interest received 44 9 81
Taxes paid -1,017 -2,485 -2,687
       
CASH FLOW FROM OPERATING ACTIVITIES -1,816 922 4,559
       
CASH FLOW FROM INVESTING ACTIVITIES      
       
Investments in tangible and intangible assets -5,529 -689 -1,519
       
CASH FLOW FROM INVESTING ACTIVITIES -5,529 -689 -1,519
       
CASH FLOW FROM FINANCING ACTIVITIES      
       
Long-term loans drawn 5,360 - -
Dividends paid -4,422 -3,618 -3,618
       
CASH FLOW FROM FINANCING ACTIVITIES 938 -3,618 -3,618
       
Change in cash and cash equivalents -6,407 -3,385 -578
       
Cash and cash equivalents at the beginning of the period 9,667 10,245 10,245
Cash and cash equivalents at the end of the period 3,260 6,860 9,667


CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS’ EQUITY
 

(EUR 1,000) Equity attributable to equity holders of the parent company
 
Share capital
Translation
differences
Retained
earnings
Shareholders’
equity, total
         
Shareholders’ equity 1 Jan. 2010 8,040 2 23,783 31,825
Comprehensive result for the period   -5 4,421 4,416
Dividends paid     -3,618 -3,618
Shareholders’ equity
30 Sept. 2010
8,040 -3 24,586 32,623
         
Shareholders’ equity 1 Jan. 2011 8,040 10 26,237 34,287
Comprehensive result for the period   -45 1,415 1,370
Dividends paid     -4,422 -4,422
Shareholders’ equity
30 Sept. 2011
8,040 -35 23,230 31,235


KEY FIGURES

  1-9/2011 1-9/2010 Change, % 1-12/2010
         
Earnings per share, EUR 0.18 0.55 -67.3 0.76
Equity per share, EUR 3.88 4.06 -4.4 4.26
Return on equity  (ROE), % 5.8 18.3   18.4
Return on investment (ROI), % 7.2 24.8   25.0
Equity ratio, % 65.5 80.4   78.8
Gearing, % 6.7 -21.0   -28.2
Gross investments, EUR 1,000 5,529 689   1,519
Gross investments, % of net sales 10.3 1.3   2.1
Contingent liabilities, EUR 1,000 19,555 9,142 113.9 11,147
Average personnel 393 372 5.6 375
Personnel at the end of the period 405 378 7.1 388
Number of shares at the end of the period
(1,000)
8,040 8,040   8,040
Number of shares outstanding, average
(1,000)
8,040 8,040   8,040


NET SALES BY MARKET AREA

(EUR 1,000) 7-9/
2011
7-9/
2010*
Change, % 1-9/
2011
1-9/
2010*
Change, % 1-12/
2010*
               
Finland 12,606 13,437 -6.2 34,154 35,072 -2.6 51,277
Scandinavia 1,956 1,871 4.5 5,294 5,284 0.2 7,045
Central and Southern Europe 1,696 1,409 20.4 4,866 3,827 27.1 5,248
North America 1,144 1,062 7.7 2,835 2,679 5.8 4,020
Asia-Pacific 2,410 1,689 42.7 6,712 4,361 53.9 5,707
TOTAL 19,812 19,468 1.8 53,861 51,223 5.2 73,297

* Due to adjustments made in the review period in internal sales reporting structures, the previously reported sales figures by market area have changed.


NET SALES BY PRODUCT LINE
 

(EUR 1,000) 7-9/
2011
7-9/
2010*
Change, % 1-9/
2011
1-9/
2010*
Change, % 1-12/
2010*
               
Clothing 7,571 7,028 7.7 20,534 19,387 5.9 25,703
Interior decoration 7,782 8,232 -5.5 22,289 21,919 1.7 34,028
Bags 4,459 4,208 6.0 11,038 9,917 11.3 13,566
TOTAL 19,812 19,468 1.8 53,861 51,223 5.2 73,297

* Due to adjustments made in the review period in internal sales reporting structures, the previously reported sales figures by product line have changed.


SEGMENT INFORMATION
 

(EUR 1,000) 1-9/2011 1-9/2010 Change, % 1-12/2010
         
Marimekko business        
   Net sales 53,861 51,223 5.2 73,297
   Operating profit 1,883 5,981 -68.5 8,169
   Assets 47,710 40,569 17.6 43,551


QUARTERLY TREND IN NET SALES AND EARNINGS
 

(EUR 1,000) 7-9/2011 4-6/2011 1-3/2011 10-12/2010
         
Net  sales 19,812 16,815 17,234 22,074
Operating result 2,321 -798 360 2,188
Earnings per share, EUR 0.21 -0.07 0.04 0.21
         
(EUR 1,000) 7-9/2010 4-6/2010 1-3/2010 10-12/2009
         
Net sales 19,468 15,747 16,008 20,719
Operating result 4,170 588 1,223 2,353
Earnings per share, EUR 0.38 0.05 0.12 0.22