Published: 2017-08-10 07:30:00 CEST
Marimekko Corporation
Half Year financial report

HALF-YEAR FINANCIAL REPORT OF MARIMEKKO CORPORATION, 1 January – 30 June 2017: Net sales fell slightly due to the timing of an annual sales promotion; earnings were at a good level, meeting the company’s expectations

Marimekko Corporation, Half-year Financial Report, 10 August 2017 at 8.30 a.m.

HALF-YEAR FINANCIAL REPORT OF MARIMEKKO CORPORATION, 1 January – 30 June 2017: Net sales fell slightly due to the timing of an annual sales promotion; earnings were at a good level, meeting the company’s expectations

This release is a summary of Marimekko’s half-year financial report for the January-June period of 2017. 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 and publications.

The second quarter in brief

  • Net sales fell by 3 percent to EUR 22.8 million (Q2/2016: 23.5). The main reason for the decline was the timing of a sales promotion in Finland.
  • Operating result declined compared to the same period last year and was EUR 0.7 million (0.9).
  • A drag was exerted on operating result by a downturn in sales in Finland, which was due to the timing of a sales promotion held every spring. The summer sales promotion was implemented in a more moderate form than in the previous year, which improved the relative sales margin.

January-June in brief

  • Net sales grew by 2 percent to EUR 45.3 million (1–6/2016: 44.5).
  • Operating result improved markedly compared with the same period last year, reaching EUR 1.6 million (-0.2). The comparison period's operating result included a restructuring expense of EUR 0.8 million. Comparable operating result was EUR 1.8 million (0.7).
  • Operating result was improved by an increase in relative sales margin, growth in sales in Finland, and smaller depreciation than in the comparison period.

Financial guidance for 2017 (unchanged)

The Marimekko Group's net sales and comparable operating profit for 2017 are forecast to be at the same level as in the previous year.

Key figures

(EUR million)                                         4-6/
2017
4-6/
2016
Change, % 1-6/
2017
1-6/
2016
Change,
%
1-12/
2016
Net sales 22.8 23.5 -3 45.3 44.5 2 99.6
International sales 10.4 10.1 3 21.0 20.9 1 43.8
   % of net sales 45 43   46 47   44
EBITDA 1.5 1.9 -18 3.3 1.9 72 9.4
Comparable EBITDA 1.5 1.9 -20 3.5 2.7 28 10.2
Operating result 0.7 0.9 -20 1.6 -0.2   5.2
Comparable operating result 0.7 0.9 -23 1.8 0.7 175 6.1
Operating result margin, % 3.1 3.7   3.5 -0.4   5.3
Comparable operating result margin, % 3.1     3.9   4.0     1.5       6.1
Result for the period 0.1 0.7 -86 0.7 -0.3   4.0
Earnings per share, EUR 0.01 0.08 -86 0.08 -0.03   0.50
Cash flow from operating activities -1.6     0.9   -2.7     -3.0     9     6.1
Return on investment (ROI), %       17.4     6.3       15.8
Equity ratio,  %       54.0 48.3   58.5
Gross investments 0.4 1.2 -64 0.7 1.4 -50 2.7
Personnel at the end of the period       452     469     -4     431
   outside Finland       109 115 -5 111
Brand sales* 40.9 53.4 -23 85.6 97.5 -12 199.3
   outside Finland 24.6 36.4 -33 53.1 65.1 -19 124.1
   proportion of international sales, % 60     68   62     67       62
Number of stores       163 158 3 159

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. The calculation method for 2017 figures has been restated for the coefficients used; to maintain comparability, the change also applies to the figures for 2016.


Tiina Alahuhta-Kasko, President and CEO, in conjunction with the report:

"The trend in our earnings was underpinned by an improved sales margin.

"In the April-June period, our net sales declined by 3 percent, which was largely due to the timing of an annual sales promotion carried out in Finland. This year the campaign was held at the end of March and beginning of April, whereas last year it took place entirely in the second quarter. Also, the relocation of our main warehouse in Finland resulted in a short-term loss of sales. The relocation of the warehouse is intended to boost the cost-effectiveness and agility of our logistics processes and thus to underpin our competitiveness in the future. Our summer sales promotion was more moderate than in the previous year, and I am glad that we succeeded in improving our relative sales margin.

"In the first half of the year, our net sales rose by 2 percent; our operating result grew to EUR 1.6 million (-0.2), and our comparable operating result was EUR 1.8 million (0.7). Our profitability was boosted by an increase in relative sales margin, growth in sales in Finland, and smaller depreciation than in the comparison period. It is good to note that, as is typical of our sector, our net sales in the first half of the year are low relative to operating expenses for seasonal reasons. I am pleased that, after the restructuring we implemented last year, we have been able to keep costs to our targeted level.

"The revamp of our collections and our brand is proceeding, and I am confident that we are on the right track and that the work we are doing will enhance our opportunities to respond to the needs of our international customer base even better than before. As we have reported previously, we are focusing this year on delineating our product range and pricing strategies in order to seek markedly stronger growth and profitability.

"We have also continued to improve the efficiency of our procurement chain. Tina Broman, who was appointed Chief Supply Chain Officer (CSCO) and member of the Management Group in July, will take up her duties in October."


Market outlook and growth targets for 2017

The general uncertainty in the global economy is forecast to continue, and the estimated consumer demand varies in Marimekko's market areas. Retailers are exercising caution in their additional purchases and in selecting new suppliers, which is expected to impact Marimekko's wholesale sales also in 2017.

Finland, Marimekko’s important domestic market, accounts for about half of the company’s net sales. There are signs of a more positive vibe for retailing, and the trend is forecast to be moderate. Nonrecurring promotional deliveries had a positive impact on the company's sales in 2016, but no similarly large deliveries are in sight for 2017. Marimekko's sales in Finland, excluding income from nonrecurring promotional deliveries, are expected to be roughly on a par with the previous year.

The Asia-Pacific region, Marimekko's second-biggest market, 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 markets are in fairly early stages. Japan already has a very comprehensive network of Marimekko stores, and new ones are being opened at a rate of a few stores per year. Sales are supported by enhancing the operations of stores and by optimising the product range. Sales in the Asia-Pacific region this year are forecast to be roughly on a par with the previous year. About half of the Marimekko stores and shop-in-shops to be opened in 2017 will be in the Asia-Pacific region, and the company sees growing demand for its products in this area especially in the longer term. In Australia, prospects are expected to continue to be positive.

In 2017, the main thrust in expansion will continue to be on openings of retailer-owned Marimekko stores. The aim is to open around 10-20 new Marimekko stores and shop-in-shops. The majority of the new stores will be shop-in-shops. Furthermore, the company will continue the enhancement of the operations of Marimekko stores opened in recent years. The company’s own e-commerce and other online sales channels are forecast to continue to grow.

Royalty income from North America is expected to increase slightly due to a licensing agreement concluded with a North American company.

The expenses of marketing operations in 2017 are forecast to be higher than in 2016 (EUR 4.4 million). The total investments are estimated at approximately EUR 2 million (2.7).


Further information:

Tiina Alahuhta-Kasko, President and CEO, tel. +358 9 758 71
Elina Aalto, 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 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 2016, brand sales of the products worldwide amounted to EUR 199 million and the company's net sales were close to EUR 100 million. Roughly 160 Marimekko stores serve customers around the globe. The key markets are Northern Europe, North America and the Asia-Pacific region. The Group employs about 400 people. The company’s share is quoted on Nasdaq Helsinki Ltd. www.marimekko.com


Marimekko Half-year Financial Report_January-June_2017.pdf