Marimekko Oyj
Interim report (Q1 and Q3)

INTERIM REPORT OF MARIMEKKO CORPORATION, 1 January – 30 September 2017: Royalties and retail sales contributed to a good earnings trend in the third quarter

Marimekko Corporation, Interim Report, 2 November 2017 at 8.30 a.m.

INTERIM REPORT OF MARIMEKKO CORPORATION, 1 January – 30 September 2017: Royalties and retail sales contributed to a good earnings trend in the third quarter

This release is a summary of Marimekko’s interim report for the January-September 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 third quarter in brief

• Net sales grew by 1 percent to EUR 27.2 million (Q3/2016: 26.9).
• Net sales were boosted by increased royalties resulting from a new licensing agreement in the Asia-Pacific region as well as a positive trend in retail sales, particularly in Finland. Finnish wholesale sales declined; the comparison period's wholesale sales included nonrecurring promotional deliveries, and none took place this year.
• Operating profit grew on the comparison period and was EUR 4.4 million (3.7).
• Operating profit was boosted by increased royalties in the Asia-Pacific region, growth in retail sales in Finland, and a rise in relative sales margin. A downturn in wholesale sales in Finland exerted a drag on results.

January-September in brief

• Net sales grew by 1 percent and were EUR 72.5 million (1–9/2016: 71.4).
• Operating profit improved on the same period last year to EUR 6.0 million (3.5). The comparison period's operating profit included a restructuring expense amounting to EUR 0.8 million. Comparable operating profit was EUR 6.2 million (4.3).
• Operating profit was improved by a rise in relative sales margin, growth in retail sales in Finland and Australia, smaller depreciation than in the comparison period, and increased royalties in the Asia-Pacific region. A drag was exerted on results by a downturn in Finnish wholesale sales; last year's wholesale sales for the third quarter included nonrecurring promotional deliveries, and none took place this year.

Financial guidance for 2017 (updated on 27 October 2017)

The Marimekko Group’s net sales for 2017 are estimated to be at the same level as in the previous year and comparable operating profit is expected to be at the same level as or higher than in the previous year.

In its half-year financial report published on 10 August 2017, the company estimated that its net sales and comparable operating profit for 2017 would be at the same level as in the previous year.

Key figures

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:

"Results for the third quarter were strong.

"In the July-September period, our net sales grew by 1 percent and our operating profit grew to EUR 4.4 million (3.7). The earnings were boosted by increased royalties resulting from a new licensing agreement in the Asia-Pacific region, by a positive trend in retail sales, particularly in Finland, and by a rise in relative sales margin. Key factors in the improvement in sales margin were a positive trend in our retail sales in general as well as growth in regular-priced sales. Our results were weakened by a downturn in Finnish wholesale sales, which was due to the fact that the comparison period's wholesale sales included nonrecurring promotional deliveries, and none took place this year.

"In the January-September period of 2017, our net sales also grew by 1 percent; our operating profit grew on the comparison period to EUR 6.0 million (3.5), and our comparable operating profit was EUR 6.2 million (4.3). On 27 October 2017, we revised our estimate of comparable operating profit for 2017 due to better-than-expected relative sales margin and trend in our retail sales as well as increased royalties. Our comparable operating profit for 2017 is expected to be at the same level as or higher than in the previous year.

"On the whole, I think we can be pleased with the third quarter. We succeeded in continuing the improvement in relative sales margin which got underway in the second quarter. Cash flow from operating activities also strengthened. This provides a good basis for proceeding with improvements.

"During the autumn, we have continued our efforts to underpin the international profile of our brand and to reinforce our competitiveness. In mid-September, in collaboration with Slush (Europe's leading event for technology and start-ups) and Junction (the largest hackathon in Europe), we held the Marimekko Designathon competition in honour of Finland's centenary year. In the competition, we invited younger-generation talents to challenge the traditional conventions of the textile and clothing industry and to develop fresh, customer-centred solutions with the help of virtual reality and augmented reality technologies. It is important for us to invest in the opportunities offered by digitisation.

"At the beginning of October, we showcased our spring/summer 2018 ready-to-wear collection at Paris Fashion Week, which is globally one of the biggest events in our sector. The presentation was held at the Palais de Tokyo museum of modern art, and its creative concept was built on our tradition of pattern design and fabric printing based at our Helsinki headquarters, which attracted the attention of the fashion world's authenticity-appreciating media and influencers. We were also happy that our bold prints and colours were shown in Paris in Junya Watanabe’s spring/summer 2018 collection for Comme des Garçons.

"In the remaining months of the year, we are continuing the long-term work by which we strive to underpin our competitiveness and to seek markedly stronger growth and profitability. As we have reported, delineating our product range and pricing strategies as well as enhancing the efficiency of our procurement chain play a strong part in this work. As is typical in our line of business, the share of holiday sales in particular of sales for the last quarter is considerable, and the outcome of the holiday season has a significant impact on results for the whole year. During the rest of the year, we will focus on ensuring successful holiday sales."

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 2016.

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 continues to be on openings of retailer-owned Marimekko stores. The aim is to open around 10–20 new Marimekko stores and shop-in-shops. Roughly half of the new stores will be shop-in-shops. Furthermore, the company continues 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 is expected to grow in 2017. Most of the royalty income for the year as a whole was generated in the January-September period of 2017.

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 1.5 million (2.7).

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. 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 a significant impact on results for the whole year. 

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