Marimekko Oyj
Financial Statement Release

FINANCIAL STATEMENTS BULLETIN OF MARIMEKKO CORPORATION, 1 January – 31 December 2017: Comparable operating profit grew by 41 percent and net sales by 3 percent

Marimekko Corporation, Financial Statements Bulletin, 15 February 2018 at 8.30 a.m.

FINANCIAL STATEMENTS BULLETIN OF MARIMEKKO CORPORATION, 1 January – 31 December 2017: Comparable operating profit grew by 41 percent and net sales by 3 percent

This release is a summary of Marimekko’s financial statements bulletin for the January-December period of 2017. The complete bulletin 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 6 percent to EUR 29.8 million (Q4/2016: 28.2).
• Net sales were boosted by an upswing in retail sales driven by a successful holiday period, particularly in Finland. The good holiday season also boosted wholesale sales in Finland, which however declined because the comparison period's wholesale sales included nonrecurring promotional deliveries, of which there were none in 2017. International sales grew by 15 percent.
• Operating profit grew by 35 percent on the same period in the previous year and was EUR 2.4 million (1.8).
• Operating profit was improved by growth in net sales, particularly by increased retail sales in Finland. Results were also boosted by a better relative sales margin and lower depreciation than in the comparison period. A downturn in wholesale sales in Finland exerted a drag on results.

2017 in brief

• Net sales grew by 3 percent and were EUR 102.3 million (2016: 99.6).
• Growth in net sales was generated primarily by retail sales in Finland and Australia, by international wholesale sales and by royalties in the Asia-Pacific region.
• Operating profit grew to EUR 8.4 million (5.2). Operating profits for 2016 and 2017 included restructuring expenses of EUR 0.8 million and EUR 0.2 million respectively. Comparable operating profit grew by 41 percent and was EUR 8.6 million (6.1).
• Operating profit was improved by growth in net sales, a better sales margin than in the previous year, and reduced depreciation and personnel expenses. A drag was exerted on results by a downturn in wholesale sales in Finland, which was due to the fact that wholesale sales in the second half of 2016 included nonrecurring promotional deliveries, of which there were none in 2017. Results were also impacted by higher other fixed costs than in the previous year.
• The Board of Directors will propose to the Annual General Meeting that a dividend of EUR 0.50 per share be paid for 2017.

Financial guidance for 2018

The Marimekko Group's net sales and comparable operating profit for 2018 are forecast to be at the same level as or higher than 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 Financial Statements Bulletin:

"Our hard work was rewarded and a successful holiday season sealed an upturn in profitability.

“In the October-December period of 2017, our net sales grew by 6 percent and our operating profit rose to EUR 2.4 million (1.8). As is typical in our sector, the proportion of holiday sales is particularly significant in the fourth quarter. It was a high point of the closing months that our holiday season was even better than expected.

“By many indicators, we succeeded in making an improvement on the previous year in 2017. Our comparable operating profit grew by 41 percent and our net sales by 3 percent. Also, EBITDA, cash flow from operating activities and equity ratio improved. Our full-year operating profit was EUR 8.4 million (5.2) and our comparable operating profit amounted to EUR 8.6 million (6.1). The results were boosted by growth in net sales, generated primarily by retail sales in Finland and Australia, international wholesale sales, and royalties in the Asia-Pacific region. In addition, relative sales margin was an improvement on the previous year; this was thanks, among other factors, to growth in regular-priced sales. Operating profit was also improved by reduced depreciation and personnel expenses. A drag was exerted on results by a decline in wholesale sales in Finland. This was due to the fact that wholesale sales for the second half of the previous year included nonrecurring promotional deliveries, of which there were none in 2017.

“We have behind us an eventful year filled with work. We continued to build a new direction for our collections and our brand. Progress was made in refining our product range and pricing strategies as well as in enhancing the efficiency of our procurement chain, and this long-term work continues.

“In spring and autumn 2017, we showcased our ready-to-wear collections at Paris Fashion Week, which is one of the top global events in our sector. We were happy that our bold prints and colours were also shown in Paris in Junya Watanabe’s spring/summer 2018 collection for Comme des Garçons. We gained further positive visibility in October and December when two notable Tokyo galleries opened Marimekko Spirit exhibitions.

 “The significance and role of digital business in our internationalisation strategy is continuously increasing. In 2017, we extended our e-commerce to 17 new countries in Europe and currently our online store already reaches customers in 30 countries. Our Chief Digital Officer (CDO) Kari Härkönen was appointed a member of our Management Group in December. In addition to online sales, he is also in charge of leading the digital transformation at Marimekko as well as developing our omnichannel operations and related digital solutions.

“The year 2018 has also got off to a brisk start. Satu Maaranen took up her duties as head designer of Marimekko’s ready-to-wear, bags and accessories in January. Her highly international profile and experience, and – above all – her fresh and modern perspective were clinching factors in her appointment. In January we also announced our collaboration with two globally renowned and prestigious operators. One of these is the Japanese clothing brand Uniqlo and the other is the cosmetics brand Clinique.

“I am glad that we have succeeded in underpinning our international competitiveness in line with our objectives. All in all, I think we can be pleased with the steps we have recently taken. We are well poised to continue our long-term work by which we seek clearly stronger growth than before. Expanding the customer base, enhancing operational efficiency and utilising the new opportunities afforded by digitisation will play a central role in this work.”

Market outlook and growth targets in 2018

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.

Finland, Marimekko’s important domestic market, represents about half of the company’s net sales. Growth in retail trade is forecast to be at a fairly good level. Sales in 2018 will be impacted positively by nonrecurring promotional deliveries; in 2017 there were no similarly large deliveries. Marimekko’s sales in Finland are expected to grow in 2018.

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 grow. The company sees increasing demand for its products in this area especially in the longer term.

In 2018, the main thrust in expansion remains on openings of retailer-owned Marimekko stores, and continuing growth is expected in the company’s own e-commerce and other online sales channels. The aim is to open around 10–15 new Marimekko stores and shop-in-shops. The company will continue the enhancement of the operations of Marimekko stores opened in recent years.

Royalty income is forecast to be roughly on a par with the previous year.

The expenses of marketing operations in 2018 are forecast to be higher than in 2017 (EUR 4.5 million). The total investments are estimated to grow relative to the previous year (EUR 1.2 million).

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 2017, brand sales of the products worldwide amounted to EUR 193 million and the company's net sales were EUR 102 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 450 people. The company’s share is quoted on Nasdaq Helsinki Ltd. www.marimekko.com