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Marimekko Corporation, Interim Report, 20 May 2021 at 8.00 a.m.
INTERIM REPORT OF MARIMEKKO CORPORATION, 1 January–31 March 2021: In the first quarter, Marimekko’s net sales were up by 17 percent and operating profit improved significantly. International sales increased noticeably.
This release is a summary of Marimekko’s interim report for the January-March period of 2021. 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 first quarter in brief
- The coronavirus pandemic continues to heavily impact the fashion industry and specialty retail sector all over the world. Despite the challenging situation, Marimekko’s net sales grew by 17 percent to EUR 29.1 million (24.9). Net sales in Finland rose by 7 percent; international sales were up by 29 percent.
- Net sales were boosted especially by a favorable trend in wholesale sales in the Asia-Pacific region, Finland and Scandinavia as well as increased licensing income in EMEA. Sales growth in the Asia-Pacific was partly due to the transfer of some of the wholesale deliveries for the final quarter of 2020 to the first quarter of the current year. In Finland, nonrecurring promotional deliveries in particular contributed to an increase in wholesale sales.
- The increasingly difficult pandemic situation and tighter restrictions in several markets continued to reduce footfall in stores. Good growth in online sales, however, supported retail sales, which only declined slightly considering the circumstances.
- Operating profit improved significantly, reaching EUR 5.6 million (1.2). Comparable operating profit was also EUR 5.6 million (1.2).
- Earnings were boosted by increased net sales, improved relative sales margin, as well as a decrease in fixed costs, which was partly due to the timing of expenses and temporary cost savings.
Financial guidance for 2021 (as revised on 12 May 2021)
The Marimekko Group’s net sales for 2021 are expected to be higher than in the previous year (2020: EUR 123.6 million). Comparable operating profit margin is estimated to be approximately on a par with or higher than in the previous year (2020: 16.3 percent).
However, the instability caused by the coronavirus pandemic in Marimekko’s markets continues, and therefore there are significant uncertainties associated with the trend in net sales and earnings. These uncertainties are described in the Major risks and factors of uncertainty section of this interim report.
|(EUR million)||1–3/2021||1–3/2020||Change, %||1–12/2020|
|% of net sales||50||45||42|
|Operating profit margin, %||19.3||4.9||15.7|
|Comparable operating profit||5.6||1.2||20.2|
|Comparable operating profit margin, %||19.3||4.9||16.3|
|Result for the period||4.4||0.2||13.8|
|Earnings per share, EUR||0.55||0.02||1.70|
|Comparable earnings per share, EUR||0.55||0.02||1.78|
|Cash flow from operating activities||1.8||-4.5||28.1|
|Return on investment (ROI), %||29.0||18.3||22.5|
|Equity ratio, %||47.0||41.3||46.6|
|Net debt / EBITDA (rolling 12 months)||0.08||0.56||-0.10|
|Gross investments *||0.4||0.5||-14||2.1|
|Personnel at the end of the period||416||441||-6||422|
|Brand sales **||67.4||73.0||-8||286.4|
|proportion of international sales, %||69||75||66|
|Number of stores||154||149||3||154|
The change percentages in the table were calculated on exact figures before the amounts were rounded to millions of euros. The figure for comparable earnings per share takes account of similar items as comparable operating profit; tax effect included. Reconciliation of alternative key figures to IFRS and management’s discretion regarding items affecting comparability are presented in the table section of this interim report.
* The figures for gross investments do not include the impact of IFRS 16.
** Brand sales are given as an alternative non-IFRS key figure, representing the reach of the Marimekko brand through different distribution channels. An unofficial estimate of sales of Marimekko products at consumer prices, brand sales 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 estimated retail value is based on the company’s realized wholesale sales and licensing income. Brand sales do not include VAT, and the key figure is not audited. At the beginning of 2021, the coefficients used to calculate brand sales were adjusted, and the figures for the comparison year have been restated accordingly. Some licensees provide exact retail figures, in which case these figures are used in reporting brand sales. For other licensing agreements, Marimekko’s own retail coefficients for different markets are used.
Tiina Alahuhta-Kasko, President and CEO, in conjunction with the report:
“Successful wholesale sales in particular contributed to an increase in our net sales in the first quarter. International sales grew markedly. Thanks to higher net sales, a stronger relative sales margin and reduced fixed costs, our results improved significantly.
“Marimekko did well in the first quarter. Our attractive collections and the growing interest in home decoration, the lessons and new operating practices we learned during the exceptional circumstances and our long-term work to develop our brand and omnichannel business helped us achieve good growth.
“Our net sales in the January-March period rose by 17 percent to EUR 29.1 million (24.9) due especially to a favorable trend in wholesale sales in the Asia-Pacific region, Finland and Scandinavia and increased licensing income in EMEA. Growth in our wholesale sales in the Asia-Pacific was partly attributable to the transfer of some of the wholesale deliveries for the final quarter of 2020 to the first quarter of the current year. In Finland, nonrecurring promotional deliveries in particular contributed to an increase in wholesale sales. Our licensing income in EMEA rose as a result of an agreement signed in spring 2021.
“Marimekko stores around the world were open in the first quarter with a few exceptions but, in many markets, the increasingly difficult pandemic situation and tighter restrictions continued to reduce footfall in stores. Good growth in online sales, however, supported our omnichannel retail. All in all, net sales in Finland grew by 7 percent, while international sales increased by 29 percent.
“Our comparable operating profit in the January-March period rose to EUR 5.6 million (1.2), representing 19.3 percent of net sales (4.9). Results improved significantly as our sales increased, the relative sales margin strengthened, and our fixed costs decreased. The decrease in fixed costs was partly due to the timing of expenses and temporary cost savings.
“At Copenhagen Fashion Week in February, our digital presentation highlighted our timeless design philosophy and original approach to printmaking in celebration of our 70th anniversary. Copenhagen Fashion Week’s focus on sustainability makes it one of the most interesting global events in the industry and a natural opportunity for Marimekko to build international awareness. The Zalando Sustainability Award competition was organized as part of the event, with Marimekko being awarded second place in recognition of its long-term work to promote sustainability.
“In the early months of the year, we also continued to increase our visibility in the Asian markets, which are especially important for us in the next phase of our international growth. Pop-up stores showcasing our anniversary and our Co-Created collections in major Asian cities introduced new audiences to our brand. In addition, the world’s first Marimekko Kioski store was opened in Japan. Marimekko Kioski streetwear is especially popular among younger consumers. We believe that the significance of these kinds of creative retail concepts as part of a seamless omnichannel customer experience will grow in the post-pandemic new reality. Our revamped online store will also open during the summer.
“This year, we are investing in strengthening the building blocks of our long-term international growth: in addition to our digital business and a seamless omnichannel customer experience, we are continuing to develop our sustainability and brand awareness. Changes in consumer behavior as a result of the growing significance of digitization and sustainability present unique growth opportunities for Marimekko, and we are willing to boldly seize those opportunities. We are of course closely monitoring the development of the pandemic situation in each of our market areas and will adjust our plans as necessary.
“Our 70th anniversary provides us with excellent opportunities to speak to our existing loyal customers as well as new fans of Marimekko. Our goal for this milestone year is to, together with our customers, make the Marimekko phenomenon even more meaningful while continuing to bring joy to people’s everyday lives around the world.”
Market outlook and growth targets for 2021
The coronavirus pandemic has created the worst crisis experienced by the global fashion industry and specialty retail sector in decades, and it will heavily impact the sector in 2021 as well. It has taken uncertainty over the global economy to a completely new level and is changing consumers’ purchasing behavior. The exceptional circumstances can have an impact on Marimekko’s sales, profitability and cash flow. Furthermore, the global crisis may affect the operational reliability of the company’s value chain. The duration of the pandemic, new infection waves and virus variants as well as the way the crisis is handled by different countries influence the depth of the economic recession in different markets.
Finland, Marimekko’s important domestic market, traditionally represents about half of the company’s net sales. Sales in Finland are expected to grow on the previous year. Domestic wholesale sales in 2021 will be boosted by nonrecurring promotional deliveries, the total value of which is estimated to be substantially higher than the year before. A vast majority of the deliveries will take place in the second half of the year.
The Asia-Pacific region is Marimekko’s second-largest market and it plays a significant part in the company’s international growth. Japan is clearly the most important country in this region to Marimekko and already has a very comprehensive network of Marimekko stores. The other Asian countries’ combined share of the company’s net sales is still noticeably smaller, but operations in these countries are constantly growing. All Marimekko stores in Asia are partner-owned. Net sales in the Asia-Pacific region are expected to increase in 2021. The aim is to open approximately 5 to 10 new Marimekko stores and shop-in-shops in 2021, and most of the planned openings will be in Asia.
Both the company’s own and its Asian partners’ omnichannel Marimekko retail is the key driver of Marimekko’s growth. Nonrecurring promotional wholesale deliveries in Finland are also estimated to have a significant impact on the company’s growth in 2021, and they can increase Marimekko’s inventory risks. The development of the coronavirus situation, vaccine coverage and possible tightening restrictions in different market areas, on the other hand, influence customer numbers in stores and hence the outlook for both retail and wholesale, including nonrecurring wholesale promotions. Rapid fluctuations in demand due to the pandemic can have an impact, for example, on the availability of products and consequently on net sales. Net sales and earnings also essentially depend on maintaining the operational reliability and efficiency of distribution centers and logistics in the exceptional situation. Marimekko will continue actions to control gray exports, which will have a clear weakening impact on the company’s sales and earnings in 2021. Licensing income is forecast to be lower than in the previous year.
Marimekko plans to accelerate its long-term international growth in 2021 and to invest especially in digital business, seamless omnichannel customer experience, sustainability and brand awareness. Fixed costs are expected to be up on the previous year. In 2020, fixed costs were reduced by partly temporary cost savings as well as subsidies granted in different countries to mitigate the negative business impacts of the coronavirus pandemic. Marketing expenses are expected to grow (2020: EUR 5.3 million). Total investments are estimated to be approximately at the same level as the year before (2020: EUR 2.1 million). Most of the investments will be devoted to IT systems in order to strengthen the company’s digital business. The estimated effects of the long-term bonus system targeted at the company’s Management Group will depend on the trend in the price of the company’s share during the year.
The instability caused by the coronavirus pandemic continues. Marimekko is closely monitoring the development of the pandemic situation in each of its market areas and will adjust its operations and plans according to the situation.
Because of the seasonal nature of Marimekko’s business, the major portion of the company’s euro-denominated net sales and earnings are generated during the last two quarters of the year.
Media and investor conference
A conference for media and institutional investors will be held in English on 20 May 2021 at 2.00 p.m. EET. A live webcast of the conference can be followed at https://marimekko.videosync.fi/2021-q1-results/register, and a recording of the webcast will be available at the same address later. Questions can be asked during the live webcast in writing.
Tiina Alahuhta-Kasko, President and CEO, tel. +358 9 758 71
Elina Anckar, CFO, tel. +358 9 758 7261
Tel. +358 40 5846944
Nasdaq Helsinki Ltd
Marimekko is a Finnish lifestyle design company renowned for its original prints and colors. 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 2020, brand sales of the products worldwide amounted to EUR 286 million and the company’s net sales were EUR 124 million. Roughly 150 Marimekko stores serve customers around the globe. The key markets are Northern Europe, the Asia-Pacific region and North America. The Group employs about 420 people. The company’s share is quoted on Nasdaq Helsinki Ltd. www.marimekko.com