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HALF-YEAR FINANCIAL REPORT OF MARIMEKKO CORPORATION, 1 January – 30 June 2021: Marimekko’s net sales and result increased considerably in the second quarter

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Marimekko Corporation, Half-year Financial Report, 19 August 2021 at 8.00 a.m.

HALF-YEAR FINANCIAL REPORT OF MARIMEKKO CORPORATION, 1 January – 30 June 2021: Marimekko’s net sales and result increased considerably in the second quarter

This release is a summary of Marimekko’s half-year financial report for the January-June 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 second quarter in brief

  • Marimekko’s net sales grew by 40 percent to EUR 32.7 million (23.3). Nearly all of Marimekko’s own stores were open and footfall in the stores grew significantly from the comparison period, when the situation was highly exceptional and Marimekko’s own stores and many of the partner-owned stores were temporarily closed for part of the quarter due to the pandemic. Net sales in Finland rose by 61 percent; international sales were up by 20 percent.
  • Net sales were boosted especially by a favorable trend in retail and wholesale sales in Finland as well as increased wholesale sales in the Asia-Pacific region and Scandinavia. On the other hand, net sales were weakened by lower licensing income in the Asia-Pacific region. Following campaigns and holidays at the turn of the reporting period, there were temporarily delays of a few days in the deliveries of the online store and some EUR 0.5 million (0.7) in retail sales were exceptionally left unrecognized as revenue for the second quarter.
  • Operating profit improved significantly, reaching EUR 5.5 million (2.7). Comparable operating profit was also EUR 5.5 million (2.7).
  • Earnings were boosted especially by increased net sales. Improved relative sales margin also supported result. On the other hand, an increase in fixed costs had a weakening impact on earnings.

January-June in brief

  • Net sales grew by 28 percent to EUR 61.8 million (48.2). Net sales were boosted especially by a favorable trend in wholesale and retail sales in Finland, growing wholesale sales in the Asia-Pacific region and Scandinavia as well as increased licensing income in the EMEA region. The good development of wholesale sales in Finland was partly supported by nonrecurring promotional deliveries. 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. On the other hand, net sales were weakened by lower licensing income in the Asia-Pacific region.
  • Operating profit amounted to EUR 11.1 million (3.9), and comparable operating profit was also EUR 11.1 million (3.9).
  • Earnings were boosted especially by increased net sales but also improved relative sales margin. On the other hand, an increase in fixed costs had a weakening impact on result.

Financial guidance for 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).

The instability caused by the coronavirus pandemic in Marimekko’s markets has again increased clearly. Therefore, there are significant uncertainties associated with the trend in the company’s net sales and earnings due to the pandemic situation. These uncertainties are described in more detail in the Major risks and factors of uncertainty section of this half-year financial report.

Key figures

(EUR million) 4–6/ 2021 4–6/ 2020 Change,
%
1–6/
2021
1–6/
2020
Change,
%
1–12/
2020
Net Sales 32.7 23.3 40 61.8 48.2 28 123.6
International sales 14.3 11.9 20 28.9 23.2 24 52.4
% of net sales 44 51 47 48 42
EBITDA 8.5 5.8 47 17.2 10.2 69 31.9
Comparable EBITDA 8.5 5.8 47 17.2 10.2 69 32.7
Operating profit 5.5 2.7 107 11.1 3.9 188 19.3
Operating profit margin, % 16.8 11.4 18.0 8.0 15.7
Comparable operating profit 5.5 2.7 107 11.1 3.9 188 20.2
Comparable operating profit margin, % 16.8 11.4 18.0 8.0 16.3
Result for the period 4.1 2.2 92 8.6 2.3 13.8
Earnings per share, EUR 0.51 0.27 92 1.06 0.29 1.70
Comparable earnings per share, EUR 0.51 0.27 92 1.06 0.29 1.78
Cash flow from operating activities 7.4 4.0 83 9.2 -0.4 28.1
Return on investment (ROI), % 31.2 19.5 22.5
Equity ratio, % 48.7 40.7 46.6
Net debt / EBITDA (rolling 12 months) -0.08 0.53 -0.10
Gross investments * 0.4 0.4 -4 0.8 0.9 -9 2.1
Personnel at the end of the period 400 432 -7 422
outside Finland 71 83 -14 84
Brand sales ** 74.7 59.0 27 142.1 132.0 8 286.4
outside Finland 49.9 44.0 13 96.7 98.4 -2 190.3
     proportion of international sales, % 67 75 68 75 66
Number of stores 154 150 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 half-year financial 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:

“Our net sales in the second quarter grew substantially both in Finland and internationally. Also, our result improved significantly.

Marimekko’s strong performance continued in the second quarter. Our net sales increased by 40 percent to EUR 32.7 million (23.3). The development of retail and wholesale sales in Finland and wholesale sales in the Asia-Pacific region and Scandinavia was particularly good. Nearly all Marimekko’s own stores were open and footfall increased significantly compared to the previous year, when the situation was highly exceptional and Marimekko’s own stores – and many partner-owned stores – were temporarily closed for part of the quarter due to the coronavirus pandemic. Our omnichannel retail sales increased by 38 percent. The strong growth of wholesale sales continued with an increase of 53 percent in April–June. In the comparison period, the pandemic had a significant impact on net sales especially in Finland, where net sales now grew by 61 percent. Our international sales increased by 20 percent in the review period. The growth of sales, in particular, strengthened our operating profit, which grew significantly. Stronger relative sales margin also supported our result. Our comparable operating profit in April–June improved to EUR 5.5 million (2.7) and was 16.8 percent of net sales (11.4).

In January–June, our net sales grew by 28 percent and amounted to EUR 61.8 million (48.2). Compared to the time pre-pandemic, i.e. the corresponding period in 2019, the rate of growth was 10 percent. Our comparable operating profit in the first half of the year increased to EUR 11.1 million (3.9), which represented 18.0 percent of net sales (8.0).

In May, we announced two limited-edition collaboration collections, which are helping us increase Marimekko’s international brand awareness. In addition to visibility, brand collaborations provide us licensing income, which is part of our business model. Together with adidas, a global leader in the sporting goods industry, we launched Marimekko’s first-ever sports apparel collaboration. The news was enthusiastically received, and the collection has provided us with an excellent opportunity to introduce Marimekko to a broad global audience including also customers entirely new to us. The Spring/Summer capsule collection with the Japanese global apparel retailer Uniqlo, in turn, was one of Uniqlo’s spearhead collaborations in 2021.

In the second quarter, international visibility was also brought about by several events related to our 70th anniversary as well as pop-up stores in Asia, Australia and North America. For example, Nordstrom, a leading fashion retailer in the United States and Canada, put Marimekko’s brand and products prominently on display with its “Pop-In@Nordstrom welcomes Marimekko” campaign in its online store and department stores in nine cities. Pop-up stores and various creative retail concepts represent an important part of our omnichannel customer experience, in the development of which we have invested consistently. We also revamped our online store in May and will further enrich the digital customer experience this fall. Overall, in the second half of 2021, we will continue our investments in strengthening the building blocks of our long-term international growth in order to seize the growth opportunities that the transformation of our industry and changes in consumer behavior present to the timeless, sustainable and unique Marimekko lifestyle.

The development of the pandemic situation in each of our markets is nevertheless evolving and the instability caused by the pandemic has again increased clearly. We will adjust our plans as necessary. New virus variants, the development of vaccination coverage and the way the situation is managed by different countries have an impact on the development of consumer confidence and purchasing behavior, in particular, and the continuing uncertainty may affect consumer demand in our different markets.

Today, the 70-year-old Marimekko brand is more vibrant than ever. After the end of the review period, in August, we presented our first Spring/Summer collection designed under the leadership of our Creative Director Rebekka Bay at Copenhagen Fashion Week and collaborated with the Copenhagen-based design studio and store studio x to open an ever-evolving experiential pop-up space in the city as an inspiration and meeting place for the local community. We also launched a Marimekko Pre-loved second-hand pilot in our online store to help extend the lifespan of Marimekko products. We believe that new and brave perspectives, concepts and touchpoints will keep the Marimekko brand relevant and meaningful for our customers also in the future.”

Market outlook and growth targets for 2021

The coronavirus pandemic has been 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. Development of the pandemic situation can cause sudden fluctuations in demand, which 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. Vaccine coverage, new infection waves and virus variants as well as the way the crisis is handled by different countries may influence the economic development and consumers’ purchasing behavior 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.

Marimekko estimates that both wholesale and retail sales will increase in 2021. The growth is expected to be particularly strong in wholesale sales, which also include sales to partners operating Marimekko stores. The increase in wholesale sales is partly supported by the nonrecurring promotional deliveries in Finland, and they can increase Marimekko’s inventory risks. The development of the coronavirus situation, vaccine coverage and possible restrictions and recommendations in different market areas, on the other hand, influence footfall in stores and hence the outlook for both retail and wholesale, including nonrecurring wholesale promotions. Rapid fluctuations in demand due to the pandemic can also affect Marimekko’s net sales. Marimekko has experienced some coronavirus related disruptions in its supply chain, which can have an impact on the availability of products and consequently on net sales and profitability. Furthermore, 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 approximately at the same level as 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, especially during the second half of the 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) and take place especially in the second half of the year. In addition, IT costs are expected to increase clearly as the accounting principles related to configuration and customization costs in a cloud computing arrangement will change as a result of a new IFRIC interpretation. According to the current, preliminary estimate, the change in accounting principles will increase Marimekko’s fixed costs and accordingly lower the company’s investments approximately by some EUR 1 million during the financial year 2021. Marimekko will finalize the calculations during the fall of 2021 and possible impacts will be accounted for retrospectively latest at the financial statements 2021. As a result, total investments are estimated to be clearly lower than the year before (2020: EUR 2.1 million). 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 first earnings period will end at the end of September 2021.

The instability caused by the coronavirus pandemic has again clearly increased. 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 traditionally generated during the last two quarters of the year. However, the relative growth of the net sales is expected to slow down during the second half of the year as the coronavirus pandemic had an exceptionally negative effect on the net sales during the first six months of 2020.

Media and investor conference

A conference for media and institutional investors will be held in English on 19 August 2021 at 2.00 p.m. EEST. A live webcast of the conference can be followed at https://marimekko.videosync.fi/2021-q2-results/, and a recording of the webcast will be available at the same address later. Questions can be asked during the live webcast in writing.

Further information:

Tiina Alahuhta-Kasko, President and CEO, tel. +358 9 758 71
Elina Anckar, CFO, tel. +358 9 758 7261

MARIMEKKO CORPORATION
Corporate Communications

Anna Tuominen
Tel. +358 40 5846944
anna.tuominen@marimekko.com


DISTRIBUTION:
Nasdaq Helsinki Ltd
Key media

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

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