INTERIM REPORT OF MARIMEKKO CORPORATION, 1 January – 30 September 2021: Marimekko’s net sales and result continued to increase in the third quarter
Marimekko Corporation, Interim Report, 3 November 2021 at 8.00 a.m.
INTERIM REPORT OF MARIMEKKO CORPORATION, 1 January – 30 September 2021: Marimekko’s net sales and result continued to increase in the third quarter
This release is a summary of Marimekko’s interim report for the January-September 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 third quarter in brief
- Marimekko’s net sales grew by 11 percent to EUR 42.4 million (38.0). The majority of Marimekko’s own stores were open in the third quarter. In Finland, net sales rose by 25 percent. Marimekko’s actions to control gray exports decreased international sales, which were down by 10 percent in the period under review.
- Net sales were boosted especially by a favorable trend in wholesale sales in Finland. The good trend in wholesale sales was supported in particular by non-recurring promotional deliveries. On the other hand, net sales were especially weakened by lower wholesale sales in EMEA, resulting from controlling gray exports, and lower licensing income in the Asia-Pacific region.
- Operating profit improved significantly, reaching EUR 13.3 million (10.5). Comparable operating profit was also EUR 13.3 million (10.5).
- 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. Fixed costs are expected to increase clearly also during the fourth quarter as a result of changes in accounting principles and investments in growth.
January-September in brief
- Net sales grew by 21 percent to EUR 104.2 million (86.2). Net sales were boosted especially by a favorable trend in wholesale and retail sales in Finland as well as growing wholesale sales in the Asia-Pacific region and Scandinavia. The good development of wholesale sales in Finland was partly supported by nonrecurring promotional deliveries. On the other hand, net sales were weakened by lower licensing income in the Asia-Pacific region.
- Operating profit amounted to EUR 24.4 million (14.4), and comparable operating profit was also EUR 24.4 million (14.4).
- 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 results.
Financial guidance for 2021 (as revised on 23 September)
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 higher than in the previous year (2020: 16.3 percent).
The instability caused by the coronavirus pandemic in Marimekko’s markets continues. Therefore, there are still 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 interim report.
|(EUR million)||7–9/ 2021||7–9/ 2020||Change,|
|% of net sales||32||40||41||44||42|
|Operating profit margin, %||31.3||27.7||23.4||16.7||15.7|
|Comparable operating profit||13.3||10.5||26||24.4||14.4||70||20.2|
|Comparable operating profit margin, %||31.3||27.7||23.4||16.7||16.3|
|Result for the period||10.6||8.0||33||19.1||10.3||86||13.8|
|Earnings per share, EUR||1.30||0.98||33||2.36||1.27||86||1.70|
|Comparable earnings per share, EUR||1.30||0.98||33||2.36||1.27||86||1.78|
|Cash flow from operating activities||9.9||12.6||-22||19.0||12.2||56||28.1|
|Return on investment (ROI), %||31.9||20.7||22.5|
|Equity ratio, %||53.2||44.6||46.6|
|Net debt / EBITDA (rolling 12 months)||-0.28||0.15||-0.10|
|Gross investments *||0.3||0.4||-18||1.1||1.2||-12||2.1|
|Personnel at the end of the period||381||428||-11||422|
|Brand sales **||105.2||77.6||36||247.3||209.6||18||286.4|
|proportion of international sales, %||62||60||66||69||66|
|Number of stores||152||151||1||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:
“Both our net sales and result continued to grow in the third quarter.
Marimekko’s business performance was again strong in the third quarter. Our net sales increased by 11 percent and amounted to EUR 42.4 million (38.0). Wholesale sales in Finland developed particularly well, supported by non-recurring promotional deliveries. The majority of Marimekko’s own stores were open, as was the case in the comparison period. Our omnichannel retail sales increased by 3 percent and our wholesale sales grew by 23 percent. Our comparable operating profit in July–September improved by 26 percent and amounted to EUR 13.3 million (10.5), representing 31.3 percent of net sales (27.7). Our result was improved particularly by the growth of net sales but also by stronger relative sales margin. On the other hand, an increase in fixed costs had a weakening impact on earnings. We estimate that our fixed costs will increase clearly also during the fourth quarter following changes in accounting principles and investments in growth.
Our long-term work to develop the Marimekko brand is one of the reasons behind our strong performance. The results of this work and the modernization of our collections are naturally seen the fastest in our strong home market in Finland, where our net sales increased by 25 percent in the third quarter. It is important for us to look after our brand image globally. To that end, we have worked for several years to control gray exports, which is a challenge faced by many internationalizing brands. In the past quarter, such actions taken by us had a negative effect on our international sales, which declined by 10 percent in the period under review.
In the January–September period, our net sales increased by 21 percent and amounted to EUR 104.2 million (86.2). Compared to the time pre-pandemic, i.e. the corresponding period in 2019, the rate of growth was 15 percent. Sales grew by 29 percent in Finland and by 11 percent internationally. Our comparable operating profit for the nine-month period increased to EUR 24.4 million (14.4), representing 23.4 percent of net sales (16.7). With the uncertainties related to the coronavirus situation concerning the rest of the year being reduced from previously expected, we specified our estimate of profitability development for the full year in September. We now expect our comparable operating profit margin in 2021 to be higher than in the previous year.
We are working resolutely to strengthen the building blocks for our long-term international growth by further developing areas such as sustainability and brand awareness. In September, together with adidas, a global leader in the sporting goods industry, we announced our second limited-edition sports apparel collaboration collection. We are very pleased to reunite again with adidas. The adidas x Marimekko capsule collection embraces both brands’ commitment to sustainability, originality and empowerment. These kinds of brand collaborations provide us with an excellent opportunity to introduce our brand to a global audience while strengthening our core business by increasing our brand awareness.
Marimekko’s visibility was also increased for example in Japan by a pop-up store at the famous Dover Street Market in Tokyo’s Ginza district, which featured our Co-created special collection, and an experiential pop-up concept created in partnership with Japan’s largest bookstore, Tsutaya, to celebrate the 70-year-old Marimekko brand. The concept was expanded to four other cities in October. The special auction we organized with the auction house Bukowskis in the Nordic region to celebrate our 70th anniversary, and the Marimekko Pre-loved second-hand pilot in our online store featuring a carefully curated collection of vintage Marimekko pieces, were ways to honor our timeless and sustainable design and provided practical solutions to extending the lifespan of Marimekko products. In September, we also put an array of vintage pieces on sale at Marimekko Kreative, the experiential space we launched in Copenhagen in August. It is important for us to continuously find new ways to bring joy to our customers’ lives and thereby ensure that our brand remains interesting and meaningful to both new audiences as well as our existing loyal customers.”
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 and efficiency 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 clearly 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 during the year, 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.
The pandemic situation has led to disruptions in global supply chains. Marimekko has also experienced some coronavirus related supply chain disruptions, which have resulted in delivery delays. If the disruptions continue, they can impact the availability of products during the rest of the year and consequently affect 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 or 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, especially during the second half of the year. The growth of fixed costs is estimated to be particularly strong in the fourth quarter. 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 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 ended at the end of September 2021.
The instability caused by the coronavirus pandemic in Marimekko’s markets 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 traditionally generated during the second half 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 3 November 2021 at 2.00 p.m. EET. A live webcast of the conference can be followed at https://marimekko.videosync.fi/2021-q3-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.
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
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