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FINANCIAL STATEMENTS BULLETIN OF MARIMEKKO CORPORATION, 1 Jan–31 Dec 2020: Despite the impacts of the coronavirus pandemic, Marimekko’s net sales for 2020 almost at the previous year’s level and comparable operating profit up by 18 percent
Marimekko Corporation, Financial Statements Bulletin 18 February 2021 at 8.00 a.m.
FINANCIAL STATEMENTS BULLETIN OF MARIMEKKO CORPORATION, 1 January–31 December 2020: Despite the impacts of the coronavirus pandemic, Marimekko’s net sales for 2020 almost at the previous year’s level and comparable operating profit up by 18 percent
This release is a summary of Marimekko’s financial statements bulletin for the January-December period of 2020. 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 fourth 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 rose by 8 percent to EUR 37.4 million (Q4/2019: 34.7).
Net sales were boosted especially by a favorable trend in wholesale sales in Finland, EMEA and Scandinavia. Nonrecurring promotional deliveries, in particular, contributed to the increase in Finnish wholesale sales. The worsened coronavirus situation and tightened restrictions in different markets clearly affected customer numbers in stores. However, online sales continued to perform strongly, supporting retail sales which declined quite moderately considering the circumstances.
Comparable operating profit grew to EUR 5.8 million (3.0). Operating profit included EUR 0.8 million in nonrecurring restructuring costs; reported operating profit was EUR 5.0 million (3.0).
Earnings were boosted by increased net sales as well as a noticeable decrease in fixed costs as a result of the adjustment of operations. A decline in relative sales margin, which was largely due to higher logistics costs resulting from an increase in online sales, had a weakening impact on results.
2020 in brief
Despite the impacts of the coronavirus pandemic, Marimekko’s net sales almost reached the level of the previous year: net sales only declined by 1 percent and were EUR 123.6 million (2019: 125.4). Net sales were weakened especially by a decline in retail sales in Finland, North America and Scandinavia as well as a decrease in wholesale sales in the Asia-Pacific region. Booming online sales, which supported retail sales, as well as a favorable trend in wholesale sales in Finland, Scandinavia and EMEA, on the other hand, had a positive impact on net sales. The increase in Finnish wholesale sales was partly due to nonrecurring promotional deliveries.
Comparable operating profit rose to EUR 20.2 million (17.1), and reported operating profit was EUR 19.3 million (17.1). Earnings were boosted by a noticeable decrease in fixed costs as a result of Marimekko’s prompt adjustment measures. A decline in relative sales margin, which was mainly due to higher logistics costs resulting from an increase in online sales, as well as reduced net sales had a weakening impact on results.
The Board of Directors’ proposal for dividends
Marimekko’s Board of Directors proposes that the Annual General Meeting on 14 April 2021 authorize the Board to decide on the payment of a maximum dividend of EUR 1.00 per share in one or several instalments at a later stage. The authorization would be valid until the next Annual General Meeting. The Board’s proposal reflects the uncertainty caused by the coronavirus pandemic in general economic conditions.
Financial guidance for 2021
The Marimekko Group's net sales for 2021 are expected to be higher than in the previous year. Comparable operating profit margin is estimated to be approximately on a par with the long-term goal of 15 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 financial statements bulletin.
Key figures
(EUR million) | 10–12/ 2020 | 10–12/ 2019 | Change, % | 1–12/ 2020 | 1–12/ 2019 | Change, % |
Net sales | 37.4 | 34.7 | 8 | 123.6 | 125.4 | -1 |
International sales | 14.1 | 12.8 | 11 | 52.4 | 54.3 | -3 |
% of net sales | 38 | 37 | 42 | 43 | ||
EBITDA | 8.1 | 6.2 | 31 | 31.9 | 29.7 | 8 |
Comparable EBITDA | 9.0 | 6.2 | 45 | 32.7 | 29.7 | 10 |
Operating profit | 5.0 | 3.0 | 65 | 19.3 | 17.1 | 13 |
Comparable operating profit | 5.8 | 3.0 | 92 | 20.2 | 17.1 | 18 |
Operating profit margin, % | 13.3 | 8.7 | 15.7 | 13.6 | ||
Comparable operating profit margin, % | 15.5 | 8.7 | 16.3 | 13.6 | ||
Result for the period | 3.5 | 2.1 | 62 | 13.8 | 13.0 | 6 |
Earnings per share, EUR | 0.43 | 0.26 | 62 | 1.70 | 1.61 | 6 |
Comparable earnings per share, EUR | 0.51 | 0.26 | 93 | 1.78 | 1.61 | 10 |
Cash flow from operating activities | 15.9 | 7.8 | 103 | 28.1 | 29.0 | -3 |
Return on investment (ROI), % | 22.5 | 17.9 | ||||
Equity ratio, % | 46.6 | 40.2 | ||||
Net debt / EBITDA (rolling 12 months) * | -0.10 | 0.35 | ||||
Gross investments ** | 0.9 | 1.3 | -29 | 2.1 | 2.6 | -17 |
Personnel at the end of the period | 422 | 450 | -6 | |||
outside Finland | 84 | 98 | -14 | |||
Brand sales *** | 76.0 | 73.9 | 3 | 285.1 | 250.8 | 14 |
outside Finland | 45.7 | 45.2 | 1 | 191.5 | 156.6 | 22 |
proportion of international sales, % | 60 | 61 | 67 | 62 | ||
Number of stores | 154 | 151 | 2 |
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 financial statements bulletin.
* Due to the adoption of IFRS 16, the ratio of net debt to EBITDA at year end was reported for the first time at the end of the financial year 2019. The key figure is calculated based on comparable rolling 12-month EBITDA.
** The figures for gross investments do not include the impact of IFRS 16.
*** 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 realized wholesale sales and licensing income, is unofficial and does not include VAT. The key figure is not audited.
Tiina Alahuhta-Kasko, President and CEO, in conjunction with the report:
“In spite of the challenging operating environment, our net sales for 2020 were almost on a par with the previous year, with both online sales and wholesale sales performing well. Thanks to operational adjustments, our comparable operating profit improved by 18 percent.
“In 2020, the global fashion industry and specialty retail sector faced the worst crisis in decades as a result of the coronavirus pandemic. Our long-term work to develop the Marimekko brand and our digital business, our comprehensive range of lifestyle products, a diverse business and distribution channel model and our ability to adjust our operations rapidly are among the factors which helped us successfully navigate in an extremely difficult operating environment. All Marimekko employees are to thank for this and we want to reward them with a one-off bonus. Our teams around the world have determinedly worked together and made Marimekko one of the fewer and fewer success stories in an industry undergoing an intense transformation.
“In this challenging situation, our net sales in the October-December period of 2020 grew by 8 percent to EUR 37.4 million (34.7). Net sales were boosted especially by a favorable trend in wholesale sales in Finland, EMEA and Scandinavia. The worsened coronavirus situation and tightened restrictions in different markets had a clear impact on customer numbers in stores, but our online sales continued to grow strongly, and all in all, retail sales decreased quite moderately. Net sales in Finland increased by 6 percent, with wholesale sales growing significantly, in particular due to nonrecurring promotions. Our international sales rose by 11 percent thanks to successful wholesale sales. Net sales growth and adjustment measures improved our comparable operating profit, which increased by 92 percent to EUR 5.8 million (3.0).
“Despite the impacts of the coronavirus pandemic, our full-year net sales were almost on a par with the previous year: net sales only declined by 1 percent, amounting to EUR 123.6 million (125.4). Due to the pandemic, most Marimekko stores around the world were temporarily closed in the first or second quarter, and the pandemic noticeably reduced footfall during the second half of the year as well. Net sales were weakened especially by a decline in retail sales in Finland, North America and Scandinavia as well as a decrease in wholesale sales in the Asia-Pacific region. Booming online sales, which reduced the decline in retail sales, as well as a favorable trend in wholesale sales in Finland, Scandinavia and EMEA, on the other hand, had a positive impact on net sales. The increase in Finnish wholesale sales was partly due to nonrecurring promotional deliveries. Thanks to adjustment measures swiftly initiated early in the year, our comparable operating profit rose to EUR 20.2 million (17.1).
“Our agility and success in the pandemic year have further strengthened our trust in our international growth strategy. The pandemic has also intensified the megatrends in our industry, such as digitization and changes in consumers’ values, especially the increased importance of sustainability. This contributes to making the value-based, timeless and sustainable Marimekko lifestyle brand more relevant than ever, thus supporting our growth objectives. We must have the courage to seize the opportunities available to us and to invest in international growth. We believe now is the right time. Therefore, our plans for 2021 include further strengthening the building blocks of international growth by investing in digital business, seamless omnichannel customer experience, sustainability and brand awareness. It is also important to continuously develop the competences of our personnel to work in a rapidly changing operating environment. Combined with the work we have been doing for years already, these investments provide us with an excellent stepping stone to the next phase of international growth, targeting Asia in particular. However, the pandemic situation that plagues our industry continues. We are closely monitoring the development of the situation in each of our market areas and will adjust our plans as necessary.
“In line with our values, we see it as our duty to strongly promote sustainability throughout our value chain and, by the power of our example, to move the entire industry forward towards a more sustainable future. Our new sustainability strategy, published in December 2020, and our ambitious goals are built around three guiding principles: timeless design brings joy for generations to come, the products of tomorrow leave no trace, and positive change through fairness and equality. We believe that, in the future, timeless and sustainable products will be made in balance with the environment, in line with the principles of the circular economy, and with full transparency, starting with raw materials. Our long-term vision is that our operations leave no trace on the environment. Late in 2020, we took a step toward achieving this goal when our own operations became carbon neutral as a result of continuous development work and emission offsetting.
“Marimekko is celebrating its 70th anniversary in 2021. The year will see, among other things, the launch of interesting special products that draw on the heart of the world of Marimekko prints as well as some entirely new kinds of collaborative projects. In these unprecedented times, it is important to find new ways to inspire people, and we would like to warmly welcome our entire community to celebrate with us.”
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 and possible tightening restrictions in different market areas as well as changes in customer numbers in stores influence the outlook for both retail and wholesale, including nonrecurring 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 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 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 also estimated to increase (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 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 18 February 2021 at 2.00 p.m. EET. A live webcast of the conference can be followed at https://marimekko.videosync.fi/2020-q4-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 285 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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