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INTERIM REPORT OF MARIMEKKO CORPORATION, 1 January – 30 September 2022: Marimekko’s net sales in the third quarter continued to grow from the strong comparison period and operating profit margin was at an excellent level
Marimekko Corporation, Interim Report, 2 November 2022 at 8.00 a.m.
INTERIM REPORT OF MARIMEKKO CORPORATION, 1 January – 30 September 2022: Marimekko’s net sales in the third quarter continued to grow from the strong comparison period and operating profit margin was at an excellent level
This release is a summary of Marimekko’s interim report for the January-September period of 2022. 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 4 percent to EUR 44.1 million (42.4). Net sales were boosted in particular by increased international sales but also retail sales in Finland. On the other hand, net sales were weakened by wholesale sales in Finland, which decreased as a result of significantly lower non-recurring promotional deliveries than in the same period the year before.
Net sales in Finland decreased by 7 percent as wholesale sales in Finland in the comparison period were strengthened by substantially higher non-recurring promotional deliveries than before. International sales were up by 28 percent with especially wholesale and retail sales in the Asia-Pacific region developing strongly. International sales were partly increased by a different kind of weighting of wholesale deliveries compared to the previous year.
Operating profit was EUR 11.1 million (13.1). Comparable operating profit also totaled EUR 11.1 million (13.1) and was 25.2 percent of net sales (31.0).
Earnings were weakened especially by an increase in fixed costs but also lower relative sales margin resulting mostly from growing logistics costs. On the other hand, increased net sales in particular supported earnings.
January-September in brief
Net sales grew by 13 percent to EUR 118.1 million (104.2). Net sales were boosted by a favorable trend in retail sales in Finland and growing international sales.
Net sales in Finland grew by 11 percent; international sales were up by 17 percent. International sales were partly increased by a different kind of weighting of wholesale deliveries in the third quarter than in the same period the year before.
Operating profit was EUR 23.4 million (23.6). Comparable operating profit totaled EUR 23.4 (23.6) million and was 19.8 percent of net sales (22.7).
Earnings were mainly weakened by an increase in fixed costs. On the other hand, increased net sales in particular supported earnings.
Financial guidance for 2022
The Marimekko Group's net sales for 2022 are expected to grow from the previous year (2021: EUR 152.2 million). Comparable operating profit margin is estimated to be approximately some 17–20 percent (2021: 20.5 percent). Global supply chain disruptions, generally increased material and logistics costs as well as the development of consumer confidence and purchasing power in particular cause volatility to the outlook for 2022.
Uncertainties related to the development of net sales and result are described in more detail in the Major risks and factors of uncertainty section of this Interim Report.
Key figures
(EUR million) | 7–9/ | 7–9/ | Change, | 1–9/ | 1–9/ | Change, % | 1–12/ |
Net sales | 44.1 | 42.4 | 4 | 118.1 | 104.2 | 13 | 152.2 |
International sales | 17.4 | 13.6 | 28 | 49.9 | 42.5 | 17 | 59.9 |
% of net sales | 39 | 32 |
| 42 | 41 |
| 39 |
EBITDA * | 13.5 | 16.1 | -16 | 30.7 | 32.6 | -6 | 43.1 |
Comparable EBITDA * | 13.5 | 16.1 | -16 | 30.7 | 32.6 | -6 | 43.1 |
Operating profit * | 11.1 | 13.1 | -15 | 23.4 | 23.6 | -1 | 31.2 |
Operating profit margin, % * | 25.2 | 31.0 |
| 19.8 | 22.7 |
| 20.5 |
Comparable operating profit * | 11.1 | 13.1 | -15 | 23.4 | 23.6 | -1 | 31.2 |
Comparable operating profit margin, % * | 25.2 | 31.0 |
| 19.8 | 22.7 |
| 20.5 |
Result for the period * | 8.9 | 10.5 | -15 | 18.7 | 18.5 | 1 | 24.4 |
Earnings per share, EUR *, ** | 0.22 | 0.26 | -15 | 0.46 | 0.46 | 1 | 0.60 |
Comparable earnings per share, EUR *, ** | 0.22 | 0.26 | -15 | 0.46 | 0.46 | 1 | 0.60 |
Cash flow from operating activities * | 7.0 | 9.7 | -27 | 8.4 | 18.1 | -54 | 35.9 |
Return on investment (ROI), |
|
|
| 35.6 | 31.2 |
| 33.0 |
Equity ratio, % * |
|
|
| 48.3 | 52.8 |
| 53.3 |
Net debt / EBITDA |
|
|
| 0.25 | -0.29 |
| -0.64 |
Gross investments * | 0.5 | 0.1 |
| 0.8 | 0.2 |
| 0.2 |
Personnel at the end of the period |
|
|
| 432 | 381 | 13 | 409 |
outside Finland |
|
|
| 63 | 68 | -7 | 69 |
Brand sales 1 | 108.5 | 105.2 | 3 | 298.6 | 247.3 | 21 | 375.6 |
outside Finland | 72.5 | 65.3 | 11 | 206.5 | 162.0 | 27 | 247.6 |
proportion of international sales, % | 67 | 62 |
| 69 | 66 |
| 66 |
Number of stores |
|
|
| 150 | 152 | -1 | 152 |
* The quarterly figures for comparison period have been restated as the accounting principle changed in 2021 following the IFRS Interpretations Committee agenda decision. Additional information is presented in the accounting principles of this Interim Report.
** Per-share key figures have been calculated and the figures for the comparison period have been restated using the new total number of shares following the issuance of shares without payment (share split), in accordance with the decision made by the AGM on 12 April 2022.
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.
1 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:
“We further increased our net sales in the third quarter, even compared to our strong performance in the corresponding period last year. Our operating profit margin was at an excellent level.
In the third quarter, our net sales increased by 4 percent to EUR 44.1 million (42.4). This growth was driven particularly by the good development of our international sales, but also that of retail sales in Finland. In total, our omnichannel retail sales increased by 11 percent. Marimekko’s wholesale sales were 3 percent lower than in the comparison period, as wholesale sales in Finland in the comparison period were strengthened by substantially higher non-recurring promotional deliveries than before. Net sales in Finland decreased by 7 percent for the same reason. International sales increased by 28 percent, boosted especially by the strong development of wholesale and retail sales in the Asia-Pacific region. International sales were partly increased by a different weighting of wholesale deliveries compared to the previous year.
During the period under review, we continued to invest in the building blocks for long-term international growth, which was reflected in higher personnel and IT expenses, for example, and our comparable operating profit in July–September decreased to EUR 11.1 million (13.1). Our operating profit margin remained at an excellent level at 25.2 percent of net sales (31.0).
In January–September, our net sales grew by 13 percent and amounted to EUR 118.1 million (104.2). Our comparable operating profit for the first nine months of the year was EUR 23.4 million (23.6), or 19.8 percent of net sales (22.7).
In July, we announced our fourth limited-edition collaboration collection with adidas, a global leader in the sporting goods industry. The collection was launched gradually, starting from July 2022, on the adidas online store and at selected adidas stores and retailers around the world. We are pleased with the international visibility achieved through our brand collaboration with adidas, which supports our growth strategy.
We also continued to develop our network of Marimekko stores in the third quarter. New Marimekko stores in Shanghai, China and in Copenhagen, Denmark were opened. In addition, our new Marimekko Marimade home concept was presented in pop-up stores in Hong Kong and Taipei. Marimekko Marimade products are made with recycled, reused, natural and biodegradable materials, for example.
We believe that determined sustainability efforts strongly support Marimekko’s long-term success. In 2020, we published our new, more ambitious sustainability strategy, and this past September, we made a commitment to the Science Based Targets (SBTi) initiative to set even more determined, science-based targets for reducing emissions throughout our value chain, in line with the UN Paris Climate Agreement. Science-based emission reduction targets are an important tool in our work towards our ambitious long-term vision of our operations leaving no trace on the environment in the future. In August, we took another step toward this ambition by collaborating with Spinnova to launch a capsule collection that contains printed products made using partly Spinnova’s innovative, more sustainably produced wood-based textile fiber. In August, we also opened the Marimekko Pre-loved, an online resale platform for secondhand and vintage items to extend the life of our products and contribute to promoting the circular economy.
In September, Marimekko’s Board of Directors decided on new long-term financial goals, raising our targets for net sales development and comparable operating profit margin. The Board of Directors also set the direction for Marimekko’s next strategy period of 2023–2027. Our excellent financial results over the past few years show that our growth strategy works. The results and overall increased interest in Marimekko around the world also demonstrate the unique opportunities for global expansion that megatrends, such as digitalization as well as changes in consumers’ values, present Marimekko with. Therefore, building on and reinforcing our proven recipe for success, our new strategy period will focus on scaling our business and growth, especially in the international markets. We elaborated on our long-term financial goals and the next strategy period at our company’s first-ever Capital Markets Day on September 14, 2022.
We believe that Marimekko’s mission of bringing joy and empowerment is more meaningful than ever in today’s uncertain world. We are excited to start working on scaling the Marimekko phenomenon, and we invite all of our stakeholders to join us on this inspiring journey.”
Market outlook and growth targets for 2022
The coronavirus pandemic has been the worst crisis experienced by the global fashion industry and specialty retail sector in decades, and it will impact the sector in 2022 as well. The development of the pandemic situation in different markets, Russia’s war against Ukraine, political tensions, increased inflation and raising interest rates impact the global economic trend as well as the development of consumers’ purchasing behavior and, as a result, can have an impact on Marimekko’s business. The fall in consumer confidence in some of Marimekko’s market areas can affect the business negatively. Russia’s war against Ukraine does not directly affect Marimekko’s business as Marimekko’s products are not manufactured or sold in Russia, Belarus or Ukraine and the company does not source raw materials from these countries. However, Russia’s war against Ukraine causes disturbances in global supply chains and contributes to the general economic situation and consumers’ buying power and behavior. These factors may affect company’s sales and profitability as well as operational reliability and efficiency of the company’s value chain.
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. The total value of nonrecurring promotional deliveries in wholesale in 2022 is estimated to be substantially lower than the year before.
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 smaller than in Japan, but operations in these countries are constantly growing. All brick-and-mortar Marimekko stores and most online stores in Asia are partner-owned. Net sales in the Asia-Pacific region are expected to increase clearly in 2022, as are total international sales, though the accrual of the sales will be weighted differently between quarters than in the comparison year also during the second half of the year. The aim is to open approximately 5 to 10 new Marimekko stores and shop-in-shops in 2022, and most of the planned openings will be in Asia.
Marimekko estimates that its net sales will increase in 2022. 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. In percentage terms, net sales growth is expected to be stronger at the beginning of 2022 than in the second half of the year. In 2021, the pandemic situation had a negative impact on the footfall in Marimekko’s own stores at the beginning of the year and the net sales in the second half of the year were supported, for example, by substantial nonrecurring promotional deliveries in wholesale in Finland.
In 2022, licensing income is forecasted to be higher than in the previous year. Marimekko will continue actions to control gray exports, but these actions will have a significantly lower weakening impact on the company’s sales and earnings in 2022 than in the previous year.
The coronavirus pandemic, related restrictions and Russia’s war against Ukraine cause disruptions in global supply chains. These disruptions have resulted in delivery delays, and thus can impact Marimekko’s net sales and profitability. In addition, disruptions in supply chains increase logistics costs, which have also grown overall worldwide. Net sales and earnings essentially depend on maintaining the operational reliability and efficiency of distribution centers and logistics in the exceptional situations. Costs of raw and other materials have increased globally. Early commitment to product orders, which is typical of the fashion and design industry, means that changes in raw and other material prices affect the company with a delay. In addition, the early commitment to product orders, further emphasized in the pandemic situation, undermines the company’s ability to optimize product orders and respond to rapid fluctuations in demand, especially in exceptional situations, as well as increases risks related to inventory. Marimekko is actively working both on mitigating the negative effects of disruptions in supply chains and increased costs as well as to secure sales development also in a weaker general economic situation.
Marimekko continues to accelerate its long-term international growth. In 2022, it will invest, for example, in increasing brand awareness, in digital and omnichannel business, in developing sustainability, in recruitments supporting its growth as well as in IT systems. Fixed costs are expected to be up on the previous year. In 2021, fixed costs were still reduced by partly temporary cost savings. Marketing expenses are expected to grow (2021: EUR 7.5 million).
Marimekko is closely monitoring the impacts of Russia’s war against Ukraine and the coronavirus pandemic as well as the development of the general economic situation, consumer confidence and purchasing power and will adjust its operations and plans according to the circumstances.
Media and investor conference
A media and investor conference will be held in English on 2 November 2022 at 2.00 p.m. EET. A live webcast of the conference can be followed at https://marimekko.videosync.fi/q3-2022, 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. In 2021, the company's net sales were EUR 152 million and brand sales of the products worldwide amounted to EUR 376 million. Globally, there are roughly 150 Marimekko stores, and online store serves customers in 35 countries. The key markets are Northern Europe, the Asia-Pacific region and North America. The Group employs about 410 people. The company’s share is quoted on Nasdaq Helsinki Ltd. www.marimekko.com
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