Marimekko Corporation, Interim Report, 16 May 2023 at 8.00 a.m.
INTERIM REPORT OF MARIMEKKO CORPORATION, 1 January–31 March 2023: Marimekko’s first quarter according to company expectations: net sales decreased by two percent, comparable operating profit below the record-high comparison period
This release is a summary of Marimekko’s interim report for the January-March period of 2023. 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
- Marimekko’s net sales decreased by 2 percent from the record-high comparison period and totaled EUR 35.3 million (36.0). As estimated earlier, net sales decreased due to a decline in Finnish wholesale sales and lower licensing income in the EMEA region. On the other hand, net sales were boosted by increased retail sales in Finland and growing international wholesale sales.
- Net sales in Finland decreased by 3 percent when weakened general consumer demand lowered domestic wholesale sales. International sales were almost on a par with the comparison period despite the lower licensing income. In spite of the expected fluctuation between quarters, the full year net sales are estimated to grow both in Finland and internationally.
- Operating profit was EUR 3.8 million (6.6) and comparable operating profit totaled EUR 3.8 million (6.6) equaling to 10.9 percent of net sales (18.4). Operating profit was decreased especially by a lower relative sales margin, mainly weakened by lower licensing income, and an increase in fixed costs compared to the same period the previous year.
- The Annual General Meeting decided to distribute a dividend of EUR 0.34 per share for the financial year 2022. The dividend was paid on 24 April 2023.
Financial guidance for 2023
The Marimekko Group's net sales for 2023 are expected to grow from the previous year (2022: EUR 166.5 million). Comparable operating profit margin is estimated to be approximately some 16–19 percent (2022: 18.2 percent). Development of consumer confidence and purchasing power, global supply chain disruptions and the general inflation development, in particular, cause volatility to the outlook for 2023.
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 the Interim Report.
Key figures
| (EUR million) | 1–3/ 2023 | 1–3/ 2022 | Change, % | 1–12/ 2022 |
| Net sales | 35.3 | 36.0 | -2 | 166.5 |
| International sales | 17.3 | 17.5 | -1 | 68.3 |
| % of net sales | 49 | 49 | 41 | |
| EBITDA | 6.1 | 9.1 | -33 | 39.9 |
| Comparable EBITDA | 6.2 | 9.1 | -33 | 40.0 |
| Operating profit | 3.8 | 6.6 | -43 | 30.2 |
| Operating profit margin, % | 10.8 | 18.4 | 18.2 | |
| Comparable operating profit | 3.8 | 6.6 | -42 | 30.4 |
| Comparable operating profit margin, % | 10.9 | 18.4 | 18.2 | |
| Result for the period | 2.4 | 5.0 | -52 | 22.7 |
| Earnings per share, EUR | 0.06 | 0.12 | -52 | 0.56 |
| Comparable earnings per share, EUR | 0.06 | 0.12 | -52 | 0.56 |
| Cash flow from operating activities | -2.0 | -3.1 | -34 | 20.1 |
| Return on investment (ROCE), % | 27.7 | 35.2 | 31.5 | |
| Equity ratio, % | 53.6 | 57.2 | 49.2 | |
| Net debt / EBITDA (rolling 12 months) | 0.15 | -0.31 | 0.03 | |
| Gross investments | 0.2 | 0.1 | 39 | 1.0 |
| Personnel at the end of the period | 449 | 409 | 10 | 459 |
| outside Finland | 76 | 74 | 3 | 76 |
| Brand sales 1 | 84.5 | 88.3 | -4 | 382.3 |
| outside Finland | 60.0 | 61.8 | -3 | 251.9 |
| proportion of international sales, % | 71 | 70 | 66 | |
| Number of stores | 154 | 147 | 5 | 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 the Interim Report.
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. 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:
“In the first quarter, our business developed as estimated. Our strong financial position enables investments in long-term growth.
Marimekko’s net sales for the first quarter decreased by two percent when compared to the record-high level in the same period the previous year and amounted to EUR 35.3 million (36.0). As estimated, net sales decreased due to a decline in domestic wholesale sales, which was caused by weaker general consumer demand in Finland, as well as lower licensing income in the EMEA region. Nevertheless, the strong appeal of our brand was demonstrated by the continued positive development of the domestic retail sales, with growth of 12 percent. Globally our omnichannel retail sales increased by nine percent. While international wholesale sales grew by eight percent, our total wholesale sales decreased by four percent due to the decline in domestic wholesale sales. Net sales in Finland decreased by three percent for the same reason. International net sales were almost on a part with the comparison period. In spite of this anticipated fluctuation between quarters, we expect our full-year net sales to grow both in Finland and internationally.
Our comparable operating profit in the January–March period totaled EUR 3.8 million (6.6), representing 10.9 percent of net sales (18.4). As expected, our operating profit in the first quarter was affected particularly by reduced licensing income, which weakened the relative sales margin, and by higher fixed expenses. Fixed costs were increased particularly by higher personnel costs in stores to support the growth of retail sales, and investments in the building blocks of international growth. As a profitable company, we are in a position to continue to make investments that strengthen our competitiveness and support our long-term growth despite the weaker general economic situation.
At Marimekko, we have started a new strategy period from the beginning of this year. During this strategy period, our focus will be on scaling our business and growth, especially in the international markets. During the coming years, we will focus on Asia as the most important geographical area for our international growth. This means, for example, that we will continue to develop our omnichannel retail network in these markets. In the first quarter, two new Marimekko stores were opened in Beijing, China. We also expanded our e-commerce activities in China to another online sales platform. In addition, two pop-up stores in Japan and one in Taiwan were opened. Inspiring stores and creative retail concepts play an important role not only as distribution channels but also as the hearts of our brand culture that build awareness, deepen the customer experience and support sales also in other channels. In Thailand, a Marimekko fashion show for Spring/Summer 2023 collection was organized, and the successful outdoor event gathered a large group of Marimekko fans, press and influencers. In the first quarter, net sales in the strategically important Asia-Pacific region grew by 16 percent even with the comparison period being boosted by some of the wholesale deliveries in the fourth quarter of 2021 being transferred to the first quarter of 2022.
Various brand collaborations hold an important role in increasing our international brand awareness. In March, IKEA stores worldwide launched BASTUA, a limited-edition collection that combines Nordic design, sauna culture and wellbeing. The collaboration collection was enthusiastically received. Later in March, we launched a new collaboration collection that combines Marimekko’s art of printmaking with adidas’ wide-ranging expertise in sports clothing, footwear and apparel. The collection delighted customers around the world.
The winning brands and companies of the future will be determined in challenging market conditions. We will continue to decisively shape Marimekko’s future by building on and reinforcing the recipe for success that has proved its effectiveness over the past few years. This way, we will bring joy and optimism to the constantly growing audiences that appreciate Marimekko’s original and timeless design.”
Market outlook and growth targets for 2023
The uncertainties related to the general development of the global economy, such as the risk of an economic recession, general cost inflation, increasing interest rates, and the energy crisis as well as geopolitical tensions influence consumer confidence, purchasing power and behavior and, as a result, can have an impact on Marimekko’s business in 2023, especially in the important domestic market of Finland. Different exceptional situations, such as Russia’s war against Ukraine, may cause even significant disruptions in production and logistics chains, and may thus have a negative impact on the company’s sales, profitability and cash flow.
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 Finnish wholesale sales in 2023 will be positively affected by non-recurring 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. 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 in 2023, as are total international sales. The aim is to open approximately 10 to 15 new Marimekko stores and shop-in-shops in 2023, and most of the planned openings will be in Asia.
Because of the seasonal nature of Marimekko’s business, the major portion of the company’s euro-denominated net sales and operating result are traditionally generated during the second half of the year. In 2023, Marimekko’s net sales are expected to grow. As estimated, net sales in the first quarter of the year were lower than in the comparison period following the weaker outlook at the beginning of the year for the wholesale sales in Finland as well as lower licensing income. Furthermore, net sales in the first quarter of 2022 were boosted by some of the wholesale deliveries in the Asia-Pacific region in fourth quarter of 2021 being transferred to the first quarter of 2022. For the full year 2023, licensing income is forecasted to be below the record level of 2022.
The general cost inflation continues to also affect Marimekko in 2023. Marimekko’s early commitment to product orders from supplier partners, which is typical of the industry, means that changes in costs affect the company with a delay. These early commitments have been further emphasized by the exceptional situations, undermining the company’s ability to optimize product orders and respond to rapid changes in demand and consumer behavior, which also increases risks related to inventory management. The domestic non-recurring promotional deliveries also raise inventory risks. Marimekko works actively to mitigate the negative impacts of disruptions in production and logistics chains as well as increased costs, and to enhance inventory management.
Marimekko develops its business with a long-term view and aims to scale its growth especially in international markets during the strategy period of 2023–2027. In 2023, fixed costs are expected to be up on the previous year. Marketing expenses are expected to grow (2022: EUR 9.2 million).
Marimekko is closely monitoring the general economic situation and the development of consumer confidence and purchasing power, as well as the impacts of Russia’s war against Ukraine and possible other exceptional situations, and the company will adjust its operations and plans according to the circumstances.
Media and investor conference
A conference for media and institutional investors will be held in English on 16 May 2023 at 2.00 p.m. EEST. A live webcast of the conference can be followed at https://marimekko.videosync.fi/q1-2023, 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 2022, the company's net sales were EUR 167 million and comparable operating profit totaled EUR 30.4 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 460 people. The company’s share is quoted on Nasdaq Helsinki Ltd. www.marimekko.com
Attachment
