Financial guidance for 2020 (as revised on 10 December 2020)
The Marimekko Group’s net sales are expected to be approximately at the same level as or slightly lower than in the previous year and comparable operating profit is estimated to be higher than the year before.
The improved outlook is based, in particular, on a better-than-expected trend and improved outlook in the retail sales in Finland.
The company estimates that clearly the major portion of its earnings for the second half of 2020 is generated during the third quarter of the year, like in 2019. The net sales accrual in the second half of 2020 is expected to be more balanced between the two last quarters.
However, there are uncertainties related to the company’s outlook for 2020. The outlook for Marimekko’s important domestic market as well as for the Group’s total retail sales continues to essentially depend on the trend in customer numbers in retail stores during the rest of the year and whether the coronavirus pandemic will intensify to an extent, which would require temporary closures of Marimekko’s own retail stores. Net sales and earnings for the rest of the year essentially also depend on maintaining the operational reliability of distribution centers and logistics in the pandemic situation.
In its Q3 interim report published on 4 November 2020, Marimekko Corporation estimated that the Group’s net sales for 2020 would be lower than in the previous year and comparable operating profit would be approximately at the same level as or lower than the year before.
Risks and uncertainties related to the coronavirus pandemic are described in more detail in the Risk management and risks section.
Market outlook and growth targets in 2020 (Interim Report Q3, 4 November 2020)
The coronavirus that spread rapidly all over the world during the first quarter of 2020 created the worst crisis experienced by the global fashion industry and specialty retail sector in decades. It has taken uncertainty over the global economy to a completely new level and has an impact on 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 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. The outlook for the domestic market and the company’s consolidated net sales and earnings are influenced by the trend in customer numbers in retail stores during the rest of the year and whether online sales continue to perform well. Several of Marimekko’s significant sales campaigns take place in the final quarter of the year. Domestic wholesale sales in 2020 are boosted by nonrecurring promotional deliveries, the total value of which is substantially higher than last year. A vast majority of the deliveries 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 internationalization. Japan is clearly the most important country in this region to Marimekko. The other countries’ combined share of the company’s net sales is still relatively small, as operations in these countries are at an earlier stage than in Japan. Japan already has a very comprehensive network of Marimekko stores. All Marimekko stores in Asia are partner-owned. Possible new infection waves and the speed of recovery from the pandemic in different countries can affect especially the company’s sales outlook for the coming year in the Asia-Pacific region. Despite the pandemic, the company continues to see increasing demand for its products in the region in the longer term.
In 2019, Marimekko became aware of cases of grey exports and has taken due action. The control of the cases has a clear weakening impact on the company’s sales and earnings in 2020.
Licensing income in 2020 is forecast to be higher than in the previous year thanks to better-than-expected estimated development.
The importance of e-commerce in the company’s business has continued to grow in 2020, and online sales are expected to perform well in the final quarter of the year as well. The full-year outlook for retail sales essentially depends on the return of customer flows to stores during the rest of the year in each market as well as possible new infection waves which may require temporary closures of Marimekko’s own retail stores. Full-year wholesale sales will be supported by nonrecurring promotional deliveries in Finland. The company’s aim is still to open approximately 10 new Marimekko stores and shop-in-shops in 2020. The main thrust in new openings is on retailer-owned Marimekko stores.
At the outset of the coronavirus crisis, Marimekko quickly made contingency plans in its supply chains to ensure continuous production and logistics, and the plans are continually updated. The exceptional circumstances have so far only had a minor impact on the supply chain. Instead, continued strong growth in demand for products in the online store and wholesale delivery problems caused by the pandemic posed challenges to Marimekko’s logistics in the early part of the year. Net sales and earnings for the rest of the year essentially depend on maintaining the operational reliability of distribution centers and logistics in the pandemic situation. As a result of growth in online sales, the company expects full-year logistics costs to increase noticeably on 2019.
To secure profitability and cash flow, Marimekko drew up an ambitious fixed-cost saving program and promptly started to implement it in the early part of the year. Fixed costs are expected to continue to decrease during the remainder of the year compared with 2019. Marketing expenses are estimated to be substantially lower than in the previous year (2019: EUR 7.4 million). The company expects its total investments to be lower than in the previous year (2019: EUR 2.6 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.