Half-year Financial Report, 15 August 2019
Market outlook and growth targets in 2019
Uncertainty in the global economy is forecast to continue, partly because of the unpredictability of the political situation. Consumer demand forecasts vary among Marimekko’s different market areas.
Finland, Marimekko’s important domestic market, represents about half of the company’s net sales. Sales in Finland are expected to be roughly on a par with the previous year. Wholesale sales in 2018 were boosted by nonrecurring promotional deliveries; there were promotional deliveries in each quarter and the largest deliveries took place in the second and final quarters. There will be no promotional deliveries of comparable size in 2019. The total value of promotional deliveries will be lower than last year, and the major deliveries will occur in the latter half of the year.
The Asia-Pacific region is Marimekko’s second-largest market and it plays a significant part in the company’s internationalisation. 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 early stage compared with Japan. Japan already has a very comprehensive network of Marimekko stores. Sales growth is supported by developing the operations of existing stores, optimising the product range and increasing online sales. This year, net sales in the Asia-Pacific region are forecast to grow. The company sees increasing demand for its products in this area especially in the longer term.
Marimekko has become aware of cases of grey exports and has taken due action. The control of the cases may have a weakening impact on the company’s sales and earnings.
The key drivers of the company’s growth are its own e-commerce and other online sales channels, partner-led retail in Asia, and increasing the sales per square metre of existing stores in Finland and the international markets. The main thrust in new openings is on retailer-owned Marimekko stores and other wholesale channels. The aim is to open approximately 10 new Marimekko stores and shop-in-shops in 2019.
Anticipated royalty income in 2019 is expected to be higher than estimated and to exceed the figure for the previous year.
More costs than in 2018 are expected to occur in the remaining half of the year. The expenses of marketing operations for the full year 2019 are forecast to be higher than in 2018 (EUR 6.3 million). Total investments are estimated to grow significantly relative to the previous year (EUR 1.3 million). Most of the investments will be used to revamp the store network and the company’s headquarter premises as well as to improve IT systems to underpin digital business. The expenses of the personnel share issue and estimated effects of the long-term bonus system targeted at the company’s Management Group are expected to exert a drag on the company’s results. The effects will depend on the trend in the price of the company’s share during the year.
Due to the seasonal nature of Marimekko’s business, the major portion of the company’s net sales and earnings are traditionally generated during the last two quarters of the year, and this is expected to be the case in 2019 as well. The share of holiday sales in particular of the company’s net sales for the last quarter is considerable and the outcome of the holiday season has an impact on results for the whole year.
*The classification method for marketing expenses has changed in 2019; to maintain comparability, the figures for 2018 have been restated accordingly.
Financial guidance for 2019 (revised 22 July 2019)
The Marimekko Group’s net sales for 2019 are forecast to be higher than in the previous year and comparable operating profit is also expected to be higher than in the previous year, amounting at the most to approximately EUR 15 million.