Marimekko to withdraw its financial guidance published on 13 February 2020 (25.3.2020)
In its financial bulletin for 2019 published on 13 February 2020, Marimekko Corporation estimated that Marimekko Group’s net sales for 2020 would be higher than in the previous year and that the comparable operating profit would be approximately at the same level as or higher than the year before.
In its financial bulletin, Marimekko estimated that the coronavirus (COVID-19) epidemic may have an impact on consumers’ and partners’ purchasing behavior and thereby on the company’s sales and profitability.
The company now estimates that the coronavirus pandemic in Marimekko’s key markets has clearly weakened the consumer demand outlook in all market areas and it is unlikely that Marimekko’s earlier financial guidance is realised. If prolonged, the exceptional circumstance will have significant impacts in the company’s sales and profitability.
Due solely to the estimated impacts of the coronavirus pandemic, Marimekko withdraws its financial guidance for 2020 published on 13 February 2020. As the situation evolves rapidly, it is not possible to give a precise estimate on the impact of the pandemic on the company’s business at the moment. Marimekko will publish a guidance for 2020 once a reliable estimate on the impacts can be made.
Market outlook and growth targets in 2020 (Financial Statements Bulletin 13 February 2020)
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. For example the coronavirus epidemic and the unstable situation in Hong Kong as well as other possible exceptional circumstances in the company’s markets may have an impact on consumers’ and partners’ purchasing behaviour and thereby on the company’s sales and profitability.
Finland, Marimekko’s important domestic market, represents about half of the company’s net sales. Sales in Finland are expected to grow on the previous year. Domestic wholesale sales in 2020 will be boosted by nonrecurring promotional deliveries, the total value of which will be substantially higher than last year. 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 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 earlier stage than in 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. The impacts of the coronavirus, at the moment concerning in particular the Asia-Pacific region, are still uncertain, but the epidemic can have a negative impact on sales, profitability and the operational reliability of the global supply chain. Some 15 percent of Marimekko’s products are manufactured in China. However, Marimekko currently estimates that net sales in the Asia-Pacific region will continue to grow this year. The company sees increasing demand for its products in this area especially in the longer term.
In 2019, Marimekko became aware of cases of grey exports and has taken due action. The control of the cases will have a clear weakening impact on the company’s sales and earnings.
The key drivers of the company’s growth are e-commerce, increasing the sales per square metre of existing stores in all markets, and partner-led retail in Asia. Nonrecurring promotional deliveries also have a significant impact on the company’s growth. The aim is 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.
Licensing income in 2020 is estimated to be markedly lower than in the previous year.
In 2020, Marimekko will noticeably heighten its investments from before in order to achieve even stronger growth and profitability in the long term. For this reason, fixed costs are estimated to increase significantly relative to the previous year. The company will further strengthen its international business competences, needed for growth, and personnel expenses are expected to be substantially higher than the year before. Marketing expenses are estimated to grow (2019: EUR 7.4 million), as the company will increase its investments in raising awareness to speak to a wider global audience. Total investments are also expected be significantly higher than in the previous year (2019: 2.6 million) due to revamping and expanding the store network as well as developing digital business and IT systems in order to strengthen the company’s international competitiveness. 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.
Because of 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 2020 as well, to a particularly large extent especially for earnings due also to the timing of growth investments. In the final quarter of the year, holiday sales make up a significant share of net sales.