Financial guidance for 2020 (Stock Exchange Release 18 September 2020)
The Marimekko Group’s net sales for 2020 are expected to be lower than in the previous year and comparable operating profit is estimated to be approximately at the same level as or lower than the year before.
However, there are significant 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 essentially depends on the trend in customer numbers in retail stores during the rest of the year and whether there will be new major coronavirus infection waves in the fall, which may require temporary closures of Marimekko’s own retail stores. The company’s wholesale partners’ and customers’ recovery from the crisis can impact their replenishment orders during the remainder of the year, and so Marimekko’s full-year outlook as well. Furthermore, the global crisis may affect the operational reliability of the company’s value chain.
Market outlook and growth targets in 2020 (Interim Report Q2, 13 August 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 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, possible 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. To take care of the health of its personnel and customers, Marimekko decided in March to temporarily close its own retail stores in Finland. The stores, with a few exceptions, were reopened in stages in May and June with elevated health and safety measures in place and with limited opening hours. Demand for products in Marimekko’s online store increased significantly over the spring and summer. 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 outlook for Marimekko’s domestic market and the company’s consolidated net sales and earnings essentially depend on the trend in customer numbers in retail stores during the rest of the year and whether there will be new major coronavirus infection waves in the fall.
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. The Japanese stores were closed in stages during April and they started to reopen their doors gradually in mid May. The Marimekko stores in mainland China, Hong Kong, South Korea and Taiwan were open in the second quarter, mainly with normal hours. The stores in Thailand closed temporarily in mid March and were reopened in mid May. The temporary closure of Marimekko stores in Asia, possible new infection waves and the impacts of the pandemic on consumer sentiment affect the company’s outlook for wholesale sales in the region. At the end of the period under review, all Asian Marimekko stores were open, partly with limited hours. Some of Marimekko’s own retail stores in Australia have been closed again due to regulations made after the end of the review period. Despite the pandemic, the company continues to see increasing demand for its products in the Asia-Pacific region in the longer term.
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 second half 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. The company’s wholesale partners’ and customers’ recovery from the crisis can impact their replenishment orders during the remainder of the year, and so Marimekko’s full-year outlook as well. Full-year wholesale sales will be substantially 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. As a result of growth in online sales, the company expects full-year logistics costs to increase on 2019.
To secure profitability and cash flow, Marimekko drew up an ambitious fixed-cost saving program and promptly started to implement it. The effects of the program were clearly evident especially in the second quarter, when the majority of Marimekko’s own retail stores were temporarily closed and the company achieved substantial savings in personnel expenses and rents, among other things. Fixed costs are expected to decrease in the second half of the year as well, but more moderately than in the early part of year. 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.