Financial guidance for 2021 (Half-year Financial Report 1–6/2021, 19 August 2021)
The Marimekko Group’s net sales for 2021 are expected to be higher than in the previous year (2020: EUR 123.6 million). Comparable operating profit margin is estimated to be approximately on a par with or higher than in the previous year (2020: 16.3 percent).
The instability caused by the coronavirus pandemic in Marimekko’s markets has again increased clearly. Therefore, there are significant uncertainties associated with the trend in the company’s net sales and earnings due to the pandemic situation. These uncertainties are described in more detail in the Risks section.
Market outlook and growth targets in 2021 (Half-year Financial Report 1–6/2021, 19 August 2021)
The coronavirus pandemic has been the worst crisis experienced by the global fashion industry and specialty retail sector in decades, and it will heavily impact the sector in 2021 as well. It has taken uncertainty over the global economy to a completely new level and is changing consumers’ purchasing behavior. Development of the pandemic situation can cause sudden fluctuations in demand, which 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. Vaccine coverage, new infection waves and virus variants as well as the way the crisis is handled by different countries may influence the economic development and consumers’ purchasing behavior in different markets.
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. Domestic wholesale sales in 2021 will be boosted by nonrecurring 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. The other Asian countries’ combined share of the company’s net sales is still noticeably smaller, but operations in these countries are constantly growing. All Marimekko stores in Asia are partnerowned. Net sales in the Asia-Pacific region are expected to increase in 2021. The aim is to open approximately 5 to 10 new Marimekko stores and shop-in-shops in 2021, and most of the planned openings will be in Asia.
Marimekko estimates that both wholesale and retail sales will increase in 2021. The growth is expected to be particularly strong in wholesale sales, which also include sales to partners operating Marimekko stores. The increase in wholesale sales is partly supported by the nonrecurring promotional deliveries in Finland, and they can increase Marimekko’s inventory risks. The development of the coronavirus situation, vaccine coverage and possible restrictions and recommendations in different market areas, on the other hand, influence footfall in stores and hence the outlook for both retail and wholesale, including nonrecurring wholesale promotions. Rapid fluctuations in demand due to the pandemic can also affect Marimekko’s net sales. Marimekko has experienced some coronavirus related disruptions in its supply chain, which can have an impact on the availability of products and consequently on net sales and profitability. Furthermore, net sales and earnings also essentially depend on maintaining the operational reliability and efficiency of distribution centers and logistics in the exceptional situation. Marimekko will continue actions to control gray exports, which will have a clear weakening impact on the company’s sales and earnings in 2021. Licensing income is forecast to be approximately at the same level as in the previous year.
Marimekko plans to accelerate its long-term international growth in 2021 and to invest especially in digital business, seamless omnichannel customer experience, sustainability and brand awareness. Fixed costs are expected to be up on the previous year, especially during the second half of the year. In 2020, fixed costs were reduced by partly temporary cost savings as well as subsidies granted in different countries to mitigate the negative business impacts of the coronavirus pandemic. Marketing expenses are expected to grow (2020: EUR 5.3 million) and take place especially in the second half of the year. In addition, IT costs are expected to increase clearly as the accounting principles related to configuration and customization costs in a cloud computing arrangement will change as a result of a new IFRIC interpretation. According to the current, preliminary estimate, the change in accounting principles will increase Marimekko’s fixed costs and accordingly lower the company’s investments approximately by some EUR 1 million during the financial year 2021. Marimekko will finalize the calculations during the fall of 2021 and possible impacts will be accounted for retrospectively latest at the financial statements 2021. As a result, total investments are estimated to be clearly lower than the year before (2020: EUR 2.1 million). The estimated effects of the longterm 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. The first earnings period will end at the end of September 2021.
The instability caused by the coronavirus pandemic has again clearly increased. Marimekko is closely monitoring the development of the pandemic situation in each of its market areas and will adjust its operations and plans according to the situation.
Because of the seasonal nature of Marimekko’s business, the major portion of the company’s euro-denominated net sales and earnings are traditionally generated during the last two quarters of the year. However, the relative growth of the net sales is expected to slow down during the second half of the year as the coronavirus pandemic had an exceptionally negative effect on the net sales during the first six months of 2020.