Financial guidance for 2020 (Interim Report Q1, 14 May 2020)
On 25 March 2020, Marimekko withdrew its earlier financial guidance for 2020 solely due to the estimated impacts of the coronavirus pandemic. The coronavirus pandemic will have a significant negative impact on Marimekko’s net sales and profitability in 2020. As the situation is changing rapidly, it is not possible at the moment to give any precise estimate of the impacts of the pandemic on business. Marimekko will define its guidance for 2020 once a more reliable estimate of the impacts can be made.
Market outlook and growth targets in 2020 (Interim Report Q1, 14 May 2020)
The coronavirus that spread rapidly all over the world during the first quarter of 2020 has taken uncertainty over the global economy to a completely new level. Consequently, consumer confidence and consumer demand forecasts have significantly weakened in all of Marimekko’s market areas. The exceptional circumstances and the resulting changes in consumers’ and partners’ purchasing behavior 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 and the way the crisis is handled by different countries affect the pace of economic recovery and, at the moment, there is no clear outlook on how things will develop 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. Marimekko’s online store has since served as the company’s own responsible distribution channel in Finland, and demand for products in the webstore has clearly exceeded expectations. 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 depends on when stores can safely be reopened and the trend in customer numbers thereafter. The first of Marimekko’s own stores in Finland will reopen in the week beginning on 18 May with elevated safety measures in place.
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. The Marimekko stores in mainland China and Hong Kong were closed or open with shortened hours until the end of March. The stores have now returned to normal opening hours. In many other Asian countries, stores were temporarily closed due to the pandemic in mid March or in April. The stores in Japan are still temporarily closed. The temporary closure of partner-owned Marimekko stores in Asia and the impacts of the pandemic on consumer sentiment affect the company’s outlook for wholesale sales for the remainder of the year. Marimekko’s own retail stores in Australia were also temporarily closed at the end of March. Despite the pandemic, the company continues to see increasing demand for its products in the Asia-Pacific 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 will have a clear weakening impact on the company’s sales and earnings.
Licensing income in 2020 is estimated to be markedly lower than in the previous year.
The importance of e-commerce in the company’s business has continued to grow in 2020. In addition, Marimekko will focus on the safe reopening of its own retail stores as soon as possible and on recovering from the exceptional circumstances as well as support its partners in their similar efforts. The temporary closure of the company’s own retail stores in Finland, Scandinavia, Germany, the United States and Australia will have a significant impact on the company’s net sales and profitability in the second quarter of the year. The outlook for the full year 2020 essentially depends on the duration of the Marimekko stores’ temporary closure and the return of customer flows in each market after the stores are reopened. The company’s wholesale partners’ and customers’ recovery from the crisis impacts not only their orders for the winter 2020 and especially the spring 2021 collections but also their replenishment orders, and so Marimekko’s current full-year outlook as well. Moreover, full-year 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, higher-than-expected demand for products in the online store and wholesale delivery problems caused by the pandemic have posed challenges to Marimekko’s logistics. The company expects an increase in logistics costs in the second quarter of the year as, in this exceptional situation, sales are concentrated online more strongly than normally.
To secure profitability and cash flow, Marimekko drew up an ambitious fixed-cost saving program and promptly started to implement it. The impacts of the program will be significantly stronger in the second quarter. The impacts on personnel expenses of the temporary layoffs that began in the company’s retail organization in different markets after the end of the review period will also be evident in the second quarter of the year. The company has re-evaluated its earlier investment plans and expects its total investments to be lower than in the previous year (EUR 2.9 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.