Interim Report Q2, 13 August 2020
“Marimekko was able to adjust its operations quickly in the exceptional situation caused by the coronavirus, and our result in the second quarter was a good achievement considering the difficult circumstances.
“During the period under review, the global fashion industry and specialty retail sector faced the worst crisis seen in several decades. The coronavirus pandemic brought discretionary consumption to a halt, which has led to serious financial difficulties for many players and has already toppled several significant companies in our industry. Dramatically, due to the pandemic, the doors of most Marimekko stores around the world closed temporarily. Nevertheless, thanks to our loyal customers and highly competent personnel, our wholesale sales, online sales and licensing income helped us restrict the decline in our net sales to 20 percent. In the April-June period of 2020, our net sales amounted to EUR 23.3 million (29.1). Net sales were weakened especially by a decline in retail sales in Finland, North America and Scandinavia as well as a decrease in wholesale sales in the Asia-Pacific region. Net sales in Finland fell by 32 percent, while international sales only decreased by 3 percent.
“Wholesale sales overall were nearly at the same level as in the comparison period, which supported net sales, and I wish to take this opportunity to thank our long-term partners for their strong cooperation during the crisis. Net sales were also boosted by a better-than-expected trend in licensing income in the Asia-Pacific region, which speaks to the appeal of our brand. Substantial growth in online sales offset some of the lost sales from our own stores: retail sales only declined by 37 percent in spite of the fact that the majority of our own retail stores were closed for most of the second quarter due to the pandemic.
“Our comparable operating profit was at a good level considering the difficult circumstances, although it fell to EUR 2.7 million (3.7) in the second quarter due to reduced sales and a weaker relative sales margin. The relative sales margin was negatively affected in particular by higher logistics costs resulting from a significant increase in online sales as well as discounts being bigger than in the comparison period. At the same time, however, the relative sales margin was supported by increased licensing income and good product margins. We quickly initiated an ambitious cost saving program in the early stages of the coronavirus pandemic. The effects of this program were clearly evident during the review period and our result was improved by a substantial reduction in fixed costs.
“We have developed our digital business for many years now. When our stores were temporarily closed, we had the agility to move our sales and marketing promotions online, including our popular annual springtime Friendship Sale promotion in Finland. Strong growth in the online demand for our products continued in the second quarter too and, working together with our recently-started new logistics partner, we were not able to increase the delivery capacity of our online store as quickly as necessary. We truly regret that our customers had to wait for their orders longer than usual. After the end of the review period, we have managed to rectify the situation and the delivery times of our online store have returned to normal. Nevertheless, the postponement of deliveries due to capacity challenges meant that approximately EUR 0.7 million in retail sales were left unrecognized as revenue for the second quarter.
“In the January-June period of 2020, our net sales fell by 14 percent to EUR 48.2 million (56.3) and our comparable operating profit declined to EUR 3.9 million (6.3) due to the impacts of the exceptional circumstances.
“Digitization and changes in consumer values — particularly the increased significance of sustainability — have been shaking up the global fashion industry for several years now, and we expect that the transformations driven by these megatrends will be considerably accelerated by the pandemic. Since 2018, at the core of Marimekko’s long-term strategy has been the pursuit of strong profitable growth through speaking to a broader global audience. Our strategy is based on the view that the industry’s megatrends present excellent growth opportunities for the Marimekko lifestyle, which is sustainable, timeless and stands out from the competition. Our mission — empowering people and bringing joy to their everyday lives — and our values are now more meaningful than ever, which is also reflected in the growing international interest in our brand.
“At the beginning of June, we announced that the visionary Rebekka Bay will take up the post of Creative Director at Marimekko in September to support our creative community in developing the appeal of our collections even further. For us at Marimekko, sustainability represents a comprehensive approach to our operations and value creation, and we will publish our new and even more ambitious sustainability strategy later this year. The pandemic has accelerated the shift to digital sales channels among customers — including new customer groups — and this will also influence Marimekko’s distribution channel choices in the future. We will continue our strong investment in e-commerce, which is becoming more and more significant, along with a seamless omnichannel customer experience.
“To strengthen our future competitiveness, it is important for us to simultaneously develop further the efficiency, flexibility and agility of our entire value chain and see to it that our organization structure, competencies, job contents and working methods respond in the best possible way to this dramatic transformation in consumer behavior, driven by digitization and other external dynamics intensified with the pandemic. Therefore, in order to reorganize and streamline our operations, we unfortunately have to initiate consultative negotiations in Finland and corresponding processes in our organizations in Scandinavia, North America and Australia. With these unfortunate but necessary measures, we aim to secure the financial position of our company in the long term.
“The first half of 2020 has been completely exceptional and characterized by rapidly changing circumstances. We have learned tremendously and successfully developed new operating methods and capabilities that will be useful if the pandemic is prolonged or other crises of a similar nature happen in the future. I want to extend my warmest thanks to everyone at Marimekko for their persistence, excellent work and unique team spirit during a very challenging period. I am convinced that, even if ensuring our competitiveness in a market undergoing a great transformation occasionally requires very unfortunate measures, we will emerge from this crisis even stronger than before.”