2014-05-08 07:30:01 CEST
2014-05-08 07:30:07 CEST
REGULATED INFORMATION
Marimekko - Interim report (Q1 and Q3)
INTERIM REPORT OF MARIMEKKO CORPORATION, 1 JANUARY - 31 MARCH 2014: Efficiency measures supported a seasonally weak quarter
Marimekko Corporation, Interim Report, 8 May 2014 at 8.30 a.m.
In the first quarter of 2014, the Marimekko Group's net sales fell by 6 percent
relative to the same period last year and amounted to EUR 19.4 million (20.7).
The decline in net sales is explained partly by a change in the rhythm of
deliveries for wholesale: a large proportion of the products in the spring 2014
collection were delivered as early as December 2013, unlike the previous
practice.
Operating result was EUR -1.7 million (-1.3). Operating result excluding
nonrecurring items improved in spite of the downturn in sales and was EUR -1.1
million (-1.3). The closure of manufacturing operations located in Sulkava and
Kitee, enhanced production efficiency at the textile printing factory in
Helsinki as well as reorganisations in the United States and write-downs of
company-owned stores contributed to the improved result.
The business climate for retail trade continued to be challenging, in Finland
even more so than had been expected. In order to reinforce business
competitiveness and to attain a more efficient organisational structure, during
the period under review Marimekko conducted consultative negotiations
concerning all operations in Finland with the exception of the personnel at the
Helsinki textile printing factory. Arrangements were also made in the United
States. Moreover, Marimekko initiated an international recruitment process for
a new Creative Director for the company.
In 2014, Marimekko will continue to invest in growth while focusing on
enhancing the operations of its stores, on improving the overall profitability
of its business, and on creating even more attractive design and products.
Key indicators
1-3/201 1-3/201 Change, 1-12/201
4 3 % 3
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Net sales, EUR million 19.4 20.7 -6 94.0
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International sales, EUR million 9.3 10.2 -9 41.8
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% of net sales 48 49 45
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EBITDA, EUR million -0.7 -0.2 -260 6.9
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EBITDA excluding nonrecurring items, EUR 0.0 -0.2 102 7.9
million
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Operating result, EUR million -1.7 -1.3 -36 0.1
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Operating result excluding nonrecurring -1.1 -1.3 16 1.4
items, EUR million
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Operating result margin, % -9.0 -6.2 0.1
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Operating result margin excluding -5.6 -6.2 1.4
nonrecurring items, %
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Result for the period, EUR million -1.5 -1.1 -33 -1.0
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Earnings per share, EUR -0.19 -0.14 -36 -0.12
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Cash flow from operating activities, -2.2 -2.3 3 5.4
EUR million
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Return on investment (ROI), % -18.1 -10.8 -1.1
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Equity ratio, % 53.4 53.8 55.5
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Gross investments, EUR million 0.5 0.8 -29 2.4
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Personnel at the end of the period 476 517 -8 502
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outside Finland 111 96 16 124
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Brand sales*, EUR million 39.7 44.3 -10 191.1
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outside Finland, EUR million 24.4 28.1 -13 115.1
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proportion of international sales, % 62 63 60
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Number of stores** 136 108 26 133
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* Estimated sales of Marimekko products at consumer prices. Brand sales are
calculated by adding together the company's own retail sales and the estimated
retail value of Marimekko products sold by other retailers. The estimate, based
on Marimekko's actual wholesale sales to these retailers, is unofficial and
does not include VAT. The key figure is not audited.
** Includes the company's own retail stores, retailer-owned Marimekko stores
and shop-in-shops with an area exceeding 30 sqm. The company's own retail
stores numbered 52 at the end of March 2014 (47). Information on changes is
available in the section Internationalisation and changes in the store network.
Mika Ihamuotila, President and CEO:
“The present-day business climate for retailing sets challenges for us as for
other players in the trade. Consumer and corporate confidence has been low and,
although a small upturn was detectable in March, consumers in Finland are still
very cautious. The weak trend in Marimekko's retail business which started in
the second quarter last year has continued in the early months of this year. I
am, however, confident about growth in Asia in particular, and I am also
pleased that our dependence on the domestic market has diminished.
“Our earnings trend is typically weak in the first quarter of the year as net
sales are seasonally low relative to operating expenses. However, our operating
result excluding nonrecurring items was an improvement on the figure for the
same period in the previous year due to action taken last year to enhance
profitability. Our wholesale sales were down by just over 10 percent, which is
partly explained by a change in the delivery rhythm for the spring collection.
Contrary to the previous practice, a large proportion of the deliveries were
made as early as December. Low confidence in the retail trade trend and in
consumer purchasing power is also reflected in retailers' caution as they
replenish their stocks.
“The early months of 2014 have been an eventful time for Marimekko. The
consultative negotiations which ended in March and our more efficient
organisational structure enable us to strengthen our competitiveness in the
long term and to develop our operations in such a way that we will be able in
the future to respond even better to the challenges of a changing business
climate and the needs of our international clientele. In spite of the difficult
state of the global economy, in the past five years we have built Marimekko
into a global design company with already more than 130 stores in Asia, Europe
and North America. We are now moving on to the next stage in our strategy and
we are updating processes related in particular to design, product development
and procurement.
“In order to strengthen the international competitiveness of our design
management, we decided in February 2014 to initiate an international
recruitment process for a new Creative Director. After the end of the period
under review, we reported that Anna Teurnell, who is currently Head of Design
for the & Other Stories brand, has been appointed to be Marimekko's Creative
Director and member of the Management Group as of 15 July 2014. At the heart of
our updating process are even more attractive products and getting them from
the drawing board and into the stores faster and more easily. I believe that
Anna Teurnell's artistic vision, international experience and Nordic background
are a good combination that is sure to be of help in achieving our ambitious
goals.
“In consumers' purchasing behaviour, a great transformation is currently taking
place as a result of digitisation, and the development of multichannel business
is of crucial importance to Marimekko as to others. Ecommerce continues
steadily to expand its share of total sales, and we are seeking all the time to
enhance consumers' shopping experience both online and in our stores.”
Financial guidance is unchanged
The forecast for the whole of 2014 remains unchanged: On the basis of general
market prospects, the company's growth targets and the agreed reorganisations,
the net sales of the Marimekko Group in 2014 are forecast to grow by 3-8
percent relative to 2013. Operating profit excluding nonrecurring items is
estimated at EUR 4-8 million.
Financial calendar 2014
The interim report for January-June will be issued on Thursday, 14 August 2014
at 8.30 a.m., and for January-September on Thursday, 6 November 2014 at 8.30
a.m.
For additional information, contact:
Mika Ihamuotila, President and CEO, tel. +358 9 758 71
Thomas Ekström, CFO, tel. +358 50 381 9751
MARIMEKKO CORPORATION
Corporate Communications
Piia Kumpulainen
Tel. +358 9 758 7293
piia.kumpulainen@marimekko.com
DISTRIBUTION:
NASDAQ OMX Helsinki Ltd
Key media
Marimekko is a Finnish textile and clothing design company renowned for its
original prints and colours. The company designs and manufactures high-quality
interior decoration items ranging from furnishing fabrics to tableware as well
as clothing, bags and other accessories. When Marimekko was founded in 1951,
its unparalleled printed fabrics gave it a strong and unique identity.
Marimekko products are sold in approximately 40 countries. In 2013, brand sales
of Marimekko products worldwide amounted to approximately EUR 191 million and
the company's net sales were EUR 94 million. The number of Marimekko stores
totalled 133 at the year end. The key markets are North America, Northern
Europe and the Asia-Pacific region. The Group employs around 500 people. The
company's share is quoted on NASDAQ OMX Helsinki Ltd. www.marimekko.com
INTERIM REPORT OF MARIMEKKO CORPORATION, 1 JANUARY - 31 MARCH 2014
MARKET REVIEW
The widespread uncertainty over the global economy continued during the period
under review. The biggest risks in the global economy have shifted to emerging
markets. Confidence indicators have risen in Europe, although recovery is still
in its infancy and weak growth might well be impacted by the Ukrainian crisis.
In the United States, economic recovery continues. There is still no clear turn
for the better in Finnish economic conditions, but confidence is gradually
returning. In the indicators of the Confederation of Finnish Industries EK,
this shows in retail trade and in services in general. Consumers' purchasing
behaviour in the January-March period continued to be very cautious.
(Confederation of Finnish Industries EK: Economic Review, March and April 2014
and Business Tendency Survey, May 2014). In the January-March period of 2014,
retail net sales in Finland fell by 0.5 percent, but the quantity of sales -
which measures real growth in sales - declined by 1.3 percent (Statistics
Finland: Turnover of trade, retail trade flash estimate, March 2014).
INTERNATIONALISATION AND CHANGES IN THE STORE NETWORK
Marimekko is experiencing a dynamic phase of internationalisation. In 2014, the
main thrust in expansion is on openings of retailer-owned Marimekko stores. The
aim is to open a total of 15-25 new Marimekko stores and shop-in-shops. Of
these, 1-3 would be company-owned stores. Also, the company will concentrate on
enhancing the operations of company-owned stores opened in recent years and
improving their profitability.
During the period under review, three Marimekko stores were opened: a
company-owned store in Ikaalinen, Finland, a retailer-owned store in
Nishinomiya, Japan, and a shop-in-shop in New Zealand.
Number of stores & shop-in-shops* 31.3.2014 31.3.2013 31.12.2013
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Finland 57 48 56
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Company-owned stores 32 28 31
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Scandinavia 13 12 13
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Company-owned stores 8 7 8
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Central and Southern Europe 4 5 4
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Company-owned stores 4 4 4
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North America 23 16 23
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Company-owned stores 6 6 6
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Asia-Pacific 39 27 37
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Company-owned stores 2 2 2
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Total 136 108 133
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Company-owned stores 52 47 51
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* Includes the company's own retail stores, retailer-owned Marimekko stores and
shop-in-shops with an area exceeding 30 sqm.
NET SALES
In the January-March period of 2014, the Group's net sales fell by 6 percent to
EUR 19,376 thousand (20,710). Net sales in Finland fell by 4 percent. With the
exception of Finland, retail sales grew in all market areas, which was partly
due to additional sales generated by stores opened in 2013. In Australia and
particularly in Germany and the UK, comparable sales by company-owned stores
were also at a good level.
A downturn in wholesale sales in all market areas was the biggest factor in the
decline in overall net sales. The decrease in wholesale sales was mainly due to
a change in the rhythm of deliveries. A large proportion of the products in the
spring 2014 collection were delivered as early as December 2013, unlike the
previous practice. Also, reduced levels compared to the previous year of
restocking deliveries to retailers exerted a drag on wholesale sales in
Finland. In addition, royalty income was at a lower level in the first quarter
of 2014 than in the comparison period.
Net sales by market area
(EUR 1,000) 1-3/2014 1-3/2013 Change, % 1-12/2013
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Finland 10,037 10,486 -4 52,159
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Retail sales 6,205 6,296 -1 35,107
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Wholesale sales 3,753 4,070 -8 16,491
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Royalties 79 120 -34 562
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Scandinavia 1,907 1,879 1 8,152
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Retail sales 1,061 805 32 4,355
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Wholesale sales 846 1,074 -21 3,796
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Royalties - - -
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Central and Southern Europe 1,837 2,001 -8 7,678
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Retail sales 319 284 12 1,408
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Wholesale sales 1,480 1,692 -13 6,170
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Royalties 38 25 52 100
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North America 1,511 1,871 -19 8,534
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Retail sales 1,129 1,103 2 5,587
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Wholesale sales 320 657 -51 2,511
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Royalties 62 111 -44 436
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Asia-Pacific 4,084 4,473 -9 17,484
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Retail sales 514 504 2 2,300
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Wholesale sales 3,570 3,969 -10 15,182
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Royalties - - 2
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International sales, total 9,339 10,224 -9 41,848
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Retail sales 3,023 2,696 12 13,651
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Wholesale sales 6,216 7,392 -16 27,659
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Royalties 100 136 -27 538
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Total 19,376 20,710 -6 94,007
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Retail sales 9,228 8,992 3 48,757
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Wholesale sales 9,969 11,462 -13 44,150
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Royalties 179 256 -30 1,100
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Finland
In the January-March period, sales in Finland fell by 4 percent to EUR 10,037
thousand (10,486). Retail sales were on a par with the same period last year,
but an 8 percent fall in wholesale sales reduced overall sales. Wholesale sales
were impacted by retailers' cautiousness as well as the change in the delivery
rhythm for the spring collection. Also, reduced levels compared to the
previous year of restocking deliveries to retailers exerted a drag on wholesale
sales in Finland in the first quarter of the year.
In the course of 2013, nine new Marimekko stores were opened in Finland, of
which four were company-owned. Comparable sales by company-owned stores
(including ecommerce) fell by 2 percent, which also indicates the cautiousness
of Finnish consumers and the downswing in purchasing power.
Scandinavia
In Scandinavia, sales during the January-March period were slightly stronger
than in the same period last year, reaching EUR 1,907 thousand (1,879). Retail
sales rose by 32 percent. Retail sales were boosted by the two new Marimekko
stores opened in 2013 as well as by the extension to Sweden and Denmark of
online retailing. Comparable sales by company-owned stores grew by 2 percent. A
downturn of 21 percent in wholesale sales was affected by the change in the
delivery rhythm for the spring collection.
Central and Southern Europe
In Central and Southern Europe, net sales for the January-March period fell by
8 percent to EUR 1,837 thousand (2,001). Retail sales grew by 12 percent.
Wholesale sales fell by 13 percent relative to the same period last year due to
the change in the rhythm of deliveries for the spring collection. Comparable
sales rose by 13 percent, and particularly in Germany and the UK sales took a
favourable trend.
North America
In North America, net sales for the January-March period fell by 19 percent to
EUR 1,511 thousand (1,871). In terms of the sales currency (mostly the US
dollar), sales fell by roughly 17 percent. Retail sales in North America rose
by 2 percent. Wholesale sales were 51 percent lower than in the comparison
period. The shop-in-shop partnership with the home furnishings retailer Crate
and Barrel will end in summer 2014, which showed up during the period under
review as a clear downturn in the number of products ordered.
Asia-Pacific
Net sales in the Asia-Pacific region fell in the January-March period by 9
percent to EUR 4,084 thousand (4,473). Wholesale sales fell by 10 percent,
affected by the change in the rhythm of deliveries for the spring collection.
Retail sales (the Sydney and Melbourne stores in Australia) grew by 2 percent.
FINANCIAL RESULT
The Group's financial result is typically weak during the first quarter because
net sales are low relative to operating expenses for seasonal reasons. In the
first quarter of 2014, the Group's operating result was EUR -1,748 thousand
(-1,290). Operating result includes a nonrecurring expense of EUR 669 thousand
connected with downsizing after the consultative negotiations which ended in
March 2014.
Operating result excluding nonrecurring items was EUR -1,079 thousand (-1,290).
The closure of manufacturing operations located in Sulkava and Kitee, enhanced
production efficiency at the textile printing factory in Helsinki as well as
reorganisations in the United States and write-downs of company-owned stores
contributed to the improved result. Operating result was weakened by a downturn
in wholesale sales in all market areas as well as a decline in comparable
retail sales in Finland.
Marketing expenses during the period under review totalled EUR 1,001 thousand
(939), or 5 percent of the Group's net sales (5).
The Group's depreciation was EUR 1,082 thousand (1,105), representing 6 percent
of net sales (5).
Operating result margin was -9.0 percent (-6.2).
Net financial expenses were EUR 72 thousand (net financial income 35), or 0
percent of net sales (0).
Result for the review period before taxes was EUR -1,820 thousand (-1,255).
Result after taxes was EUR -1,498 thousand (-1,129) and earnings per share were
EUR -0.19 (-0.14).
BALANCE SHEET
The consolidated balance sheet total as of 31 March 2014 was EUR 47,796
thousand (53,686). Equity attributable to the equity holders of the parent
company was EUR 25,495 thousand (28,865), or EUR 3.57 per share (3.34).
Non-current assets at the end of March 2014 were EUR 20,024 thousand (24,681).
At the end of the period under review, net working capital was EUR 16,970
thousand (16,990). Inventories were EUR 18,719 thousand (18,151).
CASH FLOW AND FINANCING
In the first quarter, cash flow from operating activities was EUR -2,219
thousand (-2,296), or EUR -0.27 per share (-0.28). Cash flow before cash flow
from financing activities was EUR -2,684 thousand (-3,057).
The Group's financial liabilities at the end of the period under review stood
at EUR 9,820 thousand (12,193).
At the end of the period under review, the Group's cash and cash equivalents
amounted to EUR 1,885 thousand (2,926). In addition, the Group had unused
committed long- and short-term credit lines of EUR 16,180 thousand (7,807).
The Group's equity ratio at the end of the period was 53.4 percent (53.8).
Gearing was 44.4 percent (43.8).
INVESTMENTS
The Group's gross investments in the first quarter were EUR 466 thousand (761),
or 2 percent of net sales (4). Most of the investments were devoted to building
store premises and the procurement of furniture.
PERSONNEL
In the first quarter of 2014, the number of employees averaged 478 (521). At
the end of the period, the Group had 476 (517) employees, of whom 111 (96)
worked outside Finland. The number of employees working outside Finland was
broken down as follows: Scandinavia 33 (27), Central and Southern Europe 14
(13), North America 50 (44) and Asia-Pacific 14 (12). The personnel at
company-owned stores totalled 227 at the end of the period (222).
REORGANISATIONS IN FINLAND AND THE UNITED STATES
During the period under review, Marimekko started operational reorganisations
then expected to lead to shedding an estimated maximum of 65 jobs in Finland
and the United States and, if implemented to full effect, to yield annual
savings in costs of roughly EUR 2.5 million and an improvement in operating
result. On 27 March 2014, Marimekko announced the ending of the consultative
negotiations in Finland. The negotiations determined that the targeted savings
could be achieved through markedly smaller reductions in staffing than had been
estimated. The operational reorganisation and streamlining led to the
termination of 22 jobs. Also, the contracts of a maximum of 35 people at
company-owned stores were changed to a part-time basis or the number of agreed
working hours was reduced. Work was also reduced through the termination of
fixed-term employment contracts. The negotiations involved 378 employees, 151
of whom worked at stores in Finland.
With the downsizing and working hour arrangements in Finland, the aim is to
achieve annual cost savings of an estimated total of EUR 1.5 million. The
savings will be realised gradually as of the second quarter of 2014, and the
full impact of the profit improvement will show as of the final quarter of this
year. In connection with the downsizing, the company posted a EUR 0.7 million
nonrecurring provision for expenses for the first quarter of 2014. The
arrangements in the United States are still to some extent incomplete.
Some new key positions in design, product development and sales have been
assigned within the company as part of the operational reorganisation. Efforts
will be made as far as possible to fill these positions through internal
transfers within the Group.
SHARE AND SHAREHOLDERS
Share capital and number of shares
At the end of March 2014, the company's fully paid-up share capital, as
recorded in the Trade Register, amounted to EUR 8,040,000 and the number of
shares totalled 8,089,610.
Shareholdings
According to the book-entry register, Marimekko had 7,292 shareholders at the
end of March 2014 (7,486). Of the shares, 21.2 percent were owned by
nominee-registered or non-Finnish holders (20.9). The number of shares owned
either directly or indirectly by members of the Board of Directors and the
President and CEO of the company was 1,348,358 (1,338,930), representing 16.7
percent of the number and voting rights of the company's shares (16.6).
The largest shareholders according to the book-entry register on 31 March 2014
Number of shares Percentage of shares
and votes and votes
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1. Muotitila Ltd 1,297,700 16.04
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2. Semerca Investments SA 850,377 10.51
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3. Varma Mutual Employment Pension 385,920 4.77
Insurance Company
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4. ODIN Finland 344,251 4.26
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5. Veritas Pension Insurance Company 220,000 2.72
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6. Ilmarinen Mutual Pension 215,419 2.66
Insurance Company
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7. Keva 197,754 2.44
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8. OP-Finland Small Firm Fund 151,197 1.87
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9. Mutual Fund Tapiola Finland 136,395 1.69
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10. Mutual Fund Nordea Finland Small 86,025 1.06
Cap
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Total 3,885,038 48.02
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Nominee-registered and 1,715,641 21.21
non-Finnish holders
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Others 2,488,931 30.77
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Total 8,089,610 100.00
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Share trading and the company's market capitalisation
In the first quarter of 2014, a total of 209,263 Marimekko shares were traded,
representing 2.6 percent of the shares outstanding. The total value of
Marimekko's share turnover was EUR 2,100,083. The lowest price of the Marimekko
share was EUR 9.75, the highest was EUR 10.43 and the average price was EUR
10.04. At the end of March, the closing price of the share was EUR 10.30. The
company's market capitalisation on 31 March 2014 was EUR 83,322,983
(90,927,216).
Authorisations
At the end of the period, Marimekko's Board of Directors had an authorisation,
granted by the Annual General Meeting of 17 April 2012, to decide on a directed
offering of shares to the personnel, in deviation from the shareholders'
pre-emptive right, in one or more offerings. The total number of new shares to
be offered for subscription pursuant to the authorisation may not exceed
150,000 shares. Marimekko arranged a personnel share offering in 2012, in which
a total of 49,610 new shares were subscribed for. The validity of the
authorisation expired on 17 April 2014.
EVENTS AFTER THE END OF THE PERIOD UNDER REVIEW
Changes in management
Marimekko announced on 5 February 2014 that it will initiate an international
recruitment process for a new Creative Director for the company. On 16 April
2014, the company announced the appointment of Anna Teurnell as Creative
Director of Marimekko and member of the company's Management Group as of 15
July 2014. She will lead Marimekko's design team and be responsible for the
company's design strategy for fashion, bags and accessories as well as home
products. Minna Kemell-Kutvonen, previous Creative Director of Marimekko, will
continue in the design team with responsibility for print design.
Resolutions of the Annual General Meeting
The Annual General Meeting of Marimekko Corporation on 23 April 2014 adopted
the financial statements for 2013 and discharged the members of the Board of
Directors and the President and CEO from liability. The Annual General Meeting
approved the Board of Directors' proposal to pay a dividend of EUR 0.25 per
share for the 2013 financial year, totalling EUR 2,022,403. The dividend
payment record date was 28 April 2014 and the dividend payment date was 7 May
2014.
The number of members of the Board of Directors was confirmed as six. Elina
Björklund, Arthur Engel, Mika Ihamuotila, Joakim Karske and Pekka Lundmark were
re-elected to the Board and Catharina Stackelberg-Hammarén was elected as a new
member. Pekka Lundmark serves as chairman and Mika Ihamuotila as deputy
chairman. The term in office of the members of the Board of Directors lasts
until the closing of the Annual General Meeting following the one at which they
were elected.
It was decided that the annual remuneration payable to the members of the Board
would remain unchanged from the previous year and be as follows: EUR 30,000 to
the chairman and EUR 20,000 to the other members. According to the resolution
by the Annual General Meeting, approximately 40 percent of the annual
remuneration will be paid in Marimekko Corporation's shares acquired from the
market and the remainder in cash. The shares will be acquired directly on
behalf of the Board members within two weeks from the release of the interim
report for January 1 - March 31, 2014 or, if this is not possible due to
insider regulations, on the first possible date thereafter. It was also
resolved that the President and CEO of the company will not receive any
remuneration for membership of the Board of Directors.
The Annual General Meeting voted to re-elect PricewaterhouseCoopers Oy,
Authorised Public Accountants, as the company's auditor and that the auditor's
fee would be paid as per invoice. Kim Karhu, Authorised Public Accountant,
continues as chief auditor.
Management Group's long-term bonus system
Marimekko has a long-term bonus system in order to encourage its Management
Group and to enhance the Group's commitment to the company. The earning periods
of the current bonus system will terminate on 31 October 2014 and 28 February
2015. The Board of Directors of Marimekko Corporation decided on 7 May 2014 on
a subsequent bonus system with terms corresponding to those of the current
system. The purpose of the bonus system is to encourage the Management Group to
operate with a business mentality and to add to the company's value in the long
term in particular. The aim is to combine the owners' and the Management
Group's targets in order to increase the company's value and to elicit the
Management Group's commitment to the company in the span of several years.
The system is composed of two earnings periods, which are 8 May 2014 - 31
October 2017 and 8 May 2014 - 28 February 2018. The possible bonus for each
earnings period will be based on the total yield on Marimekko Corporation's
shares, including dividends. The possible bonus will be paid in cash in two
batches, one in autumn 2017 and the other in spring 2018. Earning the bonus
requires that the person still works for the company at the time of the
payment. When receiving the bonus, the person in question commits themselves to
using 50 percent of the net value of the bonus for acquiring the company's
shares at transaction price within six months from receiving the bonus. The
shares acquired with the bonus cannot be surrendered prior to two years from
the time of acquiring the shares. The annual maximum value of the bonus paid to
a member of the Management Group in the bonus system cannot exceed the
approximate value of fixed annual salary. Marimekko's Management Group
comprises five persons at the moment.
MAJOR RISKS AND FACTORS OF UNCERTAINTY
The key strategic risks for the near future are associated with overall
economic trends and the consequent uncertainty in the operating environment,
the management of the company's expansion as well as the digitalisation of
retail.
Marimekko products are sold in approximately 40 countries. The key markets are
North America, Northern Europe and the Asia-Pacific region. There are Marimekko
stores in 15 countries. In addition to Finland, Marimekko has company-owned
stores in other Nordic countries, Germany, the United Kingdom, the United
States and Australia. The global economic cycle and factors of uncertainty
affect consumers' purchasing behaviour and buying power in all of the company's
market areas. The downturn in economic conditions, which started from the
severe problems of the international financial markets, continues to dampen the
prospects for retail as well as Marimekko's prospects for growth and earnings.
Marimekko is undergoing a phase of extensive internationalisation and change.
The distribution of products is being expanded in all key market areas. Growth
is based on opening retailer-owned Marimekko stores and shop-in-shops as well
as on setting up company-owned stores and expanding ecommerce. In recent years,
expansion has called for larger or brand-new country organisations, which
exerts a drag on the cost-effectiveness of the company. Expanding the network
of company-owned stores and building international ecommerce have increased the
company's investments, lease liabilities of store premises, inventories, and
the company's fixed costs. It also follows from this that a larger portion of
Group net sales comes from sales by the company's own retail stores, which has
increased the seasonality of the business as well as dependence on the success
of new company-owned stores and has shifted the bulk of net sales and profit
accumulation to the last quarter, thus having a negative impact on
profitability in the first half of the year. Furthermore, partnerships and the
choice of partners in the company's key market areas also involve risks.
The company's ability to design, develop and commercialise new products that
meet consumers' expectations while maintaining profitable in-house production,
sustainable sourcing and effective logistics has an impact on the company's
sales and profitability. Moreover, intellectual property rights play a vital
role in the company's success and the company's ability to manage these rights
may have an impact on the company's value.
The company's operational risks prominently include those related to the
management and success of expansion projects, the operational reliability of
procurement and logistics processes, and changes in costs of raw materials and
other procurement items. As a result of new products, the share of in-house
production has diminished, and the company uses subcontractors for its
manufacturing to an increasing extent. Therefore, the company's dependence on
the supply chain has increased. Any delays or disturbances in supply or
fluctuations in the quality of products may have a temporary harmful impact on
business. As the operations are being expanded and diversified, risks related
to the management of inventories also increase.
Among the company's economic risks, those related to the structure of sales,
increased investments, price trends for factors of production, changes in cost
structure, increased operational costs, customers' liquidity, and changes in
exchange rates (particularly US dollar, Swedish krona and Australian dollar)
may have an impact on the company's financial status.
MARKET OUTLOOK AND GROWTH TARGETS IN 2014
Overall uncertainty in the global economy is forecast to continue, and this may
impact consumers' purchasing behaviour in all of Marimekko's market areas.
The Asia-Pacific region was the driving force in Marimekko's sales growth in
2013 and the company still sees growing demand for its products in this market
area. There are 27 retailer-owned Marimekko stores in Japan and the company's
wholesale sales to Japan have been growing for several successive years. The
rise of the euro against the yen and an increase in sales tax in Japan in April
2014 may, however, have a negative impact on Marimekko's wholesale sales.
The weak state of the retail market in Finland and the negative trend in
comparable sales by Marimekko's company-owned Finnish stores which started in
the second half of 2013 have continued as forecast during the current year. The
relative trend in retail sales is expected to improve starting from the
beginning of the third quarter due to the low level of sales in the comparison
period. Low confidence in the retail trade trend and consumers' weaker
purchasing power may be reflected in retailers' caution as they replenish their
stocks during the remainder of the year as well.
Wholesale sales by Marimekko in the second half of the year will be boosted by
considerable, nonrecurring promotional deliveries. The Banana Republic
Marimekko Collection to be launched in May 2014 will boost Marimekko's royalty
earnings in the second half of 2014.
In 2014, the main thrust in expansion is on openings of retailer-owned
Marimekko stores. The aim is to open a total of 15-25 new Marimekko stores and
shop-in-shops. Of these, 1-3 would be company-owned. Furthermore, the company
will concentrate on developing the operations of company-owned stores opened in
recent years and on improving the overall profitability of business. During the
January-March period of 2014, three Marimekko stores were opened.
The planned total investments for 2014 of the Marimekko Group are estimated at
roughly EUR 3 million. The majority of investments will be directed at building
new store premises and purchasing new furniture.
FINANCIAL GUIDANCE
The forecast for the whole of 2014 remains unchanged: On the basis of general
market prospects, the company's growth targets and the agreed reorganisations,
the net sales of the Marimekko Group in 2014 are forecast to grow by 3-8
percent relative to 2013. Operating profit excluding nonrecurring items is
estimated at EUR 4-8 million.
Helsinki, 8 May 2014
MARIMEKKO CORPORATION
Board of Directors
INTERIM REPORT 1 JANUARY - 31 MARCH 2014, TABLE SECTION
The information presented in the interim report has not been audited. There may
be differences in totals due to rounding to the nearest thousand euros.
APPENDICES
Accounting principles
Formulas for key figures
Consolidated income statement and comprehensive consolidated income statement
Consolidated balance sheet
Consolidated cash flow statement
Consolidated statement of changes in shareholders' equity
Key figures
Segment information
Net sales by market area
Net sales by product line
Quarterly trend in net sales and earnings
ACCOUNTING PRINCIPLES
This interim report was prepared in accordance with IAS 34. The same accounting
principles were applied as in the 2013 financial statements , although at the
start of the financial year the company adopted certain new and amended IFRS
standards as described in the financial statements for 2013. The adoption of
new and updated standards has had no effect on the figures stated during the
period under review.
FORMULAS FOR KEY FIGURES
Earnings per share (EPS), EUR:
(Profit before taxes - income taxes) / Number of shares (average for the
financial year)
Equity per share, EUR:
Shareholders' equity / Number of shares, 31 March
Return on equity (ROE), %:
(Profit before taxes - income taxes) X 100 / Shareholders' equity (average for
the financial year)
Return on investment (ROI), %:
(Profit before taxes + interest and other financial expenses) X 100 / (Balance
sheet total - non-interest-bearing liabilities (average for the financial
year))
Equity ratio, %:
Shareholders' equity X 100 / (Balance sheet total - advances received)
Gearing, %:
Interest-bearing net debt X 100 / Shareholders' equity
Net working capital:
Inventories + trade and other receivables + current tax assets - trade and
other payables - current tax liability
CONSOLIDATED INCOME STATEMENT
(EUR 1,000) 1-3/20 1-3/20 1-12/20
14 13 13
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NET SALES 19,376 20,710 94,007
--------------------------------------------------------------------------------
Other operating income 54 56 246
--------------------------------------------------------------------------------
Increase or decrease in inventories of completed and 705 416 527
unfinished products
--------------------------------------------------------------------------------
Raw materials and consumables -7,761 -8,590 -33,547
--------------------------------------------------------------------------------
Employee benefit expenses -6,777 -6,193 -27,059
--------------------------------------------------------------------------------
Depreciation and impairments -1,082 -1,105 -6,772
--------------------------------------------------------------------------------
Other operating expenses -6,263 -6,583 -27,320
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
OPERATING RESULT -1,748 -1,290 82
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Financial income 123 72 67
--------------------------------------------------------------------------------
Financial expenses -195 -38 -953
--------------------------------------------------------------------------------
-72 35 -886
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
RESULT BEFORE TAXES -1,820 -1,255 -804
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Income taxes 322 126 -151
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NET RESULT FOR THE PERIOD -1,498 -1,129 -955
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Distribution of net result to equity holders of the -1,498 -1,129 -955
parent company
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Basic and diluted earnings per share calculated on the -0.19 -0.14 -0.12
result attributable to equity holders of the parent
company, EUR
--------------------------------------------------------------------------------
COMPREHENSIVE CONSOLIDATED INCOME STATEMENT
(EUR 1,000) 1-3/20 1-3/20 1-12/20
14 13 13
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Net result for the period -1,498 -1,129 -955
--------------------------------------------------------------------------------
Items that could be reclassified to profit or loss at a
future point in time
--------------------------------------------------------------------------------
Change in translation difference 4 -2 -30
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
COMPREHENSIVE RESULT FOR THE PERIOD -1,494 -1,131 -985
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Distribution of net result to equity holders of the -1,494 -1,131 -985
parent company
--------------------------------------------------------------------------------
CONSOLIDATED BALANCE SHEET
(EUR 1,000) 31.3.2014 31.3.2013 31.12.2012
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ASSETS
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NON-CURRENT ASSETS
--------------------------------------------------------------------------------
Intangible assets 1,766 2,535 1,976
--------------------------------------------------------------------------------
Tangible assets* 17,913 21,759 18,245
--------------------------------------------------------------------------------
Available-for-sale financial assets 16 16 16
--------------------------------------------------------------------------------
Deferred tax assets 330 371 -
--------------------------------------------------------------------------------
20,024 24,681 20,237
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CURRENT ASSETS
--------------------------------------------------------------------------------
Inventories 18,719 18,151 18,106
--------------------------------------------------------------------------------
Trade and other receivables 7,029 7,694 6,622
--------------------------------------------------------------------------------
Current tax assets 140 234 682
--------------------------------------------------------------------------------
Cash and cash equivalents 1,885 2,926 3,001
--------------------------------------------------------------------------------
27,772 29,005 28,411
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
ASSETS, TOTAL 47,796 53,686 48,648
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY AND LIABILITIES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
EQUITY ATTRIBUTABLE TO EQUITY HOLDERS OF THE
PARENT COMPANY
--------------------------------------------------------------------------------
Share capital 8,040 8,040 8,040
--------------------------------------------------------------------------------
Invested non-restricted equity reserve 502 502 502
--------------------------------------------------------------------------------
Translation differences -34 -10 -38
--------------------------------------------------------------------------------
Retained earnings 16,987 20,333 18,485
--------------------------------------------------------------------------------
Shareholders' equity, total 25,495 28,865 26,989
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
NON-CURRENT LIABILITIES
--------------------------------------------------------------------------------
Deferred tax liabilities - 163 11
--------------------------------------------------------------------------------
Provisions 190 - 101
--------------------------------------------------------------------------------
Financial liabilities 9,820 12,193 8,234
--------------------------------------------------------------------------------
Finance lease liabilities 3,276 3,306 3,252
--------------------------------------------------------------------------------
13,286 15,662 11,598
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CURRENT LIABILITIES
--------------------------------------------------------------------------------
Trade and other payables 8,918 9,089 9,989
--------------------------------------------------------------------------------
Finance lease liabilities 97 70 72
--------------------------------------------------------------------------------
9,016 9,159 10,061
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Liabilities, total 22,301 24,821 21,659
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY AND LIABILITIES, TOTAL 47,796 53,686 48,648
--------------------------------------------------------------------------------
* At the end of the review period tangible assets included assets acquired
under finance lease agreements amounting to EUR 3,268 thousand (31 March 2013:
3,316, 31 December 2013: 3,229).
The Group has no liabilities resulting from derivative contracts, and there are
no outstanding guarantees or any other contingent liabilities which have been
granted on behalf of the management of the company or its shareholders.
CONSOLIDATED CASH FLOW STATEMENT
(EUR 1,000) 1-3/201 1-3/201 1-12/201
4 3 3
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CASH FLOW FROM OPERATING ACTIVITIES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Net result for the period -1,498 -1,129 -955
--------------------------------------------------------------------------------
Adjustments
--------------------------------------------------------------------------------
Depreciation and impairments 1,082 1,105 6,772
--------------------------------------------------------------------------------
Other non-cash transactions 89 - 101
--------------------------------------------------------------------------------
Financial income and expenses 72 -35 886
--------------------------------------------------------------------------------
Taxes -322 -126 151
--------------------------------------------------------------------------------
Cash flow before change in working capital -577 -185 6,954
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Change in working capital -1,432 -1,838 -1,059
--------------------------------------------------------------------------------
Increase (-) / decrease (+) in current 267 315 666
non-interest-bearing trade receivables
--------------------------------------------------------------------------------
Increase (-) / decrease (+) in inventories -613 796 396
--------------------------------------------------------------------------------
Increase (+) / decrease (-) in current -1,086 -2,949 -2,121
non-interest-bearing liabilities
--------------------------------------------------------------------------------
Cash flow from operating activities before financial -2,009 -2,023 5,895
items and taxes
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Paid interest and payments on other financial -71 -64 -961
expenses
--------------------------------------------------------------------------------
Interest received - 24 67
--------------------------------------------------------------------------------
Taxes paid -139 -234 422
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CASH FLOW FROM OPERATING ACTIVITIES -2,219 -2,296 5,424
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Investments in tangible and intangible assets -466 -761 -2,353
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CASH FLOW FROM INVESTING ACTIVITIES -466 -761 -2,353
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Long-term loans drawn 1,586 2,876 -
--------------------------------------------------------------------------------
Long-term loans paid - - -1,083
--------------------------------------------------------------------------------
Finance lease drawn/paid -18 1 -69
--------------------------------------------------------------------------------
Dividends paid - - -2,022
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
CASH FLOW FROM FINANCING ACTIVITIES 1,568 2,877 -3,175
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Change in cash and cash equivalents -1,116 -180 -105
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Cash and cash equivalents at the beginning of the 3,001 3,106 3,106
period
--------------------------------------------------------------------------------
Cash and cash equivalents at the end of the period 1,885 2,926 3,001
--------------------------------------------------------------------------------
CONSOLIDATED STATEMENT OF CHANGES IN SHAREHOLDERS' EQUITY
(EUR 1,000) Equity attributable to equity holders of the parent company
--------------------------------------------------------------------------------
Share Invested Translation Retained Shareholde
capita non-restricted differences earnings rs'
l equity reserve equity,
total
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Shareholders' 8,040 502 -8 21,462 29,996
equity
1 January 2013
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Comprehensive
result
--------------------------------------------------------------------------------
Net result for the -1,129 -1,129
period
--------------------------------------------------------------------------------
Translation -2 -2
differences
--------------------------------------------------------------------------------
Total -2 -1,129 -1,131
comprehensive
result for the
period
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Transactions with
owners
--------------------------------------------------------------------------------
Dividends paid
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Shareholders' 8,040 502 -10 20,333 28,865
equity
31 March 2013
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Shareholders' 8,040 502 -38 18,485 26,989
equity
1 January 2014
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Comprehensive
result
--------------------------------------------------------------------------------
Net result for the -1,498 -1,498
period
--------------------------------------------------------------------------------
Translation 4 4
differences
--------------------------------------------------------------------------------
Total 4 -1,498 -1,494
comprehensive
result for the
period
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Transactions with
owners
--------------------------------------------------------------------------------
Dividends paid
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Shareholders' 8,040 502 -34 16,987 25,495
equity
31 March 2014
--------------------------------------------------------------------------------
KEY FIGURES
1-3/2014 1-3/2013 Change, % 1-12/2013
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Earnings per share, EUR -0.19 -0.14 -36 -0.12
--------------------------------------------------------------------------------
Equity per share, EUR 3.57 3.34 -12 3.34
--------------------------------------------------------------------------------
Return on equity (ROE), % -22.8 -15.3 -3.4
--------------------------------------------------------------------------------
Return on investment (ROI), % -18.1 -10.8 -1.1
--------------------------------------------------------------------------------
Equity ratio, % 53.4 53.8 55.5
--------------------------------------------------------------------------------
Gearing, % 44.4 43.8 31.7
--------------------------------------------------------------------------------
Gross investments, EUR 1,000 466 761 -39 2,353
--------------------------------------------------------------------------------
Gross investments, % of net sales 2 4 3
--------------------------------------------------------------------------------
Contingent liabilities, EUR 1,000 36,768 41,276 -11 37,365
--------------------------------------------------------------------------------
Average personnel 478 521 -8 526
--------------------------------------------------------------------------------
Personnel at the end of the period 476 517 -8 502
--------------------------------------------------------------------------------
Number of shares at the end of the 8,089,610 8,089,610 8,089,610
period
--------------------------------------------------------------------------------
Number of shares outstanding, 8,089,610 8,089,610 8,089,610
average
--------------------------------------------------------------------------------
SEGMENT INFORMATION
(EUR 1,000) 1-3/2014 1-3/2013 Change, % 1-12/2013
------------------------------------------------------------
------------------------------------------------------------
Marimekko business
------------------------------------------------------------
Net sales 19,376 20,710 -6 94,007------------------------------------------------------------
Operating result -1,748 -1,290 -36 82
------------------------------------------------------------
Assets 47,796 53,686 -11 48,648
------------------------------------------------------------
NET SALES BY MARKET AREA
(EUR 1,000) 1-3/2014 1-3/2013 Change, % 1-12/2013
---------------------------------------------------------------------
Finland 10,037 10,486 -4 52,159
---------------------------------------------------------------------
Retail sales 6,205 6,296 -1 35,107
---------------------------------------------------------------------
Wholesale sales 3,753 4,070 -8 16,491
---------------------------------------------------------------------
Royalties 79 120 -34 562
---------------------------------------------------------------------
---------------------------------------------------------------------
Scandinavia 1,907 1,879 1 8,152
---------------------------------------------------------------------
Retail sales 1,061 805 32 4,355
---------------------------------------------------------------------
Wholesale sales 846 1,074 -21 3,796
---------------------------------------------------------------------
Royalties - - -
---------------------------------------------------------------------
---------------------------------------------------------------------
Central and Southern Europe 1,837 2,001 -8 7,678
---------------------------------------------------------------------
Retail sales 319 284 12 1,408
---------------------------------------------------------------------
Wholesale sales 1,480 1,692 -13 6,170
---------------------------------------------------------------------
Royalties 38 25 52 100
---------------------------------------------------------------------
---------------------------------------------------------------------
North America 1,511 1,871 -19 8,534
---------------------------------------------------------------------
Retail sales 1,129 1,103 2 5,587
---------------------------------------------------------------------
Wholesale sales 320 657 -51 2,511
---------------------------------------------------------------------
Royalties 62 111 -44 436
---------------------------------------------------------------------
---------------------------------------------------------------------
Asia-Pacific 4,084 4,473 -9 17,484
---------------------------------------------------------------------
Retail sales 514 504 2 2,300
---------------------------------------------------------------------
Wholesale sales 3,570 3,969 -10 15,182
---------------------------------------------------------------------
Royalties - - 2
---------------------------------------------------------------------
---------------------------------------------------------------------
International sales, total 9,339 10,224 -9 41,848
---------------------------------------------------------------------
Retail sales 3,023 2,696 12 13,651
---------------------------------------------------------------------
Wholesale sales 6,216 7,392 -16 27,659
---------------------------------------------------------------------
Royalties 100 136 -27 538
---------------------------------------------------------------------
---------------------------------------------------------------------
TOTAL 19,376 20,710 -6 94,007
---------------------------------------------------------------------
Retail sales 9,228 8,992 3 48,757
---------------------------------------------------------------------
Wholesale sales 9,969 11,462 -13 44,150
---------------------------------------------------------------------
Royalties 179 256 -30 1,100
---------------------------------------------------------------------
NET SALES BY PRODUCT LINE
(EUR 1,000) 1-3/2014 1-3/2013 Change, % 1-12/2013
-------------------------------------------------------------
-------------------------------------------------------------
Clothing 8,027 8,025 0 33,979
-------------------------------------------------------------
Interior decoration 7,560 8,187 -8 38,577
-------------------------------------------------------------
Bags 3,789 4,498 -16 21,452
-------------------------------------------------------------
TOTAL 19,376 20,710 -6 94,007
-------------------------------------------------------------
QUARTERLY TREND IN NET SALES AND EARNINGS
(EUR 1,000) 1-3/2014 10-12/2013 7-9/2013 4-6/2013
-----------------------------------------------------------------
-----------------------------------------------------------------
Net sales 19,376 25,465 24,875 22,957
-----------------------------------------------------------------
Operating result -1,748 -565 3,093 -1,158
-----------------------------------------------------------------
Earnings per share, EUR -0.19 -0.07 0.22 -0.13
-----------------------------------------------------------------
-----------------------------------------------------------------
(EUR 1,000) 1-3/2013 10-12/2012 7-9/2012 4-6/2012
-----------------------------------------------------------------
-----------------------------------------------------------------
Net sales 20,710 25,748 24,214 19,701
-----------------------------------------------------------------
Operating result -1,290 13 3,486 -545
-----------------------------------------------------------------
Earnings per share, EUR -0.14 -0.04 0.31 -0.03
-----------------------------------------------------------------
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