Stockmann - Interim report (Q1 and Q3)

Stockmann Group's Interim report 1 January - 30 September 2017

Continuously improved performance in Stockmann Retail and Real Estate – Group’s
operating result negatively impacted by Lindex
STOCKMANN plc, Interim report 27.10.2017 at 8:00 EET

July-September 2017, continuing operations:
- Consolidated revenue was EUR 242.0 million (263.9).
- Revenue in comparable businesses was on a par with Q3 2016.
- Gross margin was 56.2% (56.6).
- Adjusted operating result was EUR -1.4 million (4.8).
- Stockmann Retail’s operating result up by EUR 5.3 million, Real Estate up by
EUR 1.2 million and Lindex down by EUR 10.2 million.

January-September 2017, continuing operations:
- Consolidated revenue was EUR 740.1 million (827.8).
- Revenue in comparable businesses was down by 2.0%.
- Gross margin was 55.3% (55.7).
- Adjusted operating result was EUR -12.0 million (-4.1).
- Reported operating result was EUR -162.0 million (-4.1), including an
impairment charge of EUR 150 million in Lindex’s goodwill.
- Adjusted earnings per share were EUR -0.55 (-0.45).

- The food operations in Finland have been classified as an asset held for sale
and reported as discontinued operations. The comments in the interim report
refer only to continuing operations.

Guidance for 2017 remains unchanged (published on 26 September 2017):
Stockmann expects the Group’s revenue for 2017 to decline due to weaker sales
development of Lindex, and changes in the store network and product mix.
Adjusted operating profit in continuing operations is expected to be
approximately on a par with or slightly weaker than in 2016.

CEO LAURI VEIJALAINEN:

Our determined journey continued during the third quarter. The performances in
Stockmann Retail and Real Estate improved but due to weakened development of
Lindex, the Group’s operating result was down.

Stockmann Retail continued its result improvement in the third quarter.
Comparable revenue was up 4.6% on the previous year both in Finland and in the
Baltics, with growth particularly in fashion. Costs were continuously down, and
the operating result improved by EUR 5.3 million. A strong fashion campaign was
conducted and a new inspirational lifestyle magazine was introduced in
September. Also new brands and seasonal pop-ups are being added to the
selection.

Real Estate shows a stable earnings trend. The division improved its operating
result by EUR 1.2 million in the third quarter. Improvements came particularly
from the Nevsky Centre due to the improved economic situation in Russia.

Lindex had a tough July and August, but revenue improved towards the end of the
quarter. Changes are being made to collections and campaigns, in order to boost
sales for the important last quarter of the year. The top line is the key, but
also efficiency and cost savings are being thoroughly looked at. A profitability
improvement programme will be launched at Lindex, targeting to reduce fixed
costs by over EUR 10 million annually. In addition, several actions will take
place to improve gross profit.

The Crazy Days campaign in October was successful and generated growth for the
first time in two years. The campaign reached a total sales growth of 2%. The
online store was particularly successful and it already was our second largest
unit by sales during the campaign. This gives us a good start for the most
important season of the year. We will continue our efforts and determined work
during the last quarter to ensure a good full-year performance.

KEY FIGURES

Continuing operations               7-9/  Restated  Restated  Restated  Restated
                                    2017      7-9/      1-9/      1-9/     1-12/
                                              2016      2017      2016      2016
Revenue, EUR mill.                 242.0     263.9     740.1     827.8   1 175.7
Gross margin, %                     56.2      56.6      55.3      55.7      55.7
EBITDA, EUR mill.                   14.0      18.9      33.4      38.1      85.6
Adjusted EBITDA*, EUR mill.         14.0      18.9      33.4      38.1      88.2
Operating result (EBIT), EUR      -151.4       4.8    -162.0      -4.1      28.3
mill.
Adjusted operating result           -1.4       4.8     -12.0      -4.1      30.9
(EBIT)*, EUR mill.
Net financial items, EUR mill.      -4.8      -5.0   -20.1**     -14.0     -23.1
Result before tax, EUR mill.      -156.2      -0.2    -182.1     -18.0       5.2

Result for the period, EUR mill.  -158.0      -5.4    -186.0     -28.4      -7.5

Earnings per share,                -2.21     -0.09     -2.64     -0.45     -0.18
undiluted and diluted, EUR
Personnel, average                 7 677     8 310     7 371     8 332     8 151

Continuing and discontinued         7-9/      7-9/      1-9/      1-9/     1-12/
operations***                       2017      2016      2017      2016      2016
Net earnings per share,            -2.25     -0.12     -2.78     -0.47     -0.12
undiluted and diluted, EUR
Cash flow from operating           -29.9     -33.7     -59,7     -54.6      41.5
activities, EUR mill.
Capital expenditure, EUR mill.       8.5      10.1      24.2      29.6      44.2
Equity per share, EUR                                  12.09     14.05     14.99
Net gearing, %                                          95.0      80.8      68.3
Equity ratio, %                                         41.9      45.4      48.3
Number of shares, undiluted and                       72 049    72 049    72 049
diluted, weighted average, 1 000
pc
Return on capital employed,                             -7.5      -3.5       1.8
rolling 12 months, %

* Adjustments include a write-off of EUR 150 million related to impairment in
Lindex’s goodwill. For full-year 2016, adjustments affecting operating result
were EUR 2.6 million and were mostly related to ICT outsourcing.
** Includes a write-off of EUR 3.8 million related to Stockmann’s investment in
Tuko Logistics Cooperative in the second quarter of 2017, and a write-off of EUR
2 million related to Seppälä in the third quarter of 2017.
*** Discontinued operations include department store operations in Russia which
were sold in the first quarter of 2016, and Stockmann Delicatessen food
operations in Finland which are expected to be divested at the end of 2017.

Stockmann uses Alternative Performance Measures according to the guidelines of
the European Securities and Market Authority (ESMA) to better reflect the
operational business performance and to facilitate comparisons between financial
periods. Gross profit is calculated by deducting the costs of goods sold from
the revenue, and gross margin is calculated by dividing gross profit by the
revenue as a percentage. EBITDA is calculated from the operating result
excluding depreciation, amortisation and impairment losses. Adjusted EBITDA and
adjusted operating result (EBIT) are measures which exclude non-recurring items
and other adjustments affecting comparability from the reported EBITDA and
reported operating result (EBIT). Stockmann also uses the term “revenue in
comparable businesses” which refers to revenue excluding Hobby Hall, which was
divested on 31 December 2016, the Oulu department store, which was closed on 31
January 2017, and the Lindex stores in Russia, which were closed in 2016.

OUTLOOK FOR 2017

In the Stockmann Group’s largest operating country, Finland, the economy has
begun to recover. GDP and the retail market are expected to grow in 2017.
However, consumers’ purchasing power is not expected to increase and purchasing
behaviour is changing due to digitalisation and increasing competition.

The Swedish economy remained stable in 2016 and the GDP growth estimate for 2017
remains on a higher level than in Finland. The steady growth in the fashion
market stagnated in 2016, and the market is expected to decline in 2017.

In the Baltic countries, GDP growth is estimated to continue. The outlook for
these countries is expected to be better than that for the Stockmann Group’s
other market areas.

The Russian economy is expected to recover gradually, but the purchasing power
of Russian consumers remains low.

Stockmann will continue improving the Group’s long-term competitiveness and
profitability. The efficiency measures launched in summer 2016 will be fully
visible in the 2017 operating costs. Improvements in the operating result in
2017 are estimated to come mainly from the Stockmann Retail division, which is
still loss-making, while Real Estate is expected to continue its stable
profitable performance. Lindex’s operating profit for 2017 will be clearly down
on the previous year’s record-high earnings. The planned sale of the
Delicatessen business in Finland is expected to improve the Group’s
profitability from 2018 onwards.

Capital expenditure for 2017 is estimated to be approximately EUR 40 million,
which is less than the estimated depreciation for the year.

GUIDANCE FOR 2017

The Stockmann Group’s profit guidance for the year was revised on 26 September
2017, due to weaker than estimated performance in Lindex’s business.

Stockmann expects the Group’s revenue for 2017 to decline due to weaker sales
development of Lindex, and changes in the store network and product mix.
Adjusted operating profit in continuing operations is expected to be
approximately on a par with or slightly weaker than in 2016.

Interim report
This company announcement is a summary of the Stockmann's Interim report for 1
January – 30 September 2017 and includes the most relevant information of the
report. The complete report is attached to this release as a pdf file and is
also available on the company's website at
stockmanngroup.com (http://www.stockmanngroup.com).

Press and analyst briefing
A press and analyst briefing will be held today, on 27 October 2017 at 9:15 a.m.
EET in the Fazer À la Carte restaurant on the 8th floor of Stockmann’s Helsinki
city centre department store, Aleksanterinkatu 52 B.

Webcast
CEO Lauri Veijalainen will host a webcast in English today, on 27 October 2017,
at 11:15 a.m. EET presenting the Interim report. To participate in the webcast,
please dial one of the numbers below 5–10 minutes before the webcast begins. The
presentation can be followed by this link (https://stockmann.videosync.fi/2017
-10-27-q3/register) or on the address
stockmanngroup.com. (http://www.stockmanngroup.com) The recording and
presentation material are available on the company's website after the event.

Finland: +358 (0)9 7479 0361
Sweden: +46 (0)8 5033 6574
United Kingdom: +44 (0)330 336 9105
United States of America: +1 719 325 4746

Confirmation code: 9264187

Further information:
Lauri Veijalainen, CEO, tel. +358 9 121 5062
Nora Malin, Director, Corporate Communications, tel. +358 9 121 3558

www.stockmanngroup.com

STOCKMANN plc

Lauri Veijalainen
CEO

Distribution:
Nasdaq Helsinki
Principal media

Attachments:

Stockmann Q3 2017 ENG.pdf