Stockmann - Financial Statement Release

Stockmann Group's Financial Statement Bulletin 2015

Good progress in strategy execution: Q4 EBIT back to profit in continuing
operations 

Helsinki, Finland, 2016-02-18 07:00 CET (GLOBE NEWSWIRE) -- STOCKMANN plc,
Financial Statement Release 18.2.2016 at 8:00 EET 

Department store operations in Russia have been classified as discontinued
operations. The comparison figures in the income statement and related items
have been restated accordingly. The comments in the financial statement
bulletin text refer only to continuing operations. 

October-December 2015:
Consolidated revenue was EUR 420.0 million (EUR 476.3 million)
Revenue in continuing product areas and businesses was up 1.1 per cent.
Gross margin was up, to 51.0 per cent (45.9 per cent).
Operating result excluding non-recurring items (NRI) was EUR 18.5 million (EUR
11.2 million). 
Reported operating result was EUR 4.3 million (EUR -28.1 million).

January-December 2015:
Consolidated revenue was EUR 1 434.8 million (EUR 1 605.5 million)
Revenue in continuing product areas and businesses was down by 1.3 per cent.
Operating result excluding NRI was EUR -28.5 million (EUR -37.8 million).
Earnings per share excluding NRI were EUR -0.60 (EUR -0.84).
Reported earnings per share were EUR -1.24 (EUR -1.34).

The Board of Directors will propose no dividend to be paid on the 2015 result.

Outlook for 2016:
Stockmann expects the Group’s revenue for 2016 to be down on 2015 due to
on-going strategic actions in order to improve profitability. The operating
result excluding non-recurring items is expected to be slightly positive in
2016. Due to normal seasonal variation, the first-quarter operating result will
be significantly negative. 

CEO Per Thelin:
Stockmann’s past year was historical, as rarely has there been a year so full
of changes as in 2015. In line with our strategy, we have withdrawn from
loss-making non-core businesses and product areas, and the decision to divest
the Russian department stores was by far the biggest step taken in 2015. 

As a consequence, we have booked material write-offs in the 2015 result and
thereby safeguarded the future. This means that Stockmann can now focus on the
customer experience in Stockmann department stores, Lindex stores and their
online stores, and the real estate business. The first effects of our strategic
actions are gradually emerging in our financial results. During the fourth
quarter, the Group’s operating result for continuing operations was up,
producing a positive operating result. The gross margin improved by a good five
per cent mostly due to fewer price-driven campaigns and the withdrawal from
low-margin product areas in department stores. Operating costs declined and
inventories were significantly down. 

Particularly pleasing was that Lindex achieved its best ever fourth quarter
sales due to successful Christmas campaigns. Its operating profit was up 73 per
cent, to EUR 21.3 million, in the quarter. Real Estate proceeded as planned in
increasing the efficiency of retail space and the value of properties. For
Stockmann Retail, the fourth quarter was an improvement, but the division was
still burdened by the heavy non-recurring expenses resulting from the strategic
changes taken. 

We begin the year 2016 with a better starting position than a year ago, but
there is still a lot to be achieved. Boosting the profitability of Stockmann
Retail is essential, in order to achieve the turnaround. Our target is to make
a slightly positive operating result for the Group in 2016.  All steps taken
will drive us towards this goal. 

Key figures

Continuing operations                            10-12/  10-12/   1-12/    1-12/
                                                   2015    2014    2015     2014
Revenue, EUR mill.                                420.0   476.3       1  1 605.5
                                                                  434.8         
Gross margin, per cent                             51.0    45.9    50.6     48.6
Operating result before depreciation (EBITDA),     37.9    22.0    43.4     18.1
 excluding non-recurring items*, EUR mill.                                      
Operating result**,                                18.5    11.2   -28.5    -37.8
excluding non-recurring items*, EUR mill.                                       
Operating result**, EUR mill.                       4.3   -28.1   -52.5    -77.2
Net financial costs, EUR mill.                      7.2     5.4    21.2     23.3
Result before tax,                                 14.6     5.8   -46.4    -64.1
excluding non-recurring items*, EUR mill.                                       
Result before tax, EUR mill.                       -2.9   -33.5   -73.7   -100.5
Result for the period,                             16.6    -4.1   -43.0    -60.3
excluding non-recurring items*, EUR mill.                                       
Result for the period, EUR mill.                  -19.1   -40.5   -88.9    -96.7
Earnings per share, undiluted, EUR                -0.27   -0.56   -1.24    -1.34
Personnel, average                               10 151  12 308  10 762   12 157
                                                                                
Continuing and discontinued operations           10-12/  10-12/   1-12/    1-12/
                                                   2015    2014    2015     2014
Net earnings per share, undiluted, EUR            -1.26   -0.53   -2.43    -1.39
Cash flow from operating activities, EUR mill.     97.0   116.9    17.2     29.6
Capital expenditure, EUR mill.                     16.5    11.1    53.4     53.8
Equity per share, EUR                                             14.53    10.55
Net gearing, per cent                                              72.1    105.4
Equity ratio, per cent                                             46.1     39.3
Number of shares, undiluted, weighted average,                   72 049   72 049
 1 000 pc                                                                       
Return on capital employed,                                        -7.6     -4.9
rolling 12 months, per cent                                                     


*In the fourth quarter of 2015, Stockmann recorded EUR 14.2 million
non-recurring costs affecting operating result (2014: EUR 39.3 million) and EUR
21.8 million in taxes and financial costs in its continuing operations. During
January-December 2015, non-recurring costs in continuing operations affecting
the result for the period amounted to EUR 45.8 million (EUR 36.4 million), of
which EUR 24.0 million (EUR 39.3 million) affected operating result.
Non-recurring costs in discontinued operations were EUR 76.4 million in 2015. 
** Operating result is not comparable since the figures for 2014 do not include
the increased depreciation due to a valuation change of the real estate
properties. 

Strategy process

In 2015, Stockmann focused on the comprehensive turnaround of its business in
accordance with the strategic direction set in late 2014. Since 1 January 2015,
the company has been divided into three divisions: Stockmann Retail, Real
Estate and Fashion Chains (Lindex as of 1 January 2016). 

Stockmann Retail currently consists of the Stockmann department stores and
Hobby Hall, together with their online stores. During 2015, the product
selection in the department stores and the Stockmann online store was focused
on the key product areas of fashion, cosmetics, food and home products.
Consequently, Stockmann stopped offering its own selections in the product
areas of electronics, books, sports equipment, toys and pet supplies. Hobby
Hall’s assets are reported as assets held for sale, and Stockmann is in the
process of finding a new owner. 

Real Estate develops and leases premises in the five Stockmann-owned
properties. It is also responsible for sub-leasing of retail space in
department stores which operate in leased premises. During 2015, several new
tenants, which complement the selection offered to customers, started at
Stockmann premises. Electronics is now being offered by Expert in Finland and
by Euronics in the Baltic countries, and books are being offered by Bonnier
Books which is the new owner of the Academic Bookstore. During the fourth
quarter, the Helsinki city centre department store’s product selection was
complemented by the Hamleys toy store, the Musti ja Mirri pet supply store, the
Halti outdoor store and the Espresso House coffee bar. 

The Fashion Chains division comprises Lindex, after the divestment of Seppälä
on 1 April 2015. Lindex continued its successful growth in 2015 with good
development in its main markets in Scandinavia. Lindex entered the UK market in
March when it opened its first store in London. The franchising business was
expanded into two new countries, Kosovo and Albania. The stores in Russia will
be closed by the summer 2016, as decided in early 2015. 

According to its strategy, Stockmann discontinued business operations that were
not considered to have the potential for profitable growth. The Seppälä fashion
chain’s business in Finland and Estonia was divested in a management buy-out as
of 1 April 2015. The Academic Bookstore business was sold to the Swedish media
company Bonnier Books AB as of 1 October 2015. The Stockmann Beauty chain was
closed down during spring 2015. In April, a decision was made to close down the
Oulu department store in Finland in early 2017. 

As an important part of the turnaround, Stockmann launched an efficiency
programme in February 2015 with an annual cost savings target of EUR 50
million, which will be reflected in the result mainly from 2016 onwards. A
substantial part of the efficiency programme consists of the renewal of the
processes and structure of Stockmann’s support functions. The reorganisation
led to a personnel reduction of nearly 200 people in Finland in 2015, of which
90 through lay-offs. Further cost-savings actions in the support functions will
continue during 2016. 

Another central part of the efficiency programme is to improve cooperation with
suppliers, review the brand mix, and renegotiate terms and conditions with the
key suppliers, in order to reduce fixed costs and to improve the gross margin.
The inventory value was decreased by approximately EUR 70 million in 2015 by
reducing the number of suppliers, by planning purchases more carefully and by
discontinuing non-core product areas and businesses. 

Stockmann will open a new distribution centre in April 2016. Operations from
current warehouses in Finland will be moved in stages to the new centre in 2016
and from Riga in 2017. The centre will be highly automated, and will serve the
department stores and Stockmann online store more efficiently. With the new
distribution centre Stockmann is targeting an additional annual cost saving of
approximately EUR 5.5 million compared with 2014, or EUR 3.5 million including
the increased depreciation. Savings are expected to be achieved in full from
2018 onwards. These cost savings are not included in the efficiency programme’s
annual savings target of EUR 50 million. 

Stockmann focuses strongly on omnicommerce. New digital tools were introduced
in 2015 for store staff and customers, in order to improve the shopping
experience. Also a project of renewing the Stockmann online store started in
the autumn, and the new online store is expected to be launched in 2016. 

Events after the reporting period

Stockmann withdrew from its department store business in Russia by selling its
Russian subsidiary AO Stockmann, to Reviva Holdings Limited on 1 February 2016.
The purchase price was EUR 5 million and significant lease liabilities were
also transferred to the new owner. Reviva is the owner of Debruss, the Russian
franchisee of the international department store chain Debenhams. Reviva took
over the operations of all current department stores in seven locations and
plans to gradually transition the stores to the Debenhams brand by early 2017. 

Due to the transaction, Stockmann recorded a non-recurring cost of EUR 78.5
million for the fourth quarter of 2015. Department store operations in Russia
have been classified as discontinued operations in the financial statements for
2015. Comparison figures in the income statement and related items have been
restated. The financial performance of the discontinued operations is described
in a separate table at the end of in this financial statement bulletin. 

Stockmann will continue in Russia as a real estate owner and run the operations
of the Nevsky Centre shopping centre in St Petersburg. Reviva became a
long-term anchor tenant of the shopping centre as of 1 February 2016. Stockmann
will classify the shopping centre as an investment property in accordance with
IAS 40 as of 1 February 2016, since the property will no longer be used by the
Group’s own operations. Investment properties are not depreciated, but any
gains or losses due to changes in fair value are recognised through profit and
loss for the period during which they arise. 

Risk factors

Stockmann is exposed to risks that arise from the operating environment, risks
related to the company’s own operations and financial risks. The general
economic situation is affecting consumers’ purchasing behaviour and purchasing
power in all of the Group’s market areas. Rapid and unexpected movements in
markets may influence the behaviour of both the financial markets and
consumers. A weak operating environment may also affect operations of
Stockmann’s tenants and consequently may have a negative impact on rental
income and the occupancy rate of Stockmann’s properties. These may have an
effect on the fair value of the real estate. Uncertainties related to the
general economic situation, and particularly those related to consumers’
purchasing power are considered to be the principal risks that will continue to
affect Stockmann during 2016. 

Fashion accounts for over two thirds of the Group’s revenue. An inherent
feature of the fashion trade is the short lifecycle of products and their
dependence on trends, the seasonality of sales and the susceptibility to
abnormal changes in weather conditions. Responsible management of the supply
chain is important for the Group’s brands in order to retain customer
confidence in Stockmann. The Group addresses these factors as part of its
day-to-day management of operations. 

The Group’s operations are based on flexible logistics and efficient flows of
goods. Delays and disturbances in the flow of goods and information can have a
temporary adverse effect on operations. Every effort is made to manage these
operational risks by developing appropriate back-up systems and alternative
ways of operating, and by seeking to minimise disturbances to information
systems. Operational risks are also met by taking out insurance cover. 

The Group’s revenue, earnings and balance sheet are affected by changes in
exchange rates between the Group’s reporting currency, which is the euro, and
the Swedish krona, the Norwegian krone, the US dollar, the Russian rouble and
certain other currencies. Currency fluctuations may have a significant effect
on the Group’s business operations. Financial risks, including risks arising
from interest rate fluctuations, are managed in accordance with the risk policy
confirmed by the Board of Directors. 

Outlook for 2016

In the Stockmann Group’s main operating country, Finland, the general economic
situation remains uncertain and only slow GDP growth is estimated. Consumers’
purchasing power is expected to remain low, and the development of the non-food
retail market is likely to continue being weak. 

The GDP growths for Sweden, Norway and the Baltic countries are estimated to be
somewhat higher than in Finland. The affordable fashion market in Sweden is
expected to remain relatively stable. In the Baltic countries, more competition
is expected in the retail market. 

Stockmann will continue operating its shopping centre in St Petersburg.
Economic development in Russia is expected to remain weak in 2016. This may
have a negative impact on the rental income from tenants in Stockmann’s real
estate business. 

Stockmann’s strategy aims at improving the Group’s long-term competitiveness
and profitability through a comprehensive turnaround of its business. An
efficiency programme was launched in February 2015 with an annual cost savings
target of EUR 50 million. The programme is progressing according to plan, and
its main effects are reflected in Stockmann’s performance from 2016 onwards. 

Capital expenditure for 2016 is estimated to be approximately EUR 60-65 million
which is on a par with the estimated depreciation for 2016. 

Stockmann expects the Group’s revenue for 2016 to be down on 2015 due to
on-going strategic actions in order to improve profitability. Operating result
excluding non-recurring items is expected to be slightly positive in 2016. Due
to normal seasonal variation, the first-quarter operating result will be
significantly negative. 

This company announcement is a summary of the Stockmann Financial Statements
Bulletin 2015 and includes the most relevant information of the bulletin. The
complete bulletin is attached to this release as a pdf file and is also
available on the company's website at stockmanngroup.com. 

Annual General Meeting 2016
The Annual General Meeting of Stockmann plc will be held on Tuesday 15 March
2016 at 2 p.m. at Finlandia Hall in Helsinki, Finland (address: Mannerheimintie
13). Notice of the Annual General Meeting which includes proposals to the
meeting is published as a separate stock exchange release on 18 February 2016. 

Financial releases in 2016
Stockmann's financial statements and an electronic version of the Annual Report
will be published in the week starting on 22 February 2016. The printed Annual
Report will be available in the week starting on 7 March 2016. 

The 2016 interim reports will be released on 28 April 2016, 12 August 2016, and
28 October 2016. 

Press and analyst briefing
A press and analyst briefing in Finnish will be held today, on 18 February 2016
at 9:15 a.m. at the Fazer À la Carte restaurant on the 8th floor of Stockmann's
Helsinki city centre department store, Aleksanterinkatu 52. 

Webcast
CEO Per Thelin and CFO Lauri Veijalainen will host a webcast in English today,
on 18 February 2016, at 11:15 a.m. EET presenting the financial statements. 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 linkor on
the address stockmanngroup.com.The recording and presentation material are
available on the company's website after the event. 

Finland: +358 9 2310 1620
Sweden: +46 8 5065 3938
United Kingdom: +44 20 3427 1910
Germany: +49 69 2222 10624
Netherlands: +31 20 716 8256
France: +33 1 76 77 22 20
United States of America: +1646 254 3366

Confirmation code: 5794041

Further information:
Per Thelin, CEO, tel. +358 9 121 5542
Lauri Veijalainen, CFO, tel. +358 9 121 5062
Nora Malin, Director, Corporate Communications, tel. +358 9 121 3558

www.stockmanngroup.com


STOCKMANN plc

Per Thelin
CEO


Distribution:
Nasdaq Helsinki
Principal media

Viðhengi:

Financial Statements Bulletin ENG.pdf