Stockmann - Company Announcement

STOCKMANN MAKES A PROVISION IN SECOND-QUARTER EARNINGS DUE TO THE POSSIBLE CLOSURE OF ONE OF ITS DEPARTMENT STORES IN MOSCOW

STOCKMANN plc
Company Announcement
27.5.2008 at 11.45

STOCKMANN MAKES A PROVISION IN SECOND-QUARTER EARNINGS DUE TO THE POSSIBLE
CLOSURE OF ONE OF ITS DEPARTMENT STORES IN MOSCOW

Following the ruling of the International Commercial Arbitration Court in
Moscow in favour of Stockmann in the dispute concerning Stockmann's
Smolenskaya department store in the centre of Moscow, the lessors
nevertheless resorted to illegal measures and cut off the provision of
electricity to Stockmann. By so doing, the lessors made it impossible to
keep the department store open as from Tuesday, May 13, 2008. In order to
minimize the damage, Stockmann began transferring sales goods, beginning
on May 22, to its other department stores in Moscow.

If the Smolenskaya department store has to be closed permanently as a
consequence of the lessors' actions, the costs due to the closure and
undepreciated carrying amounts will result in a non-recurring charge to
the Department Store Division's earnings of roughly EUR 14 million. Due to
the long-drawn-out settlement process, Stockmann has decided to make a
provision for this in its second-quarter earnings. Even taking into
account the provision, second-quarter operating profit will be
substantially better than it was a year earlier. On the other hand, the
Department Store Division, in case the department store is permanently
closed, probably will not reach its full-year target, according to which
operating profit in 2008 would improve on the figure a year earlier. The
entire Group's target is still to post better profit in 2008 than in 2007.
If the department store is not reopened during this year, consolidated
total sales in 2008 will be about EUR 2.4 billion.

As a consequence of the lessors' illegal measures and their actions in
violation of the decisions of the International Commercial Arbitration
Court in Moscow (ICAC), Stockmann has initiated legal action against the
lessors. Compensation will be claimed not only for the costs resulting
from closure of the department store but also for the unrealized operating
profit due to non-use of the premises during the lease period, which
extends up to 2018.

The Smolenskaya department store in question is one of the four Stockmann
department stores located in Moscow. Stockmann will open its fifth
department store in Moscow in the Metropolis shopping centre in October
2008. The sixth department store in Moscow will be opened in Rostokino
shopping centre either in late 2009 or early 2010. In the centre of St
Petersburg, Stockmann has under construction a new department store and a
shopping centre, which according to target schedule will be completed by
the end of 2009. According to plans, Stockmann's department store in
Ekaterinburg will be opened in 2009.


STOCKMANN plc

Hannu Penttilä
CEO


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