Lindex owner Stockmann's New Year strength derailed by March sales plunge
Stockmann’s latest result showed the Finnish retail giant enduring a 17.6% fall in consolidated revenue the first three months of the year as Covid-19 hit it hard during March.
Revenue fell to €168.4 million, but the gross margin rose to 54.2%, up from 53.2% a year ago. However, it made a wider operating loss of €30.5 million, bigger than the €21.4 million loss of the previous year.
Parent company, Stockmann plc, filed for corporate restructuring after the period ended so the results statement actually took the form of a shorter interim management statement.
But it still gave us plenty of clues to where the company is going as it continues to work on its turnaround. CEO Jari Latvanen said that the “strategic choices made in spring 2019 have proven to be correct, and the group’s business operations developed as planned in 2019 and in January-February 2020”. He said group sales in the first two months of the year “were on a healthy level, with growth of 3.5%. Under the prevailing circumstances, the development at the beginning of the year can be considered good”.
But that was before the coronavirus. This led to “an extreme decline in customer volumes and sales after the first week of March and sales declined by 49.1 % in March”.
Despite continued strong growth in the online stores of its Stockmann and Lindex operations in recent weeks, online sales growth “cannot compensate for the drastic decline in customer volumes in the current exceptional situation”.
The company also said the “coronavirus epidemic has forced us to look for new ways of taking Stockmann Group into the future. The numerous restrictions and special regulations imposed as a result of the outbreak will considerably decrease the volume of our business operations, their profitability and cash flows. As a result of the outbreak, we launched cost-saving measures in March and initiated codetermination negotiations to cut costs and to adjust personnel resources with temporary lay-offs”.
But the board still believes “that Stockmann’s business remains viable and can be restored to a sound basis,” a belief that led to the restructuring filing early last month.
Thos proceedings are protecting the company from creditors pursuing repayment of €640 million in external debt and are supported by a majority of its creditors. And the company said that while this has “caused uncertainty among suppliers, management foresees that the business relations will gradually normalise. The measures to adjust the cost structure and product intake due to the coronavirus will materialise from Q2 onwards. These will provide support to cash flow”.
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