Marimekko Q3 sales rise but cost increases dent profits
Marimekko’s third-quarter report on Wednesday showed the Finnish design and textile specialist continuing to grow, even though the comparison period was a strong one. It said it enjoyed an “excellent” operating profit margin, although operating profit still fell.
Net sales rose 4% to €44.1 million, boosted in particular by higher international sales, although retail sales in its domestic market were also good. But the sales figure was dented by weaker wholesale in Finland, which fell due to significantly lower non-recurring promotional deliveries than in the same period the year before.
That meant net sales in Finland were down 7% overall. But international sales were up by 28% with wholesale and retail in the Asia-Pacific region developing strongly. The international performance was partly increased by “a different kind of weighting of wholesale deliveries compared to the previous year”.
Operating profit fell, however, dropping to €11.1 million from €13.1 million and accounting for 25.2% of net sales compared to 31% a year ago. Earnings were dented by rising fixed costs and also a lower relative sales margin resulting mostly from growing logistics costs.
For the nine months of the financial year so far, net sales rose 13% to €118.1 million with an 11% rise in Finland and a 17% increase internationally. Operating profit edged down slightly to €23.4 million from €23.6 million, reflecting the Q3 issues.
Despite the weakness on the profits front compared to the prior year, the company is generally moving in the right direction, boosted by some strong product, initiatives and development of its retail stores.
In July, it launched its fourth limited-edition collaboration collection with Adidas and it said it’s “pleased with the international visibility achieved, which supports our growth strategy”.
In Q3, it opened new Marimekko stores in Shanghai and in Copenhagen. And its new Marimekko Marimade home concept was presented in pop-up stores in Hong Kong and Taipei. These products are made with recycled, reused, natural and biodegradable materials.
So what of the future? That remains uncertain but the company still expects net sales for 2022 to grow from the previous year when they were €152.2 million. The comparable operating profit margin is estimated to be 17%–20%, compared to 20.5% a year ago.
Covid is still impacting business to a certain extent and it said the “fall in consumer confidence in some of Marimekko’s market areas can affect the business negatively”. Russia’s war against Ukraine doesn’t directly affect the business as its products aren’t made or sold in the region and the company sources no raw materials there.
However, the war “causes disturbances in global supply chains and contributes to the general economic situation and consumers’ buying power and behaviour. These factors may affect company’s sales and profitability as well as operational reliability and efficiency of the company’s value chain”.
It expects sales in Finland — which accounts for around half of its total sales — to continue growing. Meanwhile, its second-largest market — Asia-Pacific — should “play a significant part in the company’s international growth”.
Japan remains key for its business but other Asian markets are “constantly growing” and Asia is its major focus for new stores and concessions.
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