Stockmann struggles in Q1, will boost premium offer, Lindex is stronger
Stockmann hailed an improvement in its results on Tuesday with its Q1 consolidated revenue rising 4.2% to €207.2 million at comparable currency rates as Lindex did well. But that was the extent of the good news and the Stockmann chain itself struggled with the firm planning to boost its upscale fashion and beauty offer to get it back to health.
So how bad were the results? The gross margin was down to 53.2% from 55.1% and the adjusted operating loss narrowed but was still not where the company wanted it to be. It lost €20.6 million compared to a loss of €24.8 million in the three months to the end of March 2018. Its reported operating loss was €21.4 million, narrower than the €26.9 million of a year ago.
Executive Chairman Lauri Ratia called the performance “satisfactory” and said it was due to “Lindex’s continuously good performance” and the timing of the Crazy Days sales campaign, which this year took place during Q1 in Finland.
Lindex sales increased by 3% and its online store in particular continued to perform “strongly”, which is perhaps an understatement given that its sales grew 41%.
Meanwhile, Stockmann Retail’s revenue rose 15% due to that change in the timing of the Crazy Days campaign, but the gross margin declined so there was clearly a lot of discounting behind the sales rise.
And for the future? It’s looking good for Lindex but Stockmann remains a problem. Lindex is its largest division and “is estimated to continue its steady performance,” but “in light of the current earnings trend, it is clear that we need a substantial change in Stockmann’s operating model,” the company said.
It’s currently in the process of reworking its strategy for Stockmann Retail and Real Estate and said it “will strengthen the premium hiqh-quality offering in fashion, beauty and home, and secure excellent customer service.” Digital growth is also a key focus. Its strategy is aiming to return Stockmann Retail “to a growth trajectory by 2021.”
To simplify its business operations, the firm’s plan is also to combine the Stockmann Retail and Real Estate divisions, “which also would provide our customers a more coherent shopping experience.” Its aim is to reduce costs by at least €40 million by spring 2021, “of which a major part will be visible already in the 2020 results.”
But with all this going on, the group still faces a tough environment. This year’s economic growth is expected to be slower in Finland, although Sweden and the Baltics should continue to grow.
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