Marimekko upbeat as sales rise and international business grows
May 9, 2018
Design company Marimekko saw its net sales and earnings improving in the first three months of the year as it made a modest operating profit, despite a tough retail market in its native Finland.
The company’s net sales rose as much as 7% to €24.1 million in Q1 and international sales were up a pleasing 14%, reaching 51% of the total compared to 47% this time last year. The figures were boosted by improving wholesale turnover in Finland (due to non-recurring promotional deliveries), as well as higher wholesale and royalties in the Asia-Pacific region.
But, as mentioned, retail sales were challenging and declined in Finland, although this was due to calendar effects as it shifted the timing of its annual spring sales promotion.
What did all that mean for profit? Well, it was certainly good (if not spectacular) news. Ebitda rose to €1.9 million from €1.7 million. Operating profit rose to €1.2 million from the €0.9 million of a year earlier comparable operating profit was €1.2 million, up slightly from €1.1 million a year ago.
But while higher sales provided a boost to the bottom line, a decline in the relative sales margin, caused by lower-margin wholesale accounting for a larger share of total turnover, kept profit low.
For the full year, the company expects its net sales and comparable operating profit to be “at the same level as or higher than in the previous year,” which doesn’t tell us much but does, at least, point to an improving situation
CEO Tiina Alahuhta-Kasko said the current year has “started in style,” citing the worldwide launch of two limited-edition collaboration collections, one with Uniqlo and the other with beauty brand Clinique.
“Partnerships of this kind are particularly valuable for us as they enable us to raise our international profile and to reach new target groups,” she said. “The exceptionally broad international visibility conferred by these brand collaborations was complemented by the positive reception we received at Paris Fashion Week in March.”
As well as collaborations, the company is focused on targeting new customers and reaching out to the expanding market in Asia to accelerate growth, while also ramping up its online efforts.
“In the past few years, we have focused in particular on improving our profitability and our international competitiveness. In the current strategy period 2018–2022, we are continuing our long-term work and seeking markedly stronger growth than before” the CEO said. “Expanding the customer base, enhancing operational efficiency and utilising the new opportunities afforded by digitisation play a central role in this work.
“The key drivers of our growth are e-commerce, partner-led retail in Asia, and boosting sales per square metre in Marimekko stores. It is gratifying that in the first quarter of 2018, we are already able to report positive news about the trend in our international sales, particularly in the Asia-Pacific region.”
But the uncertain backdrop out there means she remains cautious for the future.
“Uncertainty in the global economy is forecast to continue, partly because of the unpredictability of the political situation,” the company said. “Consumer demand forecasts vary among Marimekko’s different market areas.”
However, its domestic market, Finland, is expected to grow this year while second biggest market Asia-Pacific should expand too. The brand has major growth potential in the area as Japan is its only really developed market there and other countries in the region remain under-exploited for now. Japan is still seeing rising demand as it opens new stores, and Marimekko expects the wider region to continue expanding over the longer term.
In 2018, the main thrust of its global expansion remains opening retailer-owned Marimekko stores. The aim is to open around 10-15 new brand stores and shop-in-shops while continuing the “enhancement” of the operations of Marimekko stores opened in recent years.
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