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HALF-YEAR FINANCIAL REPORT OF MARIMEKKO CORPORATION, 1 January – 30 June 2022: Marimekko’s net sales grew and result improved in the second quarter of 2022

Marimekko Corporation, Half-year Financial Report, 17 August 2022 at 8.00 a.m.

HALF-YEAR FINANCIAL REPORT OF MARIMEKKO CORPORATION, 1 January – 30 June 2022: Marimekko’s net sales grew and result improved in the second quarter of 2022

This release is a summary of Marimekko’s half-year financial report for the January-June period of 2022. The complete report is attached to this release as a pdf file and it is also available on the company’s website at company.marimekko.com under Releases & publications.

The second quarter in brief

• Marimekko’s net sales grew by 16 percent to EUR 38.0 million (32.7). Net sales were boosted in particular by increased retail sales in Finland but also internationally.
• Net sales in Finland rose by 25 percent; international sales were up by 5 percent. However, the rate of growth of international sales was negatively impacted by a different kind of weighting of wholesale deliveries compared to the previous year. For the full year 2022, we expect our international net sales to grow clearly.
• Operating profit improved to EUR 5.7 million (4.9). Comparable operating profit grew by 17 percent to EUR 5.7 million (4.9) and was 15.0 percent of net sales (14.9).
• Earnings were boosted especially by increased net sales. On the other hand, an increase in fixed costs had a weakening impact on result.

January-June in brief

• Net sales grew by 20 percent to EUR 74.0 million (61.8). Net sales in Finland grew by 26 percent; international sales were up by 13 percent.
• Net sales were boosted especially by a favorable trend in retail and wholesale sales in Finland but also by growing international sales.
• Operating profit improved and amounted to EUR 12.3 million (10.5). Comparable operating profit improved by 17 percent to EUR 12.3 (10.5) million and was 16.6 percent of net sales (17.0).
• Earnings were boosted especially by increased net sales. On the other hand, an increase in fixed costs had a weakening impact on result.

Financial guidance for 2022

The Marimekko Group's net sales for 2022 are expected to grow from the previous year (2021: EUR 152.2 million). Comparable operating profit margin is estimated to be approximately some 17–20 percent (2021: 20.5 percent). Global supply chain disruptions, generally increased material and logistics costs as well as the development of consumer confidence and purchasing power in particular cause volatility to the outlook for 2022.

Uncertainties related to the development of net sales and result are described in more detail in the Major risks and factors of uncertainty section of this Half-year Financial Report.

Key figures

(EUR million)	4–6/2022	4–6/2021	Change,%	1–6/2022	1–6/2021	Change, %	1–12/2021
Net sales	38.0	32.7	16	74.0	61.8	20	152.2
International sales	15.0	14.3	5	32.5	28.9	13	59.9
% of net sales	39	44		44	47		39
EBITDA *	8.1	7.8	4	17.3	16.5	5	43.1
Comparable EBITDA *	8.1	7.8	4	17.3	16.5	5	43.1
Operating profit *	5.7	4.9	17	12.3	10.5	17	31.2
Operating profit margin, % *	15.0	14.9		16.6	17.0		20.5
Comparable operating profit *	5.7	4.9	17	12.3	10.5	17	31.2
Comparable operating profit margin, % *	15.0	14.9		16.6	17.0		20.5
Result for the period *	4.8	3.6	31	9.8	8.1	22	24.4
Earnings per share, EUR *, **	0.12	0.09	31	0.24	0.20	22	0.60
Comparable earnings per share, EUR *, **	0.12	0.09	31	0.24	0.20	22	0.60
Cash flow from operating activities *	4.4	7.0	-36	1.4	8.4	-84	35.9
Return on investment (ROI), % *				42.3	30.5		33.0
Equity ratio, % *				44.6	48.3		53.3
Net debt / EBITDA (rolling 12 months)				0.29	-0.08		-0.64
Gross investments *	0.1	-0.3		0.3	0.1		0.2
Personnel at the end of the period				460	400	15	409
outside Finland				73	71	3	69
Brand sales 1	101.8	74.7	36	190.1	142.1	34	375.6
outside Finland	72.2	49.9	45	134.0	96.7	39	247.6
proportion of international sales, %	71	67		70	68		66
Number of stores				149	154	-3	152

* The quarterly figures for comparison period have been restated as the accounting principle changed in 2021 following the IFRS Interpretations Committee agenda decision. As a result of restatement, gross investments in the second quarter of 2021 were negative. Additional information is presented in the accounting principles of this Half-year Financial Report.

** Per-share key figures have been calculated and the figures for the comparison period have been restated using the new total number of shares following the issuance of shares without payment (share split), in accordance with the decision made by the AGM on 12 April 2022.

The change percentages in the table were calculated on exact figures before the amounts were rounded to millions of euros. The figure for comparable earnings per share takes account of similar items as comparable operating profit; tax effect included.

1 Brand sales are given as an alternative non-IFRS key figure, representing the reach of the Marimekko brand through different distribution channels. An unofficial estimate of sales of Marimekko products at consumer prices, brand sales are calculated by adding together the company’s own retail net sales and the estimated retail value of Marimekko products sold by other retailers. The estimated retail value is based on the company’s realized wholesale sales and licensing income. Brand sales do not include VAT, and the key figure is not audited. At the beginning of 2021, the coefficients used to calculate brand sales were adjusted, and the figures for the comparison year have been restated accordingly. Some licensees provide exact retail figures, in which case these figures are used in reporting brand sales. For other licensing agreements, Marimekko’s own retail coefficients for different markets are used.

Tiina Alahuhta-Kasko, President and CEO, in conjunction with the report:

“Net sales grew in the second quarter both in Finland and internationally. Our result also improved clearly.

The positive development of Marimekko’s business continued in the second quarter. Our net sales increased by 16 percent to EUR 38.0 million (32.7), driven especially by the good development of retail sales in Finland but also internationally. In total, our omnichannel retail sales increased by 37 percent. In April–June, net sales increased by 25 percent in Finland and international sales grew by 5 percent. However, the rate of growth of international sales was negatively impacted by a different kind of weighting of wholesale deliveries compared to the previous year. For the full year 2022, we expect our international net sales to grow clearly.

In April–June, our result was boosted particularly by sales growth, and our comparable operating profit improved to EUR 5.7 million (4.9), representing 15.0 percent of net sales (14.9). During the period under review, we continued to invest in the building blocks for long-term international growth, which was reflected in higher marketing and personnel expenses, for example. In addition to our investments in growth, our costs in 2022 are being increased by the general rise in material and logistics costs as well as various global supply chain disruptions. Uncertainties in the operating environment and global economy, general cost inflation and rising interest rates may have negative impact on consumer purchasing power and behavior in some of our markets during the rest of the year. We are taking an active approach at Marimekko to reduce the negative impacts of supply chain disruptions and increased costs in various ways. We believe that the globally increasing interest in our brand, collections that appeal to an increasingly broad customer base and our continuously improving omnichannel customer experience, including various inspiring events online and at our stores, put us in an excellent position to increase our sales even in a more challenging market situation.

In January–June, our net sales increased by 20 percent and amounted to EUR 74.0 million (61.8). Our comparable operating profit for the first half of the year improved to EUR 12.3 million (10.5), representing 16.6 percent of net sales (17.0).

At the beginning of April, Marimekko and IKEA announced a brand collaboration inspired by Nordic sauna culture. The limited-edition collection, to be launched in March 2023 at most IKEA stores worldwide, will combine Marimekko’s art of printmaking with IKEA’s home furnishing knowledge. The announcement of the collaboration was enthusiastically received also at Milan Design Week. In addition, in June, we launched a collaboration collection with the modern luxury brand Mansur Gavriel. The playful summer collection combines Mansur Gavriel’s quality craftsmanship and most iconic bag styles with two bold Marimekko prints designed by Maija Isola and Annika Rimala in the 1960s. After the review period, in July, we again joined forces with adidas, a global leader in the sporting goods industry, to launch our fourth limited-edition global collaboration collection. Various brand collaborations are an important tool for further increasing Marimekko’s international brand awareness, which supports our growth strategy.

Our network of Marimekko stores was strengthened in the second quarter: two new Marimekko stores were opened in China Mainland in May, and one in Hong Kong in June. We believe that in an increasingly digital world, physical stores continue to play an important role for consumers as inspirational and experiential meeting places centering around personalized service. In Thailand, a Marimekko pop-up café was opened in June in conjunction with one of the stores in Bangkok. Creative retail concepts are an important part of the omnichannel customer experience: they provide an even more comprehensive Marimekko lifestyle experience, introduce our brand to new customers and increase customer loyalty.

In May, we organized our traditional fashion show in Esplanadi park in Helsinki, open to the public, after a two-year break caused by the coronavirus pandemic. We also extended the show to connected events around the city for the first time. The tradition, which began 30 years ago, demonstrates several of Marimekko’s core values: a sense of community, equality and inclusion. Our values are also reflected in Marimekko being one of the main partners of Helsinki Pride 2022 and participating in related events in June. We are pleased to be able to promote values important to us and bring color and joy to our community in various ways.

After the review period, in August, we announced Marimekko Pre-loved, a marketplace for buying and selling second-hand and vintage products. The new online second-hand marketplace supports one of the three main principles of our sustainability strategy – timeless design brings joy for generations to come – and represents an important step in our ambitious efforts to continuously extend the lifespan of our products and contribute to promoting the circular economy.

The positive development of our business from one quarter to the next speaks to the effectiveness of our growth strategy. Our strong development is underpinned by our persistent long-term efforts, for which I want to extend my warmest thanks to everyone at Marimekko as well as our partners. We will continue to determinedly accelerate our long-term international growth while simultaneously working on the company’s direction for the next strategy period, which will be discussed in more detail at Marimekko’s Capital Markets Day on 14 September 2022. At the event, we will also provide more information on our review of Marimekko’s long-term financial targets.”

Market outlook and growth targets for 2022

The coronavirus pandemic has been the worst crisis experienced by the global fashion industry and specialty retail sector in decades, and it will impact the sector in 2022 as well. The development of the pandemic situation in different markets, Russia’s war against Ukraine, political tensions, increased inflation and raising interest rates impact the global economic trend as well as the development of consumers’ purchasing behavior and, as a result, can have an impact on Marimekko’s business. The fall in consumer confidence in some of Marimekko’s market areas can affect the business negatively in particular during the second half of the year. Russia’s war against Ukraine does not directly affect Marimekko’s business as Marimekko’s products are not manufactured or sold in Russia, Belarus or Ukraine and the company does not source raw materials from these countries. However, Russia’s war against Ukraine causes disturbances in global supply chains and contributes to the general economic situation and consumers’ buying power and behavior. These factors may affect company’s sales and profitability as well as operational reliability and efficiency of the company’s value chain.

Finland, Marimekko’s important domestic market, traditionally represents about half of the company’s net sales. Sales in Finland are expected to grow on the previous year. The total value of nonrecurring promotional deliveries in wholesale in 2022 is estimated to be substantially lower than the year before.

The Asia-Pacific region is Marimekko’s second-largest market and it plays a significant part in the company’s international growth. Japan is clearly the most important country in this region to Marimekko and already has a very comprehensive network of Marimekko stores. The other Asian countries’ combined share of the company’s net sales is still smaller than in Japan, but operations in these countries are constantly growing. All brick-and-mortar Marimekko stores and most online stores in Asia are partner-owned. Net sales in the Asia-Pacific region are expected to increase clearly in 2022, as are total international sales, though the accrual of the sales will be weighted differently between quarters than in the comparison year. The aim is to open approximately 5 to 10 new Marimekko stores and shop-in-shops in 2022, and most of the planned openings will be in Asia.

Marimekko estimates that both retail and wholesale sales will increase in 2022. Licensing income is also forecasted to be higher than in the previous year. Marimekko will continue actions to control gray exports, but these actions will have a significantly lower weakening impact on the company’s sales and earnings in 2022 than in the previous year. Because of the seasonal nature of Marimekko’s business, the major portion of the company’s euro-denominated net sales and earnings are traditionally generated during the second half of the year. In percentage terms, net sales growth is expected to be stronger at the beginning of 2022 than in the second half of the year. In 2021, the pandemic situation had a negative impact on the footfall in Marimekko’s own stores at the beginning of the year and the net sales in the second half of the year were supported, for example, by substantial nonrecurring promotional deliveries in wholesale in Finland.

The coronavirus pandemic, related restrictions and Russia’s war against Ukraine cause disruptions in global supply chains. These disruptions have resulted in delivery delays, and thus can impact Marimekko’s net sales and profitability. In addition, disruptions in supply chains increase logistics costs, which have also grown overall worldwide. Net sales and earnings essentially depend on maintaining the operational reliability and efficiency of distribution centers and logistics in the exceptional situation. Costs of raw and other materials have increased globally. Early commitment to product orders, which is typical of the fashion and design industry, means that changes in raw and other material prices affect the company with a delay. In addition, the early commitment to product orders, further emphasized in the pandemic situation, undermines the company’s ability to optimize product orders and respond to rapid fluctuations in demand, especially in exceptional situations, as well as increases risks related to inventory. Marimekko is actively working both on mitigating the negative effects of disruptions in supply chains and increased costs as well as to secure sales development also in a weaker general economic situation.

Marimekko continues to accelerate its long-term international growth. In 2022, it will invest especially in increasing brand awareness, in digital and omnichannel business, in developing sustainability, in recruitments supporting its growth as well as in IT systems. Fixed costs are expected to be up on the previous year. In 2021, fixed costs were still reduced by partly temporary cost savings. Marketing expenses are expected to grow (2021: EUR 7.5 million).

Marimekko is closely monitoring the impacts of Russia’s war against Ukraine and the coronavirus pandemic as well as the development of the general economic situation, consumer confidence and purchasing power and will adjust its operations and plans according to the circumstances.

Media and investor conference

A media and investor conference will be held in English on 17 August 2022 at 2.00 p.m. EEST. A live webcast of the conference can be followed at https://marimekko.videosync.fi/q2-2022-results, and a recording of the webcast will be available at the same address later. Questions can be asked during the live webcast in writing.

Further information:

Tiina Alahuhta-Kasko, President and CEO, tel. +358 9 758 71Elina Anckar, CFO, tel. +358 9 758 7261

MARIMEKKO CORPORATIONCorporate Communications

Anna TuominenTel. +358 40 5846944anna.tuominen@marimekko.com

DISTRIBUTION:Nasdaq Helsinki LtdKey media

Marimekko is a Finnish lifestyle design company renowned for its original prints and colors. The company’s product portfolio includes high-quality clothing, bags and accessories as well as home décor items ranging from textiles to tableware. When Marimekko was founded in 1951, its unparalleled printed fabrics gave it a strong and unique identity. In 2021, the company's net sales were EUR 152 million and brand sales of the products worldwide amounted to EUR 376 million. Globally, there are roughly 150 Marimekko stores, and online store serves customers in 35 countries. The key markets are Northern Europe, the Asia-Pacific region and North America. The Group employs about 410 people. The company’s share is quoted on Nasdaq Helsinki Ltd. www.marimekko.com

 

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