Stockmann Group half year financial report, 1 January–30 June 2020

Improvement in performance in June, fashion sales higher than the industry average

STOCKMANN plc, Half year financial report 24.7.2020 at 8:00 EET

April–June 2020:
- Consolidated revenue was EUR 182.7 million (242.3), down 23.2% in comparable currency rates.
- Gross margin was 54.1% (58.6).
- Operating result was EUR -3.1 million (10.2).
- The adjusted operating result was EUR -1.8 million (-16.2).
- Earnings per share were EUR -0.24 (-0.10).
- Adjusted earnings per share were EUR -0.20 (-0.01).
- Stockmann plc filed for corporate restructuring on 6 April 2020 (Stock Exchange Release 6 April 2020).

January–June 2020:
- Consolidated revenue was EUR 351.1 million (449.5), down 20.6% in comparable currency rates.
- Gross margin was 54.2% (56.1).
- Operating result was EUR -33.5 million (-11.2).

- The adjusted operating result was EUR -31.2 million (-4.4).
- Earnings per share were EUR -0.79 (-0.56).
- Adjusted earnings per share were EUR -0.73 (-0.47).

Guidance for 2020:
Due to the rapid changes that took place in the business environment, Stockmann’s previous guidance, published on 13 February 2020, is no longer valid. Stockmann will provide a new guidance once visibility in our markets is clearer.

CEO Jari Latvanen:
The global coronavirus pandemic has had a profound impact on our business performance, but this spring’s transformation and efficiency measures have produced results. We adapted our operations in order to ensure the safety of our customers and personnel; we held Stockmann’s main campaign of the spring exclusively online and developed new services suited to the coronavirus restrictions. We also cut our costs significantly through furloughs and other cost saving measures. National restrictions limited the operations of Stockmann’s stores in the Baltic countries, and the pandemic also had a large impact on the operations of the Lindex store chain in all market areas.

In terms of revenue, we performed better than expected in March–June, especially in home and beauty categories. The amount of capital tied up in stock is lower than a year ago in both divisions, and the company’s cash reserves has been significantly strengthened. The lifting of coronavirus restrictions has increased customer flows at the Stockmann department stores and Lindex stores since late May. The strong growth in the online sales of both Stockmann and Lindex continued in the second quarter. During the first half of the year, the Stockmann division launched around 50 new brands and delivered more online store orders than throughout the whole of last year, while the growth of Lindex’s online store was 102% in the second quarter.

Our cost control measures have had a significant impact. Swift adjustment measures in both Lindex and Stockmann, combined with last year’s cost savings programme, reduced the Group’s fixed costs by about EUR 35 million compared with the previous year. We will continue to adapt our cost structure to the situation in our operating environment. The corporate restructuring of the Stockmann parent company will make it possible to renegotiate the terms of the lease agreements, with the aim of achieving a lower cost level.

The result for the first half was, however, weak, despite the recovery of the business, the strong growth in online sales and significant cost saving measures.

We will continue to develop our operations with a strong focus on the customer, upgrade our digital service channels in both divisions, continue to renew the Stockmann department stores and to bring out new brands for our customers on a regular basis.

KEY FIGURES

4–6/
2020

4–6/
2019
1–6/
2020
1–6/
2019
1–12/
2019
Revenue, EUR mill. 182.7 242.3 351.1 449.5 960.4
Gross margin, % 54.1 58.6 54.2 56.1 56.3
Operating result (EBIT), EUR mill. -3.1 10.2 -33.5 -11.2 13.3
Adjusted operating result (EBIT), EUR mill. -1.8 16.2 -31.2 -4.4 29.0
Result for the period, EUR mill. -15.0 -5.5 -52.4 -37.9 -54.3
Earnings per share,
undiluted and diluted, EUR
-0.24 -0.10 -0.76 -0.56 -0.84
Personnel, average 5 738 7 007 6 168 6 961 7 002
Cash flow from operating activities, EUR mill. 108.3 48.0 85.9 27.9 102.3
Capital expenditure, EUR mill. 4.0 9.3 10.3 15.8 33.8
Equity per share, EUR 10.43 10.96 11.12
Net gearing, % 109.9 121.7 112.4
Equity ratio, % 35.5 37.2 38.1

ITEMS AFFECTING COMPARABILITY

EUR million

4–6/
2020
4–6/
2019
1–6/
2020
1–6/
2019
1–12/
2019
Operating result (EBIT) -3,1 10,2 -33,5 -11,2 13,3
Adjustments to EBIT
  Restructuring and transformation measures 1.3 6.1 2.4 6.1 15.2
  Gain on sale of properties -0.1 0.7 0.4
Adjustments total 1.3 6.0 2.4 6.8 15.6
Adjusted operating result (EBIT) -1.8 16.2 -31.2 -4.4 29.0

CORPORATE RESTRUCTURING PROCEEDINGS

The coronavirus epidemic, which broke out in Europe after the first week of March, caused significant changes in the Stockmann Group’s operating environment with customer volumes decreasing suddenly. Despite continued strong growth in the online sales of the Stockmann division and Lindex, the online sales growth is not sufficient to compensate the significant decline in customer volumes in these exceptional circumstances.

Since it is the view of the management and the Board of Directors that the company’s business remains viable and can be restored to a sound basis, the Board of Directors of Stockmann decided, taking into consideration the company’s financial structure, to file for corporate restructuring of the parent company Stockmann plc on 6 April 2020. The coronavirus and the restrictions it has caused have, and will continue to have, a significant effect on the company’s customer volumes, cash flow and result.

The Group subsidiaries, including the Stockmann department stores in the Baltic countries and Lindex, are not in the scope of the restructuring proceedings.

On 8 April 2020, the District Court of Helsinki ruled to initiate the corporate restructuring proceedings of Stockmann plc in accordance with the Restructuring of Enterprises Act. The District Court appointed Attorney Jyrki Tähtinen of Borenius Attorneys Ltd as an administrator of the restructuring proceedings. According to the decision of the District Court, the draft restructuring programme must be filed before 11 December 2020.

COVID-19

The coronavirus epidemic, which broke out in Europe after the first week of March, caused significant changes in the Stockmann Group’s operating environment and customer volumes decreased suddenly. The negative effects of the coronavirus epidemic on the market environment persisted in the second quarter. The national restrictions were partially lifted in May, which was reflected as positive development in customer flows at Stockmann department stores and Lindex stores.

During the second quarter other operating income came to EUR 5.3 million as a result of public funding related to the COVID-19 situation, which mainly Lindex, in various countries has received from government authorities or other corresponding public bodies.

GUIDANCE FOR 2020

Due to the rapid changes that took place in the business environment, Stockmann’s previous guidance, published on 13 February 2020, is no longer valid. Stockmann will provide a new guidance once visibility in our markets is clearer.

OUTLOOK FOR 2020

The outbreak of the coronavirus epidemic has caused significant changes in the Stockmann Group’s operating environment, and it has had a material impact on the company’s customer volumes and cash flow.

Uncertainty in the global economy is expected to persist throughout 2020, and the coronavirus pandemic is having a significant impact on the economy across the world. The retail market is expected to remain challenging due to changes in consumer behaviour and confidence, which are also affected by the coronavirus situation.

Stockmann updated its guidance on 18 March 2020: Due to the rapid changes that took place in the business environment, Stockmann’s previous guidance, published on 13 February 2020, is no longer valid. Stockmann will provide a new guidance once visibility in our markets is clearer.

Stockmann is working on drawing up a draft restructuring programme, which according to the decision of the District Court, must be filed before 11 December 2020.

Half year financial report
This company announcement is a summary of the Stockmann Group’s Half year financial report for 1 January – 30 June 2020 and includes the most relevant information of the report. The complete report is attached to this release as a pdf file and is also available on the company's website at stockmanngroup.com.

Webcast
The press and analyst briefing will be held on 24 July 2020 at 10:00 as a live webcast, that can be followed by this link or on the address stockmanngroup.com. The recording and presentation material are available on the company's website after the event.

Further information:
Jari Latvanen, CEO, tel. +358 9 121 5606
Pekka Vähähyyppä, CFO, puh. +358 9 121 3351
Henna Tuominen, Director, Communications, CSR and IR, tel. +358 50 5705080

www.stockmanngroup.com

STOCKMANN plc

Jari Latvanen
CEO

Distribution:
Nasdaq Helsinki
Principal media