Stockmann Group’s Interim Management Statement for 1 January – 31 March 2020
Good performance in January–February, COVID-19 impacted dramatically on business in March
STOCKMANN plc, Interim report 30.4.2020 at 8:00 EET
- Consolidated revenue was EUR 168.4 million (207.2), down 17.6% in comparable currency rates.
- Gross margin was 54.2% (53.2).
- Operating result was EUR -30.5 million (-21.4).
- Adjusted operating result was EUR -29.4 million (-20.6, or -21.8 excluding Nevsky Centre).
- Adjusted earnings per share were EUR -0.53 (-0.46).
- After the reporting period Stockmann plc filed for corporate restructuring on 6 April 2020 (Stock exchange release 6.4.2020). Stockmann is publishing its Interim Report for January–March 2020 as a shorter Interim Management Statement due to the current coronavirus (COVID-19) situation and Stockmann plc’s corporate restructuring proceedings initiated on 8 April 2020 by the District Court of Helsinki.
CEO Jari Latvanen
The strategic choices made in spring 2019 have proven to be correct, and the Group’s business operations have developed as planned in 2019 and in January–February 2020. Group sales in January–February were on a healthy level, with a growth of 3.5%. Under the prevailing circumstances, the development at the beginning of the year can be considered good.
Unfortunately, the unprecedented situation caused by the coronavirus led to an extreme decline in customer volumes and sales after the first week of March and sales declined by 49.1 % in March. Despite continued strong growth in the online stores of Stockmann and Lindex in recent weeks, the online sales growth cannot compensate for the drastic decline in customer volumes in the current exceptional situation.
The coronavirus epidemic has forced us to look for new ways of taking Stockmann Group into the future. The numerous restrictions and special regulations imposed as a result of the outbreak will considerably decrease the volume of our business operations, their profitability and cash flows. As a result of the outbreak, we launched cost-saving measures in March and initiated codetermination negotiations to cut costs and to adjust personnel resources with temporary layoffs.
After the first week of March, the coronavirus epidemic in Europe has caused significant changes in the operating environment of the Stockmann Group, with customer volumes decreasing suddenly. The coronavirus and the restrictions imposed in the current situation had a major impact on the company’s customer volumes and cash flow and therefore Stockmann plc decided to file for corporate restructuring. Filing for corporate restructuring gives us the time and opportunity to look for ways to restore our operations in a difficult situation. We will continue our operations and serve our customers in the best possible way. Our primary goal at the moment is to secure the preconditions for profitable business, the jobs of our employees and to continue developing the Group’s healthy business operations for the future.
|Revenue, EUR mill.||168.4||207.2||960.4|
|Gross margin, %||54.2||53.2||56.3|
|Operating result (EBIT), EUR mill.||-30.5||-21.4||13.3|
|Adjusted operating result (EBIT), EUR mill.||-29.4||-20.6||29.0|
|Result for the period, EUR mill.||-37.4||-32.4||-54.3|
|Earnings per share, undiluted and diluted, EUR||-0.55||-0.47||-0.84|
|Personnel, average||6 599||6 914||7 002|
|Cash flow from operating activities, EUR mill.||-22.4||-20.1||102.3|
|Capital expenditure, EUR mill.||6.3||6.5||33.8|
|Equity per share, EUR||10.31||11.11||11.12|
|Net gearing, %||126.5||123.7||112.4|
|Equity ratio, %||35.8||36.7||38.1|
ANNUAL GENERAL MEETING
Due to the coronavirus situation and the restrictions on public meeting issued by the Finnish Government on 16 March 2020, Stockmann decided on 17 March to cancel its Annual General Meeting that was scheduled for Wednesday 18 March 2020. Stockmann plc will convene the annual general meeting on 4 June 2020.
As a result of the cancellation of Stockmann plc’s Annual General Meeting, the Board members Peter Therman and Eva Hamilton left their seats on 18 March by resigning from Stockmann’s Board of Directors. Both Therman and Hamilton had earlier announced that they would no longer be available to be re-elected as members of the company’s Board of Directors. Consequently, as of 19 March, Stockmann’s Board of Directors has consisted of the following members until the next Annual General Meeting: Stefan Björkman, Esa Lager, Leena Niemistö, Lauri Ratia, Tracy Stone and Dag Wallgren.
EVENTS AFTER THE REPORTING PERIOD
After the first week of March, the coronavirus epidemic in Europe has caused significant changes in Stockmann Group’s operating environment and there was a sudden and considerable decrease customer volumes. Despite continued strong growth in the online stores of Stockmann and Lindex in recent weeks, the online sales growth cannot compensate for the drastic decline in customer volumes in the current exceptional situation.
The view of the management and the Board of Directors is that Stockmann’s business remains viable and can be restored to a sound basis. Therefore the Board of Directors has decided, taking into consideration the company’s financial structure, to file for restructuring proceedings for the parent company Stockmann plc on 6 April 2020. The coronavirus and related restrictions have had and will continue to have a significant impact on the company’s customer volumes and cash flow.
The Group’s subsidiaries, including the Stockmann department stores in the Baltics and Lindex, are not included in the scope of the restructuring proceedings.
With its decision on 8 April 2020, the District Court of Helsinki ruled to initiate proceedings for Stockmann plc in accordance with the restructuring act. The District Court appointed Attorney Jyrki Tähtinen from Borenius Attorneys Ltd as administrator for the company’s corporate restructuring proceedings. According to the decision of the District Court, the proposal for the restructuring programme must be filed before 11 December 2020.
BUSINESS CONTINUITY, RISKS AND FINANCIAL SITUATION
The view of the management and the Board of Directors is that Stockmann’s business remains viable and can be restored to a sound basis. However, the coronavirus and the restrictions it has caused have, and will continue to have, a significant impact on the company’s customer volumes and cash flow. Stockmann plc’s decision to file for restructuring was supported by debtors representing more than half of the debts, and Stockmann continues to have a constructive dialogue with its financers also during the restructuring phase. As a result of the filing for restructuring the District Court ruled a temporary prohibition of collection for Stockmann plc and approximately EUR 640 million of the Group’s external debts (interest bearing loans including the hybrid bond which is treated as equity, trade and other short term liabilities) are subject to restructuring. This has caused uncertainty among suppliers, but the management foresees that the business relations will gradually normalise. The measures to adjust the cost structure and product intake due to the coronavirus will materialise from Q2 onwards. These will provide support to the cash flow.
In Stockmann’s financial assets on 31 March 2020 there was a unrealized foreign exchange gain of EUR 15.2 million of derivatives. All derivate contracts were closed by the banks on 6 April 2020. The Group is not hedging its foreign exchange positions currently.
The prolonged coronavirus situation will have a negative impact on Stockmann's liquidity, financial position and the value of assets. The management and the Board of Directors regularly assess the operational and strategic risks associated with the situation. Risks are also assessed as part of the ongoing restructuring process.
Stockmann is in discussions with the Swedish tax authorities regarding the possible provision of security related to Stockmann Sverige AB’s tax dispute with the Swedish authorities' reassessment decisions for the years 2013-2017 totalling EUR 22 million plus interest.
Stockmann is working on drawing up a proposal for the restructuring programme. As part of the preparation of the programme Stockmann will assess the sale and leaseback alternatives of its real estates. The process concerning strategic alternatives for the ownership of Lindex continues is on hold.
GUIDANCE AND OUTLOOK FOR 2020
The global outbreak of the coronavirus has caused significant changes in the operating environment of the Stockmann Group, resulting in an extreme decline in customer volumes and cash flow. The uncertainties in the global economy are expected to remain during 2020 and the coronavirus situation will have a significant impact on the world economy. The retail market is expected to remain challenging due to changes in consumer behavior and confidence, which are also affected by the coronavirus situation.
On 18 March 2020 Stockmann revised its guidance: Due to the rapid changes in the business environment, Stockmann’s previous outlook, published on 13 February 2020, is not valid anymore. Stockmann will provide a new guidance when the visibility in our markets is clearer.
Stockmann is working on drawing up a proposal for the restructuring programme, which according to the decision of the District Court, must be filed before 11 December 2020.
Interim Management Statement
This company announcement is a summary of the Stockmann's Interim Management Statement for 1 January – 30 March 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.
Due to the public meeting restriction, the press and analyst briefing will be held today, on 30 April 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.
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