Stockmann Group’s Interim report 1 January – 30 September 2019
Stockmann Group’s strategic transformation continued in the third quarter
STOCKMANN plc, Interim report 30.10.2019 at 8:00 EET
July–September 2019, continuing operations
- Consolidated revenue was EUR 225.3 million (232.5), down 1.8% in comparable currency rates.
- Gross margin was 56.4% (58.7).
- Operating result was EUR 2.1 million (-4.9).
- Adjusted operating result was EUR 5.4 million (5.9, or 1.4 excluding Nevsky Centre).
- Earnings per share were EUR -0.27 (-0.21)
- Adjusted earnings per share were EUR -0.23 (-0.06).
January–September 2019, continuing operations
- Consolidated revenue was EUR 674.8 million (714.3), down 4.2% in comparable currency rates.
- Gross margin was 56.2% (57.5).
- Operating result was EUR -9.1 million (-2.2).
- Adjusted operating result was EUR 1.0 million (4.9, or -8.7 excluding Nevsky Centre).
- Earnings per share were EUR -0.83 (-0.56).
- Adjusted earnings per share were EUR -0.69 (-0.47).
The Group’s 2019 figures include changes due to IFRS 16. Comparison figures for 2018 are not restated. The IFRS 16 items are presented in the table “Impact of IFRS 16”.
Guidance for 2019 remains unchanged:
Stockmann expects the Group’s adjusted operating profit, excluding Nevsky Centre but including the impact of IFRS 16, to be on a par with 2018.
CEO Jari Latvanen:
Stockmann’s transformation process is on track. We are implementing our strategy as planned and fully focusing on developing our operations in order to offer excellent customer service and inspiring experiences. We are renewing the selections further to create newness with unique and sustainable brands and upgrading the stores to fit the needs of our defined customer groups. In particular the Tampere department store is currently undergoing a number of refurbishments to strengthen Stockmann's position as number one source of inspiration in fashion, beauty and home.
In the third quarter, Lindex had strong sales and it improved its operating result. Sales increased in all markets. Lindex continued the roll-out of its new e-commerce platform and launched a new partnership with Boozt. Lindex also opened its first franchising store in a new market, Denmark, in October with record breaking success.
Stockmann division’s operating result improved slightly but was still negative. Revenue declined as rental income decreased due to real estate divestments and the renovation of the Delicatessen in Tallinn. In the Crazy Days campaign, which took place after the quarter in October, sales were on a par with the previous year. Sales were up by 2% in Finland, and down 8% in the Baltics. The online store had strong growth of 11%. We successfully launched the Crazy Days online store in Estonia and Latvia.
Stockmann has announced on a consent solicitation to start shortly upon the release of the January-September interim report to the current hybrid bond holders to agree to postpone the first reset date by 18 months. The postponement would give Stockmann financial flexibility and operating time in the process of the potential divestment of Lindex, and would enable the company to fully focus on implementing its current strategy.
We are heading into the last months of the year at full speed. We have a lot of interesting projects going on that will improve the customer experience, such as the renewed loyal customer programme which was launched in October. We will continue to put actions into practice while simultaneously investing heavily in the success of this year's Christmas sales.
KEY FIGURES
| Continuing operations | 7–9/ 2019 |
7–9/ 2018 |
1–9/ 2019 |
1–9/ 2018 |
1–12/ 2018 |
| Revenue, EUR mill. | 225.3 | 232.5 | 674.8 | 714.3 | 1 018.8 |
| Gross margin, % | 56.4 | 58.7 | 56.2 | 57.5 | 56.9 |
| EBITDA, EUR mill. | 36.2 | 9.0 | 95.7 | 39.8 | 76.0 |
| Adjusted EBITDA, EUR mill. | 39.5 | 19.8 | 105.8 | 46.8 | 84.3 |
| Operating result (EBIT), EUR mill. | 2.1 | -4.9 | -9.1 | -2.2 | -5.0 |
| Adjusted operating result (EBIT), EUR mill. | 5.4 | 5.9 | 1.0 | 4.9 | 28.4 |
| Net financial items, EUR mill. | -13.1 | -7.8 | -40.4 | -25.4 | -34.6 |
| Result before tax, EUR mill. | -11.0 | -12.7 | -49.5 | -27.6 | -39.6 |
| Result for the period, EUR mill. | -18.2 | -13.8 | -56.1 | -36.7 | -43.7 |
| Earnings per share, undiluted and diluted, EUR |
-0.27 | -0.21 | -0.83 | -0.56 | -0.68 |
| Personnel, average | 7 163 | 7 487 | 7 028 | 7 258 | 7 241 |
| Continuing and discontinued operations | 7–9/ 2019 |
7–9/ 2018 |
1–9/ 2019 |
1–9/ 2018 |
1-12/ 2018 |
| Net earnings per share, undiluted and diluted, EUR |
-0.27 | -0.21 | -0.83 | -0.56 | -0.70 |
| Cash flow from operating activities, EUR mill. | 4.4 | -3.1 | 32.3 | 0.8 | 82.9 |
| Capital expenditure, EUR mill. | 8.4 | 6.0 | 24.2 | 21.1 | 29.3 |
| Equity per share, EUR | 10.68 | 11.72 | 11.71 | ||
| Net gearing, % | 125.8 | 74.4 | 64.4 | ||
| Equity ratio, % | 36.3 | 44.9 | 46.2 | ||
| Number of shares, undiluted and diluted, weighted average, 1 000 pc | 72 049 | 72 049 | 72 049 | ||
| Return on capital employed, rolling 12 months, excl IFRS 16 items, % | -0.3 | 0.7 | -0.4 |
ITEMS AFFECTING COMPARABILITY
| EUR million | 7–9/ 2019 |
7–9/ 2018 |
1–9/ 2019 |
1–9/ 2018 |
1–12/ 2018 |
| EBITDA | 36.2 | 9.0 | 95.7 | 39.8 | 76.0 |
| Adjustments to EBITDA | |||||
| Restructuring and transformation measures | 3.3 | 9.4 | 3.2 | 3.3 | |
| Gain or loss on sale of properties | 0.7 | -7.0 | -6.8 | ||
| Value adjustment to assets held for sale | 10.8 | 10.8 | 11.9 | ||
| Adjustments total | 3.3 | 10.8 | 10.1 | 7.1 | 8.4 |
| Adjusted EBITDA | 39.5 | 19.8 | 105.8 | 46.8 | 84.3 |
| EUR million | 7–9/ 2019 |
7–9/ 2018 |
1–9/ 2019 |
1–9/ 2018 |
1-12/ 2018 |
| Operating result (EBIT) | 2.1 | -4.9 | -9.1 | -2.2 | -5.0 |
| Adjustments to EBIT | |||||
| Goodwill impairment | 25.0 | ||||
| Restructuring and transformation measures | 3.3 | 9.4 | 3.2 | 3.3 | |
| Gain or loss on sale of properties | 0.7 | -7.0 | -6.8 | ||
| Value adjustment to assets held for sale | 10.8 | 10.8 | 11.9 | ||
| Adjustments total | 3.3 | 10.8 | 10.1 | 7.1 | 33.4 |
| Adjusted operating result (EBIT) | 5.4 | 5.9 | 1.0 | 4.9 | 28.4 |
IMPACT OF IFRS 16
| EUR million, quarterly | Reported 7–9/2019 |
IFRS 16 items 7–9/2019 |
Excluding IFRS 16 items 7–9/2019 |
Reported 7–9/2018 |
| Revenue | 225.3 | -0.5 | 225.8 | 232.5 |
| EBITDA | 36.2 | 24.5 | 11.7 | 9.0 |
| Adjusted EBITDA | 39.5 | 24.5 | 15.0 | 19.8 |
| Depreciation | 34.1 | 20.2 | 13.9 | 13.9 |
| Operating result (EBIT) | 2.1 | 4.3 | -2.2 | -4.9 |
| Adjusted operating result (EBIT) | 5.4 | 4.3 | 1.1 | 5.9 |
| Net financial items | -13.1 | -6.4 | -6.7 | -7.8 |
| Net result | -18.2 | -1.6 | -16.7 | -13.8 |
| Cash flow from operating activities | 4.4 | 18.1 | -13.7 | -3.1 |
| EUR million, YTD | Reported 1–9/2019 |
IFRS 16 items 1–9/2019 |
Excluding IFRS 16 items 1–9/2019 |
Reported 1–9/2018 |
| Revenue | 674.8 | -1.6 | 676.4 | 714.3 |
| EBITDA | 95.7 | 75.5 | 20.2 | 39.8 |
| Adjusted EBITDA | 105.8 | 75.5 | 30.3 | 46.8 |
| Depreciation | 104.8 | 63.6 | 41.2 | 42.0 |
| Operating result (EBIT) | -9.1 | 11.9 | -21.0 | -2.2 |
| Adjusted operating result (EBIT) | 1.0 | 11.9 | -10.9 | 4.9 |
| Net financial items | -40.4 | -19.8 | -20.5 | -25.4 |
| Net result | -56.1 | -6.3 | -49.9 | -36.7 |
| Assets | 2 119.8 | 527.7 | 1 592.1 | 1 881.8 |
| Interest-bearing net debt | 968.6 | 516.1 | 452.5 | 627.8 |
| Cash flow from operating activities | 32.3 | 55.7 | -23.3 | 0.8 |
Stockmann uses Alternative Performance Measures according to the guidelines of the European Securities and Market Authority (ESMA) to better reflect the operational business performance and to facilitate comparisons between financial periods. Gross profit is calculated by deducting the costs of goods sold from the revenue, and gross margin is calculated by dividing gross profit by the revenue as a percentage. EBITDA is calculated from the operating result excluding depreciation, amortisation and impairment losses. Adjusted EBITDA and adjusted operating result (EBIT) are measures which exclude non-recurring items and other adjustments affecting comparability from the reported EBITDA and the reported operating result (EBIT).
STRATEGY PROCESS
Lindex’s updated strategy for 2019–2023 has been approved. The aim is to further strengthen international growth and in particular digital transformation. Lindex has a strong market position in the Nordics, with a rapidly growing e-commerce business, well-performing flexible store network, and improving profitability. The Board of Directors sees great potential in Lindex, and has therefore decided to investigate strategic alternatives for the company’s ownership. The process is developing as planned.
A two-year transformation process has started, which aims to position Stockmann as the number one source of inspiration of fashion, beauty and home. Much effort will be put into excellent customer service and inspiring customer experiences. Stockmann will develop its fashion, beauty and home selection to fit into the needs of the defined customer groups, and create newness with unique and sustainable brands. The company will also position itself for growth in the Baltics, both in the fashion and grocery businesses.
To turn Stockmann’s result into profit, the business requires significant renewal and reduction of costs, with a savings target of at least EUR 40 million by spring 2021. Savings will start to be visible towards the end of 2019, and will be evident in the 2020 results.
OUTLOOK FOR 2019
We expect that the uncertainties in the global economy will remain during the rest of the year.
In 2019, the retail growth is estimated to decline somewhat due to economic slowdown in Finland, but modest growth is expected to continue in Sweden (source: Federation of Finnish Commerce, HUI Research). In the Baltic countries, the outlook for the retail trade is expected to be better than that for the Stockmann Group’s other main market areas (source: OECD).
Capital expenditure for 2019 is estimated to be approximately EUR 35 million.
Stockmann expects the Group’s adjusted operating profit, excluding Nevsky Centre but including the impact of IFRS 16, to be on a par with 2018.
Interim report
This company announcement is a summary of the Stockmann's Interim report for 1 January – 30 September 2019 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.
Press and analyst briefing and webcast
A press and analyst briefing will be held today, on 30 October 2019 at 10:00 a.m. EET in the Fazer À la Carte restaurant on the 8th floor of Stockmann’s Helsinki city centre department store, Aleksanterinkatu 52 B. The event can be followed as a live webcast 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:
Pekka Vähähyyppä, CFO, tel. +358 50 3890012
STOCKMANN plc
Jari Latvanen
CEO
Distribution:
Nasdaq Helsinki
Principal media