Chairman's review

Chairman Lauri Ratia, Interim Report Q1 2019 (30.4.2019):

Our first-quarter performance was satisfactory and the adjusted operating result improved by EUR 4.2 million. The improvement was due to Lindex’s continuously good performance and the timing of the Crazy Days campaign, which this year took place during the first quarter in Finland.

Lindex’s sales increased by 3%. The online store in particular continued to perform strongly and achieved a sales growth of 41%. Stockmann Retail’s revenue during the first quarter was up by 15% due to the change in the timing of the Crazy Days campaign, but the gross margin declined. Real Estate closed the Nevsky Centre divestment in January as planned. As a result, the amount of the company’s debt decreased significantly. In one
year the interest-bearing net debt has nearly halved, from EUR 801.8 million to EUR 457.1 million.

Our largest division, Lindex, is estimated to continue its steady performance, but in light of the current earnings trend, it is clear that we need a substantial change in Stockmann’s operating model. We are currently in the process of reworking the strategy for Stockmann Retail and Real Estate. We will strengthen the premium hiqh-quality offering in fashion, beauty and home, and secure excellent customer service. Digital acceleration remains in high focus. The strategic actions aim at returning Stockmann Retail to a growth trajectory by 2021.

To simplify business operations, our plan is to combine the Stockmann Retail and Real Estate divisions, which also would provide our customers a more coherent shopping experience to. We will build a new lean organisational structure and sustainable business model. Our aim is to reduce costs by at least EUR 40 million by spring 2021, of which a major part would be visible already in the 2020 results. With these decisive measures we expect Stockmann Retail to become a healthy and profitable business again.

Stockmann’s customers will start to see the outcome of the rejuvenated strategy gradually. This transformation will be a demanding journey, but I am confident that the personnel of Stockmann will be able to rejuvenate the company over the next two years.