STOCKMANN'S FINANCIAL STATEMENT BULLETIN 2006

STOCKMANN plc STOCK EXCHANGE RELEASE February 8, 2007, at 13.40

STOCKMANN'S FINANCIAL STATEMENT BULLETIN 2006

The Stockmann Group reported its best-ever earnings. Profit before taxes increased by 25 per cent and was EUR 128.9 million (EUR 102.8 million in 2005). The earnings trend abroad was especially positive. Other operating income amounted to EUR 34.4 million. As a consequence of disposals, aggregate sales decreased by 16 per cent to EUR 1 552.7 million (EUR 1 851.3 million in 2005). Sales from continuing operations increased by 6.3 per cent. The Department Store Division posted record earnings, and Hobby Hall's operating profit also improved. Seppälä's operating profit decreased from the peak level reached a year ago. The return on capital employed increased and was 22.9 per cent. Earnings per share increased to EUR 1.93, as against EUR 1.44 a year ago. The Board of Directors will propose the payment of a dividend of EUR 1.30 per share.

Changes in the Group structure

Stockmann sold the entire shares outstanding in its subsidiary Stockmann Auto Oy Ab as from March 1, 2006, for a total debt-free price of EUR 67.9 million. The capital gain on the transactions was a total of EUR 7.4 million. Concurrently, Stockmann and Veho Group Oy Ab launched wide-ranging loyal customer cooperation in the area of vehicle sales and services.

Stockmann sold its subsidiary that carries on the Zara business in Russia to the owner of the Zara trademark, the Inditex Group of Spain, under an agreement signed on January 30, 2006. Pursuant to the agreement that was made, operations in Russia have been carried out for Inditex's account as from January 1, 2006. The State Antimonopoly Committee of the Russian Federation approved the sale of shares in June, and the deal closed at the end of June. The purchase price was EUR 41.5 million and the capital gain on the sale of shares was EUR 21.9 million. Stockmann continues the Zara business in Finland.

Sales and result

The Stockmann Group's sales from continuing operations grew by 6 per cent to EUR 1 477.8 million. Sales from continuing operations grew by 2 per cent in Finland and 25 per cent abroad. Sales generated by international operations grew, accounting for 24 per cent of sales from continuing operations (20 per cent). As a consequence of disposals, the Group's aggregate sales decreased by 16 per cent to EUR 1 552.7 million (EUR 1 851.3 million). Similarly, consolidated revenue diminished by 16 per cent to EUR 1 300.7 million (EUR 1 542.6 million).

The gross margin on continuing operations improved by EUR 37.2 million to EUR 518.5 million. However, because the divested businesses were no longer included in the gross margin, the Group's aggregate gross margin decreased by EUR 20.1 million and was EUR 527.0 million. The relative gross margin was 40.5 per cent (35.5 per cent). The relative gross margin increased at Hobby Hall and the Department Store Division, but was down slightly at the Seppälä units. The change in the sales mix contributed to improving the Group's relative gross margin because low-margin vehicle sales were discontinued from the beginning of March. Operating costs were down EUR 14.9 million and depreciation decreased by EUR 3.7 million. Operating profit was up EUR 25.8 million to EUR 129.5 million (EUR 103.7 million). Operating profit was 10.0 per cent of revenue (6.7 per cent). Operating profit generated by continuing operations improved by EUR 4.3 million to EUR 99.9 million.

Other operating income, EUR 34.4 million, came from the capital gains on the disposals of Stockmann Auto and the Zara business in Russia, from the capital gain on the unbuilt part of a plot of land in Tallinn as well as from a capital gain on the sale of Hobby Hall's office premises. The capital gain on the portion of the plot in Tallinn, EUR 4.7 million, and the capital gain on the office premises, EUR 0.4 million, are included in continuing operations. Other operating income in 2005 amounted to EUR 7.0 million.

Net financial income and expenses increased by EUR 0.3 million and were EUR 0.6 million negative (EUR 0.9 million negative). Capital gains of EUR 0.8 million on sales of shares were included in net financial income and expenses, as against EUR 0.9 million a year earlier.

Profit before taxes was EUR 129.0 million, up EUR 26.1 million on the figure a year earlier. Profit from continuing operations before taxes increased by EUR 5.5 million to EUR 99.4 million.

Direct taxes were EUR 24.3 million, decreasing by EUR 1.7 million on the figure a year earlier. The capital gains on the sale of the shares in Stockmann Auto Oy Ab and in the company carrying on the Zara business in Russia, EUR 29.3 million, are tax-free income.

Net profit for the financial year was EUR 104.7 million, compared with EUR 76.9 million a year earlier. Net profit for the financial year from continuing operations increased by EUR 5.3 million to EUR 75.2 million.

Earnings per share were EUR 1.93 (EUR 1.44) and diluted for options they were EUR 1.90 (EUR 1.42). Earnings per share from continuing operations were EUR 1.39 (EUR 1.31) and diluted for options they were EUR 1.37 (EUR 1.29). Equity per share was EUR 10.34 (EUR 9.34).

New long-term financial targets

Reflecting the change in Stockmann's Group structure, the Board of Directors confirmed in June the Group's new financial targets up to 2011. The objective is for the Group's return on capital employed to reach 22 per cent in 2011, with an operating profit margin of 10 per cent. The other financial targets - an equity ratio of at least 50 per cent and sales growth that outpaces the market average - are unchanged. The dividend policy likewise will remain unchanged: the objective is to pay dividends amounting to more than 50 per cent of the profit on ordinary operations, nevertheless taking into account the financing required to grow the business. The Board of Directors estimates that in 2011, international operations will account for about half of the Group's sales and earnings.

Sales and earnings trend by operating unit

The Department Store Division's sales grew by 9 per cent to EUR 1 119.0 million (EUR 1 024.1 million). Sales in Finland were up 4 per cent. Sales were spurred by the new department store that was opened in the Jumbo Shopping Centre in Vantaa in October 2005. The extensive enlargement and renovation work in the Helsinki department store, causing about 2 000-3 000 square metres of retail space to be continuously out of use, has not had a greater-than-anticipated impact on the main department store's sales, though many new shopping centres have been opened in the Helsinki metropolitan area over the same period. Sales growth was weakened by the exceptional weather conditions all year long. International Operations' sales were lifted by the good like-for-like retail performance by the department stores in Russia and the Baltic countries as well as by the new Bestseller stores that were opened in Russia. Sales by International Operations grew by 26 per cent and their share of the division's sales rose to 26 per cent (22 per cent). The Department Store Division's operating profit increased by EUR 14.1 million to EUR 79.5 million (EUR 65.4 million), which is the best-ever result. In Finland, earnings were down slightly, primarily as a consequence of the costs and operating inconveniences caused by the expansion and refurbishment works at the Helsinki department store. Earnings from International Operations showed a very positive trend. In Riga and Moscow in particular, the results of the department stores that were opened in 2003 and 2004 improved markedly. The Department Store Division's result was also buoyed by the EUR 4.7 million capital gain on the sale of the unbuilt portion of the department store plot that was sold in Tallinn. The return on capital employed was 21.2 per cent (19.7 per cent).

Because of a development programme aiming at improving profitability, Hobby Hall's sales were down 5 per cent to EUR 199.8 million (EUR 210.5 million). Sales abroad were 16 per cent of aggregate sales (16 per cent). Online sales continued their robust growth, making up 47 per cent of Hobby Hall's distance sales in Finland (36 per cent) and 33 per cent of Hobby Hall's distance sales in Estonia (21 per cent). An online store was opened in Latvia in the autumn, and it got off to a promising start. Thanks to effective cost management and the increase in the relative gross margin that was achieved through a revamped product assortment, Hobby Hall's operating profit improved by EUR 1.0 million to EUR 7.1 million (EUR 6.1 million). The operating profit figure includes the EUR 0.4 million capital gain on the disposal of Hobby Hall's office premises. In autumn 2006, Hobby Hall conducted test marketing for mail order sales in the Moscow area, during which it tested factors such as how distance retailing logistics work in Russia. On the basis of test marketing, it was decided to launch mail order sales in Russia in autumn 2007. The return on capital employed was 7.7 per cent (7.0 per cent).

Seppälä's sales rose by 2 per cent and were EUR 158.1 million (EUR 155.2 million). Sales grew strongly in the Baltic countries and Russia, where they were boosted by the new stores that were opened towards the end of 2005 and in 2006 as well as by the good like-for-like sales trend. Seppälä's sales abroad grew by 51 per cent and its share of the division's aggregate sales rose to 22 per cent (15 per cent). Sales in Finland fell by 7 per cent. Seppälä's number of stores in Finland was unchanged over nearly the whole year, and competition hotted up, with new shopping centres and stores opening both in the Helsinki metropolitan area and in the smaller regional centres. Furthermore, the exceptional weather conditions throughout the year hampered sales, particularly in Finland. Seppälä's relative gross margin decreased slightly on the comparison period but was at a high level on an international yardstick. Due to the energetic establishment of new stores in Russia and the Baltic countries, fixed costs rose more swiftly than sales. Seppälä's operating profit was EUR 21.1 million (EUR 31.1 million). Operating profit in the comparison period includes EUR 5.6 million of capital gains on the sale of shares. The return on capital employed was 92 per cent, against 156 per cent a year earlier.

Stockmann Auto's sales in January-February were EUR 74.8 million and it reported operating profit of EUR 7.7 million. The operating profit figure includes the EUR 7.4 million capital gain on the disposal of the Stockmann Auto businesses. Stockmann Auto was transferred to the new owners on March 1, 2006.

Financing and capital employed

Stockmann's financial position remained strong. Interest-bearing liabilities at the end of the year were EUR 23.4 million (EUR 47.2 million), and they were entirely comprised of long-term borrowings (EUR 13.7 million). During the year, EUR 10.0 million of new long-term borrowings was drawn down. Liquid assets totalled EUR 59.2 million at the end of the year, compared with EUR 18.4 million a year earlier. Gross capital expenditures amounted to EUR 125.5 million. The proceeds from disposals of businesses and properties generated a total of EUR 114.7 million in cash. Net working capital at the end of the year was EUR 194.5 million, compared with EUR 237.9 million a year earlier. Dividend payouts totalled EUR 59.5 million. Share subscriptions made by exercising the 2000 share options added EUR 19.5 million to shareholders' equity. The equity ratio increased on the comparison period and was 74.5 per cent (66.4 per cent).

ROCE improved in line with higher earnings and was 22.9 per cent (19.6 per cent). The Group's capital employed increased by EUR 42.4 million and was EUR 595.0 million (EUR 552.5 million) at the end of the year.

Dividends

For the financial year 2005, in accordance with the resolution of the Annual General Meeting, a dividend of EUR 1.10 per share was paid, or a total of EUR 59.5 million. The Board of Directors will propose to the Annual General Meeting that a dividend of EUR 1.30 per share be paid for the 2006 financial year. The proposed dividend is 67.4 per cent of earnings per share.

Capital expenditures and current projects

Capital expenditures in 2006 totalled EUR 125.5 million (EUR 57.0 million). Investments in operations abroad came to EUR 61.5 million, or 49 per cent of total investments.

The construction works for the major enlargement and transformation project for the department store in the centre of Helsinki got under way in the early part of the year. The project involves expanding the department store's commercial premises by about 10 000 square metres by converting existing premises to commercial use and by building new retail space. In addition, completely new goods handling, servicing and customer parking areas will be built. After the enlargement the Helsinki department store will have a total of about 50 000 square metres of retail space. The project has a cost estimate of about EUR 145 million. The works will be carried out stage by stage and are estimated to reach completion in 2010. During 2006, the project required an investment of EUR 46.7 million.

In 2006, two Stockmann Beauty stores were opened, bringing their total number to 13 at the end of the year. During 2006, seven Bestseller stores were opened in Russia: three in St Petersburg and one each in Moscow, Kazan, Yekaterinburg and Nizhny Novgorod. So far, a total of 11 Bestseller stores have been opened in Russia. The objective is to further expand the chain of Bestseller stores during 2007.

In February 2007, the Department Store Division will open a fourth department store in Moscow in the Mega Shopping Centre that is to be built on the southeast side. The cost estimate for the department store - to be built in leased premises - is about EUR 16 million for Stockmann's part of the investment.

Under an agreement signed in 2005, Stockmann purchased a 10 000-odd square metre commercial plot on Nevsky Prospect, St Petersburg's high street. The plot is located next to the Vosstaniya Square underground station, in the immediate vicinity of Moscow Station. On this plot, Stockmann will erect the Nevsky Centre shopping centre that will have about 100 000 square metres of gross floor space, of which about 50 000 square metres will be store and office space. A full-scale Stockmann department store with about 20 000 square metres of retail space has been planned for the shopping centre, along with other retail stores, office premises and an underground car park. The department store and shopping centre investment will have a price tag of about EUR 135 million. On the plot for the Nevsky Centre development, the old buildings have been torn down, and the actual construction works have got under way. An agreement on the general contract was signed at the beginning of October. Stockmann's objective is to open the department store and commercial centre in autumn 2008. The purchase and development of the property called for an outlay of EUR 32.8 million during the financial year.

At the beginning of August, Stockmann signed a preliminary agreement on opening Moscow's fifth Stockmann department store in leased premises in the Metropolis Shopping Centre that is to be built right near the city's centre. The department store will have a total of more than 8 000 square metres of retail space, and Stockmann's investment in the project will be about EUR 12 million. The objective is to open the department store in 2008.

In August, Stockmann and Nike concluded a franchising agreement on establishing Stockmann-operated Nike stores in Russia. The objective is to achieve a substantial increase in sales of Nike sports products in the area of the Russian Federation. Stockmann is planning to open a number of new Nike stores in Russia every year. The first two Nike stores operated by Stockmann will be opened in February 2007 in St Petersburg.

The Department Store Division's capital expenditures came to EUR 115.3 million.

Hobby Hall's capital expenditures amounted to EUR 3.2 million. Investments went mainly for information systems. Hobby Hall launched distance retailing in Lithuania in February 2007 and will launch distance retailing in Russia during autumn 2007.

Seppälä's capital expenditures came to EUR 6.1 million. In Russia, during 2006 Seppälä opened four stores in St Petersburg, two in Kazan, two in Yekaterinburg, one in Moscow and one in Nizhny Novgorod. In addition, one store was opened in Riga, Latvia, and one in Vilnius, Lithuania. In 2006, the number of stores in Finland grew by one. Seppälä is planning to expand its operations to Ukraine, a new market area, in 2007. Seppälä's objective is to open a total of 10-15 stores in Russia and the Baltic countries during 2007 and to start operations in Ukraine.

Other capital expenditures during the financial year came to EUR 0.9 million.

Capital expenditures in 2007 are estimated to amount to about EUR 150 million. The biggest investment items are the enlargement and transformation project for the department store in the centre of Helsinki and the construction works of the department store and shopping centre in St Petersburg.

Shares and shareholders

The company's market capitalization increased by EUR 267.3 million during the year and stood at EUR 2 028.6 million at the end of the year (EUR 1 761.3 million).

Stockmann's share prices underperformed both the OMX Helsinki index and the OMX Helsinki Cap index during the financial year. At the end of the year the stock exchange price of the Series A share was EUR 36.40, compared with EUR 32.11 at the end of 2005, and the Series B share was selling at EUR 36.48, as against EUR 32.53 at the end of 2005.

During 2006 the share capital was increased by a total of EUR 2.7 million, corresponding to the subscriptions for 1 371 861 Series B shares made with the 2000 share options. The share capital increases were entered in the Trade Register to the amount of EUR 168 100 on May 17, 2006, EUR 402 200 on June 29, 2006, EUR 72 300 on August 25, 2006, EUR 166 400 on October 10, 2006, EUR 312 484 on November 10, 2006, and EUR 1 236 508 on December 18, 2006. In respect of the 192 865 Series B shares subscribed for at the end of 2006, the Board of Directors approved the subscription at its meeting held on February 8, 2007. The share capital increase is EUR 385 730. In addition, in respect of the 23 350 Series B shares subscribed for with 2000 share options in December 2005, the share capital increase was entered in the Trade Register on February 28, 2006.

By exercising the A, B and C share options for 2000, which are quoted on the Helsinki Stock Exchange, further subscriptions can be made for a total of 238 909 new Series B shares with a par value of 2 euros. The subscription price for shares to be subscribed for by exercising the A options, after the dividend to be paid out in 2006, is EUR 11.55; the price through exercise of the B options is EUR 12.55, and the price through exercise of the C options is EUR 13.55 per share. The subscription period for shares to be subscribed for by exercising the share options for 2000 ends on April 1, 2007.

After the above-mentioned increases, the share capital stands at EUR 111 709 806. The total number of Series A shares is 24 564 243 and the total number of Series B shares is 31 290 660.

Stockmann held 382 903 of its own Series B shares (treasury shares) at the end of 2006, and they represented 0.7 per cent of all the shares outstanding and 0.1 per cent of all the votes. The shares were bought back at a total price of EUR 5.8 million.

The Annual General Meeting in 2006 granted to the Board of Directors one-year authorizations to decide on the transfer of the company's treasury shares. The Board of Directors will again request the Annual General Meeting for authorizations for five years for the purpose of transferring treasury shares. The company's Board of Directors does not have valid authorizations to increase the share capital, to float issues of convertible bonds or bonds with warrants, or to buy back own shares.

Loyal Customer and key employee share option scheme

The 2006 Annual General Meeting approved the Board of Directors' proposal on the granting of share options to Stockmann's Loyal Customers. A total maximum of 2 500 000 share options will be granted without consideration to Stockmann's Loyal Customers in disapplication of shareholders' pre-emptive subscription rights. The subscription rights are to be disapplied because by granting the share options, Stockmann will offer Loyal Customers a benefit that rewards them for their continued patronage and at the same time improves Stockmann's competitive position. The share options will be granted to Loyal Customers whose purchases during January 1, 2006 - December 31, 2007, together with purchases made on parallel cards for the same account, are at least EUR 6 000 in total amount. For purchases of at least EUR 6 000, a Loyal Customer will receive 20 share options without consideration. In addition, for each full 500 euros by which the purchases exceed EUR 6 000, the Loyal Customer will receive an additional two share options. Each share option will entitle its holder to subscribe for one Stockmann plc Series B share. The subscription price is the volume-weighted average price of the Series B share on the Helsinki Stock Exchange during the period February 1 - February 28, 2006, which is EUR 33.35. The subscription price of a share to be subscribed for with the share options will be lowered by the amount of Stockmann plc dividends paid after the end of the determination period for the share price, counting from the record date up to the date of the share subscription. The subscription price of shares to be subscribed for by exercising the share options, after the dividend declared by the Board of Directors for the 2006 financial year, will be EUR 30.95. The subscription periods for the shares are May 2, 2008-May 31, 2008, May 4, 2009-May 31, 2009 and May 2, 2010-May 31, 2010. As a consequence of the subscriptions, the company's share capital can be increased by a maximum of EUR 5 000 000.

The Annual General Meeting also passed the Board of Directors' proposal on the granting of share options to key employees of the Stockmann Group. A total of 1 500 000 share options will be granted to key employees belonging to the senior and middle management of Stockmann and its subsidiaries and its wholly-owned subsidiary in disapplication of shareholders' pre-emptive subscription rights. The disapplication of the subscription right is made because the share options are part of the Group's incentive and commitment-building scheme for key employees. Of the share options, 375 000 will bear the marking 2006A, 375 000 the marking 2006B, 375 000 the marking 2006C, and 375 000 the marking 2006D. The subscription period for shares with share option 2006A is March 1, 2008 - March 31, 2010; with share option 2006B, March 1, 2009 - March 31, 2011; with share option 2006C, March 1, 2010 - March 31, 2012; and with share option 2006D, March 1, 2011 - March 31, 2013. The subscription period for shares will not, however, commence with the 2006B and 2006D share options unless the Group's financial targets criteria as determined separately by the Board of Directors have been met. Those share options 2006B and 2006D in respect of which the criteria determined separately by the Board of Directors have not been met shall lapse in the manner decided by the Board of Directors. Each share option will entitle its holder to subscribe for one Stockmann plc Series B share, whereby a total maximum of 1 500 000 shares can be subscribed for with the share options. The subscription price for each share through the exercise of the 2006A and 2006B share options is the volume-weighted average price of the company's Series B share on the Helsinki Stock Exchange during the period February 1 - February 28, 2006, plus 10 per cent, or EUR 36.69. The subscription price with the 2006C and 2006D share options is the volume-weighted average price of the company's Series B share on the Helsinki Stock Exchange during the period February 1 - February 29, 2008, plus 10 per cent. On the record date for each dividend payout, the subscription price of the shares to be subscribed for with share options will be lowered by the amount of dividends declared after the commencement of the period for determining the subscription price and prior to the share subscription. The subscription prices, after the dividend payout proposed by the Board of Directors for the 2006 financial year, is EUR 34.29 with option A and EUR 34.29 with option B. The determination period for the subscription price of share options C and D has not yet started. As a consequence of the subscriptions, the company's share capital can be increased by a maximum of EUR 3 000 000.

In accordance with the share option programme for key employees that was passed as a resolution of the Annual General Meeting, Stockmann's Board of Directors granted 2006A and 2006B share options to key employees and to Stockmann's wholly-owned subsidiary. Under the terms and conditions of the share options, Stockmann's Board of Directors will decide on the distribution of the C and D share options at a later date.

Proposal for amending the Articles of Association

According to the new Companies Act, a shareholder whose shares have not been transferred to the book-entry system does not have the right to participate in the Annual General Meeting. Accordingly, the Board of Directors proposes that Article 12 of the Articles of Association be amended to comply with the new Companies Act.

Personnel strength

The Stockmann Group had an average payroll of 10 069 employees in 2006, or 489 less than in the comparison period (10 558 in 2005 and 9 589 in 2004). The department store in the Jumbo Shopping Centre and the new Bestseller and Seppälä stores brought an increase in the number of employees, but the personnel strength was reduced by the disposals of the Zara business in Russia at the beginning of 2006 and Stockmann Auto at the beginning of March. The personnel of Zara in Russia and Stockmann Auto transferred to the new owners' employ under the terms of their current employment contracts. Stockmann's average number of employees, converted to full-time staff, decreased by 500 and was 8 037 (8 537 in 2005 and 7 812 in 2004). The Group's total wages and salaries decreased by EUR 10.4 million from the comparison period and was EUR 167.9 million (EUR 178.3 million in 2005 and EUR 166.6 million in 2004).

At the end of December 2006, Stockmann had 3 477 employees working abroad. At the end of December of last year Stockmann had 3 737 people working abroad. The proportion of people working abroad was 32 per cent (32 per cent) of the total personnel.

Corporate social responsibility

Corporate social responsibility is part of the company's normal long-term operations. The focuses of Stockmann's corporate social responsibility are our own staff, the environment and far-reaching integrity in overseas sourcing.

Risk factors

The risk level of the business environment in the Stockmann Group's areas of operations varies. The level of business risk in the Baltic countries has diminished significantly after these countries became members of the European Union, nor do the risks differ in any material respect from business risks in Finland.

Business risks in Russia are higher than in Finland and the Baltic countries, and the operating environment is less stable owing to factors such as the business culture and the undeveloped state of the country's infrastructure. The pervasiveness of the grey economy, particularly in the importation of consumer goods, is still large and plays a part in distorting properly functioning competition. Over the past years, the operating environment and legislation pertaining to business activities have nevertheless evolved favourably. The country's economic growth has been robust thanks to the strong impetus from export revenues in the energy sector. Stockmann has over 17 years of experience of operating in Russia's continually changing operating environment. Accordingly, even large changes in the operating environment in Russia are not estimated to result in a material increase in the Group's business risk.

The Group's operations are based on flexibly run logistics and

efficient goods flows.Delays and disturbances in flows of goods and
information can have a temporarily adverse effect on operations.The
aim is to manage operational risks connected with these factors by developing appropriate standby systems and alternative ways of working as well as by enhancing an undisturbed operation of information systems. Operational risks are also covered by taking out insurance policies. Operational risks are not estimated to have a material impact on Stockmann's business activities.

The Group's revenue and earnings are affected by changes in foreign exchange rates between the Group's reporting currency, the euro, and the Russian rouble, the United States dollar as well as certain other currencies. Financial risks are managed in accordance with the risk policy confirmed by the Board of Directors, and they are not estimated to have a material effect on the Group's business operations.

The Stockmann Group is not involved in major pending litigation.

Outlook for 2007

Retail sales excluding the motor trade are estimated to increase by about 3 per cent in Finland in 2007. The markets in Russia and the Baltic countries are set to continue growing faster than the Finnish market. Stockmann's sales are estimated to come in at about EUR 1.6 billion. Sales from continuing operations are estimated to grow.

Owing to the timing of marketing campaigns and sound inventories, earnings in the first quarter of 2007 will improve on the previous year and, correspondingly, earnings in the second quarter will be lower. Earnings in 2006 included substantial non-recurring items as a consequence of the disposal of businesses. In 2007, these will be markedly smaller than in the previous year. The Group has a number of major investments in progress. The start-up costs of the investments that will become operational during the year will be a factor burdening the result for 2007. Because of a decrease in non-recurring items, the Group's profit before taxes will be lower than in 2006. The Group's objective is, however, to post improved operating profit from continuing operations compared with 2006.

Helsinki, February 8, 2007

STOCKMANN plc

CONSOLIDATED BALANCE SHEET31.12.2006 31.12.2005
EUR mill.EUR mill.
ASSETS

NON-CURRENT ASSETS

Intangible assets

Intangible rights6.37.1
Goodwill0.5
Intangible assets, total6.37.6
Property, plant and equipment
Land and water39.921.8
Buildings and constructions132.1145.6
Machinery and equipment51.863.0
Modification and renovation expenses for leased49.357.6
premises Advance payments and construction in 79.1 15.0 progress
Property, plant and equipment, total352.2303.1
Available-for-sale investments6.56.0
Non-current receivables, interest-bearing4.3
Deferred tax assets2.53.5
NON-CURRENT ASSETS, TOTAL367.5324.5
CURRENT ASSETS

Inventories 155.0 212.0 Current receivables

Receivables, interest-bearing98.9107.5
Receivables, non-interest-bearing86.599.2
Income tax receivable0.5
Current receivables, total185.9206.6
Cash and cash equivalents59.218.4
CURRENT ASSETS, TOTAL400.1437.0
ASSETS, TOTAL767.6761.5

STOCKMANN GROUP

CONSOLIDATED BALANCE SHEET31.12.2006 31.12.2005
EUR mill.EUR mill.
EQUITY AND LIABILITIES

EQUITY

Share capital111.3108.9
Share issue0.40.0
Share premium fund183.4166.5
Other funds44.144.1
Translation difference0.00.0
Retained earnings232.3185.7
Equity attributable to equity holders of the571.6505.3
parent
Minority interest0.00.0
EQUITY, TOTAL571.6505.3
NON-CURRENT LIABILITIES
Deferred taxes26.228.2
Non-current liabilities, interest-bearing23.413.7
NON-CURRENT LIABILITIES, TOTAL49.641.9
CURRENT LIABILITIES Current liabilities, interest-bearing
Current liabilities33.6
Current liabilities, interest-bearing, total33.6
Current liabilities, non-interest-bearing
Trade payables and other current liabilities145.9175.5
Income tax liability0.55.2
Current liabilities, non-interest-bearing,146.4180.7
total
CURRENT LIABILITIES, TOTAL146.4214.3
LIABILITIES, TOTAL196.0256.2
EQUITY AND LIABILITIES, TOTAL767.6761.5

STATEMENT OF CHANGES IN EQUITY

EUR mill.ShareShareLegalOther
capital*premiumreserve funds**
fund
Equity December 31, 2004106.8154.80.244.4
Options exercised2.111.7
Share bonus0.1
Transfer to other funds0.1
Costs of share issue-0.1
Cash flow hedges-0.6
Dividends Translation differences Profit for the period
Equity December 31, 2005109.0166.50.243.9
Options exercised2.716.7
Share bonus0.2
Transfer to other funds0.0
The adjustment corresponding the expenses of share optons Dividends Translation differences Profit for the period
Equity December 31, 2006111.7183.40.243.9
*Including share issue
** Excluding deferred tax liability

STATEMENT OF CHANGES IN EQUITY

Translation RetainedMinority Equity
EUR mill.difference earnings Total interesttotal
Equity December 31, 2004-0.1161.9 467.90.0467.9
Options exercised13.913.9
Share bonus0.10.1
Transfer to other funds0.20.30.3
Costs of share issue-0.1-0.1
Cash flow hedges-0.6-0.6
Dividends-53.0 -53.0-53.0
Translation differences0.2-0.20.00.0
Profit for the period76.976.90.076.9
Equity December 31, 20050.0185.7 505.30.0505.3
Options exercised19.519.5
Share bonus0.20.40.4
Transfer to other funds0.00.0
The adjustment1.31.31.3
corresponding the expenses of share optons
Dividends-59.5 -59.5-59.5
Translation differences0.00.00.00.0
Profit for the period104.7 104.70.0104.7
Equity December 31, 20060.0232.3 571.60.0571.6

REVENUE 1-12/2006 1-12/2005 change change EUR mill. EUR mill. EUR mill. EUR mill.

Department Store Division, 696.3 666.7 29.6 4.4 Finland Department Store Division, 245.0 193.3 51.6 26.7 international operations Department Store Division, 941.3 860.0 81.2 9.4 total

Hobby Hall, Finland138.1145.8-7.7-5.3
Hobby Hall,27.828.9-1.1-3.9
international operations Hobby Hall, total 165.9 174.7 -8.8 -5.0

Seppälä, Finland101.4108.7-7.2-6.7
Seppälä,29.419.410.051.5
international operations Seppälä, total 130.8 128.1 2.8 2.2

Unallocated 1.7 2.1 -0.4

Operations in Finland, total937.5923.214.31.5
International operations,302.2241.660.525.0
total Continuing operations, total 1 239.6 1 164.9 74.8 6.4

Operations in Finland61.1338.3-277.3-82.0
International operations39.4-39.4-100.0
Discontinued operations61.1377.7-316.7-83.8
Operations in Finland, total998.51 261.5-263.0-20.8
International operations,302.2281.021.17.5
total Total 1 300.7 1 542.6 -241.9 -15.7

CONSOLIDATED INCOME STATEMENTContinuing Discontinued
1.1.-31.12.2006operationsoperationsTotal
EUR mill.EUR mill.EUR
mill.
REVENUE1 239.661.1 1 300.7
Other operating income5.129.334.4
Raw material and consumables used710.65.9716.5
Change in inventories,10.646.657.1
increase (-), decrease (+) Raw material and consumables used, 721.1 52.5 773.6 total Wages, salaries and employee benefits 199.3 5.4 204.7 expenses
Depreciation and impairment losses31.80.332.1
Other operating expenses192.62.6195.1
Total expenses1 144.860.8 1 205.6
OPERATING PROFIT 99.9 29.6 129.5

Financial income1.81.8
Financial expenses-2.30.0-2.3
PROFIT BEFORE TAXES 99.4 29.6 128.9

Income taxes 24.2 0.1 24.3

PROFIT FOR THE PERIOD 75.2 29.5 104.7

CONSOLIDATED INCOME STATEMENTContinuing Discontinued
1.1.-31.12.2005operationsoperationsTotal
EUR mill.EUR mill.EUR
mill.
REVENUE1 164.9377.71 542.6
Other operating income7.00.07.0
Raw material and consumables used699.7312.81.012.5
Change in inventories,-16.2-0.9-17.1
increase (-), decrease (+) Raw material and consumables used, 683.6 311.9 995.5 total Wages, salaries and employee 187.6 30.4 218.0 benefits expenses Depreciation and impairment 29.9 5.8 35.8 losses
Other operating expenses175.221.5196.7
Total expenses1 076.3369.61 445.9
OPERATING PROFIT 95.6 8.1 103.7

Financial income2.20.83.0
Financial expenses-3.9-3.9
PROFIT BEFORE TAXES 93.9 8.9 102.8

Income taxes 24.0 2.0 26.0

PROFIT FOR THE PERIOD 69.9 6.9 76.9

KEY FIGURES

20062005
Equity ratio, per cent74.566.4
Gearing, per cent-6.35.7
Cash flow from operations per share, EUR2.161.53
Interest-bearing net debt, EUR mill.-134.7-83.3
Number of shares at Sept. 30, 2006, thousands55 662 54 460
Weighted average number of shares,thousands54 310 53 350
Weighted average number of shares, diluted, thousands55 178 54 129
Earnings per share, EUR1.931.44
Earnings per share, diluted, EUR1.901.42
Operating profit, per cent10.06.7
Equity per share, EUR10.349.34
Return on equity, per cent, moving 12 months19.415.8
Return on capital employed, per cent, moving 12 months22.919.6
Average number of employees, converted to full-time8 0378 537
staff Investments 125.5 57.0

INCOME STATEMENT, QUARTERLY, Group, EUR Q4 Q3 Q2 Q1 mill.

Continuing operations2006200620062006
Revenue389.6281.1299.5269.4
Other operating income0.40.04.70.0
Materials and consumables-215.6 -166.1 -170.8 -168.7
Wages, salaries and employee benefits-57.9-44.2-48.9-48.3
expenses
Depreciation-7.9-7.9-8.1-8.0
Other operating expenses-58.1-43.0-47.7-43.7
Operating profit50.519.828.70.8
Finance income and expenses-0.50.5-0.90.2
Profit before tax50.120.427.91.1
Income taxes-12.3-5.0-6.6-0.3
Profit for the period, continuing37.815.421.20.8
operations Discontinued operations Profit for the period, discontinued 0.0 0.0 21.9 7.6 operations Profit for the period 37.8 15.4 43.1 8.4

Earnings per share, continuing operations, EUR

Basic0.700.290.390.01
Diluted0.690.280.390.01
Earnings per share, discontinued operations, EUR
Basic0.00-0.010.410.14
Diluted-0.010.000.400.14
Earnings per share, total, EUR
Basic0.700.280.800.15
Diluted0.680.280.790.15

SEGMENT INFORMATION

Segments

Sales, EUR mill.1-12/20061-12/2005
Department Store Division1 119.01 024.1
Hobby Hall199.8210.5
Seppälä158.1155.2
Shared0.90.9
Continuing operations, total1 477.81 390.7
Discontinued operations74.8460.6
Group1 552.61 851.3
Revenue, EUR mill.1-12/20061-12/2005
Department Store Division941.3860.0
Hobby Hall165.9174.7
Seppälä130.8128.1
Shared1.72.1
Continuing operations, total1 239.61 164.9
Discontinued operations61.1377.7
Group1 300.71 542.6
Operating profit, EUR mill.1-12/20061-12/2005
Department Store Division79.565.4
Hobby Hall7.16.1
Seppälä21.131.1
Shared-8.0-7.3
Continuing operations, total0.20.3
Discontinued operations99.995.6
Group29.68.1
Department Store Division129.5103.7
Investments,
gross, EUR mill.31.12.06 31.12.2005
Department Store Division115.342.1
Hobby Hall3.21.3
Seppälä6.13.4
Shared0.92.3
Continuing operations, total125.549.1
Discontinued operations7.9
Group125.557.0
Assets, EUR mill.31.12.06 31.12.2005
Department Store Division557.9463.7
Hobby Hall104.0106.3
Seppälä38.031.2
Shared67.739.3
Continuing operations, total767.6640.5
Discontinued operations121.1
Group767.6761.5

Non-interest-bearing liabilities, EUR mill.31.12.06 31.12.2005
Department Store Division122.0110.4
Hobby Hall13.915.3
Seppälä10.910.9
Shared25.832.9
Continuing operations, total172.6169.4
Discontinued operations39.6
Group172.6209.0

MARKET AREAS 1-12/2006Continuing Discontinued
Sales, EUR mill.operationsoperationsTotal
Finland 1)1 123.774.8 1 198.6
Baltic states 2)165.3165.3
Russia 3)188.8188.8
Group1 477.874.8 1 552.6
Finland, per cent76.077.2
International operations,24.022.8
per cent

Continuing Discontinued

Revenue, EUR mill.operationsoperationsTotal
Finland 1)937.561.1998.5
Baltic states 2)140.6140.6
Russia 3)161.6161.6
Group1.239.661.1 1.300.7
Finland, per cent75.676.8
International operations,24.423.2
per cent

Continuing Discontinued

Operating profit, EUR mill.operationsoperationsTotal
Finland 1)75.27.782.9
Baltic states 2)21.021.0
Russia 3)3.821.925.6
Group99.929.6129.5
Finland, per cent75.264.0
International operations,24.836.0
per cent

Investments,31.12.2006
gross, EUR mill.Continuing Discontinued
operationsoperationsTotal
Finland 1)64.064.0
Baltic states 2)1.81.8
Russia 3)59.759.7
Group125.5125.5
Finland, per cent51.051.0
International operations,49.049.0
per cent

Continuing Discontinued

Assets, EUR mill.operationsoperationsTotal
Finland 1)594.8594.8
Baltic states 2)69.769.7
Russia 3)103.1103.1
Group767.6767.6
Finland, per cent77.577.5
International operations,22.522.5
per cent 1) Department Store Division, Hobby Hall and Seppälä 2) Department Store Division, Hobby Hall and Seppälä 3) Department Store Division and Seppälä

MARKET AREAS 1-12/2005Continuing Discontinued
Sales, EUR mill.operationsoperationsTotal
Finland 1)1 106.8414.1 1 520.9
Baltic states 2)140.8140.8
Russia 3)143.146.5189.6
Group1.390.7460.6 1 851.3
Finland, per cent79.689.982.2
International operations,20.410.117.8
per cent

Continuing Discontinued

Revenue, EUR mill.operationsoperationsTotal
Finland 1)923.2338.3 1.261.5
Baltic states 2)119.7119.7
Russia 3)122.039.4161.4
Group1 164.9377.7 1.542.6
Finland, per cent79.389.681.8
International operations,20.710.418.2
per cent

Continuing Discontinued

Operating profit, EUr mill.operationsoperationsTotal
Finland 1)92.23.195.4
Baltic states 2)7.37.3
Russia 3)-4.05.01.0
Group95.68.1103.7
Finland, per cent96.538.692.0
International operations,3.561.48.0
per cent

Investments,31.12.2005
gross, EUR mill.Continuing Discontinued
operationsoperationsTotal
Finland 1)31.82.734.6
Baltic states 2)1.71.7
Russia 3)15.65.120.7
Group49.17.957.0
Finland, per cent64.834.960.7
International operations,35.265.139.3
per cent

Continuing Discontinued

Assets, EUR mill.operationsoperationsTotal
Finland 1)489.398.2587.4
Baltic states 2)72.272.2
Russia 3)79.022.9101.9
Group640.5121.1761.5
Finland, per cent76.481.177.1
International operations,23.618.922.9
per cent 1) Department Store Division, Hobby Hall and Seppälä 2) Department Store Division, Hobby Hall and Seppälä 3) Department Store Division and Seppälä

CONTINGENT LIABILITIES EUR millions 2006 2005 Security pledged on behalf of the company

Mortgages given1.71.7
Securities pledged0.10.1
Total1.71.7
Security pledged on behalf of other parties
Guarantees1.5
Total1.5
Other liabilities of the company Repuchased liabilities for transferred lease and 13.3 hire-purchase agreements Total 13.3

Liabilities, total

Mortgages1.71.7
Guarantees1.5
Pledges0.10.1
Other liabilities13.3
Total3.315.0
Minimum payments on the basis of binding lease agreements on commercial premises
EUR mill20062005
Within one year69.666.0
Within 1-5 years211.1 205.0
In five years more140.4 178.5
Total421.1 449.5
Lease payments
Within one year1.11.7
Within 1-5 years0.91.6
Total2.02.3
DERIVATIVE CONTRACTS

EUR millions 2006 2005 Currency forwards

Nominal values010.4
Fair values0-0.2

CONSOLIDATED CASH FLOW STATEMENT STOCKMANN GROUP 2006 2005 EUR mill. EUR mill.

CASH FLOWS FROM OPERATING ACTIVITIES Net profit for the financial year 104.7 76.9 Adjustments:

     Deprecation32.135.8
     Other operating income-34.4-7.0
     Interest paid and other financial expenses2.33.7
     Interest received-1.8-2.8
     Taxes paid24.328.2
     Other adjustments1.7
Changes in working capital:
    Change in trade and other receivables1.7-2.6
    Change in inventories5.2-17.1
    Change in trade payables and other11.20.9
liabilities
Interest paid-2.5-3.9
Interest received1.11.2
Taxes paid-28.2-31.3
NET CASH FROM OPERATING ACTIVITIES 117.4 81.9

CASH FLOWS FROM INVESTING ACTIVITIES

Investments in tangible and intangible assets-112.2-58.1
Acquisition of subsidiary net cash acquired-12.7
Disposal of subsidiaries less cash at date of105.011.7
disposal
Capital expenditures on other investments-0.50.0
Cash from tangible assets8.4
Cash from other investments0.91.5
Dividends received0.10.2
NET CASH USED IN INVESTING ACTIVITIES -11.0 -44.7

CASH FLOWS FROM FINANCING ACTIVITIES Change in loans granted, increase (-), decrease 0.3 0.0 (+)

Proceeds from issue of share capital17.213.9
Short-term loans drawn down10.015.8
Repayments of long-term loans-33.6-36.6
Dividends paid-59.5-53.3
NET CASH USED IN FINANCING ACTIVITIES -65.6 -60.2

Change in cash and cash equivalents 40.8 -23.0

Cash and cash equivalents 18.4 41.4 at start of the financial year Cash and cash equivalents 59.2 18.4 at end of the financial year

AVERAGE NUMBER OF EMPLOYEES CONVERTED TO FULL-TIME STAFF 2002 2003 2004 2005 2006

Department Store Division4 459 4 691 5 400 6 057 6 418
Hobby Hall755704608537515
Seppälä705709759809890
Management and administration9297104100100
Continuing operations, total6 011 6 201 6 871 7 503 7 923
Discontinued operations741867941 1 034114
Total6 752 7 068 7 812 8 537 8 037

STOCKMANN plc

Hannu Penttilä CEO

SUPPLEMENT Notice of Annual General Meeting

DISTRIBUTION Helsinki Stock Exchange Principal media

A press and analyst conference will be held today, February 8, 2007, at 14.00 at the World Trade Center, Aleksanterinkatu 17, Helsinki.

Conference call today, February 8, 2007 at 16.00 (GMT+2h). Additional information: www.stockmann.com

SUPPLEMENT

NOTICE OF ANNUAL GENERAL MEETING

Notice is hereby given to the shareholders of Stockmann plc that the company's Annual General Meeting will be held on Tuesday, March 20, 2007, at 4.00 p.m. in Finlandia Hall at the address Karamzininkatu 4, Helsinki. In addition to advance registration, shareholders must also register for the meeting, for which registration will begin at 2.30 p.m. Registration for the meeting should be made at the reception desk no later than by 3.45 p.m. Free parking will be provided for attendees in the parking lot of Finlandia Hall.

The following items are on the agenda:

1. The matters belonging to the competence of the Annual General Meeting under Article 14 of the Articles of Association and Chapter 5 of the Companies Act.

2. Amendment of § 12 of the Articles of Association

Under the new Companies Act, a shareholder who has not been registered in the book-entry system does not have the right to participate in a general meeting. Accordingly, the Board of Directors proposes that Article 12 of the Articles of Association be amended in line with the new Companies Act.

3. Proposal for authorizing the Board of Directors to decide on the transfer of own shares

The Board of Directors proposes that the Annual General Meeting authorize the Board to decide on the transfer of a maximum of 373,134 of the company's own Series B shares (treasury shares). The authorization comprises the right to transfer shares in one or more instalments in disapplication of shareholders' pre-emptive rights. Shares can be transferred as consideration in acquisitions that may be made or in other structural arrangements, be used as part of the company's incentive and compensation system, be used for the payment of share bonuses to the Board of Directors, or they can be sold in public trading. The transfer must take place in a public trade at the fair value from time to time. The authorization is valid for five years from the close of the Annual General Meeting.

Financial statement documents and proposals by the Board of Directors

The financial statement documents and the above-mentioned proposals by the Board of Directors are available for inspection by shareholders as from March 12, 2007, at the company's Head Office, Aleksanterinkatu 52 B, 8th floor, Helsinki (Christina Harjunpää). Copies of the documents will be sent to shareholders upon request.

Participation in the Annual General Meeting

Those shareholders are entitled to participate in the Annual General Meeting, who have been entered on Friday, March 9, 2007, as shareholders in the Shareholder Register kept by Finnish Central Securities Depository Ltd and who have registered for the meeting no later than on Wednesday, March 14, 2007.

Shareholders wishing to participate in the Annual General Meeting must notify the company of their intention to attend no later than on Wednesday, March 14, 2007, 4.00 p.m. by registering on the company's website at www.stockmann.com or by telephoning +358-9-121 4020. If a participant in the meeting represents a shareholder by proxy, we request that proxy forms for a designated person be delivered to the company no later than by March 15, 2007, at the address Stockmann plc, Petra Laakso, P.O. Box 147, 00381 Helsinki.

Payment of dividend

The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 1.30 per share be paid for the 2006 financial year. It is proposed that the dividend for the 2006 financial year be paid out on March 30, 2007, to shareholders who on the record date for dividend payment, March 23, 2007, have been entered as shareholders in the Shareholder Register kept by Finnish Central Securities Depository Ltd.

Composition of the Board of Directors

The Board's Appointments and Compensation Committee is proposing to the Annual General Meeting that seven members be elected to seats on the Board. Following the announcement by Lasse Koivu, Chairman of the Board, that he will no longer be available as a member of the company's Board of Directors, the Board's Appointments and Compensation Committee will propose that the Board's present members, Erkki Etola, managing director, Oy Etola Ab; Professor Eva Liljeblom, Kari Niemistö, managing director, Oy Selective Investor Ab; Minister Christoffer Taxell, Carola Teir-Lehtinen, Corporate Executive Vice President, Communications, Fortum Corporation; and Chamber Counsellor Henry Wiklund, having given their consent, be re-elected, to a period of office up to the end of the next Annual General Meeting. In addition, the Committee is proposing that Kaj-Gustaf Bergh, managing director, Föreningen Konstsamfundet r.f., having given his consent, be elected as a new member for the same period of office.

Auditors

Shareholders of the company, who represent over 50 per cent of the voting rights, have informed the company that they are going to propose to the Annual General Meeting that Jari Härmälä, Authorized Public Accountant, and Henrik Holmbom, Authorized Public Accountant, having given their consent, be elected as the regular auditors for the financial year 2007. It is proposed that the independent firm of public accountants KPMG Oy Ab be elected as the deputy auditor.

Helsinki, February 8, 2007

Board of Directors





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