Stockmann Group's Interim Report 1 January - 30 June 2015
New strategy well under way, operating profit up in the second quarter
Helsinki, Finland, 2015-08-12 07:00 CEST (GLOBE NEWSWIRE) --
STOCKMANN plc, Interim Report 12.8.2015 at 8:00 EET
Stockmann-konsernin osavuosikatsaus 1.1.–30.6.2015
New strategy well under way, operating profit up in the second quarter
Consolidated revenue was EUR 405.8 million (EUR 495.3 million), down 10.9 per cent at comparable exchange rates excluding Seppälä.
Gross margin up to 51.2 per cent (48.1 per cent).
Operating profit excluding non-recurring items (NRI) was EUR 5.7 million (EUR 3.5 million).
Consolidated revenue was EUR 786.2 million (EUR 890.9 million), down 4.0 per cent at comparable exchange rates excluding Seppälä.
Operating result excluding NRI was EUR -44.2 million (EUR -40.3 million).
Result for the period excluding NRI was EUR -58.2 million (EUR -48.2 million).
Earnings per share excluding NRI came to EUR -0.81 (EUR -0.67).
Non-recurring items were EUR -9.8 million (EUR 0 million).
The outlook for 2015 remains unchanged: Due to planned structural changes, Stockmann expects the Group’s revenue in 2015 to be down on 2014. The operating result excluding non-recurring items is expected to improve, but to remain negative in 2015 due to the performance of the Stockmann Retail division. Operating results for the Real Estate and Fashion Chains divisions are expected to be positive.
CEO Per Thelin:
Stockmann is proceeding well with its new strategy and took several key steps during the reporting period. The divestment of Seppälä took place in April as planned. In June, Stockmann signed a letter of intent regarding the sale of the Academic Bookstore business to the Swedish media company Bonnier Books AB. The Academic Bookstore will continue as a tenant in the Finnish department stores.
In line with its strategy, Stockmann Retail’s future product selection will have a stronger focus on fashion, cosmetics, food and home products. The Real Estate division has made good progress and signed a number of new tenant agreements which significantly improve our product and service offering. We are proud to announce that the world famous toy shop Hamleys will open its first store in Finland at Stockmann this November. Other new tenants agreed for the Helsinki flagship include Halti and Espresso House. Expert opened its electronics stores in Helsinki and Turku department stores during the second quarter, and this will soon be followed by Tampere. In the Baltic countries, we are introducing Euronics electronics stores in September, and also new cafeterias and other new services.
Stockmann’s revenue was down during the second quarter, mainly due to the timing of the Crazy Days campaign and the continuously weak Russian rouble. Despite this, the Group’s quarterly operating profit excluding non-recurring items was up. The Real Estate division improved its operating profit and Lindex continued its stable performance. A new cosmetics label, Lindex Beauty was launched successfully during the quarter.
Decisions on many structural measures and cost savings were taken during the quarter. We are continuing the efficiency programme, which targets annual cost savings of EUR 50 million. The effects of the programme will mainly be visible from 2016 onwards, but we can see that the underlying business is improving. Our cost base is already lower than in 2014. The department stores’ revenue is picking up and we have taken market share in our biggest product category, fashion, during recent months. Sales in July were very promising with growth in the department stores and Lindex fashion stores in all key markets.
|Revenue, EUR mill.||405.8||495.3||786.2||890.9||1 844.5|
|Gross margin, per cent||51.2||48.1||48.2||47.0||46.6|
|Operating result, EUR mill.||-4.1||3.5||-54.0||-40.3||-82.2|
|Operating result excluding non-recurring items, EUR mill.||5.7||3.5||-44.2||-40.3||-42.9|
|Net financial costs, EUR mill.||4.8||7.3||10.1||12.7||21.4|
|Result before tax, EUR mill.||-8.9||-3.8||-64.0||-53.1||-103.6|
|Result for the period, EUR mill.||-11.9||-8.1||-68.0||-48.3||-99.8|
|Earnings per share, undiluted, EUR||-0.16||-0.11||-0.94||-0.67||-1.39|
|Equity per share, EUR||14.42||11.28||10.55|
|Cash flow from operating activities, EUR mill.||17.2||77.5||-48.0||-35.5||29.6|
|Capital expenditure, EUR mill.||9.7||17.8||26.2||27.3||53.8|
|Net gearing, per cent||85.3||104.3||105.4|
|Equity ratio, per cent||44.6||41.1||39.3|
|Number of shares, undiluted, weighted average, 1 000 pc||72 049||72 049||72 049|
Return on capital employed,
rolling 12 months, per cent
|Personnel, average||12 740||14 866||13 383||14 584||14 533|
Stockmann is continuing to pursue the comprehensive turnaround of its business in accordance with the strategic direction set in late 2014. The company is divided into three segments as of 1 January 2015: Stockmann Retail, Real Estate and Fashion Chains, the latter comprising Lindex, as Seppälä’s operations in Finland and Estonia were divested on 1 April 2015. Hobby Hall’s distance retail business is planned to be incorporated into a separate subsidiary.
Stockmann Retail currently consists of the Stockmann department stores, the Academic Bookstore and Hobby Hall, together with their online stores. The future product selection of the Stockmann department stores and the online store will focus on fashion, cosmetics, food and home products. To enhance the customer experience, the offering will be complemented with attractive goods and services from tenants. In line with this strategy, Stockmann has signed a letter of intent with Hamleys, the oldest toy shop in the world, to open a store in Stockmann’s Helsinki flagship as a tenant in November 2015. Hamleys and Stockmann are also looking into cooperation possibilities in Stockmann’s other department stores in Finland from 2016 onwards.
Stockmann has signed a letter of intent regarding the sale of the Academic Bookstore business to the Swedish media company Bonnier Books AB. Bonnier will continue the Academic Bookstore business in Stockmann’s department store premises in Finland and will rent a total of approx. 5 000 square metres of store space in locations currently used by Stockmann. The transaction is expected to take place at the latest on 1 October 2015 and the purchase price is expected not to have a significant effect on Stockmann’s earnings in 2015.
Stockmann has withdrawn from its own electronics offering during the second quarter and has leased retail space in its department stores in Finland to Expert ASA Oy. Expert opened its store in Helsinki city centre in May and in Turku in June and will open its store in Tampere department store in September 2015. In June, Stockmann signed agreements on leasing retail space from its department stores in Tallinn and Riga to Euronics, the market leader in the consumer electronics retail business in the Baltic countries. The cooperation will start as of September 2015 in both locations.
As an important part of the turnaround, Stockmann launched an efficiency programme in February 2015 with an annual cost savings target of EUR 50 million. In April Stockmann decided to close down its department store in Oulu, Finland, at the latest in early 2017 and three department stores in the Mega shopping centres in Moscow by the end of 2016. A significant share of the cost savings is expected to be achieved through streamlining support functions. The codetermination negotiations associated with these changes were carried out in Finland during the second quarter, and the outcome was that 100 jobs were reduced in support functions. In Russia, the number of positions will be reduced by approximately 70 during 2015. The efficiency programme will continue, and the effects of the programme will be reflected in Stockmann's earnings mainly from 2016 onwards.
Stockmann is exposed to risks that arise from the operating environment, risks related to the company’s own operations and financial risks. The general economic situation is affecting consumers’ purchasing behaviour and purchasing power in all of the Group’s market areas. Rapid and unexpected movements in the markets may influence the behaviour of both the financial actors and consumers. Uncertainties related to the general economic situation, particularly those related to consumers’ purchasing power, and currency fluctuations are considered to be the principal risks that will continue to affect Stockmann during 2015. A weak operating environment may also cause a decline in rental income from tenants and in the occupancy rate of properties. These may have an effect on the fair value of the real estate.
The Stockmann Group entities are subject to tax audits which may lead to reassessment of taxes. In June 2015, Stockmann plc received a tax audit report proposing an increase in taxable income in Finland. The tax authorities will make the decision on the matter in due course after Stockmann’s reply to the audit report. According to Stockmann’s management, the taxes have been paid correctly and no increase in taxable income should be made. The proposed increase would result in a negative effect on Stockmann’s result of approximately EUR 8 million, excluding interest. Also Stockmann Sverige AB is currently in a tax audit process carried out by the Swedish tax authorities but the company has not yet received the tax audit report.
The company does not consider any other material changes to have taken place in its risk factors presented in the 2014 financial statements.
Outlook for 2015
The Russian rouble has weakened considerably and economic growth in Russia is expected to remain at a low level in 2015, having a continuously negative impact on consumers’ purchasing power. The weak purchasing power is also expected to decrease the number of Russian shoppers in Finland and in the Baltic countries. The crisis in Ukraine, sanctions against Russia and their counter-measures may further affect the Russian economy during the year. As a consequence, the outlook for the Russian retail market remains very uncertain.
In Finland, no growth is expected in the retail market in 2015. The demand for non-food products, in particular, remains uncertain. Purchasing power is expected to remain low, which will have a negative effect on consumer purchasing behaviour.
The affordable fashion market in Sweden and the retail market in the Baltic countries are expected to remain relatively stable. Low consumer confidence may, however, affect consumers’ willingness to make purchases in all market areas.
Stockmann’s strategy aims at improving the Group’s long-term competitiveness and profitability. An efficiency programme was launched in February 2015 with an annual cost savings target of EUR 50 million. The effects will start to be reflected in Stockmann’s performance mainly from 2016 onwards.
Capital expenditure for 2015 is estimated to be approximately EUR 70 million. The operating result will be adversely affected by the increase in depreciation as a result of the fair market valuation of the real estate. Depreciation for 2015 is estimated to total over EUR 80 million.
Due to planned structural changes, Stockmann expects the Group’s revenue in 2015 to be down on 2014. The operating result excluding non-recurring items is expected to improve, but to remain negative in 2015 due to the performance of the Stockmann Retail division. Operating results for the Real Estate and Fashion Chains divisions are expected to be positive.
Press and analyst briefing
A press and analyst briefing in Finnish will be held today, on 12 August 2015 at 9:15 a.m. at the Fazer À la Carte restaurant on the 8th floor of Stockmann's Helsinki city centre department store, Aleksanterinkatu 52.
CEO Per Thelin and CFO Lauri Veijalainen will host a webcast in English on 12 August 2015, at 11:15 a.m. EET presenting the Interim Report. To participate in the webcast, please dial one of the numbers below 5–10 minutes before the call begins. The presentation can be followed by this link or on the address stockmanngroup.com.
Finland: +358 9 2310 1619
Sweden: +46 8 5065 3931
United Kingdom: +44 20 3427 1921
Germany: +49 69 2222 10641
France: +33 1 76 77 22 34
United States of America: +1646 254 3371
Confirmation code: 8765076
Per Thelin, CEO, tel. +358 9 121 5801
Lauri Veijalainen, CFO, tel. +358 9 121 5062
Nora Malin, Director, Corporate Communications, tel. +358 9 121 3558
OVK Q2 2015 ENG.pdf