Stockmann Group’s Interim Management Statement, 1 January–30 September 2020

Stockmann Group’s third-quarter operating result improved due to strong performance especially in Lindex

STOCKMANN plc, Interim report 30.10.2020 at 8:00 EET

July–September 2020:
- Consolidated revenue was EUR 207.6 million (225.3), down 6.8% in comparable currency rates.
- Gross margin was 57.4 % (56.4).
- Operating result was EUR 11.7 million (2.1).
- The adjusted operating result was EUR 13.9 million (5.4).
- Earnings per share were EUR -0.02 (-0.27).
- Adjusted earnings per share were EUR -0.01 (-0.23).

January–September 2020:
- Consolidated revenue was EUR 558.7 million (674.8), down 16.1% in comparable currency rates.
- Gross margin was 55.3% (56.2).
- Operating result was EUR -21.9 million (-9.1).

- The adjusted operating result was EUR -17.3 million (1.0).
- Earnings per share were EUR -0.80 (-0.83).
- Adjusted earnings per share were EUR -0.74 (-0.69).
- Stockmann plc filed for corporate restructuring on 6 April 2020 (Stock Exchange Release 6 April 2020).

Updated guidance for 2020:
The COVID-19 pandemic has a significant negative impact on the entire Stockmann Group’s business operations. The fourth quarter is associated with greater uncertainty than normal due to the coronavirus situation. The revenue for the year 2020 will be on a lower level than in the previous year and the operating result will be loss-making.

CEO Jari Latvanen:
Stockmann Group showed strong performance in both Lindex and Stockmann divisions as a result of enhanced sales activities as well as implemented cost efficiency measures. Under the current exceptional circumstances in the operating environment, Stockmann Group performed well during the period. Despite the decline in revenue the Stockmann Group´s operating profit improved and was EUR 11.7 million and the cash amounted to EUR 132 million.

Visitor trends in the brick and mortar stores started to recover towards a normal level during the third-quarter until the changes resulting from the COVID-19 pandemic affected the business at the end of the period. The coronavirus pandemic is still the main reason for the decline in sales despite the solid growth trend in digital sales.

The third-quarter result shows that the new Stockmann Group’s strategy works well also in exceptional circumstances. The transformation is proceeding according to the renewed strategy and that the company is agile to adapt to changes in the international operating environment. Stockmann Group will continue adapting the cost structure in views of the situation in our operating environment.

Lindex continued its digital expansion and launched on Zalando. Launch of the new underwear brand called Closely in which Lindex has been a partner and an investor since the project started two years ago. As part of efforts to explore new business models and ways of prolonging the lifetime of the garments Lindex is testing second-hand sales of kids’ outerwear in some selected stores. Lindex division initiated a cost saving programme to achieve a reduction of approximately EUR 14.5 million.

Stockmann division updated its business strategy during the period according to the current situation. The target is to be able to respond to changes in the operating environment and consumer behaviour by focusing on customer relationships and loyalty, developing an omnichannel customer experience, inspiring customers in the selected categories: fashion, beauty, home, food and beverages, improving a customer-centric culture and concentrating on profitable business. Stockmann division continued renewals in several department stores during the third quarter. Stockmann’s premium position was further strengthened by adding several designer brands. Additionally a new natural cosmetics department in the Helsinki Flagship was opened. Stockmann division also launched two new collections for its own brands.

Rental negotiations for Stockmann division’s department stores will continue targeting to a lower cost level according to the current market level. Stockmann division is also continuing to renew its operations and improving efficiency in processes.

The corporate restructuring administrator’s report of Stockmann plc’s assets, liabilities and other undertakings, and on the circumstances that affect the financial position of the company and its expected development, states that the preconditions for viable business exist and a solid restructuring programme can be established. The proposal for the restructuring programme is in process and the restructuring programme draft will be filed by 11 December 2020.

KEY FIGURES

7–9/
2020
7–9/
2019
1–9/
2020
1–9/
2019
1–12/
2019
Revenue, EUR mill. 207.6 225.3 558.7 674.8 960.4
Gross margin, % 57.4 56.4 55.3 56.2 56.3
Operating result (EBIT), EUR mill. 11.7 2.1 -21.9 -9.1 13.3
Adjusted operating result (EBIT), EUR mill. 13.9 5.4 -17.3 1.0 29.0
Result for the period, EUR mill. 1.1 -18.2 -51.2 -56.1 -54.3
Earnings per share,
undiluted and diluted, EUR
-0.02 -0.27 -0.80 -0.83 -0.84
Personnel, average 6 104 7 163 6 104 7 028 7 002
Cash flow from operating activities, EUR mill. 23.3 4.4 109.2 32.3 102.3
Capital expenditure, EUR mill. 4.2 8.5 14.6 24.2 33.8
Equity per share, EUR 10.39 10.68 11.12
Net gearing, % 104.4 125.8 112.4
Equity ratio, % 35.8 36.3 38.1

CORPORATE RESTRUCTURING PROCEEDINGS

The coronavirus epidemic, which broke out in Europe after the first week of March, caused significant changes in Stockmann Group’s operating environment with customer volumes decreasing suddenly. Despite continued strong growth in the online sales of Stockmann division and Lindex, the online sales growth is not sufficient to compensate for the significant decline in customer volumes in these exceptional circumstances.

Since it is the view of the management and the Board of Directors that the company’s business remains viable and can be restored to a sound basis, the Board of Directors of Stockmann decided, taking into consideration the company’s financial structure, to file for corporate restructuring of the parent company Stockmann plc on 6 April 2020. The coronavirus and the restrictions it has caused have, and will continue to have, a significant effect on the company’s customer volumes, cash flow and result.

Group subsidiaries, including Stockmann department stores in the Baltic countries and Lindex, are not in the scope of the restructuring proceedings.

On 8 April 2020, the District Court of Helsinki ruled to initiate the corporate restructuring proceedings of Stockmann plc in accordance with the Restructuring of Enterprises Act. The District Court appointed Attorney Jyrki Tähtinen of Borenius Attorneys Ltd as an administrator of the restructuring proceedings.

On 17 August 2020, the administrator of the corporate restructuring proceedings of Stockmann plc, Attorney Jyrki Tähtinen, in accordance with the Finnish Restructuring of Enterprises Act, provided all parties concerned a report of Stockmann plc’s assets, liabilities and other undertakings (as per 8 April 2020) and on the circumstances that affect the financial position of the company and its expected development. The administrator stated that the preconditions for viable business exist and a solid restructuring programme can be established.

COVID-19

The coronavirus epidemic, which broke out in Europe after the first week of March, caused significant changes in Stockmann Group’s operating environment and customer volumes decreased suddenly. The negative effects of the coronavirus epidemic on the market environment persisted in the second quarter. The national restrictions were partially lifted in May, which was reflected as positive development in customer flows at Stockmann department stores and Lindex stores. During the third quarter, Stockmann’s business operations normalised gradually. Visitor trends in the brick and mortar stores started to recover towards a normal level during the third-quarter until the changes resulting from the COVID-19 pandemic affected the business at the end of the period. Stockmann’s and Lindex’s online stores were both performing very well with improved sales growth. During the third quarter, Lindex online sales almost fully compensated for the decline in the sales of the brick and mortar stores.

During the third quarter other operating income came to EUR 2.8 million as a result of public funding related to the COVID-19 situation, which has been received mainly by Lindex, in various countries from government authorities or other corresponding public bodies. Other operating income for the period was EUR 8.1 million.

UPDATED GUIDANCE FOR 2020

The COVID-19 pandemic has a significant negative impact on the entire Stockmann Group’s business operations. The fourth quarter is associated with greater uncertainty than normal due to the coronavirus situation. The revenue for the year 2020 will be on a lower level than in the previous year and the operating result will be loss-making.

Earlier guidance for 2020:

Due to the rapid changes that took place in the business environment, Stockmann’s previous guidance, published on 13 February 2020, is no longer valid. Stockmann will provide a new guidance once visibility in our markets is clearer.

OUTLOOK FOR 2020

The outbreak of the coronavirus epidemic has caused significant changes in Stockmann Group’s operating environment, and it has had a material impact on the company’s customer volumes and cash flow.

Uncertainty in the global economy is expected to persist throughout 2020, and the coronavirus pandemic is having a significant impact on the economy across the world. The retail market is expected to remain challenging due to changes in consumer behaviour and confidence, which are also affected by the coronavirus situation.

Stockmann is working on drawing up a draft restructuring programme, which according to the decision of the District Court, must be filed by 11 December 2020.

Interim Management Statement
This company announcement is a summary of the Stockmann's Interim Management Statement for 1 January – 30 September 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.

Webcast
The press and analyst briefing will be held on 30 October 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.

Further information:
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

www.stockmanngroup.com

STOCKMANN plc

Jari Latvanen
CEO

Distribution:
Nasdaq Helsinki
Principal media



Stockmann Interim Management Statement Q3 2020.pdf


Back