Stockmann Group’s Interim Report 1 January – 30 September 2015
Helsinki, Finland, 2015-10-28 07:00 CET (GLOBE NEWSWIRE) —
STOCKMANN plc, Interim Report 28.10.2015 at 8:00 EET
Consolidated revenue was EUR 350.9 million (EUR 405.0 million), down 2.9 per cent at comparable exchange rates excluding Seppälä.
Gross margin was up, to 50.1 per cent (49.6 per cent).
Operating result excluding non-recurring items (NRI) was EUR -12.7 million (EUR -14.8 million).
Consolidated revenue was EUR 1 137.1 million (EUR 1 295.9 million), down 3.6 per cent at comparable exchange rates excluding Seppälä.
Operating result excluding NRI was EUR -56.9 million (EUR -55.1 million).
Result for the period excluding NRI was EUR -71.6 million (EUR -61.7 million).
Earnings per share excluding NRI came to EUR -0.99 (EUR -0.86).
Non-recurring items were EUR -13.0 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:
Implementation of our new strategy is proceeding according to plan. Many changes have taken place and they have required a lot of work from all Stockmann employees. There are still many steps ahead of us, as we are just at the beginning of the process of building a new Stockmann. However, the direction is clear, and we are moving purposefully towards our goal.
Stockmann wants to ensure inspiration, quality and convenient shopping for its customers. We are renewing our product offering in the department stores, with focus on creating a more up-to-date brand mix in our key product areas. We want to bring new experiences to our customers, and the Brooklyn campaign in September was a successful example of this. An attractive tenant mix will complement Stockmann’s own offering, and together with our tenants we share the common goal of providing top-notch shopping experiences to our customers.
During the third quarter we completed the sale of the Academic Bookstore to Bonnier Books as planned. Books will remain in the offering for customers, as the Academic Bookstore will continue as a tenant in most of our Finnish department stores. Euronics opened its electronics stores in the Riga and Tallinn department stores in September. The cooperation has started well, and the new tenant expands our offering, as electronics have not been sold earlier in our Baltic department stores.
Despite the tough market environment and weak Russian rouble, Stockmann’s operating result excluding non-recurring items improved slightly in the third quarter, and operating result before depreciation was already positive. Particularly Lindex made a strong improvement in its result thanks to increased sales and tight cost control. The Real Estate division continued its good performance. Stockmann Retail’s operating result was still negative, despite a decline in operating costs. We are heading towards the most important season in the retail business, the Christmas season, and we will put all our effort in achieving our goals.
|Revenue, EUR mill.||350.9||405.0||1 137.1||1 295.9||1 844.5|
|Gross margin, per cent||50.1||49.6||48.8||47.8||46.6|
|Operating result before depreciation (EBITDA), EUR mill.||4.5||2.4||-8.2||-1.5||-11.3|
|Operating result*, EUR mill.||-16.0||-14.8||-69.9||-55.1||-82.2|
Operating result* excluding
non-recurring items, EUR mill.
|Net financial costs, EUR mill.||5.7||4.7||15.7||17.4||21.4|
|Result before tax, EUR mill.||-21.6||-19.5||-85.7||-72.6||-103.6|
|Result for the period, EUR mill.||-16.5||-13.6||-84.6||-61.7||-99.8|
|Earnings per share, undiluted, EUR||-0.23||-0.19||-1.17||-0.86||-1.39|
|Equity per share, EUR||14.19||11.14||10.55|
|Cash flow from operating activities, EUR mill.||-31.8||-51.9||-79.8||-87.3||29.6|
|Capital expenditure, EUR mill.||10.8||15.4||37.0||42.7||53.8|
|Net gearing, per cent||89.9||114.3||105.4|
|Equity ratio, per cent||43.8||39.0||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||13 008||14 344||13 258||14 504||14 533|
* Operating result is not comparable since the figures for 2014 do not include the increased depreciation due to a change in the valuation of the real estate properties.
Stockmann is continuing to pursue the comprehensive turnaround of its business in accordance with the strategic direction set in late 2014. As of 1 January 2015, the company has been divided into three segments: Stockmann Retail, Real Estate and Fashion Chains.
Stockmann Retail currently consists of the Stockmann department stores 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. This offering is complemented by an attractive range of goods and services from tenants. The goal shared by Stockmann’s own retail operations and its tenants is to provide a top-notch shopping experience to Stockmann’s customers.
Stockmann strongly focuses on omnicommerce and is investing in digital solutions. In September, Stockmann released the first version of its own mobile application designed to make shopping easier at Stockmann’s department stores. The development of the app will continue and new functionalities will be introduced to it in stages. Stockmann has also developed a tablet tool for the sales staff, and this will be introduced in all the Finnish department stores during autumn 2015. Furthermore, the digital fitting room piloted in the spring at the Helsinki city centre department store will be expanded to the other Finnish department stores by the end of the year.
Stockmann has withdrawn from offering its own electronics and book selections. Expert has opened electronics stores in the Stockmann department stores in Helsinki city centre, Turku and Tampere, and Euronics has opened electronics stores in the Tallinn and Riga department stores. The sale of the Academic Bookstore business to the Swedish media company Bonnier Books AB was completed on 30 September 2015. Bonnier continues to operate the Academic Bookstore business in Stockmann’s department store premises in six locations in Finland. Due to the transaction, Stockmann recorded a non-recurring item of EUR -3.2 million related to inventories and non-current assets for the third quarter of 2015. The book inventories on the closing date were higher than earlier estimated.
Stockmann will withdraw from offering its own toy and pet supplies selections during the last quarter of 2015. In Helsinki’s flagship premises, Hamleys, the oldest toy shop in the world, will open its store in November 2015. Another new tenant in the Helsinki flagship will be the pet supplies store Musti ja Mirri. Both Hamleys and Musti ja Mirri are looking into cooperation possibilities with Stockmann in other department stores in Finland from 2016 onwards. Stockmann’s own sports selection will be complemented by the Halti outdoor store at the Helsinki flagship store as of November. Stockmann has reduced its own sports equipment selection but will continue offering sports clothing and footwear in all of its stores.
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. During the third quarter, improving cooperation with suppliers, reviewing the brand mix, and renegotiating terms and conditions with the key suppliers have continued to be major focus areas. The first effects of the supplier review are already visible in the inventories, which have declined by over EUR 45 million in Stockmann Retail, compared with the end of September in 2014. The efficiency programme will continue according to plan, and the effects of the programme will be reflected in Stockmann’s performance mainly from 2016 onwards.
Stockmann will open a new distribution centre for Finland and the Baltic countries in April 2016. The centre will be highly automated, and will serve the department store and Stockmann online store more efficiently. The current warehouse operations in four locations in the Helsinki region will be transferred to the new distribution centre in stages in 2016 and the Baltic warehouse operations in Riga will be transferred in 2017. Hobby Hall logistics in Viinikkala and Tammisto will, for the time being, remain as before. Since the centralised distribution centre will require fewer employees than at present, Stockmann started codetermination negotiations concerning all warehouse operations in Finland in February 2014. As a result of the negotiations, the number of jobs will be reduced by approximately 110, of which most will be through layoffs. When starting the negotiations, the reduction need was estimated at a maximum of 220 jobs, or 200 full-time equivalents in Finland. With the new distribution centre Stockmann is targeting an additional annual cost saving of approximately EUR 5.5 million compared to 2014, or EUR 3.5 million including the increased depreciation due to the investment in automation technology. Savings are expected to be achieved in full from 2018 onwards. The cost savings are not included in the efficiency programme’s annual savings target of EUR 50 million.
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. The proposed increase would result in a negative effect on Stockmann’s result of approximately EUR 8 million, excluding interest. Stockmann Sverige AB is currently also undergoing a tax audit process. According to the preliminary tax audit report, the Swedish tax authorities are proposing an increase in taxable income for financial year 2013. The proposed increase would result in a negative effect of approximately EUR 6 million, excluding interest. Stockmann expects to receive the final tax audit report in the near future. According to Stockmann’s management, the taxes have been paid correctly in both cases, and no increase in taxable income should be made.
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. Sanctions against Russia and their counter-measures continue to 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 through a comprehensive turnaround of its business. An efficiency programme was launched in February 2015 with an annual cost savings target of EUR 50 million. The programme is progressing according to plan, and its main 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.
CEO Per Thelin and CFO Lauri Veijalainen will host a webcast in English on 28 October 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. The recording and presentation material are available on the company’s website after the event.
Finland: +358 9 2310 1619
Sweden: +46 8 5065 3932
United Kingdom: +44 20 3427 1933
Germany: +49 69 2222 10639
Netherlands: +31 20 716 8251
France: +33 1 76 77 22 41
United States of America: +1646 254 3370
Confirmation code: 3540099
Per Thelin, CEO, tel. +358 9 121 5542
Lauri Veijalainen, CFO, tel. +358 9 121 5062
Nora Malin, Director, Corporate Communications, tel. +358 9 121 3558