CEO’s review
CEO Susanne Ehnbåge, Stockmann Group’s Half-year Finacial Report Q2/2023, published on 21 July 2023
We at the Stockmann Group are now entering a new phase. We will accelerate and seek new growth, combined with improved profitability, while keeping a clear focus on sustainability. With great honour and excitement, I look forward to leading the Stockmann Group after taking over as CEO on 12 May 2023.
During the past years, the Stockmann Group has undergone major and extensive changes. After the COVID-19 pandemic and as a part of the restructuring programme, all properties of the Stockmann division have been sold and all confirmed undisputed debts have been paid. The Lindex division has improved both its sales and profitability to record levels, while the Stockmann division has recovered to a great extent from heavy losses. I would like to thank all my colleagues and the Board of Directors for the good work completed so far.
The second quarter was characterised by a business environment of rising interest rates and continued high inflation that weakened consumers’ purchasing power. This, combined with the uncertainties related to the geopolitical tensions, continued to keep consumer confidence below average.
At the beginning of the second quarter, the challenges deriving from the operating environment, combined with a late spring, had a negative impact on fashion demand in several markets. However, after mid-May, sales picked up significantly and in local currencies the quarterly revenue was at the previous year’s level for the Group, but decreased in EUR by 6.3% due to weak SEK and NOK.
Lindex division’s revenue increased in local currencies by 2.0% as Lindex succeeded in increasing sales in all main markets regardless of the notable general decrease of fashion sales. The revenue of the Stockmann division decreased by 6.4% during the second quarter, which was mainly explained by the timing of Stockmann’s Crazy Days campaign that contributed more to the first- than the second-quarter sales compared to the previous year. Additionally, the reduction in the size of the Itis store in Helsinki had a negative impact on revenue. There was continued strong increase in the number of new loyalty programme members in both divisions.
I am especially pleased that Lindex succeeded in improving the adjusted operating result in local currencies for both the second quarter and first half-year, despite the historically high US-dollar, increased raw material prices and overall inflation impact. At the same time, the Stockmann division increased the mix of clearance and promotion sales, which affected the result negatively. This, together with an adverse currency impact on the Lindex result, decreased the Group’s operating result for the period. In local currencies the Group’s adjusted operating result was on par with the previous year for the second quarter and even increased for the first half-year.
During the second quarter, the Group’s financial situation and equity ratio further improved and the Group showed positive cash-flow despite the ongoing investments and the payments of undisputed debts. In the middle of July we signed a loan agreement for a Revolving Credit Facility of EUR 40 million, which further improves the Group’s financial situation. Inventories are at a balanced level and have decreased compared to both the previous year and the end of first quarter.
As the Stockmann Group, we are committed to fair and responsible business practices, and to the Science Based Targets initiative (SBTi). During the reporting period, Stockmann’s Board of Directors approved our science-based climate targets. The work will proceed and be completed during 2023 in accordance with the schedule of the initiative.
We see the future to be exciting yet demanding, and we will strive for a future growth and profitability for both divisions. Lindex will enter new markets and sales channels, whereas the Stockmann division will continue its repositioning towards luxury and affordable luxury. Both divisions are making considerable investments in improving the overall digitalisation to meet customer expectations and improve process and cost efficiency. The ongoing construction of the Lindex division’s new EUR 110 million omnichannel distribution centre is proceeding well, and it is planned to be taken into operation in autumn 2024.
The Stockmann Group strives to end the restructuring programme as soon as possible. Our strategy work progressed during the second quarter, and we are evaluating our strategic options for the period after the restructuring programme.
I would like to thank all the fantastic team members at Lindex and Stockmann for their excellent collaboration and valuable support during my first weeks as the Group CEO. I would also like to thank our customers, partners and other stakeholders who are sharing and supporting our important transformation journey.
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