The Stockmann Group's sales grew by 7.4% to EUR 1 698.6 million. Profit before extraordinary items grew by 7.9% and was EUR 74.0 million. The operating profit figures posted by the Department Store Division and Seppälä Division were at the previous year's good level. The Vehicle Division reported its best-ever earnings. The Hobby Hall Division's result was down on the previous year and in the red. Stockmann's earnings per share improved to EUR 1.01 (EUR 0.97). The Board of Directors is proposing the payment of an ordinary dividend of EUR 0.90 for the 2003 financial year and a bonus dividend of EUR 0.45, or a total of EUR 1.35 per share.

Sales up 7.4 per cent

The Stockmann Group's sales grew by 7.4 per cent, or EUR 116.3 million, to EUR 1 698.6 million. Net turnover increased by EUR 97.4 million, or 7.4 per cent, to EUR 1 412.7 million. The net turnover figures by division are shown in the accompanying table.

Earnings improve

The gross margin on the Group's operations was EUR 457.5 million, an increase of EUR 18.6 million on the previous year (EUR 438.9 million), and 32.4 per cent of net turnover (33.4 per cent). The relative gross margin on operations weakened by 1.0 percentage point owing to the strong growth in the Vehicle Division's sales and the weakening in the Hobby Hall Division's relative gross margin. Operating expenses grew by EUR 21.4 million and depreciation diminished by EUR 0.1 million.

Operating profit was up EUR 3.9 million to EUR 65.7 million. Operating profit was 4.7 per cent of net turnover, or on a par with the previous year.

Other operating income consisted mainly of capital gains on the sale of real estate and the goodwill compensation obtained from the disposal of the agency sales of magazine and newspaper subscriptions. Other operating income amounted to EUR 15.4 million, compared with EUR 8.8 million a year ago.

Net financial income grew by EUR 1.6 million from the previous year and was EUR 8.3 million.

Profit before extraordinary items grew by EUR 5.4 million and was EUR 74.0 million. Because there were no extraordinary items, pre-tax profit was the same in amount.

Direct taxes increased by EUR 3.4 million and were EUR 22.3 million.

Net profit for the financial year was EUR 51.7 million, compared with EUR 49.7 million a year earlier.

Earnings per share increased by EUR 0.04 and were EUR 1.01. The figure a year ago was EUR 0.97. Earnings per share, diluted for the effect of share options, were EUR 1.00 (EUR 0.97).

Capital employed grew and was EUR 611.9 million (EUR 577.5 million). Capital employed was increased, notably, by the share subscriptions made with the 1997 options at the end of the year. The return on capital employed rose to 13.2 per cent, as against 12.6 per cent a year ago. The return on equity was 9.6 per cent, as it was a year earlier. Equity per share was EUR 10.36, compared with EUR 10.17 a year earlier.

The company's market capitalization grew by 34.6 per cent, or by EUR 245.5 million from the previous year and was EUR 955.6 million.

Sales and profitability trend of the divisions

The Department Store Division's sales grew by 5 per cent to EUR 851.3 million. Sales by the functions in Finland increased by 4 per cent. The Oulu department store reported a particularly strong increase in sales. Sales by International Operations grew by 10 per cent and its share of the division's sales rose to 15.8 per cent (15.1 per cent). The Department Store Division posted operating profit of EUR 39.7 million, the same figure as a year ago. Earnings were burdened by the pre-opening costs of the Riga department store, which was opened in mid-October, as well as by the pre-opening costs for the new Stockmann Beauty and Zara stores. In addition, the result of International Operations was burdened by the fall in the exchange rate of the US dollar, particularly in the last quarter. The return on capital employed was 21.1 per cent, on a par with the figure a year earlier (21.0 per cent).

The lowering in the car tax at the beginning of the year has led to soaring vehicle sales, which continued all year long. The Vehicle Division's sales grew by 20 per cent to EUR 480.4 million. Unit sales of new vehicles grew by 26.4 per cent on the previous year, rising from 9 965 to 11 333, and used vehicles were up 16.6 per cent, rising from 7 917 to 9 327. Stockmann's market share in the motor trade grew further in all the localities where it operates. The division's operating profit increased by EUR 0.2 million to EUR 5.6 million, an all-time high (EUR 5.4 million). At the beginning of October, the Vehicle Division wound up its last Mitsubishi dealership. Its territory as an Audi dealer in turn expanded from the start of October to eastern and western Uusimaa province in addition to the existing dealership in the Helsinki metropolitan area. The return on capital employed was 13.2 per cent, against 13.5 per cent a ear earlier.

Sales by the Hobby Hall Division declined by 1 per cent to EUR 235.7 million. The volume of packages dispatched grew by 5.6 per cent. Towards the end of 2002, Hobby Hall launched a streamlining programme aiming at annual cost savings of EUR 6 million. The programme was carried out according to plan and had an impact on the trend in costs beginning in the second quarter. Because the relative gross margin and sales fell clearly short of targets, Hobby Hall's profitability was unsatisfactory. In addition, the costs of winding up stores cut into earnings. The Hobby Hall Division's operating result decreased by EUR 3.9 million and was a loss of EUR 3.4 million. In order to improve its profitability, the Hobby Hall Division decided in autumn 2003 to concentrate more closely on distance retailing and to step up its logistics and category management. The objective of the changes is to achieve an improvement in earnings of about EUR 7.5-8.5 million annually. The Herttoniemi store was closed in September, the stores in Espoo and in the centre of Tallinn at the end of 2003 and the Tampere store in February 2004. It was decided to change the role of the stores remaining in operation - in Helsinki's Hämeentie street, in the Tammisto district of Vantaa and at Rocca al Mare in Tallinn - so that they support distance retailing. During 2003 the Hobby Hall Division's staff was reduced by about 100 employees.

The Seppälä Division's sales declined by 2 per cent on the same period a year ago and were EUR 130.3 million. Seppälä has been striving to improve its stock turn rate and gross margin, and results began to show up in the form of improved operating profit in the latter half of the year compared with the same period a year earlier. On the other hand, operating with a clearly lower level of stocks than in the previous year affected the sales trend to some extent. In addition, Seppälä's largest store in Estonia, which is located in Tallinn's Viru Centre, has been closed since April 2003 because of refurbishing work on the shopping centre that will take about a year. The number of stores in Finland was reduced by one: four stores were closed and three new stores were opened. Year-end sales were nevertheless lifted by the first four stores that were opened in Riga, Latvia, in the autumn.

Despite unsatisfactory earnings in the second quarter, full-year operating profit rose to nearly the previous year's level and was EUR 10.1 million (EUR 10.4 million). The return on capital employed increased by a hefty 58.5 per cent (52.4 per cent) thanks to a speed-up in capital turnover.

The trend in operating profit and return on capital employed by division are shown in the accompanying table.

Financing and invested capital

Liquid assets totalled EUR 121.3 million, compared with EUR 70.5 million at the end of 2002.

Loan repayments during the year amounted to EUR 1.0 million. In Latvia a 9.0 million lat (EUR 13.6 million) loan for the department store construction project was drawn down. The amount of long-term loans at the end of December was EUR 48.6 million. Capital expenditures in 2003 came to EUR 40.9 million. Dividend payouts total EUR 45.8 million. The 1997 options were exercised to subscribe for a total of 1 239 700 shares in the last quarter, bringing a total increase in shareholders' equity of EUR 16.4 million. In addition, disposals of fixed assets generated EUR 36.6 million.

The equity ratio declined from 69.7 per cent in the comparison period to 68.3 per cent.

Total contingent liabilities diminished by EUR 7.6 million from the end of 2002 and were EUR 60.8 million. Lease agreements on business premises amounted to EUR 471.1 million, compared with EUR 363.0 million a year earlier. Lease liabilities were increased by the leases on the new department stores in Moscow and in the Jumbo Shopping Centre in Vantaa as well as by the sale and leaseback of the Tapiola department store property.


A dividend of EUR 0.70 per share was paid for the 2002 financial year and additionally a bonus dividend of EUR 0.20 per share in honour of the company's 140-year jubilee, or a total of EUR 45.8 million. In recent years the company has had a positive earnings trend, a strong balance sheet and a very high equity ratio, in addition to which the share option programmes that are maturing over the next few years will increase the company's shareholders' equity further. Accordingly, the Board of Directors is proposing to the Annual General Meeting the payment of an ordinary dividend for the 2003 financial year of EUR 0.90 and a bonus dividend of EUR 0.45, or a total of EUR 1.35 per share. The proposed dividend is 133.7 per cent of earnings per share.

Property and business transactions

In line with its strategy of freeing up capital, at the end of March Stockmann sold its department store property in Espoo's Tapiola district to a wholly-owned subsidiary of the Dutch real-estate investment company Wereldhave N.V. for just over EUR 36 million. At the same time, Stockmann leased the divested property from the new owner for the Tapiola department store's use under a long-term leaseback agreement.

Stockmann sold Academic Bookstore's agency sales of magazine and newspaper subscriptions to Suomalainen Kirjakauppa Oy. The business was transferred to the new owner as from June 1, 2003. The arrangement fits in with the Stockmann Group's strategy, with its focus on the consumer trade. Academic Bookstore will continue acting as an agent for magazine and newspaper subscriptions ordered by Stockmann's Loyal Customers and will still handle order-based book sales to customers and public-sector organizations.

Capital expenditures

Capital expenditures during the financial year totalled EUR 40.9 million (EUR 25.8 million).

The Department Store Division's capital expenditures came to EUR 18.2 million. The division's biggest capital expenditure was the Riga department store which was opened on October 17. During 2003 the outlay for the site's building and fixturings was a total of about EUR 14.7 million. All in all, Stockmann has invested EUR 19.7 million in the site.

Moscow's first Zara store was opened at the end of February in the Mega Shopping Centre. In April new Zara stores were opened in Finland in Helsinki's Itäkeskus Shopping Centre and in Turku's Hansa Block. New stores that are part of the Stockmann Beauty cosmetics chain were opened during the year in the Forum Shopping Centre in Helsinki and in Tampere's Koskikeskus Shopping Centre, as well as in Seinäjoki and Vaasa.

In April Stockmann and IKEA's Russian subsidiary LLC IKEA MOS entered into a lease agreement on a Stockmann department store with about 10 000 square metres of retail space that will be located in the Mega Shopping Centre on the south side of Moscow. The construction works on the site are proceeding according to plans and the department store will be opened in April 2004. Stockmann's investments in the site will come to about EUR 20 million, of which an outlay of EUR 2.7 million was made during 2003. Established by IKEA, Mega is a 200 000 square metre shopping centre where, among other retailers, the first Zara in Russia has been in operation since February.

Refurbishing and enlargement works are in progress in the Stockmann-owned building in the Suomenoja district of Espoo which is used by the Vehicle Division. An Audi dealership serving metropolitan Helsinki and its environs will be opened in the refurbished premises in spring 2004. The project has a cost estimate of about EUR 3.4 million.

The Hobby Hall Division's capital expenditures totalled EUR 1.7 million. They went for developing the information systems and starting up mail order sales in Lithuania.

Seppälä's capital expenditures came to EUR 1.2 million. They went primarily for the new stores in Latvia.

Investments in real-estate properties during the financial year amounted to EUR 16.8 million, of which EUR 9.6 million was for the Riga department store.

Other capital expenditures came to EUR 3.0 million.

Current projects

In the autumn IKEA decided to build a Mega North Shopping Centre with about 200 000 square metres of retail space on Moscow's north side. In October Stockmann made an agreement with IKEA on opening a department store with about 10 000 square metres of retail space in rented premises in the same shopping centre. The construction works got under way at the end of 2003. Stockmann's capital expenditure for the site will come to about EUR 20 million. According to plans, the department store will be opened at the end of 2004 and it will be Moscow's third full-sized Stockmann department store.

The preliminary agreement that was signed with ZAO Znamenskaya concerning a department store in St Petersburg has lapsed because the owner of the property failed to arrange the financing required for implementing the shopping centre by the deadline specified in the agreement. Stockmann is looking for alternative department store sites in St Petersburg.

Stockmann has made an agreement with VV-Auto Oy, which is owned by Kesko Corporation, on termination of the lease agreement for the VW-Audi car dealership in Helsinki's Herttoniemi district by December 31, 2004 at the latest. The parties are negotiating on a possible sale of business operations by the end of August 2004.

In October Stockmann made an agreement on opening a department store with about 11 000 square metres of retail space in rented premises in the new section of the Jumbo Shopping Centre in Vantaa. According to plans, the department store will be completed in 2006 at the latest.

A large-scale project for enlargement and modification works on the department store in the centre of Helsinki is pending. According to the plan, the department store's commercial premises will be expanded 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 and maintenance areas will be built as well as access passages to the new customer car-park. After the enlargement the Helsinki department store will have about 50 000 square metres of retail sales space. The project has a total cost estimate of about EUR 115 million. The works are estimated to reach completion during 2008. Implementation of the project will call for modifying the town plan, a process that has already been started.

Preparations for IFRS financial statements

The IAS regulation which the European Union issued in 2002 stipulates that all listed companies prepare consolidated financial statements in accordance with International Financial Reporting Standards (IFRS) for the 2005 financial year at the latest.

Stockmann undertook preparations for IFRS financial statements in spring 2002, and the work has progressed according to the timetable set. Stockmann's IFRS working group has surveyed all the IFRS standards that affect the Group's operations and the changes in accounting practice they will entail. Basic training in the implementation of IFRS and the standards that are of most relevance to Stockmann has been arranged for the staff. The decisions required for the selection of the principles of valuing fixed assets, the classification and treatment of financial instruments and the format for presenting financial statement information were taken in autumn 2003. An information system that facilitates the preparation and documentation of IFRS financial statements was placed in use in October 2003.

Stockmann will go over to IFRS financial statements by drawing up, on the basis of the financial statements for 2003, an opening IFRS balance sheet for 2004 and making the IFRS-required adjustments to the financial statements for 2003. During 2004, IFRS financial statements will be prepared quarterly alongside the accounts according to Finnish financial statement practice in order to obtain comparison figures for the 2005 interim reports. The interim reports and financial statements for 2005 will be published in accordance with IFRS.

Effects on the financial statements of introducing IFRS

According to a preliminary analysis, the changeover to IFRS reporting can involve changes in Stockmann's accounting policies particularly in the following subareas: the method of amortizing revaluations, the treatment of imputed deferred taxes, segmental reporting, the treatment of treasury shares, the treatment of entitlement-based employment benefits (the employment disability part of insurance under the Employees' Pensions Act), the classification and valuation of financial assets as well as hedge accounting for derivative contracts.

In addition, the IFRS financial statements must present more extensive notes to the accounts than at present, explain the accounting policies in greater detail and present a new statement of shareholders' equity.

Since IFRS standards are still partially in the process of finalization, it has not yet been possible to take account of all the details of the changes compared with present reporting. According to a preliminary analysis, the effect of the change in accounting policies on the Group's profit and loss account and balance sheet will be minor. The estimate available at the present time indicates that the change in accounting policies will reduce the Group's total assets, thereby causing a slight decrease in the equity ratio. According to the estimate, the annual effects on the consolidated profit and loss account will not be material in amount.

Share capital and shares

At its meetings held on May 20, 2003, August 12, 2003, and February 12, 2004, Stockmann's Board of Directors approved shareholders' requests to convert a total of 293 000 of the company's shares from Series A into Series B shares in accordance with Article 3 of the Articles of Association.

A total of 5 580 Stockmann plc Series B shares with a par value of 2 euros were subscribed for with Stockmann Loyal Customer share options during the subscription period from May 2, 2003, to May 31, 2003. As a consequence of the subscriptions, the share capital was increased by EUR 11 160.

The 1997 share options were exercised to subscribe for a total of 1 239 700 Stockmann plc Series B shares with a par value of 2 euros in the fourth quarter. As a consequence of the subscriptions, the share capital was increased by EUR 2 479 400. During January 2004, the 1997 options were exercised to subscribe for a further 20 300 Series B shares, and consequently the options were exercised to subscribe for the maximum amount or 1 260 000 Series B shares. As a consequence of the subscriptions, the total increase in the share capital was EUR 2 520 000. The subscription period for the 1997 options ended on January 31, 2004.

At the end of the year, the total number of Series A shares was 24 738 893 and there were 27 890 448 Series B shares. Following the increases the share capital is EUR 105 258 682.

The company's market capitalization grew by 34.6 per cent during the year and was EUR 955.6 million at the end of December.

At the end of 2002, the market capitalization was EUR 710.1 million.

Stockmann's shares outperformed both the HEX All-Share Index and the HEX Portfolio Index during the year. At the end of December the stock exchange price of the Series A share was EUR 18.00, compared with EUR 13.84 at the end of 2002, and the Series B share was selling at EUR 18.30, as against EUR 13.80 at the end of 2002. During the year more than 20 per cent of the company's shares changed owners.

At the end of December Stockmann held 163 000 of the company's own Series A shares and 250 000 of its own Series B shares. The par value of these shares is a total of EUR 826 000, and they represent 0.8 per cent of all the shares outstanding as well as 0.7 per cent of the total votes. The shares were purchased for a total price of EUR 6.2 million.

The company's Board of Directors does not have valid authorizations to increase the share capital or to float issues of convertible bonds or bonds with warrants or to buy back its own shares.

Personnel strength

Stockmann's payroll at the end of December 2003 was 9 542 employees, or 625 employees more than at the end of the previous year.

In 2003 Stockmann employed an average of 8 745 people, or 432 more than in the previous year, when the average payroll was 8 313 employees. Converted to full-time staff, the average number of employees rose by 316 and was 7 068. The number of employees grew primarily owing to the effect of the department store opened in Riga in October and the new Zara stores. In the parent company, the average number of employees converted to full-time staff increased by 24 and was 4 280.

At the end of 2003 the number of staff working at units abroad was 1 946 employees, or 20 per cent of the entire personnel. At the end of the previous year, 1 387 employees, or 16 per cent of the personnel, were employed at units abroad.

Outlook for 2004

Retail sales excluding the motor trade are estimated to increase by about 2 per cent in Finland in 2004. The volume of new vehicle sales is estimated to be at the previous year's level. It is estimated that the markets in Russia and the Baltic countries will continue to grow faster than the Finnish market. The growth in the Stockmann Group's sales is expected to be at least at the same level as it was in 2003. Sales in 2004 are estimated to top EUR 1.8 billion.

The operating profit generated by the Department Store Division and Seppälä is estimated to improve on the level reported for 2003 and the Vehicle Division's operating profit is set to remain at least at the same level. Hobby Hall's result is expected to improve significantly and to return to the black. Accordingly, profit on ordinary operations is estimated to improve markedly. Other operating income will depend on the decisions taken during the year. Stockmann's target is for the Group to post higher profit before extraordinary items in 2004 than it did in 2003.

Helsinki, February 12, 2004


Net turnover

EUR mill.EUR mill.%EUR mill.
Department Store Division,602.2579.43.922.8
Finland Department Store Division, 111.0 99.9 11.1 11.1 international operations Department Store Division, 713.2 679.3 5.0 33.9 total
Vehicle Division394.5328.320.266.2
Hobby Hall Division,158.5161.5-1.9-3.0
Finland Hobby Hall Division, 38.8 36.6 5.9 2.2 international operations
Hobby Hall Division, total197.3198.1-0.4-0.8
Seppälä Division, Finland98.8101.0-2.2-2.2
Seppälä Division,
international operations
Seppälä Division, total107.3109.2-1.7-1.9
Real Estate + others21.024.2-13.1-3.2
Operations in Finland,1 254.61
total International operations, 158.2 144.6 9.4 13.6 total Group 1 412.7 1 315.3 7.4 97.4

Profit and loss account

EUR mill.EUR mill.
Net turnover1 412.71 315.3
Other operating income15.48.8
Raw materials and services955.3876.4
Staff expenses194.9184.9
Depreciation and reduction in value28.828.9
Other operating expenses183.4172.0
Operating profit65.761.9
Financial income and expenses8.36.7
Profit before extraordinary items74.068.6
Extraordinary items0.00.0
Profit before taxes74.068.6
Income taxes, total22.318.9
Minority interest0.00.0
Profit for the financial year51.749.7
Gross investments40.925.8
Per cent of net turnover2.92.0
Profit and loss account, Group quarterly, EUR mill.

Q1/03 Q2/03 Q3/03 Q4/03

Net turnover318.7348.3327.7418.1
Other operating income12.
Raw materials and services225.5237.9221.1270.7
Staff expenses46.048.944.255.9
Other operating expenses42.444.045.251.8
Operating profit10.513.110.032.1
Financial income and expenses,
Profit before extraordinary items12.515.311.634.6
Extraordinary items0.
Profit before taxes12.515.311.634.6
Direct taxes (corresponding to3.64.43.410.9
profit before taxes)
Minority interest0.
Profit for the period8.910.88.323.7
Earnings trend of the divisions Operating profit

1-12/031-12/02ChangeROCE %ROCE %
EUR mill.EUR mill.EUR mill.20032002
Department Store39.739.
Vehicle Division5.
Hobby Hall Division-3.40.5-3.9-3.40.5
Seppälä Division10.110.4-0.358.552.4
Other operating15.48.86.6
income Eliminations + -16.1 -19.3 3.2 others Group 65.7 61.9 3.9 13.2 12.6

The operating profit figures of the commercial units are presented according to management accounting. A good financial position Security pledged, contingent liabilities and other commitments

GroupParent company
Security pledged
Liabilities for which
mortgages on real-estate have been lodged as security
  Pension loans
  Mortgages given1.81.8
Mortgages pledged as1.81.8
security, total Other security pledged for loans of the company
  Mortgages given1.
  Securities pledged0.
Security pledged on behalf
of Group undertakings Guarantees
  Rent guarantees16.4
  Other guarantees17.41.4
Leasing commitments
Payable during the 20042.
financial year
  Payable at a later date0.90.811.98.6
Other own commitments
Repurchase commitments55.363.555.363.5
for transferred leasing and hire purchase agreements Total 55.3 63.5 55.3 63.5 Commitments, total
  Other commitments59.164.972.073.8
Derivative instruments of the Group

Dec.31, 2003Dec.31, 2002
EUR mill.EUR mill.
Nominal value
Foreign exchange derivatives11.711.4
  Interest rate derivatives35.045.0
Fair value
Foreign exchange derivatives-0.10.0
  Interest rate derivatives-0.9-0.8
Average number of employees, converted to full-time staff

1-12/03 1-12/02 Change

Department Store Division4 7824 459323
Vehicle Division77674135
Hobby Hall Division704755-51
Seppälä Division7097054
Management and administration97925
Group7 0686 752316
BALANCE SHEETDec.31,2003Dec.31,2002
ASSETSEUR mill.EUR mill.
Intangible assets
Intangible rights10.39.8
Goodwill arising on consolidation0.0
Other capitalized long-term expenses24.624.8
Advance payments and projects in progress5.41.6
Intangible assets, total40.436.3
Tangible assets
Land and water17.820.2
Buildings and constructions133.0146.9
Machinery and equipment59.863.1
Other tangible assets0.10.1
Advance payments and construction in progress9.56.1
Tangible assets, total220.2236.4
Own shares6.26.2
Other shares and participations22.422.5
Investments, total28.728.7
Raw materials and consumables191.3188.9
Stocks, total191.3188.9
Non-current debtors
Trade debtors0.20.5
Loan receivables0.10.2
Other debtors0.5
Deferred tax assets0.8
Non-current debtors, total1.70.7
Current debtors
Trade debtors177.7169.1
Other debtors6.511.7
Prepayments and accrued income13.110.3
Current debtors, total197.3191.2
Debtors, total199.0191.8
Securities held in current assets101.856.6
Cash in hand and at banks19.513.9
BALANCE SHEETDec.31,2003Dec.31,2002
Share capital105.3102.8
Premium fund147.1133.1
Fund for own shares6.26.2
Reserve fund0.20.1
Other funds43.743.7
Retained earnings192.9189.2
Net profit for the financial year51.749.7
Minority interest0.00.0
Deferred tax liability26.023.3
Non-current creditors
Loans from credit institutions48.635.0
Pension loans0.8
Non-current creditors, total48.635.8
Current creditors
Pension loans0.3
Trade creditors92.281.7
Other creditors40.541.3
Accruals and prepaid income46.445.5
Current creditors, total179.0168.7

Helsinki, February 12, 2004

Stockmann plc

Hannu Penttilä CEO

Distribution Helsinki Exchanges Principal media

A press and analysts conference will be held today, February 12, 2004, at 2.30 p.m. at the World Trade Center, Aleksanterinkatu 17, Helsinki.