STOCKMANN'S FINANCIAL STATEMENT BULLETIN 2007

A MAJOR ACQUISITION SUPPORTS STOCKMANN'S GROWTH STRATEGY

The Stockmann Group's sales from continuing operations were up 13 per cent in 2007 to EUR 1 668.3 million (EUR 1 477.8 million in 2006). Fourth- quarter operating profit from continuing operations improved on last year and was EUR 70.8 million (EUR 50.5 million). Profit before taxes from continuing operations for the entire financial year was EUR 119.4 million (EUR 99.4 million). In December, Stockmann acquired a 98% holding in Lindex, one of Northern Europe's largest fashion chains. Stockmann's earnings per share were EUR 1.59. The Board of Directors will propose the payment of a dividend of EUR 1.35 per share.

Key figures Continuing operations 1-12/2007 1-12/2006

SalesEUR mill.1 668.31 477.8
RevenueEUR mill.1 398.21 239.6
Operating profitEUR mill.125.299.9
Profit before taxesEUR mill.119.499.4
Earnings per shareEUR1.591.39
Group total
Equity per shareEUR10.6610.34
Cash flow from operatingEUR mill.119,9117.4
activities
Gearingper cent146.9-6.3
Equity ratioper cent32.674.5
Weighted average number ofthousands55 60654 310
shares Return on capital employed, per cent 12.1 22.9 rolling 12 months

Financial reporting

Stockmann adopted International Financial Reporting Standards (IFRS) on January 1, 2005. The financial statements have been prepared in compliance with IAS 34. The accounting policies and calculation methods applied are the same as those in the 2006 financial statements. In the financial reporting for 2006, Stockmann Auto and the Zara business in Russia are treated as discontinued operations in accordance with IFRS 5. The acquisition of Lindex in 2007 has been treated as a business combination in accordance with IFRS 3. The figures are unaudited.

Lindex becomes a Stockmann Group Company

In December, the branch office in Finland of Stockmann Sverige AB, a Stockmann subsidiary, purchased 97.8 per cent of the shares in the Swedish fashion chain AB Lindex (publ) through a public tender offer. Lindex is one of the leading fashion chains in the Nordic countries. It has good profitability and a strong market position, particularly in Sweden, Norway and Finland. Furthermore, the company already has operations in all the Baltic countries and, since 2007, also in the Czech Republic, with purchasing offices in six countries. At the close of the financial year, Lindex had 346 stores and a payroll of 4 644 employees.

Lindex is in a similar strategic position to Stockmann, because both companies are seeking to achieve a large part of their growth outside their domestic markets. Lindex rounds out the Stockmann Group's operations and thereby improves the potential of all Stockmann's divisions to achieve profitable growth rapidly, above all in the countries of Eastern Europe and in Russia. Stockmann has set in motion a project to integrate Lindex into the Stockmann Group. The project involves a thorough revision of all functions to ensure that the best ways of operating and advantages of scale can be utilized stage by stage across the entire Group.

The cost of acquiring Lindex's entire shares outstanding is EUR 850.9 million. Lindex's balance sheet items have been measured at fair value at the time of the acquisition. According to preliminary calculations, the balance sheet value of trademarks, customer and supplier agreements as well as inventories was a total of EUR 89.1 million greater than the carrying amount at the time of the purchase, EUR 91.0 million. EUR 721.7 million of the acquisition cost has been allocated to goodwill. The acquisition cost is presented in the tabular section of the financial statement bulletin in accordance with IFRS 3.

Lindex was included in Stockmann's consolidated financial statements as from December 5, 2007. During the financial year, Lindex increased the Stockmann Group's sales by EUR 68.1 million, revenue by EUR 54.7 million and operating profit by EUR 15.0 million.

According to the pro forma calculation drawn up to illustrate the situation, Lindex's sales from continuing operations during the calendar year 2007 were EUR 704.9 million, revenue 566.2 million and operating profit EUR 70.9 million. If Lindex had been consolidated within the Stockmann Group from the beginning of the calendar year, the Group's sales for the 2007 financial year, according to the pro forma calculation, would have been EUR 2 305.1 million, revenue EUR 1 909.7 million and net profit EUR 93,7 million.

Lindex's shares were delisted from the OMX Nordic Exchange Stockholm on January 18, 2008. At the balance sheet date, 2.2 per cent of the shares in Lindex were not owned by Stockmann. The acquisition cost of these shares will be EUR 18.4 million, for which a corresponding non-current non- interest bearing liability has been recorded in the balance sheet. In January 2008, Stockmann acquired an additional 0.6 per cent of the shares in Lindex. In order to obtain the remaining 1.6 per cent of the shares, redemption proceedings have been initiated and on the basis of this Lindex has been consolidated within the Stockmann Group as a wholly owned subsidiary in accordance with IAS 32.

Sales and result

Consolidated operating profit from continuing operations in the fourth quarter improved on the previous year and was EUR 70.8 million (EUR 50.5 million). The result includes Lindex's operating profit after the acquisition date, EUR 15.0 million.

Operating profit from continuing operations for the financial year grew by EUR 25.3 million to EUR 125.2 million (EUR 99.9 million). Operating profit from continuing operations includes non-recurring capital gains of EUR 9.7 million, whereas these amounted to EUR 5.1 million a year ago. Earnings improved in Finland and the Baltic countries and decreased in Russia. Consolidated earnings were burdened by the costs of starting up a new department store in Moscow as well as by the energetic establishment of new Bestseller stores and Seppälä stores in Russia and the certificate problems encountered in goods transports in the first part of the year.

The Stockmann Group's sales from continuing operations in 2007 grew to EUR 1 668.3 million, up 13 per cent. The Group's sales abroad amounted to EUR 496.8 million, an increase of 40 per cent. Sales from continuing operations in Finland grew by 4 per cent to EUR 1 171.5 million. International operations accounted for an increased share of consolidated sales, rising from 24 per cent to 30 per cent. The Group's revenue was EUR 1 398.2 million, as against EUR 1 300.7 million in the comparative period. Other operating income amounted to EUR 9.7 million. In the comparative period, other operating income totalled EUR 34.4 million, consisting mainly of capital gains on asset sales.

The Group's operating gross margin increased by EUR 79.9 million to EUR 607.0 million during the financial year. The relative gross margin was 43.4 per cent (40.5 per cent). The relative gross margin on operations of the Department Store Division, Hobby Hall and Seppälä improved. The Group's relative gross margin was furthermore lifted by the acquisition of Lindex and by the discontinuance of low-margin vehicle sales as from the beginning of March 2006. Operating costs increased by EUR 54.8 million and depreciation by EUR 4.8 million. Primarily owing to the impact of the EUR 34.4 million of other operating income during the comparative period, consolidated operating profit was down by EUR 4.4 million to EUR 125.2 million. Net financial expenses grew by EUR 5.2 million and were EUR 5.7 million (EUR 0.6 million). The increase in net financial expenses was due largely to the debt financing of the acquisition of Lindex shares.

Profit before taxes was EUR 119.4 million for the financial year, down EUR 9.5 million on the figure a year earlier. Direct taxes were EUR 31.1 million, increasing by EUR 6.8 million on the figure a year earlier. In the comparative period, earnings included EUR 29.3 million of tax-free capital gains. The Group's fourth-quarter net profit was EUR 48.6 million, compared with EUR 37.8 million a year earlier. Earnings per share in the financial year were EUR 1.59 (EUR 1.93) and diluted for options, earnings were EUR 1.58 (EUR 1.90). Equity per share was EUR 10.66 (EUR 10.34).

Stockmann's Board of Directors set new long-term financial targets in summer 2006. The targets are: to reach by 2011 a 10 per cent operating profit on revenue, a 22 per cent return on capital employed and sales growth that outpaces the market. The target set for the equity ratio was 50 per cent. During the financial year, the Group's operating profit margin from continuing operations rose and was 9 per cent of revenue. Owing to the acquisition of Lindex with debt financing, the equity ratio declined and was 32.6 per cent. In line with this, the return on capital employed diminished and was 12.1 per cent. During 2008, when the Lindex acquisition has been completed, the Board of Directors will reassess the long-term financial targets.

Sales and earnings trend by business segment

The Department Store Division's sales grew by 9 per cent to EUR 1 218.1 million in 2007. Sales in Finland were up 5 per cent. International Operations' sales were increased by the good like-for-like retail performance of the department stores in Russia and the Baltic countries, a fourth department store that was opened in Moscow in mid-February as well as the new Bestseller stores. In Russia, the problems encountered in imports in the early months of the year led to a temporary shortfall of merchandise, which slowed sales growth in the early months of the year. The department stores in Estonia and Latvia reported an excellent sales trend. Sales by International Operations grew by 21 per cent and its share of the division's sales rose to 28 per cent (26 per cent). The relative gross margin improved during the financial year. The Department Store Division's operating profit improved substantially and was EUR 91.8 million (EUR 79.5 million). Net profit includes EUR 9.7 million of non- recurring capital gains, compared with EUR 4.7 million of such gains recorded in net profit a year earlier. Earnings generated by the businesses in Finland and the Baltic countries improved clearly. Earnings from International Operations were burdened by the start-up costs of the department store that was opened in Moscow in February, the start-up costs of the new Bestseller and Nike stores and the larger-than-normal discounts in the second quarter due to delays in customs clearance at the start of the year. The division's operating profit improved in the fourth quarter and was EUR 46.9 million (EUR 44.3 million).

Lindex's figures are included in the Group's figures as from December 6, 2007. Three-week sales were EUR 68.1 million, and operating profit for the same period amounted to EUR 15.0 million. According to the pro forma calculation, Lindex's sales from continuing operations during the 2007 calendar year were EUR 704.9 million, and operating profit was EUR 70.9 million.

Hobby Hall reported sales growth of 3 per cent to EUR 206.5 million (EUR 199.8 million). Sales grew in both Finland and the Baltic countries. Operations in Russia were started up in December. Hobby Hall's relative gross margin increased. Online sales continued to grow strongly, accounting for 66 per cent of Hobby Hall's distance retailing in Finland (47 per cent). Online sales also grew in Estonia, accounting for 40 per cent of Hobby Hall's distance retailing in Estonia (33 per cent). Hobby Hall placed a new ERP system in operation in April. The commissioning process burdened earnings in the report period by causing non-recurring costs and problems in customer service. After the start-up phase, the new ERP system will enhance Hobby Hall's operations and reporting as well as improve customer service. Hobby Hall's operating profit in the financial period was EUR 5.7 million (EUR 7.1 million). Fourth-quarter operating profit decreased to EUR 2.7 million (EUR 3.4 million), mainly due to start- up costs for the operations in Russia.

Seppälä's sales grew by 11 per cent to EUR 174.7 million. Sales grew strongly in Russia and the Baltic countries, where they were boosted by the new stores that were opened towards the end of 2006 and in 2007 as well as by the good like-for-like sales trend. Sales abroad grew by 49 per cent and their share of Seppälä's total sales rose to 30 per cent (22 per cent). The relative gross margin improved, but fixed costs and depreciation also increased because of the heavy investments in opening new stores, especially in Russia. Seppälä's operating profit in the financial year was EUR 20.7 million (EUR 21.1 million). Fourth-quarter operating profit amounted to EUR 8.6 million (EUR 7.3 million).

Financing and capital employed

As a consequence of the acquisition of Lindex shares, Stockmann's financial position and capital structure changed significantly. Interest- bearing liabilities at the end of the year were EUR 905.6 million (EUR 23.4 million), of which EUR 855.4 million consisted of long-term borrowings (EUR 23.4 million). Liquid assets totalled EUR 33.2 million at the end of the year, compared with EUR 59.2 million a year earlier. Capital expenditures amounted to EUR 977.4 million. Net working capital at the end of the year was EUR 193.9 million, compared with EUR 194.5 million a year earlier. Dividend payouts totalled EUR 72.1 million. Share subscriptions made by exercising the 2000 share options added EUR 3.1 million to shareholders' equity. The equity ratio was 32.6 per cent (74.5 per cent) at the end of the year.

The return on capital employed was 12.1 per cent (22.9 per cent). The Group's capital employed increased by EUR 909.7 million and was EUR 1 504.7 million (EUR 595.0 million) at the end of the year.

Dividends

For the financial year 2006, in accordance with the resolution of the Annual General Meeting, a dividend of EUR 1.30 per share was paid, or a total of EUR 72.1 million. The Board of Directors will propose to the Annual General Meeting that a dividend of EUR 1,35 per share be paid for the 2007 financial year. The proposed dividend is 84.9 per cent of earnings per share.

Capital expenditures and current projects

Capital expenditures during 2007 totalled EUR 977.4 million (EUR 125.5 million).

The construction works for the major enlargement and transformation project for the department store in the centre of Helsinki are continuing. The project involves expanding the department store's commercial premises 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, servicing and customer parking areas will be built. After the enlargement, the Helsinki department store will have a total of about 50 000 square metres of retail space. The revised cost estimate for the enlargement is about EUR 190 million. The works are estimated to be completed phase by phase by autumn 2010. The spaces that were temporarily not available for retail sales whilst the construction works were under way have again been placed in use, and the department store's retail floor space is in the beginning of 2008 the same as it was before the project started. Henceforth, new retail space will be placed in use when it reaches completion. During 2007, the project required an investment of EUR 51.6 million. Stockmann has succeeded in carrying out the extensive project without disrupting the department store's profitability. The department store's sales grew in 2007.

In 2007, a Stockmann Beauty store was opened in Joensuu, Rovaniemi and Lappeenranta. The Stockmann Beauty chain now has sixteen stores.

In February 2007, the Department Store Division opened a fourth department store in Moscow, in the Mega shopping centre on the southeast side of town. The department store has just over 10 000 square metres of retail space. Stockmann's portion of the total costs of the department store, which was built in leased premises, was EUR 16.5 million, of which EUR 5.8 million was an outlay in 2007. Operations have started up according to plan.

Seven new Bestseller stores were opened in Russia during 2007: two in St Petersburg and one store each in Moscow, Kazan, Samara, Rostov-on-Don and Novosibirsk. Stockmann now has a total of 18 Bestseller stores in Russia.

The first two Stockmann Nike stores were opened in St Petersburg in February. During 2007, Stockmann established yet a third store in St Petersburg as well as stores in Nizhny Novgorod, Novosibirsk and Rostov-on- Don.

In 2006, Stockmann purchased a 10 000-odd square metre commercial plot on Nevsky Prospect, St Petersburg's high street. The plot is located next to the Vosstaniya Square metro station, in the immediate vicinity of the Moscow railway station. On this plot, Stockmann will erect Nevsky Centre, a shopping centre with about 100 000 square metres of gross floor space, of which about 50 000 square metres will be store and office space. A full- scale Stockmann department store with about 20 000 square metres of retail space has been planned for the shopping centre, along with other retail stores, office premises and an underground carpark. The investment outlay for the department store and shopping centre has grown in step with a rise in construction costs, project delays and a change in the structure of the contract agreement. The total investment is estimated to be about EUR 170 million. The foundation works for the building are under way. Stockmann's objective is to open the department store and commercial centre by the end of 2009. During 2007, the project required an investment of EUR 24.0 million.

Stockmann has signed a preliminary agreement on opening Moscow's fifth Stockmann department store in leased premises in the Metropolis shopping centre that is being built near the city's centre. The department store will have a total of about 8 000 square metres of retail space, and Stockmann's investment in the project will be about EUR 12 million. Stockmann's objective is to open the department store by the end of 2008.

Stockmann has also made an agreement on opening a full-scale department store in leased premises located in a shopping centre that is currently being built in Ekaterinburg, Russia. The department store will have a total of more than 8 000 square metres of retail space, and Stockmann's investment in the project will be about EUR 12 million. According to plans, the department store will be opened in 2009.

At the beginning of 2008, Stockmann signed a preliminary agreement on opening a sixth Stockmann department store in Moscow in leased premises. The department store, which will be located in the Rostokino shopping centre that is under construction on the north side of Moscow, will have about 10 000 square metres of retail space, and Stockmann's investment in it will be about EUR 16 million. According to preliminary plans, the shopping centre will be completed at the end of 2009.

The Department Store Division's capital expenditures came to EUR 111.5 million.

At the turn of the year, Lindex placed in use a new distribution centre that is located in Gothenburg, Sweden. The facility will boost the efficiency of the company's operations and will be fully operational in the spring of 2008. Lindex has started a refurbishment program of stores

in Norway.The program will be completed in the following two years and
will improve competitiveness.Lindex aims to open business in Russia
during the second half of the year and continues expansion in other markets. The objective is to open approximately 20-25 new stores in 2008.

Hobby Hall's capital expenditures amounted to EUR 3.5 million, which went mainly for the upgrade of the ERP system. Hobby Hall launched distance retailing in Lithuania in February and in Russia at the end of the year. Hobby Hall is also starting up online sales in Sweden during 2008.

Seppälä's capital expenditures came to EUR 9.3 million. In 2007, Seppälä opened a store in Tampere and Kerava, Finland, in Pärnu, Estonia, and in the cities of Vilnius and Kaunas in Lithuania. Seppälä opened 11 stores in Russia: four in St Petersburg as well as one each in Moscow, Samara, Nizhny Novgorod, Yaroslavl, Voronezh, Rostov-on-Don and Novosibirsk. In Finland and Estonia, a total of 15 stores were refurbished, some of them having moved into new premises. During 2007, an upgrade of the cash register system was carried out at the stores in Finland and Estonia, and it was completed in October. Seppälä is continuing to explore the possibility of starting up operations in Ukraine.

Other capital expenditures came to EUR 853.1 million, of which the acquisition of the Lindex shares accounted for EUR 850.9 million.

Capital expenditures in 2008 are estimated to amount to about EUR 195 million. The biggest investment items are the enlargement and transformation project for the department store in the centre of Helsinki and the construction works on the department store and shopping centre in St Petersburg.

On September 27, 2007, Stockmann made an agreement with Nordea on transferring its financing of Loyal Customer accounts to Nordea. The consideration paid for the transfer under the agreement contributed to improving Stockmann's earnings. This transfer of accounts will lighten Stockmann's balance sheet in 2008 by about EUR 65 million. The credit facilities of Stockmann's credit line Loyal Customer Cards will converge with those of the international MasterCard during 2008 in Finland, Estonia and Latvia, where Stockmann has previously not offered a Loyal Customer Card with a credit facility. In respect of Russia, Stockmann, acting in co- operation with Citibank, has agreed on bringing to market a MasterCard Loyal Customer Card with a credit facility in spring 2008.

Shares and shareholders

The company's market capitalization diminished by EUR 368.8 million during the year and stood at EUR 1 659.8 million at the end of the year (EUR 2 028.6 million).

Stockmann's share price underperformed both the OMX Helsinki index and the OMX Helsinki Cap index during the report period. At the end of the year, the stock exchange price of the Series A share was EUR 29.50, compared with EUR 36.40 at the end of 2006, and the Series B share was selling at EUR 29.66, as against EUR 36.48 at the end of 2006.

The 192 865 Stockmann shares subscribed for in December 2006 with the share options for the year 2000 were entered in the Trade Register on February 28, 2007, and they were admitted to public trading on the OMX Nordic Exchange Helsinki together with existing shares on March 1, 2007.

Share options for the year 2000 were exercised in March to subscribe for 238 709 shares. Of these, 18 000 shares were entered in the Trade Register on April 10, 2007, and 220 709 shares on May 14, 2007. They were accepted for public trading on the OMX Nordic Exchange Helsinki together with the old shares on April 11, 2007 and May 15, 2007. As a consequence of the subscriptions, the share capital was increased by EUR 477 418. Following the increases the share capital is EUR 112 187 224.

A total of 2 500 000 new Series B shares were eligible for subscription on the basis of the share options for 2000. During the subscription period, a total of 2 499 800 Stockmann Series B shares were subscribed for with the share options. The subscription period ended on April 1, 2007.

At December 31, 2007, Stockmann had 24 564 243 Series A shares and 31 529 369 Series B shares.

Stockmann held 369 560 of its own Series B shares (treasury shares) at the end of 2007, and they represented 0.7 per cent of all the shares outstanding and 0.1 per cent of all the votes. The shares were bought back at a total price of EUR 5.6 million.

The Annual General Meeting in 2006 authorized the Board of Directors to decide on the transfer of the company's own Series B shares in one or more instalments. The authorization will be valid for five years. The company's Board of Directors does not have valid authorizations to increase the share capital, to float issues of convertible bonds or bonds with warrants, or to buy back its own shares.

Board of Directors' proposals to the Annual General Meeting

The Board of Directors proposes to the Annual General Meeting that the Board be authorized to resolve on the issuance of shares and/or of special rights entitling holders to shares referred to in chapter 10, section 1 of the Companies Act in one or more instalments. The Board will be authorized to decide on the number of the Series A and Series B shares to be issued. Under the authorization, the total number of shares to be issued may not exceed the total maximum of 15 000 000 shares. The equity issue or the issuance of special rights can be carried out either in line with the pre- emptive subscription rights of existing shareholders, or in disapplication of the pre-emptive rights (rights issue). Under the authorization, the Board is entitled to decide on all terms and conditions of the equity issue and the issuance of special rights pursuant to chapter 10, section 1 of the Limited Liability Companies Act. The authorization remains in force for a maximum of three years as from the date of the Annual General Meeting. The purpose of the equity issue and/or issuance of special rights entitling to shares is to strengthen the company's capital structure by repayment of the borrowed capital raised for the acquisition of Lindex.

Up to now, Stockmann has twice carried out a share option programme directed at its Loyal Customers. They have proved beneficial, both from the company's standpoint and for Loyal Customers. Accordingly, the Board of Directors will propose to the Annual General Meeting that the programme be continued by granting a total maximum of 2.5 million share options without consideration to Stockmann's Loyal Customers in disapplication of shareholders' pre-emptive subscription rights. The purpose of granting the share options is to offer Loyal Customers a significant benefit that rewards them for patronage and at the same time improves Stockmann's competitive position. Share options will be granted to Loyal Customers whose purchases during January 1, 2008 - December 31, 2009, together with purchases made on parallel cards for the same account, are at least EUR 6 000 in total amount. For purchases of at least EUR 6 000, a Loyal Customer will receive 20 share options without consideration. In addition, for each full 500 euros by which the purchases exceed EUR 6 000, the Loyal Customer will receive an additional two share options. Each share option entitles its holder to subscribe for one of the company's Series B shares. It will be proposed that the subscription price per share be the volume-weighted average price of the Series B share on the OMX Nordic Exchange Helsinki during the period February 1 - February 29, 2008.The subscription price of a share subscribed for with the share options will be lowered, by the amount of the dividends declared prior to the share subscription, on the record date for each dividend payout. The subscription period for the shares is in May in the years 2011-2012. As a consequence of the subscriptions, the company's share capital can be increased by a maximum of EUR 5.0 million.

Number of employees in 2007

The Group had an average payroll of 11 161 employees in 2007, or 1 092 more than in the comparative period (10 069 employees in 2006 and 10 558 in 2005). The increase in the number of employees was attributable to the opening of a new department store in Russia, new Bestseller, Nike and Seppälä stores abroad and the acquisition of Lindex in December. Converted to full-time staff, Stockmann's average number of employees grew by 942 and was 8 979 employees (8 037 in 2006 and 8 537 in 2005). The Group's total wages and salaries grew by EUR 14.0 million from the comparative period and was EUR 181.9 million (EUR 167.9 million in 2006 and EUR 178.3 million in 2005).

At the end of December 2007, Stockmann had 8 294 employees working abroad. At the end of December of last year Stockmann had 3 477 people working abroad. The proportion of employees working abroad was 50 per cent of the total personnel (32 per cent).

Corporate social responsibility

Corporate social responsibility is part of the company's normal long-term operations. The focuses of Stockmann's corporate social responsibility are our own staff, the environment and far-reaching integrity in overseas sourcing.

Risk factors

With the acquisition of Lindex, the Stockmann Group's areas of operations expanded. Whereas the Group previously had operations in Finland, Russia and the Baltic countries, it now also operates in the well-established markets of Sweden and Norway as well as in the Czech Republic, where operations are in the start-up stage. The risk level of the business environment in the Stockmann Group's areas of operations varies. The level of business risk in the Baltic countries has diminished significantly after these countries became members of the European Union, nor do the risks, apart from the present risks of an overheating of the economy, differ in any material respect from business risks in Finland.

Business risks in Russia are higher than in the Nordic countries and the Baltic area, and the operating environment is less stable owing to factors such as the business culture and the undeveloped state of the infrastructure in the country concerned. The pervasiveness of the grey economy, particularly in the importation of consumer goods, is still large and plays a part in distorting properly functioning competition. Over the past years, the operating environment and legislation pertaining to business activities have nevertheless evolved favourably. The country's economic growth has been robust thanks to the strong impetus from export revenues in the energy sector. Stockmann has over 18 years of experience of operating in Russia's continually changing operating environment. Accordingly, even large changes in the operating environment in Russia are not estimated to result in a material increase in the Group's business risk.

Fashion accounts for about 53 per cent of the Group's sales. An inherent aspect of the fashion trade is the short life cycle of products and their dependence on trends, the seasonality of sales and their susceptibility to abnormal weather conditions. The Group responds to these factors as part of its day-to-day management of operations. Except for significant exceptional situations, these factors are not estimated to have a material effect on the Group's sales or earnings.

The Group's operations are based on flexibly run logistics and efficient goods flows. Delays or disturbances in flows of goods and information can have a temporarily detrimental effect on operations. Every effort is made to control these operational risks by developing appropriate back-up systems and alternative ways of operating as well as by investing in information systems that run in a snag-free manner. Operational risks are also met by taking out insurance cover. Operational risks are not estimated to have a material impact on Stockmann's business activities.

The Group's revenue and earnings are affected by changes in foreign exchange rates between the Group's reporting currency, the euro, and the Swedish krona, the Norwegian krone, the Russian rouble, the United States dollar as well as certain other currencies. Financial risks, including risks arising from interest rate fluctuations, are managed in accordance with the risk policy confirmed by the Board of Directors, and they are not estimated to have a material effect on the Group's business operations.

AB Lindex is involved in ongoing legal proceedings concerning the eligibility for deduction in Swedish taxation of losses of about EUR 70 million made by the Lindex Group's company in Germany. Lindex has won the previous legal proceedings in the matter in 2004/2005 and 2005/2006, but the Swedish tax authorities have appealed the decisions, and hearing of the case is continuing. Lindex has recorded against the losses a tax deduction of about EUR 21 million, including interest, which is recorded in earnings.

Lindex has also demanded a rectification of an assessment on the basis of the estimated earnings from operations in Germany during 2004-2006. The value of this rectification demand is about EUR 32 million, which has not been recorded in earnings.

The Group is engaged in legal proceedings concerning the validity of the leasehold on the Smolenskaya department store, which is located in the centre of Moscow, after April 1, 2008. The litigation concerns exercise of a 10-year continuation lease period under the lease agreement.

The Stockmann Group is not involved in other major pending litigation.

Full-year outlook

Of late, uncertainty has increased greatly in the world economy as well as in the financial and equity markets. In the Stockmann Group's market areas in the Nordic countries, the Baltic area and Russia, this has nevertheless not been reflected in consumer demand. According to estimates, there will be further growth in consumption demand. The growth will be stronger in the Baltic countries and Russia than in the Nordic countries.

Lindex will be part of the Stockmann Group for all of 2008. Because sales by all the divisions are expected to be on a favourable trend, this means a strong increase in the Group's sales. Stockmann's consolidated sales are estimated to come in at approximately EUR 2.4 - 2.5 billion in 2008.

Operating profit from continuing operations is expected to improve and all the divisions are set to generate higher operating profit. The operating result for the first quarter of 2008 will be lower than in the previous year and in the red owing to the timing of a campaign and a non-recurring imputed IFRS expense item recorded on the Lindex transaction. Correspondingly, second-quarter earnings will improve substantially on the figure a year earlier. Although the Group's financial expenses following the Lindex acquisition will increase clearly, the objective is to post higher profit in 2008 than in the previous year.

Balance sheet, Group EUR millions 31.12.07 31.12.06 ASSETS Non-current assets

   Intangible assets844.56.3
   Property, plant and equipment476.8352.2
   Available-for-sale investments6.56.5
   Non-current receivables1.7
   Deferred tax assets5.32.5
Non-current assets, total1 334.8367.5
Current assets
   Inventories244.4155.0
   Receivables, interest-bearing98.898.9
   Receivables, non interest-bearing112.587.0
   Cash and cash equivalents33.259.2
Current assets, total488.9400.1
Assets, total1 823.7767.6
EQUITY AND LIABILITIES
Equity593.8571.6
Minority interest0.00.0
Equity, total593.8571.6
Non-current liabilities, interest-bearing855.4
Reserves5.3
Non-current liabilities, total860.723.4
Deferred taxesliabilities57.326.2
Current liabilities
Current liabilities, interest-bearing50.1
Current liabilities, non interest-bearing261.7146.4
Current liabilities, total311.8146.4
Equity and liabilities, total1 823.7767.6
Equity ratio, per cent32.674.5
Gearing, per cent146.9-6.3
Cash flow from operations per share, EUR2.162.15
Interest-bearing net debt, EUR mill.773.6-134.7
Number of shares at September 30,56 09455 662
thousands Weighted average number of shares, 55 606 54 310 thousands Weighted average number of shares, 55 815 55 178 diluted, thousands Market capitalization, EUR mill. 1 659.8 2 028.6

Equity ratio, per cent = 100 x (Equity + minority interest) / Total assets less advance payments received

Gearing, per cent = 100 x Interest-bearing liabilities less cash and cash equivalents / Equity total

Interest-bearing net debt = Interest-bearing liabilities less cash and cash equivalents less interest-bearing liabilities

Market capitalization, EUR mill. = Number of shares multiplied by the quotation for the respective share series on the balance sheet date

Cash flow statement, Group EUR millions 1-12/2007 1-12/2006 Cash flows from operating activities Net profit for the financial year 88.4 104.7 Adjustments:

    Deprecation36.932.1
    Profit (-) and loss (+) from sales-34.4
    of non-current assets
    Financial expenses7.02.3
    Financial income-1.3-1.8
    Taxes paid31.124.3
    Other adjustments1.21.7
Changes in working capital:
    Change in trade and other receivables-11.01.7
    Change in inventories-12.55.2
    Change in trade payables and other8.811.2
    liabilities
Interest paid-6.5-2.5
Interest received1.31.1
Taxes paid-23.5-28.2
Net cash from operating activities119.9117.4
Cash flows from investing activities
Investments in tangible and intangible-113.2-112.2
assets Acquisition of subsidiary net cash -852.5 -12.7 acquired Disposal of subsidiaries less cash at 105.0 date of disposal
Capital expenditures on other investments-0.5
Cash from tangible assets8.4
Cash from other investments0.9
Dividends received0.10.1
Net cash used in investing activities-965.6-11.0
Cash flows from financing activities
Proceeds from issue of share capital5.817.2
Change in short-term loans, increase (+),35.5-33.3
decrease (-) Long-term loans, increase (+), decrease (- 835.6 10.0 )
Dividends paid-72.1-59.5
Net cash used in financing activities804.8-65.6
Change in cash and cash equivalents-40.940.8
Translation differences in cash and cash0.4
equivalents Cash and cash equivalents at start of the 59.2 18.4 period
Cash and cash equivalents33.259.2
Cheque account on credit-14.6
Cash and cash equivalents at end of the18.659.2
period

Income statement,1-12/2007
Group, EUR millionsContinuing DiscontinuedTotal
operationsoperations
Revenue1 398.21 398.2
Other operating income9.6839.7
Materials and consumables-791.2-791.2
Wages, salaries and employee benefits-224.1-224.1
expenses
Depreciation-36.9-36.9
Other operating expenses-230.6-230.6
Operating profit125.2125.2
Finance income and expenses-5.7-5.7
Profit before tax119.4119.4
Income taxes-31.1-31.1
Profit for the period88.488.4
Earnings per share, EUR1.591.59
Earnings per share, diluted, EUR1.581.58
Operating profit, per cent9.09.0
Equity per share, EUR10.66
Return on equity, per cent, moving 1215.2
months Return on capital employed, per cent, 12.1 moving 12 months Average number of employees, converted 8.979 8.979 to full-time staff Investments 977.4 977.4

Income statement,1-12/2006
Group, EUR millionsContinuing DiscontinuedTotal
operationsoperations
Revenue1 239.661.11 300.7
Other operating income5.129.334.4
Materials and consumables-721.1-52.5-773.6
Wages, salaries and employee-199.3-5.4-204.7
benefits expenses
Depreciation-31.8-0.3-32.1
Other operating expenses-192.6-2.6-195.1
Operating profit99.929.6129.5
Finance income and expenses-0.50.0-0.6
Profit before tax99.429.6128.9
Income taxes-24.2-0.1-24.3
Profit for the period75.229.5104.7
Earnings per share, EUR1.390.541.93
Earnings per share, diluted, EUR1.370.531.90
Operating profit, per cent8.148.410.0
Equity per share, EUR10.34
Return on equity, per cent, moving19.4
12 months Return on capital employed, per 22.9 cent, moving 12 months Average number of employees, 7.923 114 8.037 converted to full-time staff Investments 125.5 125.5

Earnings per share, EUR = (Profit before taxes - minority interest - income taxes) / Average number of shares, adjusted for share issues Return on equity, per cent, moving 12 months = 100 x Profit for the period (12 months) / (Equity + minority interest) (average over 12 months) Return on capital employed, per cent, moving 12 months = 100 x (Profit before taxes + interest and other financial expenses) (12 months) / Capital employed (average over 12 months)

SEGMENT INFORMATION Segments Sales, EUR millions 1-12/2007 1-12/2006 Change per cent

Department Store Division1 218.11 119.09
Lindex68.1
Hobby Hall206.5199.83
Seppälä174.7158.111
Shared0.80.9-12
Continuing operations, total1 668.31 477.813
Discontinued operations74.8
Group1 668.31 552.67
Revenue, EUR millions1-12/20071-12/2006Change
per cent
Department Store Division1 025.0941.39
Lindex54.7
Hobby Hall171.7165.94
Seppälä145.1130.811
Shared1.71.74
Continuing operations, total1 398.21 239.613
Discontinued operations61.1
Group1 398.21 300.77
Operating profit, EUR1-12/20071-12/2006Change
millionsper cent
Department Store Division91.879.516
Lindex15.0
Hobby Hall5.77.1-19
Seppälä20.721.1-2
Shared-7.5-8.0-7
Eliminations-0.70.2
Continuing operations, total125.299.925
Discontinued operations29.6
Group125.2129.5-3
Investments,
gross, EUR millions31.12.0731.12.06Change
per cent
Department Store Division111.5115.3-3
Lindex853.1
Hobby Hall3.53.27
Seppälä9.36.152
Shared0.9-100
Continuing operations, total977.4125.5679
Discontinued operations
Group977.4125.5679
Assets, EUR millions31.12.0731.12/06Change
per cent
Department Store Division652.4557.917
Lindex992.9
Hobby Hall102.7104.0-1
Seppälä44.738.018
Shared30.967.7-54
Continuing operations, total1 823.7767.6138
Discontinued operations
Group1 823.7767.6138
Non-interest-bearing31.12.0731.12.06Change
liabilities, EUR millionsper cent
Department Store Division125.9122.03
Lindex100.8
Hobby Hall14.513.95
Seppälä11.510.95
Shared71.725.8178
Continuing operations, total324.3172.688
Discontinued operations
Group324.3172.688

Market areas1-12/2007
ContinuingDiscontinuedTotal
Sales, EUR millionsoperationsoperations
Finland 1)1 171.51 171.5
Sweden and Norway 2)59.559.5
Baltic states and Czech Republic 3)194.1194.1
Russia 4)243.2243.2
Group1 668.31 668.3
Finland, per cent70.270.2
International operations, per cent29.829.8
ContinuingDiscontinuedTotal
Revenue, EUR millionsoperationsoperations
Finland 1)977.6977.6
Sweden and Norway 2)47.547.5
Baltic states and Czech Republic 3)165.0165.0
Russia 4)208.0208.0
Group1 398.21 398.2
Finland, per cent69.969.9
International operations, per cent30.130.1
ContinuingDiscontinuedTotal
Operating profit, EUR millionsoperationsoperations
Finland 1)96.896.8
Sweden and Norway 2)13.913.9
Baltic states and Czech Republic 3)21.121.1
Russia 4)-6.6-6.6
Group125.2125.2
Finland, per cent77.377.3
International operations, per cent22.722.7
Investments,31.12.2007
gross, EUR millionsContinuingDiscontinuedTotal
operationsoperations
Finland 1)80.280.2
Sweden and Norway 2)847.0847.0
Baltic states and Czech Republic 3)5.15.1
Russia 4)45.045.0
Group977.4977.4
Finland, per cent8.28.2
International operations, per cent91.891.8
ContinuingDiscontinuedTotal
Assets, EUR millionsoperationsoperations
Finland 1)585.2585.2
Sweden and Norway 2)975.7975.7
Baltic states and Czech Republic 3)75.875.8
Russia 4)187.0187.0
Group1 823.71 823.7
Finland, per cent32.132.1
International operations, per cent67.967.9
1) Department Store Division, Lindex,
Hobby Hall and Seppälä 2) Department Store Division, Lindex, Hobby Hall and Seppälä 3) Department Store Division, Hobby Hall and Seppälä

Market areas1-12/2006
ContinuingDiscontinuedTotal
Sales, EUR millionsoperationsoperations
Finland 1)1 123.774.81 198.6
Sweden and Norway 2)
Baltic states and Czech Republic 3)165.3165.3
Russia 4)188.8188.8
Group1 477.874.81 552.6
Finland, per cent76.0100.077.2
International operations, per cent24.022.8
ContinuingDiscontinuedTotal
Revenue, EUR millionsoperationsoperations
Finland 1)937.561.1998.5
Sweden and Norway 2)
Baltic states and Czech Republic 3)140.6140.6
Russia 4)161.6161.6
Group1 239.661.11 300.7
Finland, per cent75.6100.076.8
International operations, per cent24.423.2
ContinuingDiscontinuedTotal
Operating profit, EUR millionsoperationsoperations
Finland 1)75.27.782.9
Sweden and Norway 2)
Baltic states and Czech Republic 3)21.021.0
Russia 4)3.821.925.6
Group99.929.6129.5
Finland, per cent75.226.064.0
International operations, per cent24.874.036.0
Investments,31.12.2006
gross, EUR millionsContinuingDiscontinuedTotal
operationsoperations
Finland 1)64.064.0
Sweden and Norway 2)
Baltic states and Czech Republic 3)1.81.8
Russia 4)59.759.7
Group125.5125.5
Finland, per cent51.051.0
International operations, per cent49.049.0
ContinuingDiscontinuedTotal
Assets, EUR millionsoperationsoperations
Finland 1)594.8594.8
Sweden and Norway 2)
Baltic states and Czech Republic 3)69.769.7
Russia 4)103.1103.1
Group767.6767.6
Finland, per cent77.577.5
International operations, per cent22.522.5
1) Department Store Division, Lindex,
Hobby Hall and Seppälä 2) Department Store Division, Lindex, Hobby Hall and Seppälä 3) Department Store Division, Hobby Hall and Seppälä

Statement of changesShare
in equitypremiumOther
Group, EUR millionsEquity*fundfunds
Equity December 31, 2005109.0166.544.1
Options exercised2.716.7
Share bonus0.2
Transfer to other funds0.0
Dividends
Translation differences
Profit for the period
Equity December 31, 2006111.7183.444.1
Options exercised0.52.6
Share bonus
Transfer to other funds0.0
Cash flow hedges
Cost of share issue
Dividends
Translation differences
Profit for the period
Equity December 31, 2007112.2186.044.1
* including share issue

Statement of changesTrans-
in equityFair valuelationRetained
Group, EUR millionsreserve**reserveearnings
Equity December 31, 20050.0185.7
Options exercised
Share bonus0.2
Transfer to other funds1.3
Dividends-59.5
Translation differences0.00.0
Profit for the period104.7
Equity December 31, 20060.0232.3
Options exercised
Share bonus0.4
Transfer to other funds
Cahs flow hedges0.5
Cost of share issue1.9
Dividends-72.1
Translation differences0.00.0
Profit for the period88.4
Equity December 31, 20070.50.0250.9
** excluding deferred tax liability

Statement of changes

in equityMinority
Group, EUR millionsTotalinterestTotal
Equity December 31, 2005505.30.0505.3
Options exercised19.519.5
Share bonus0.40.4
Transfer to other funds1.31.3
Dividends-59.5-59.5
Translation differences0.00.0
Profit for the period104.70.0104.7
Equity December 31, 2006571.60.0571.6
Options exercised3.13.1
Share bonus0.40.4
Transfer to other funds0.00.0
Cash flow hedges0.50.5
Cost of share issue1.91.9
Dividends-72.1-72.1
Translation differences0.00.0
Profit for the period88.40.088.4
Equity December 31, 2007593.80.0593.8

Contingent liabilities, 31.12.07 31.12.06 Group EUR millions Mortgages on land and 1.7 1.7 buildings

Guarantees1.5
Pledges0.10.1
Total1.83.2
Lease agreements on business
premises, EUR millions Minimum rents payable on the basis of binding lease agreements on business premises
Within one year124.669.6
After one year449.3351.5
Total573.8421.1
Lease payments
Within one year1.41.1
After one year1.30.9
Total2.82.0
Derivative instruments
Nominal value
Interest rate derivatives7.4
Exchange rates
CountryCurrency31.12.0731.12.06
RussiaRUB35.986034.6800
EstoniaEEK15.646615.6466
LatviaLVL0.69640.6972
LithuaniaLTL3.45283.4528
SwedenSEK9.44159.0404

Income statement

quarterly,Q4Q3Q2Q1
Group, EUR millions2007200720072007
Continuing operations
Revenue483.9308.6294.2311.4
Other operating income0.09.7
Materials and consumables-255.8-179.8-164.0-191.6
Wages, salaries and-73.2-47.6-52.6-50.8
employee benefits expenses
Depreciation-10.5-8.9-8.4-9.1
Other operating expenses-73.7-50.0-55.1-51.7
Operating profit70.832.114.18.2
Finance income and expenses-4.3-0.5-0.8-0.2
Profit before tax66.531.613.38.0
Income taxes-17.9-8.1-3.2-1.9
Profit for the period,48.623.510.26.1
continuing operations Discontinued operations Profit for the period, discontinued operations Profit for the period 48.6 23.5 10.2 6.1 Earnings per share, continuing operations, EUR
Basic0.870.430.180.11
Diluted0.870.420.180.11
Earnings per share,
discontinued operations, EUR Basic Diluted Earnings per share, total, EUR
Basic0.870.430.180.11
Diluted0.870.420.180.11
Q4Q3Q2Q1
Sales, EUR millions2007200720072007
Department Store Division400.4275.5261.0281.2
Lindex68.1
Hobby Hall58.945.946.055.6
Seppälä51.245.443.534.6
Shared0.20.20.20.2
Continuing operations,578.8367.0350.7371.7
total Discontinued operations Group 578.8 367.0 350.7 371.7 Revenue, EUR millions
Department Store Division336.9232.2219.6236.3
Lindex54.7
Hobby Hall49.238.238.146.2
Seppälä42.537.836.128.7
Shared0.70.50.40.1
Continuing operations,483.9308.6294.2311.4
total Discontinued operations Group 483.9 308.6 294.2 311.4 Operating profit, EUR millions
Department Store Division46.925.711.57.8
Lindex15.0
Hobby Hall2.72.5-0.91.5
Seppälä8.65.55.80.8
Shared-2.4-1.1-2.1-1.8
Eliminations0.0-0.5-0.10.0
Continuing operations,70.832.114.18.2
total Discontinued operations Group 70.8 32.1 14.1 8.2

Income statement

quarterly,Q4Q3Q2Q1
Group, EUR millions2006200620062006
Continuing operations
Revenue389.6281.1299.5269.4
Other operating income0.40.04.7
Materials and consumables-215.6-166.1-170.8-168.7
Wages, salaries and-57.9-44.2-48.9-48.3
employee benefits expenses
Depreciation-7.9-7.9-8.1-8.0
Other operating expenses-58.1-43.0-47.7-43.7
Operating profit50.519.828.70.8
Finance income and expenses-0.50.5-0.90.2
Profit before tax50.120.427.91.1
Income taxes-12.3-5.0-6.6-0.3
Profit for the period,37.815.421.20.8
continuing operations Discontinued operations Profit for the period, 21.9 7.6 discontinued operations Profit for the period 37.8 15.4 43.1 8.4 Earnings per share, continuing operations, EUR
Basic0.700.290.390.01
Diluted0.690.280.390.01
Earnings per share,
discontinued operations, EUR
Basic-0.010.410.14
Diluted-0.010.400.14
Earnings per share, total,
EUR
Basic0.700.280.15
Diluted0.680.280.790.15
Q4Q3Q2Q1
Sales, EUR millions2006200620062006
Department Store Division363.4249.0270.8235.8
Lindex
Hobby Hall55.545.546.252.6
Seppälä45.340.240.232.4
Shared0.20.20.30.2
Continuing operations,464.4334.9357.6320.9
total
Discontinued operations74.8
Group464.4334.9357.6395.7
Revenue, EUR millions
Lindex305.5209.8227.4198.5
Department Store Division
Hobby Hall46.137.838.443.6
Seppälä37.533.233.326.8
Shared0.50.20.40.5
Continuing operations,389.6281.1299.5269.4
total
Discontinued operations61.1
Group389.6281.1299.5330.5
Operating profit, EUR
millions Department Store Division 44.3 13.1 22.2 -0.1 Lindex
Hobby Hall3.42.10.61.0
Seppälä7.35.47.60.8
Shared-3.8-0.9-1.9-1.4
Eliminations-0.60.10.20.6
Continuing operations,50.619.828.70.8
total
Discontinued operations21.97.7
Group50.619.850.68.5

ASSETS

EUR mill.20072006
Acquisition cost Jan. 1551.7500.4
Aquisitions through154.7
business combinations (investment) (+)
Translation difference +/--0.20.0
Increases Jan. 1-Dec. 31125.9124.3
Decreases Jan. 1-Dec. 31-18.4-72.9
Acquisition cost Dec. 31813.8551.7
Accumulated depreciation193.2190.2
Jan. 1
Depreciation on reductions-17.6-29.1
Depreciation for the36.932.1
financial year Accumulated depreciation 218.5 193.2 Dec. 31
Book value Jan. 1310.2358.5
Book value Dec. 31601.4310.2
Goodwill
EUR mill.20072006
Acquisition cost Jan. 10.5
Aquisitions through721.7
business combinations (investment) (+)
Translation difference +/--1.7-0.5
Acquisition cost Dec. 31720.0
Book value Jan 1.0.5
Book value Dec. 31720.0
Total1 321.3358.5

ACQUIRED OPERATIONS2007
CarryingFair valuesCarrying
Acquired companiesamountsrecordedamounts
beforeinafter
businessbusinessbusiness
EUR mill.combinationcombination combination
Intangible assets
   Trademarks18.478.296.6
    Leasehold interest0.00.0
    Customer agreements2.42.4
    Supplier agreements4.34.3
    EDP software10.310.3
    Goodwill7.6-7.60.0
Property, plant and equipment41.141.1
Other fiancial assets2.62.6
Tax assets3.03.0
Inventories72.64.276.8
Trade and other receivables14.614.6
Nettovarat
Cash and cash equivalents9.09.0
Assets, total179.281.5260.8
Deferred taxes1.725.026.7
Pension liabilities (defined3.43.4
benefit)
Other provisions2.52.5
Current account with overdraft29.029.0
facility
Other liabilities69.969.9
Liabilities, total106.525.0131.5
Net assets72.756.6129.3
Acquisition cost850.9
Goodwill721.7721.7
Purchase price paid in cash832.5
Unpaid part of purchase price18.4
Cash assets of subsidiary acquired20.0
+Current account with overdraft facility Cash flow effect 852.5

STOCKMANN plc

Hannu Penttilä CEO

DISTRIBUTION OMX Nordic Exchange Helsinki Principal media

A press and analyst conference will be held today, February 7, 2008, at 14.00 at the World Trade Center, Aleksanterinkatu 17, Helsinki.





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