STOCKMANN MAKES A PROVISION IN SECOND-QUARTER EARNINGS DUE TO THE POSSIBLE CLOSURE OF ONE OF ITS DEPARTMENT STORES IN MOSCOW

STOCKMANN plc Company Announcement 27.5.2008 at 11.45

STOCKMANN MAKES A PROVISION IN SECOND-QUARTER EARNINGS DUE TO THE POSSIBLE CLOSURE OF ONE OF ITS DEPARTMENT STORES IN MOSCOW

Following the ruling of the International Commercial Arbitration Court in Moscow in favour of Stockmann in the dispute concerning Stockmann's Smolenskaya department store in the centre of Moscow, the lessors nevertheless resorted to illegal measures and cut off the provision of electricity to Stockmann. By so doing, the lessors made it impossible to keep the department store open as from Tuesday, May 13, 2008. In order to minimize the damage, Stockmann began transferring sales goods, beginning on May 22, to its other department stores in Moscow.

If the Smolenskaya department store has to be closed permanently as a consequence of the lessors' actions, the costs due to the closure and undepreciated carrying amounts will result in a non-recurring charge to the Department Store Division's earnings of roughly EUR 14 million. Due to the long-drawn-out settlement process, Stockmann has decided to make a provision for this in its second-quarter earnings. Even taking into account the provision, second-quarter operating profit will be substantially better than it was a year earlier. On the other hand, the Department Store Division, in case the department store is permanently closed, probably will not reach its full-year target, according to which operating profit in 2008 would improve on the figure a year earlier. The entire Group's target is still to post better profit in 2008 than in 2007. If the department store is not reopened during this year, consolidated total sales in 2008 will be about EUR 2.4 billion.

As a consequence of the lessors' illegal measures and their actions in violation of the decisions of the International Commercial Arbitration Court in Moscow (ICAC), Stockmann has initiated legal action against the lessors. Compensation will be claimed not only for the costs resulting from closure of the department store but also for the unrealized operating profit due to non-use of the premises during the lease period, which extends up to 2018.

The Smolenskaya department store in question is one of the four Stockmann department stores located in Moscow. Stockmann will open its fifth department store in Moscow in the Metropolis shopping centre in October 2008. The sixth department store in Moscow will be opened in Rostokino shopping centre either in late 2009 or early 2010. In the centre of St Petersburg, Stockmann has under construction a new department store and a shopping centre, which according to target schedule will be completed by the end of 2009. According to plans, Stockmann's department store in Ekaterinburg will be opened in 2009.

STOCKMANN plc

Hannu Penttilä CEO

DISTRIBUTION OMX Nordic Exchange Helsinki Principal media





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