Stockmann Group’s Interim Report 1 January - 30 September 2014

Weak performance continued in the third quarter - strategy process proceeding according to plan

Helsinki, Finland, 2014-10-29 07:00 CET (GLOBE NEWSWIRE) -- STOCKMANN plc, Interim Report 29.10.2014 at 8.00 EET

July-September 2014:
Consolidated revenue was EUR 405.0 million (EUR 454.4 million), down 10.9 per cent, or down 8.1 per cent at comparable exchange rates.
Operating result was EUR -14.8 million (EUR 10.7 million).

January-September 2014:
Consolidated revenue was EUR 1 295.9 million (EUR 1 429.3 million), down 9.1 per cent excluding terminated franchising operations, or down 5.8 per cent at comparable exchange rates.
Operating result was EUR -55.1 million (EUR 6.1 million).
Result for the period was EUR -61.7 million (EUR -13.2 million, excluding Lindex’s tax refund of EUR 25.1 million).
Earnings per share came to EUR -0.86 (EUR -0.19, excluding Lindex’s tax refund of EUR 0.35).

Profit guidance for 2014 (revised 14 October 2014):
Stockmann estimates that the Group’s euro-denominated revenue in 2014 will decline on 2013. The Group’s operating result excluding non-recurring items is expected to be negative in 2014.

Chairman of the Board Kaj-Gustaf Bergh:
Consumer confidence is still low in Finland and retail market’s outlook for the rest of the year is uncertain. In Russia, the weak economy and record-low rouble are weakening Stockmann’s results. We have faced challenges in our operations, and therefore our sales have decreased more than the market. In September in particular, the Group’s revenue decreased in all divisions and this made a significant contribution to the weak earnings of the quarter. As a result, we also changed our profit guidance for the full year.

Seppälä’s brand renewal and turnaround project to improve profitability have not brought the desired results. The operating losses have increased during this year. To break the loss spiral we are planning significant downsizing in Seppälä's operations in the main markets in Finland and Estonia. Seppälä plans to withdraw from the other Baltic countries and Russia during 2015. This is a regrettable step for Seppälä's staff, but it is necessary in order to make the Group's earnings profitable again.

The fourth quarter of the year plays a crucial role for Stockmann's earnings performance. The successful Crazy Days campaign provides a good start for the department and online stores’ Christmas campaigns. We have appointed new directors to lead the Stockmann Retail and Real Estate divisions and to ensure the implementation of the new strategy. I am confident that under their leadership, our employees will be able to achieve their best and we will be able to develop our most important competitive factor: good customer service.

Improving Stockmann’s competitiveness is a part of the on-going strategy work. The direction of the new Stockmann is beginning to take shape. In Stockmann Retail we will focus on the department and online stores’ omnichannel business model. Earlier this autumn we made a decision to find a new owner for Hobby Hall's operations. Stockmann's new CEO, Per Thelin, has now been appointed, so we are well under way in the strategy process.

Strategy process
Stockmann is carrying out a process of reviewing and revising the Group’s strategy. The process covers all of the Group’s operations in all markets, and the target is to improve Stockmann’s long-term competitiveness and profitability. A new operating structure under three divisions – Stockmann Retail, Real Estate and Fashion Chains – will be introduced as of 1 January 2015.

In Stockmann Retail the focus will increasingly be on the Stockmann department stores and online store. A new owner is being sought for the Hobby Hall distance retail business. The Real Estate division’s goal is to maximize the value of the Group’s real estate holdings. The Fashion Chains include the Lindex and Seppälä businesses. Stockmann believes that Lindex has significant development potential to become a truly international fashion brand. To support this strategy, an operational Board of Directors for AB Lindex, including new external members, was elected in October.

Efforts to improve Seppälä’s profitability have not been successful. In 2013 Seppälä’s operating result was EUR -14.4 million, and operating losses excluding non-recurring items for 2014 are expected to be over EUR 25 million. As a consequence, plans are being made to downsize the operations significantly in Finland and in Estonia, and to close down the business in Latvia and Lithuania during 2015. The stores in Russia will be closed, according to an earlier decision, during the rest of 2014 and during 2015. Seppälä currently has 130 stores in Finland, 36 in the Baltic countries and 16 in Russia.

Due to the planned downsizing, Seppälä will start codetermination negotiations which will affect all employees in Finland, approximately 800 people in total. The downsizing could lead to a personnel reduction of up to 380 people. The planned actions may cause non-recurring expenses which will be recorded during the last quarter of 2014, once decisions on the possible closures have been made.

Outlook for 2014
The Russian rouble has weakened considerably and economic growth in Russia is expected to remain at a low level in 2014. The crisis in Ukraine, sanctions against Russia and their counter-measures will continue to affect the Russian economy during the year. As a consequence, the outlook for the Russian retail market is very uncertain.

In Finland, uncertainty will continue in the retail market. Demand for non-food products is expected to remain weak in the last quarter of the year, and the outlook remains unstable. Purchasing power is expected to remain low, which will have a negative effect on consumer purchasing behaviour.

The affordable fashion market in Sweden is expected to improve slightly in 2014. The retail market in the Baltic countries is expected to remain relatively stable. Low consumer confidence may, however, affect consumers’ willingness to make purchases in all market areas.

Stockmann’s strategy process will continue until the end of the year, with the target of improving the Group’s long-term competitiveness and profitability. The cost savings programme will continue. Plans to downsize Seppälä’s operations are estimated to be finalized by the end of the year.

The Group’s capital expenditure for the year is estimated to be lower than depreciation, and to amount to approximately EUR 60 million.

Due to the weaker-than-estimated performance, particularly in Seppälä’s business, and unstable outlook for the rest of 2014, Stockmann’s profit guidance for the year was changed on 14 October.

Stockmann estimates that the Group’s euro-denominated revenue in 2014 will decline on 2013. The Group’s operating result excluding non-recurring items is expected to be negative in 2014.

Key figures

Revenue, EUR mill. 405.0 454.4 1 295.9 1 429.3 2 037.1
Revenue growth, % -10.9 -6.3 -9.3 -2.9 -3.7
Gross margin, % 49.6 49.5 47.8 48.2 48.6
Operating result, EUR mill. -14.8 10.7 -55.1 6.1 54.4
Net financial costs, EUR mill. 4.7 4.1 17.4 18.6 27.6
Result before tax, EUR mill. -19.5 6.5 -72.6 -12.5 26.8
Result for the period, EUR mill. -13.6 28.9* -61.7 11.9* 48.4
Earnings per share, undiluted, EUR -0.19 0.40* -0.86 0.16* 0.67
Equity per share, EUR     11.14 11.88 12.42
Cash flow from operating activities, EUR mill. -51.9 -47.9 -87.3 -57.8 125.4
Capital expenditure, EUR mill. 15.4 15.3 42.7 43.7 56.8
Net gearing, %     114.3 111.5 87.3
Equity ratio, %     39.0 39.9 43.8
Number of shares, undiluted, weighted average, 1 000 pc     72 049 72 049 72 049
Return on capital employed,
rolling 12 months, %
    -0.3 3.6 3.4
Personnel, average 14 344 14 685 14 504 14 830 14 963

* Includes a tax refund of EUR 25.1 million (EUR 0.35 per share) to Lindex in September 2013.

This company announcement is a summary of the Stockmann's Interim Report for 1 January - 30 September 2014 and includes the most relevant information of the report. The complete report is attached to this release as a pdf file and is also available on the company's website at

Press and analyst briefing and conference call
A press and analyst briefing in Finnish will be held today, on 29 September 2014 at 9.15 a.m. at the Fazer À la Carte restaurant on the 8th floor of Stockmann's Helsinki city centre department store, Aleksanterinkatu 52.

A conference call in English will be held today, on 29 September 2014 at 11.15 a.m. EET. To participate the conference call, please dial +358 9 8864 8511 and, when requested, key in the meeting room number *657899* including the asterisks. The presentation material will be available for downloading on the company's website from 9.15 a.m. EET onwards.

Further information:

Pekka Vähähyyppä, CFO, tel. +358 9 121 3351
Nora Malin, Director, Corporate Communications, tel. +358 9 121 3558


Nora Malin
Director, Corporate Communications

Principal media