HALF-YEAR FINANCIAL REPORT OF MARIMEKKO CORPORATION, 1 January – 30 June 2023

Marimekko’s net sales grew and operating profit improved in the second quarter

Marimekko Corporation, Half-year Financial Report, 17 August 2023 at 8.00 a.m.

HALF-YEAR FINANCIAL REPORT OF MARIMEKKO CORPORATION, 1 January – 30 June 2023: Marimekko’s net sales grew and operating profit improved in the second quarter

This release is a summary of Marimekko’s half-year financial report for the January-June period of 2023. The complete report is attached to this release as a pdf file and it is also available on the company’s website at company.marimekko.com under Releases & publications.

The second quarter in brief

• Marimekko’s net sales increased by 6 percent from the record-high comparison period and totaled EUR 40.3 million (38.0). The increase in net sales was driven particularly by growth in international wholesale sales and licensing income.
• Finnish retail sales grew, but total net sales in Finland decreased by 3 percent when weakened general consumer demand lowered domestic wholesale sales. International sales grew by 21 percent.
• Operating profit was EUR 6.6 million (5.7) and comparable operating profit totaled EUR 6.8 million (5.7) equaling to 16.8 percent of net sales (15.0).
• Operating profit was boosted especially by increased net sales and improved relative sales margin. On the other hand, an increase in fixed costs had a weakening impact on result.

January-June in brief

• Company’s net sales grew by 2 percent and amounted to EUR 75.6 million (74.0). Net sales were boosted by increased international wholesale sales and a favorable trend in retail sales in Finland.
• Net sales in Finland decreased by 3 percent when weakened general consumer demand lowered domestic wholesale sales. International sales grew by 9 percent.
• Operating profit was EUR 10.4 million (12.3) and comparable operating profit totaled EUR 10.6 million (12.3) equaling to 14.0 percent of net sales (16.6).
• Operating profit was decreased by higher fixed costs and lower relative sales margin. On the other hand, increased net sales had a strengthening impact on result.

Financial guidance for 2023

The Marimekko Group's net sales for 2023 are expected to grow from the previous year (2022: EUR 166.5 million). Comparable operating profit margin is estimated to be approximately some 16–19 percent (2022: 18.2 percent). Development of consumer confidence and purchasing power, global supply chain disruptions and the general inflation development, in particular, cause volatility to the outlook for 2023.

Uncertainties related to the development of net sales and result are described in more detail in the Major risks and factors of uncertainty section of the Half-year Financial Report.

Key figures

(EUR million)	4–6/ 2023	4–6/ 2022	Change, %	1–6/ 2023	1–6/ 2022	Change, %	1–12/ 2022
Net sales	40.3	38.0	6	75.6	74.0	2	166.5
International sales	18.1	15.0	21	35.4	32.5	9	68.3
% of net sales	45	39		47	44		41
EBITDA	8.8	8.1	9	15.0	17.3	-13	39.9
Comparable EBITDA	9.0	8.1	11	15.2	17.3	-12	40.0
Operating profit	6.6	5.7	16	10.4	12.3	-16	30.2
Operating profit margin, %	16.4	15.0		13.8	16.6		18.2
Comparable operating profit	6.8	5.7	19	10.6	12.3	-14	30.4
Comparable operating profit margin, %	16.8	15.0		14.0	16.6		18.2
Result for the period	4.8	4.8		7.2	9.8	-27	22.7
Earnings per share, EUR	0.12	0.12		0.18	0.24	-27	0.56
Comparable earnings per share, EUR	0.12	0.12	1	0.18	0.24	-25	0.56
Cash flow from operating activities	5.0	4.4	12	2.9	1.4	115	20.1
Return on capital employed (ROCE), %				34.4	42.3		31.5
Equity ratio, %				47.4	44.6		49.2
Net debt / EBITDA (rolling 12 months)				0.43	0.29		0.03
Gross investments	0.5	0.1		0.7	0.3	166	1.0
Personnel at the end of the period				484	460	5	459
outside Finland				69	73	-5	76
Brand sales 1	104.0	101.8	2	188.5	190.1	-1	382.3
outside Finland	78.6	72.2	9	138.6	134.0	3	251.9
proportion of international sales, %	74	71		73	70		66
Number of stores				157	150	5	154

The change percentages in the table were calculated on exact figures before the amounts were rounded to millions of euros. The figure for comparable earnings per share takes account of similar items as comparable operating profit; tax effect included. Reconciliation of alternative key figures to IFRS and management’s discretion regarding items affecting comparability are presented in the table section of the Half-year Financial Report.

¹ Brand sales are given as an alternative non-IFRS key figure, representing the reach of the Marimekko brand through different distribution channels. An unofficial estimate of sales of Marimekko products at consumer prices, brand sales are calculated by adding together the company’s own retail net sales and the estimated retail value of Marimekko products sold by other retailers. The estimated retail value is based on the company’s realized wholesale sales and licensing income. Brand sales do not include VAT, and the key figure is not audited. Some licensees provide exact retail figures, in which case these figures are used in reporting brand sales. For other licensing agreements, Marimekko’s own retail coefficients for different markets are used.

Tiina Alahuhta-Kasko, President and CEO, in conjunction with the report:

“Our net sales grew and our operating profit improved in the second quarter. Our international sales developed strongly, and we are continuing the determined scaling up of our profitable growth.

Marimekko’s net sales for the second quarter increased by six percent from the record-breaking comparison period and amounted to EUR 40.3 million (38.0). The increase in net sales was driven particularly by growth in international wholesale sales and licensing income. Our international net sales grew by 21 percent in total. Net sales in Finland decreased by three percent despite growth in retail sales, as the weakened general consumer demand affected wholesale sales in Finland. Our wholesale sales developed favorably in the Asia-Pacific region and North America in particular, growing globally by four percent in total. Our omnichannel retail sales, on the other hand, grew by two percent globally.

In April-June, our comparable operating profit improved clearly to EUR 6.8 million (5.7) and was 16.8 percent of net sales (15.0). Operating profit was boosted especially by increased net sales and improved relative sales margin. In line with our strategy, we continued our investments in scaling up our business and growth in the international markets in particular, which increased our fixed costs as previously estimated.

In January-June, our net sales grew by two percent and totaled EUR 75.6 million (74.0). Our comparable operating profit for the first six months of the year was EUR 10.6 million (12.3), equaling 14.0 percent of net sales (16.6).

We continued the development of our omnichannel retail network in April–June. New Marimekko stores were opened in Beijing, Taipei and Taichung, and a new shop-in-shop was opened in Bangkok. In Tampere we opened a new company-owned store. In addition, three pop-up stores were opened in Seoul. In June, we announced that Marimekko will expand its omnichannel store network to Singapore in the fall, with the first store to be opened in September. After the end of the period under review, we also announced Marimekko’s expansion into Malaysia and Vietnam in 2023, with the first stores opening later this year. As other brick-and-mortar Marimekko stores and most online stores in Asia, these new stores will be owned by our loose-franchise partners. Altogether, we plan to open an estimated total of 15–20 new Marimekko stores and shop-in-shops during 2023. The majority of these planned openings will take place in Asia, which is the most important geographical region for our international growth in accordance with our strategy. In the second quarter, net sales in the Asia-Pacific region grew by 28 percent.

In April, Marimekko presented its home collection arriving on the market in the fall at the internationally influential Milan Design Week, announcing the most recent artist collaboration containing ceramics and household textiles with Sabine Finkenauer and a new glassware series designed by Matti Klenell. North America, on the other hand, saw the launch of the summery limited-edition collaboration collection with West Elm, a modern furniture and home décor company, in May. In addition to global brand partnerships that provide us with extensive visibility, targeted local collaborations are an important way to introduce more and more new audiences to Marimekko.

In May, we celebrated Marimekko Day in Finland with public fashion shows, among other events, gathering a vast crowd of friends of Marimekko to the Esplanadi Park in Helsinki. At the same time, the Marimekko Terassi summer terrace was opened in front of the Helsinki flagship store to delight people all summer long. Our tradition of public fashion shows that has been going on for more than thirty years reflects our inclusive approach to design and showcases Marimekko’s core values: a sense of community, equality and inclusion. The same values were visible in our collaboration with Helsinki Pride 2023 and in our store window artworks celebrating Pride Month in Helsinki, Bangkok and New York. We are pleased to bring color and joy to our community across the world in various ways.

Internationally growing brand awareness, our developing omnichannel store network and inspiring communal experiences around the Marimekko brand support us in scaling up our business. Our strong financial position and the good development of our business enable us to carry on long-term growth investments to further strengthen our competitiveness, even in a weaker market environment. We are delighted to continue growing Marimekko together with our loyal customers, new friends of our brand and the continually expanding group of shareholders.”

Market outlook and growth targets for 2023

The uncertainties related to the general development of the global economy, such as the risk of an economic recession, general cost inflation, increasing interest rates, and the energy crisis as well as geopolitical tensions influence consumer confidence, purchasing power and behavior and, as a result, can have an impact on Marimekko’s business in 2023, especially in the important domestic market of Finland. Different exceptional situations, such as Russia’s war against Ukraine, may cause even significant disruptions in production and logistics chains, and may thus have a negative impact on the company’s sales, profitability and cash flow.

Finland, Marimekko’s important domestic market, traditionally represents about half of the company’s net sales. Sales in Finland are expected to grow on the previous year. The Finnish wholesale sales in 2023 will be positively affected by non-recurring promotional deliveries, the total value of which is estimated to be substantially higher than the year before. A vast majority of the deliveries will take place in the second half of the year.

The Asia-Pacific region is Marimekko’s second-largest market and it plays a significant part in the company’s international growth. Japan is clearly the most important country in this region to Marimekko and already has a very comprehensive network of Marimekko stores. All brick-and-mortar Marimekko stores and most online stores in Asia are partner-owned. Net sales in the Asia-Pacific region are expected to increase in 2023, as are total international sales. The aim is to open approximately 15 to 20 new Marimekko stores and shop-in-shops in 2023, and most of the planned openings will be in Asia.

Because of the seasonal nature of Marimekko’s business, the major portion of the company’s euro-denominated net sales and operating result are traditionally generated during the second half of the year. In 2023, Marimekko’s net sales are expected to grow. As estimated, net sales in the first quarter of the year were lower than in the comparison period following the weaker outlook at the beginning of the year for the wholesale sales in Finland as well as lower licensing income. Furthermore, net sales in the first quarter of 2022 were boosted by some of the wholesale deliveries in the Asia-Pacific region in fourth quarter of 2021 being transferred to the first quarter of 2022. For the full year 2023, licensing income is forecasted to grow from the record level of 2022.

The general cost inflation continues to also affect Marimekko in 2023. Marimekko’s early commitment to product orders from supplier partners, which is typical of the industry, means that changes in costs affect the company with a delay. These early commitments have been further emphasized by the exceptional situations, undermining the company’s ability to optimize product orders and respond to rapid changes in demand and consumer behavior, which also increases risks related to inventory management and relative profitability. The domestic non-recurring promotional deliveries also raise inventory risks. Marimekko works actively to mitigate the negative impacts of disruptions in production and logistics chains as well as increased costs, and to enhance inventory management.

Marimekko develops its business with a long-term view and aims to scale its growth especially in international markets during the strategy period of 2023–2027. In 2023, fixed costs are expected to be up on the previous year. Marketing expenses are expected to grow (2022: EUR 9.2 million).

Marimekko is closely monitoring the general economic situation and the development of consumer confidence and purchasing power, as well as the impacts of Russia’s war against Ukraine and possible other exceptional situations, and the company will adjust its operations and plans according to the circumstances.

Media and investor conference

A media and investor conference will be held in English on 17 August 2023 at 2.00 p.m. EEST. A live webcast of the conference can be followed at https://marimekko.videosync.fi/q2-2023, and a recording of the webcast will be available at the same address later. Questions can be asked during the live webcast in writing.

Further information:

Tiina Alahuhta-Kasko, President and CEO, tel. [phone]
Elina Anckar, CFO, tel. [phone]

MARIMEKKO CORPORATION
Corporate Communications

Anna Tuominen
Tel. [phone]
[e-mail]

DISTRIBUTION:
Nasdaq Helsinki Ltd
Key media

Marimekko is a Finnish lifestyle design company renowned for its original prints and colors. The company’s product portfolio includes high-quality clothing, bags and accessories as well as home décor items ranging from textiles to tableware. When Marimekko was founded in 1951, its unparalleled printed fabrics gave it a strong and unique identity. In 2022, the company's net sales were EUR 167 million and comparable operating profit totaled EUR 30.4 million. Globally, there are roughly 150 Marimekko stores, and online store serves customers in 35 countries. The key markets are Northern Europe, the Asia-Pacific region and North America. The Group employs about 460 people. The company’s share is quoted on Nasdaq Helsinki Ltd. www.marimekko.com  

Attachment

• Marimekko_Corporation_Half-year_Report_2023