MARIMEKKO FINANCIAL STATEMENTS BULLETIN 2022: Marimekko’s net sales in the fourth quarter reached last year’s level and operating profit margin was at a good level despite the very strong comparison p

Marimekko Corporation, Financial Statements Bulletin, 16 February 2023 at 8.00 a.m.

MARIMEKKO FINANCIAL STATEMENTS BULLETIN 2022: Marimekko’s net sales in the fourth quarter reached last year’s level and operating profit margin was at a good level despite the very strong comparison period and a challenging market situation

This release is a summary of Marimekko’s financial statements bulletin for the January-December period of 2022. 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 fourth quarter in brief

• Marimekko’s net sales grew by 1 percent to EUR 48.4 million (48.1). Net sales were boosted, in particular, by increased retail sales in Finland but also growing international wholesale sales. On the other hand, net sales were weakened by a decrease in wholesale sales in Finland.
• Net sales in Finland decreased by 2 percent when weakened general consumer demand lowered domestic wholesale sales. In addition, wholesale sales in Finland were partly decreased by lower non-recurring promotional deliveries than in the comparison period. International sales were up by 5 percent.
• Operating profit was EUR 6.8 million (7.6). Operating profit included EUR 0.1 million of items affecting comparability. Comparable operating profit totaled EUR 6.9 million (7.6) and was 14.3 percent of net sales (15.8).
• Operating profit was weakened especially by an increase in fixed costs but also lower relative sales margin. On the other hand, operating profit was supported by lower depreciation than in the comparison period.

Year 2022 in brief

• Net sales grew by 9 percent to EUR 166.5 million (152.2). Both a favorable trend in retail sales in Finland and growing international sales boosted net sales. On the other hand, net sales were weakened by a decrease in Finnish wholesale sales. The decrease was mainly due to significantly lower non-recurring promotional deliveries than in the comparable year. Net sales in Finland grew by 6 percent; international sales were up by 14 percent.
• Operating profit was EUR 30.2 million (31.2). Operating profit included EUR 0.1 million of items affecting comparability and comparable operating profit totaled EUR 30.4 million (31.2) and was 18.2 percent of net sales (20.5). Operating profit was mainly weakened by an increase in fixed costs but also lower relative sales margin. On the other hand, operating profit was particularly supported by increased net sales but also by lower depreciation than in the comparable year.

Board’s proposal for dividend

The Board of Directors proposes to the Annual General Meeting that a dividend of EUR 0.34 will be paid for 2022, with 17 April 2023 as the dividend payout record date and 24 April 2023 as the dividend payout date.

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 Financial Statements Bulletin.

Key figures

* Per-share key figures have been calculated and the figures for the comparison period have been restated using the new total number of shares following the issuance of shares without payment (share split), in accordance with the decision made by the AGM on 12 April 2022.

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 Financial Statements Bulletin.

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. At the beginning of 2021, the coefficients used to calculate brand sales were adjusted, and the figures for the comparison year have been restated accordingly. 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:

"Despite the very strong comparison period and a challenging market situation, our net sales in the fourth quarter reached last year's level and our operating profit margin remained at a good level.

Our net sales in the last quarter of 2022 were up by one percent, despite an already record strong comparative period. The net sales were EUR 48.4 million (48.1), with especially retail sales in Finland but also international wholesale sales developing well. The market situation became more challenging in the fourth quarter especially in Finland, where nevertheless the good performance of retail sales reflects our brand's appeal. Globally, our omnichannel retail sales grew by 13 percent. While international wholesale sales grew clearly, total wholesale sales declined by 10 percent, as weakened general consumer demand and lower non-recurring promotional deliveries than in the comparison period reduced domestic wholesale sales. The decline in wholesale sales weakened the net sales in Finland by two percent. Our international net sales increased by five percent.

Comparable operating profit in the fourth quarter totaled EUR 6.9 (7.6) million and was 14.3 percent of net sales (15.8). As expected, our operating profit in the period under review was particularly impacted by higher fixed costs, such as higher store personnel costs that enabled retail sales growth as well as investments in marketing and digital development.

In the last quarter of the year, we continued to strengthen our international store network, as even in the digitalized world, stores play an important role not only as distribution channels but also as the hearts of brand culture that build awareness, deepen the customer experience and support sales also in other channels. We opened a new, experiential store in New York in SoHo, an area known as one of the city's most central shopping districts and an epicenter of international fashion and design brands. North America is one of Marimekko's key markets, and we approach these markets through key cities. New York is one of the most important cities in the global fashion industry, having a wider impact for building brand awareness and positioning extending also to Europe and Asia. New Marimekko stores were also opened in Shenzhen, Mainland China and Bangkok, Thailand, and an online store launched in Hong Kong. In addition, pop-up stores delighted customers in Hangzhou, Mainland China and Montreal, Canada as well as Taichung, Taiwan.

In the full-year 2022, our net sales increased by nine percent to EUR 166.5 million (152.2). Our net sales in Finland grew by six percent, while international sales increased by 14 percent. During the year, we invested in the building blocks for our long-term international growth, which was reflected in increased personnel, IT and marketing expenses, for example. Comparable operating profit totaled EUR 30.4 (31.2) million and was 18.2 percent of net sales (20.5).

General cost inflation and rising interest rates, the energy crisis, global supply chain disruptions and a decline in consumer confidence particularly in Finland have increased uncertainties in the operating environment. Despite the challenges, in 2022 we took bold and productive steps in executing our growth strategy in order to bring joy and empower even more people around the world with our prints and colors. For our successful results, I would like to extend my heartfelt thanks to all Marimekko people and our partners around the world: as a team, we have been agile in finding solutions to changing situations while, at the same time, persevering to develop and renew Marimekko.

Thanks to our sharpened creative vision, the desirability of our brand and our collection has been further strengthened, and our lifestyle assortment with different price points continues to serve customers also in a more price-sensitive environment. Interest in Marimekko is growing internationally, and the impressive limited-edition brand collaboration collections launched during the year with brands such as adidas have brought Marimekko to the awareness and reach of more and more people. We are determined to improve the sustainability of our products and our practices, and our commitment to the Science Based Targets initiative further raises our ambition level. Our inspiring stores and creative retail concepts have expanded the Marimekko phenomenon in our key markets, especially in Asia. In addition, our continuous work to reinforce our digital and omnichannel business is reflected in our competitiveness, and we are embarking on exploring more widely the opportunities that data and technology bring to boost our efficiency and customer experience.

Over the past few years, we have found the ingredients for a recipe for success in speaking to a wider global audience in a meaningful way that is forward-looking while true to the original Marimekko DNA. In our strategy period 2023–2027, which started at the beginning of this year, we will focus on scaling our business and growth, especially in international markets, by building on and reinforcing this success recipe. At Marimekko, we believe that the winning brands and companies of the future will be determined in challenging market conditions. As a profitable company, we have the possibility to make investments required for long-term growth despite a weaker macroeconomic climate. We will decisively continue to build Marimekko's future by challenging the fashion and design industry with empowering optimism, art of printmaking and timeless and long-lasting design.”

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 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 Finland. The pandemic situation, particularly in China, where restrictions have only recently been lifted, and Russia’s war against Ukraine may cause even significant disruptions in production and logistics chains, which may result in delivery delays and increased costs and 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 5 to 10 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. However, net sales in the first quarter of the year are estimated to be 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 be below 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 pandemic situation, 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. 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, the development of consumer confidence and purchasing power, as well as the impacts of Russia’s war against Ukraine and the coronavirus pandemic and will adjust its operations and plans according to the circumstances.

Media and investor conference

A conference for media and institutional investors will be held in English on 16 February 2023 at 2.00 p.m. EET. A live webcast of the conference can be followed at https://marimekko.videosync.fi/q4-2022, 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. +358 9 758 71
Elina Anckar, CFO, tel. +358 9 758 7261

MARIMEKKO CORPORATION
Corporate Communications

Anna Tuominen
Tel. +358 40 5846944
anna.tuominen@marimekko.com

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 brand sales of the products worldwide amounted to EUR 382 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

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• Marimekko Corporation Financial statements bulletin 2022