HELSINKI, Finland--(BUSINESS WIRE)--Regulatory News:
January-March 2016:
Consolidated revenue was EUR 273.1 million (EUR 345.8 million)
Revenue in continuing product areas and businesses was down 12.5 per cent, mostly due to the timing of the Crazy Days campaign.
Gross margin was up, to 50.2 per cent (46.8 per cent).
Operating result was EUR -30.3 million (EUR -42.0 million).
Result for the period was EUR -31.6 million (EUR -47.2 million).
Earnings per share were EUR -0.46 (EUR -0.66).
Divestment of the Russian department store business was completed on 1 February 2016. The business is reported as a discontinued operation.
Per Thelin stepped down as the CEO and Lauri Veijalainen was appointed interim CEO on 4 April 2016.
An agreement has been signed to sell the Hobby Hall distance retailing business to SGN Group. The transaction will take place on 31 December 2016.
Outlook for 2016 remains unchanged: Stockmann expects the Group’s revenue for 2016 to be down on 2015 due to ongoing strategic actions in order to improve profitability. The operating result excluding non-recurring items is expected to be slightly positive in 2016.
Interim CEO Lauri Veijalainen:
Stockmann’s strategy implementation is proceeding in accordance with the direction and plan, which were accepted by the Board in late 2014. Achieving a comprehensive turnaround will take time, but already during the first quarter of the year, we were able to cut the Group’s operating losses. The strategic actions are expected to improve our operating result so that it will be slightly positive in 2016.
We have divested several loss-making operations, including the Russian retail business, which took place in February as planned. Stockmann Retail has also withdrawn from several loss-making product areas, Real Estate has introduced several new tenants to our properties and Lindex has continued its stable growth. We can also now announce that we have found a new owner for Hobby Hall, and this divestment completes Stockmann’s strategic aim to withdraw from the non-core businesses.
Stockmann’s revenue was down in the first quarter, due to the timing of the Crazy Days campaign in the department stores. The campaign, which took place after the reporting period, and which celebrated its 30thanniversary, achieved a reasonable result with sales growth in fashion and cosmetics.
We will continue to make determined efforts to achieve the turnaround, with special emphasis on ensuring that we are working actively to change our cost structure to match the scope of our operations. The results of the efficiency programme launched in 2015 are gradually becoming visible in our results for the current year. Lindex is already benefiting from the efficiency actions made during 2015 and improved its operating result during the first quarter. I am confident that the ongoing and planned actions will take us towards a more efficient and customer-oriented Stockmann.
Key figures
| Continuing operations |
1-3/ 2016 |
1-3/ 2015 |
1-12/ 2015 |
| Revenue, EUR mill. | 273.1 | 345.8 | 1 434.8 |
| Gross margin, per cent | 50.2 | 46.8 | 50.6 |
| Operating result before depreciation (EBITDA), EUR mill. | -16.2 | -24.5 | 43.4* |
| Operating result, EUR mill. | -30.3 | -42.0 | -28.5* |
| Net financial costs, EUR mill. | 4.3 | 4.1 | 21.2 |
| Result before tax, EUR mill. | -34.6 | -46.2 | -46.4* |
| Result for the period, EUR mill. | -31.6 | -47.2 | -43.0* |
| Earnings per share, undiluted, EUR | -0.46 | -0.66 | -1.24 |
| Personnel, average | 9 299 | 11 702 | 10 763 |
| Continuing and discontinued operations |
1-3/ 2016 |
1-3/ 2015 |
1-12/ 2015 |
| Net earnings per share, undiluted, EUR | -0.31 | -0.78 | -2.43 |
| Cash flow from operating activities, EUR mill. | -75.3 | -65.2 | 17.2 |
| Capital expenditure, EUR mill. | 5.9 | 16.5 | 53.4 |
| Equity per share, EUR | 14.20 | 14.65 | 14.53 |
| Net gearing, per cent | 81.6 | 84.6 | 72.1 |
| Equity ratio, per cent | 44.8 | 43.9 | 46.1 |
| Number of shares, undiluted, weighted average, 1 000 pc | 72 049 | 72 049 | 72 049 |
| Return on capital employed, rolling 12 months, per cent | -5.3 | -4.6 | -7.6 |
* Excluding non-recurring items of EUR 45.8 million, of which EUR 24.0 million affected the operating result. No non-recurring items were booked in the first quarter.
Strategy
In the first quarter of 2016, Stockmann continued to focus on the comprehensive turnaround of its business according to the strategy. Stockmann withdrew from its department store business in Russia by selling its Russian subsidiary AO Stockmann, to Reviva Holdings Limited on 1 February 2016. The business has been classified as a discontinued operation. All major structural changes in the non-core units have now been made, and the company will focus on developing its three divisions: Stockmann Retail, Real Estate and Lindex.
Stockmann Retail will fully concentrate on the development of the selected focus areas, i.e. fashion, cosmetics, food and home products, in its department and online stores in Finland and in the Baltic countries. Stockmann will invest in the renewal of its department stores in order to offer even better customer experiences. The largest investments will be made in the department stores in Tapiola and Helsinki city centre. Stockmann will open an entirely new department store in Tapiola in March 2017 with a new, omnichannel store concept. In Helsinki, the city centre department store is undergoing a significant refurbishment, which includes renewals of several entire departments such as women’s accessories, cosmetics, and home products.
In addition, Stockmann is investing in omnichannel commerce. The new Stockmann online store is expected to be launched in the second half of 2016. New digital tools are being developed for store staff and customers, in order to improve the shopping experience. A pilot for B-2-B digital service was launched during the first quarter of 2016. Stockmann will open a new, more efficient distribution centre in May 2016, which will combine the existing warehouses into one and improve the omnichannel operations by speeding up delivery times, among other things. The current warehouses in Finland will be moved in stages to the new centre in 2016 and from Riga in 2017.
Real Estate concentrates on developing and completing the offering in the department stores with attractive products and services from external tenants. During the first quarter, XS Toys opened its toy store in the department store in Riga and will open its store in the Tallinn department store in August. The cooperation will also expand to Finland, as XS Toys will open stores in the Turku, Tampere, Jumbo and Itis department stores before the Christmas season in 2016. In addition, agreements were signed for the Gastrobar in the Helsinki flagship store, Isku home decoration store in the Book House building in Helsinki, and Scandinavian Outdoor and Halti outdoor stores in Tampere and Turku department stores.
Lindex continued its successful growth with good development in its main markets in the Nordic countries. Seven stores in Russia were closed during the first quarter, and the remaining three stores will be closed by mid May 2016.
As an important part of the turnaround, Stockmann launched an efficiency programme in February 2015 with an annual cost savings target of EUR 50 million, which will be reflected in the result mainly from 2016 onwards. The renewal of the processes and structure in Stockmann’s support functions is a substantial part of the efficiency programme. In 2015, the renewal led to a reduction of nearly 200 employees in Finland, and since the start of the year, to further reductions of around 35 employees. Other actions include renegotiated terms and conditions with suppliers, which will be visible in lower costs of goods sold and for indirect procurement in other operating costs. The release of store space from own retail operations to external tenants will result in lower rental costs. In addition, with the new distribution centre Stockmann is targeting an annual cost saving of approximately EUR 5.5 million compared with 2014, or EUR 3.5 million including the increased depreciation, to be achieved in full from 2018 onwards.
Events after the reporting period
Per Thelin and the Board of Directors jointly agreed that Per Thelin would leave his position as Chief Executive Officer of Stockmann plc on 4 April 2016. Thelin had been the CEO of Stockmann since November 2014. The Board of Directors has initiated a process to find a new CEO. Lauri Veijalainen, Chief Financial Officer, was appointed the interim CEO of Stockmann as of 4 April 2016.
The Annual General Meeting of Lindex decided in April to elect Susanne Najafi as a new member to the Lindex Board of Directors. She will replace Per Thelin in the Board. Per Sjödell will continue as the Chairman of the Lindex Board of Directors. Stockmann’s Board of Directors has also reassessed the independence of its members in accordance with Recommendation 15 in the Finnish Corporate Governance Code. According to the assessment those Board members (Najafi, Sjödell), who are paid an additional remuneration for their duties in the Lindex Board of Directors, are not considered independent of Stockmann.
Stockmann signed an agreement on 27 April 2016 to sell the Hobby Hall business to SGN Group. The closing of the transaction will take place on 31 December 2016 and the transfer of business will take place on 1 January 2017. The purchase price is not expected to have a significant effect on Stockmann’s earnings. The transaction includes Hobby Hall’s entire assets and liabilities. Sales and support operations, excluding logistics, and the related personnel will move to SGN Group when the transaction takes place. As of 1 May 2016, Hobby Hall’s logistics operations and all warehouse personnel will move to Posti Group. In the 2016 financial reporting, Hobby Hall will continue to be reported as a part of the Stockmann Retail segment, but its assets will be reported as assets held for sale in the balance sheet.
Risk factors
Stockmann is exposed to risks that arise from the operating environment, risks related to the company’s own operations and financial risks.
The general economic situation is affecting consumers’ purchasing behaviour and purchasing power in all of the Group’s market areas. Consumers’ purchasing behaviour is also influenced by digitalisation and changing purchasing trends. Rapid and unexpected movements in markets may influence the behaviour of both the financial markets and consumers. A weak operating environment may also affect operations of Stockmann’s tenants and consequently may have a negative impact on rental income and the occupancy rate of Stockmann’s properties. These may have an effect on the fair value of the real estate. Uncertainties related to the general economic situation, and particularly those related to consumers’ purchasing power are considered to be the principal risks that will continue to affect Stockmann during 2016.
Fashion accounts for over two thirds of the Group’s revenue. An inherent feature of the fashion trade is the short lifecycle of products and their dependence on trends, the seasonality of sales and the susceptibility to abnormal changes in weather conditions. Responsible management of the supply chain is important for the Group’s brands in order to retain customer confidence in Stockmann. The Group addresses these factors as part of its day-to-day management of operations.
The Group’s operations are based on flexible logistics and efficient flows of goods. Delays and disturbances in the flow of goods and information can have a temporary adverse effect on operations. Every effort is made to manage these operational risks by developing appropriate back-up systems and alternative ways of operating, and by seeking to minimise disturbances to information systems. Operational risks are also met by taking out insurance cover.
The Group’s revenue, earnings and balance sheet are affected by changes in exchange rates between the Group’s reporting currency, which is the euro, and the Swedish krona, the Norwegian krone, the US dollar, the Russian rouble and certain other currencies. Currency fluctuations may have a significant effect on the Group’s business operations. Financial risks, including risks arising from interest rate fluctuations, are managed in accordance with the risk policy confirmed by the Board of Directors.
Outlook for 2016
In the Stockmann Group’s main operating country, Finland, the general economic situation remains uncertain and only slow GDP growth is estimated. Consumers’ purchasing power is expected to remain low, and the development of the non-food retail market is likely to continue being weak.
The GDP growths for Sweden, Norway and the Baltic countries are estimated to be somewhat higher than in Finland. The affordable fashion market in Sweden is expected to remain relatively stable. In the Baltic countries, more competition is expected in the retail market.
Stockmann will continue operating its shopping centre in St Petersburg. Economic development in Russia is expected to remain weak in 2016. This may have a negative impact on the rental income from tenants in Stockmann’s real estate business.
Stockmann’s strategy aims at improving the Group’s long-term competitiveness and profitability through a comprehensive turnaround of its business. An efficiency programme was launched in February 2015 with an annual cost savings target of EUR 50 million. The programme is progressing according to plan, and its main effects will be reflected in Stockmann’s performance from 2016 onwards.
Capital expenditure for 2016 is estimated to be approximately EUR 60-65 million which is on a par with the estimated depreciation for 2016.
Stockmann expects the Group’s revenue for 2016 to be down on 2015 due to on-going strategic actions in order to improve profitability. The operating result excluding non-recurring items is expected to be slightly positive in 2016.
Press and analyst briefing
A press and analyst briefing will be held today, on 28 April 2016 at 9:15 a.m. EET in the Fazer À la Carte restaurant on the 8th floor of Stockmann’s Helsinki city centre department store, Aleksanterinkatu 52 B. In addition to Stockmann’s management, Sam Nieminen, the CEO of SGN Group which will be the new owner of Hobby Hall, will be present in the briefing.
Webcast
Interim CEO Lauri Veijalainen will host a webcast in English today, on 28 April 2016, at 11:15 a.m. EET presenting the Interim Report. To participate in the webcast, please dial one of the numbers below 5–10 minutes before the webcast begins. The presentation can be followed by this link or on the address stockmanngroup.com. The recording and presentation material are available on the company's website after the event.
Finland: +358 9 2310 1619
Sweden: +46 8 5065 3933
United Kingdom: +44 20 3427 1934
United States of America: +1646 254 3376
Confirmation code: 1161458
STOCKMANN plc
Lauri Veijalainen
Interim CEO
Distribution:
Nasdaq Helsinki
Principal media
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