Lindex bounces back says owner Stockmann but signature retail unit is weak
Feb 14, 2019
Finnish retail giant Stockmann had a mixture of good and bad news on Thursday as it reported both positive and negative figures. And it remained cautious even while hailing Lindex's turnaround.
On the plus side, CEO Lauri Veijalainen reported a group adjusted operating result that improved by €16 million for the year as Lindex grew its share in its main markets, and as its online sales continued to grow “well” throughout the year. In fact, Lindex’s adjusted operating profit almost doubled, on the back of that sales growth plus a better gross margin and cost savings.
But the group's headline revenue figures were still down with Q4 slightly worse (on some measures) than the rest of the year.
Looking only at continuing operations, for the year, group revenue fell to €1,018.8 million from €1,055.9 million. However, the gross margin rose to 56.9% from 55.8% and adjusted profit on an Ebitda basis rose to €76 million from €67.8 million. Adjusted operating profit rose to €28.4 million from €12.3 million a year earlier. The final net profit figure was a loss of €43.7 million, but that was much better than the prior year’s €198.1 million loss.
But the picture in Q4 was a little cloudier, despite the improvements in some areas for the year as a whole. The headline revenue figure fell, as it had done for the year, but the margin also dipped in the last quarter. Revenue fell to €304.5 million from €315.7 million and the gross margin dropped to 55.6% from 56.8%. Adjusted Ebitda rose to €36.2 million from €34.1 million but adjusted operating profit fell to €23.5 million from €24.2 million. However, the net loss improved to €7 million from €12.1 million.
For the current year, the company expects its “adjusted operating profit, excluding the impact of [the] Nevsky Centre [sale], to improve compared to 2018.”
That Nevsky Centre sale, plus other divestments, helped reduce the firm’s debt load in 2018, but digging deeper into the 2018 figures, while the CEO talked up the Lindex performance, as well as an improvement in its real estate ops, it’s clear that not everything was going right.
The Stockmann Retail unit was the biggest problem and “did not achieve a positive result, despite our efforts,” the company said.
Its full-year sales fell short of the firm’s target, and it admitted that it was disappointed. And it seems this unit was responsible for that decline in Q4 with the company saying “the operating result weakened mostly in the last quarter of the year, despite good growth in online sales in the quarter.”
But the firm is working on improving the unit’s profitability and said that this year it has launched “a project aiming at reducing the group’s expenses by €20 million by the end of the year,” most of the cost-saving measures to be felt at the Retail division.
The company said it will continue the implementation of its overall strategy, working to boost sales and the gross margin and “will also accelerate renewal measures including our digital journey, the effects of which will become visible for our customers during the year.”
It’s taking a mixed view on its 2019 sales prospects though, saying that in its largest operating countries, Finland and Sweden, “the general economic situation’s improved and GDP growth as well as consumer confidence development continued to be positive in 2018.” But it added that this year, while overall retail sector growth “is estimated to decline somewhat due to [the] economic slowdown in Finland, growth is expected to continue in Sweden.” At least the outlook is expected to be better in the Baltics than in the firm’s other main markets.
On the plus side, the company expects its e-tail ops to grow steadily as consumers increasingly choose digital. But physical stores will “continue to be challenging [as] the retail industry is facing major structural challenges through digitalisation and further internationalisation.”
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