Marimekko has tough Q1 as Covid-19 and calendar shifts affect key markets
Marimekko saw its sales and profits declining in the first three months of the year due to the coronavirus pandemic and other issues. It meant net sales were down by 8% to €24.9 million and international sales fell 21% to €11.3 million.
Meanwhile, operating profit fell 53% to €1.2 million, EBITDA fell 23% to €4.4 million and net profit was down a massive 91% to €0.2 million.
One big problem was a decline in wholesale in Asia-Pacific due to "an exceptional delivery pattern in the comparison period". You see, some of its wholesale deliveries for Q4 2018 had actually happened in Q1 2019. That boosted last year’s figures and meant Q1 2020 looked weaker than it would otherwise have done.
But even without that situation, the impact of Covid-19 couldn’t be ignored as consumers reined-in their spending and wholesale customers applied the brakes too. The company said some expected wholesale re-orders didn't come in from Asia-Pacific customers, (although the aforementioned issue of the timing of orders had the biggest impact in the region) and that EMEA wholesale was also weaker. This was due to the coronavirus, as was the fact that licensing income was hurt by a drop in business in North America.
That said, in Finland (the company’s domestic market), both retail and wholesale increased during the quarter, with net sales up by as much as 6%. And e-tail enjoyed a boost as lockdowns drove sales online in March. The firm said demand for products in the online store “exceeded expectations”.
But with business so heavily disrupted, the company has withdrawn all previous guidance and said it's currently unable to give any guidance as to how trading and profitability will be affected for the rest of the year.
CEO Tiina Alahuhta-Kasko said: “The year got off to a promising start for Marimekko, but the rapid spread of the coronavirus pandemic in all of our markets in March had a significant impact on our sales and profitability for the entire first quarter. At the beginning of 2020, hardly anyone could have imagined the situation in which we have been living these past few months. Early this year, the coronavirus epidemic closed stores in mainland China and Hong Kong and then rapidly spread around the globe and, in March, suppressed customer flows in Marimekko’s other markets as well.”
But the CEO also highlighted that strength in e-tail referred to above and said years of investment and a strong digital focus helped it in 2020. “In March, we moved our promotions online. During the past few years, we have invested in the long-term development of our digital business. The e-commerce competitiveness we have achieved as a result of this is one of our strengths in this exceptional situation.”
And the company is now trying to get back to normal. It closed its stores in Finland, the rest of Scandinavia, Germany, the US and Australia when the pandemic spread, but has been able to start reopening this month “with elevated safety measures in place”.
But it clearly won’t be business-as-usual just yet. For a start, the firm has been cutting costs, re-assessing its investment plans, working with landlords to achieve rent reductions and “working actively to adjust purchases, product flow and inventories to the new situation”.
It’s also been “making contingency plans in our supply chain to ensure the continuity of production and logistics” and “in preparation for a possible prolongation of the crisis,” it has boosted its funding too.
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