Marimekko - Result as expected, growth foreseen towards year-end
Marimekko reported Q1 results roughly in line with our expectations. Growth is seen to return and EBIT to improve in H2. We retain our HOLD-rating and TP of EUR 10.0.
Q1 net sales and EBIT decreased as expected
Q1 was characterized by robust comparative figures and subdued market development in Finland's wholesale deliveries, along with a decline in licensing sales that directly affected the overall scale. In Q1, the group net sales declined by 2% y/y to EUR 35.3m, however coming in slightly above our expectations. The decline was driven by softer sales development in Finland, the EMEA region and North America. Meanwhile, the APAC region and Scandinavia scored strong double-digit sales growth. Decreased licensing sales lowered gross margin below the comparison period despite product margins remaining on a solid level. Furthermore, increased fixed costs pressed Q1 adj. EBIT to EUR 3.8m, implying a margin of 10.9%. Our view is that the result contained no big surprises despite EBIT fell short of consensus quite clearly.
Tightened grip on Asian shop openings
The company upgraded its outlook on new store openings in 2023 with now expecting to establish 10-15 new stores with most of them located in the Asia. In our view, this provides decent growth prospects for H2’23 and 2024, and consequently we slightly increased our H2 net sales estimates for the APAC region. Marimekko expects its 2023 EBIT margin to range between 16-19% which might imply a relative profitability below that of the comparison period. We however foresee this temporal due to the company’s front-loaded investments in its capabilities. In total, our 23E EBIT decreased by 1% while 24E profitability improved by 2%, reflecting enhanced beliefs for the APAC region’s growth.
Valuation not challenging
We foresee Marimekko’s valuation as not challenging with it trading above its premium, but below the luxury peer group. Marimekko’s earnings growth for 2023-24 will remain subdued due to uncertain market environment and front-loaded OPEX investments. With only minor adjustments made to our estimates, we retain our HOLD-rating and target price of EUR 10.0.
Q1 was characterized by robust comparative figures and subdued market development in Finland's wholesale deliveries, along with a decline in licensing sales that directly affected the overall scale. In Q1, the group net sales declined by 2% y/y to EUR 35.3m, however coming in slightly above our expectations. The decline was driven by softer sales development in Finland, the EMEA region and North America. Meanwhile, the APAC region and Scandinavia scored strong double-digit sales growth. Decreased licensing sales lowered gross margin below the comparison period despite product margins remaining on a solid level. Furthermore, increased fixed costs pressed Q1 adj. EBIT to EUR 3.8m, implying a margin of 10.9%. Our view is that the result contained no big surprises despite EBIT fell short of consensus quite clearly.
Tightened grip on Asian shop openings
The company upgraded its outlook on new store openings in 2023 with now expecting to establish 10-15 new stores with most of them located in the Asia. In our view, this provides decent growth prospects for H2’23 and 2024, and consequently we slightly increased our H2 net sales estimates for the APAC region. Marimekko expects its 2023 EBIT margin to range between 16-19% which might imply a relative profitability below that of the comparison period. We however foresee this temporal due to the company’s front-loaded investments in its capabilities. In total, our 23E EBIT decreased by 1% while 24E profitability improved by 2%, reflecting enhanced beliefs for the APAC region’s growth.
Valuation not challenging
We foresee Marimekko’s valuation as not challenging with it trading above its premium, but below the luxury peer group. Marimekko’s earnings growth for 2023-24 will remain subdued due to uncertain market environment and front-loaded OPEX investments. With only minor adjustments made to our estimates, we retain our HOLD-rating and target price of EUR 10.0.