Marimekko - Strong momentum continues

New guidance due to better than expected sales trend

Marimekko raised its 2020E guidance in particular due to better than expected trend and improved outlook in the retail sales in Finland. The company now expects 20E net sales to be approx. at the same level or slightly lower compared to last year (2019: EUR 125m). Adj. EBIT is expected to be higher compared to the previous year (2019: EUR 17.1m). Previously, Marimekko expected 20E net sales to be lower compared to the previous year and adj. EBIT to be approx. at the same level or lower compared to last year. We expected 20E sales to decline by 3.5% y/y to EUR 121m and adj. EBIT of EUR 17.3m.

Appealing to consumers despite the uncertain times

The profit warning didn’t come as a total surprise as the company has constantly been able to appeal to consumers, even despite the uncertain times. The company indicated that most of the earnings for H2’20E were generated during Q3. The net sales accrual in H2E is expected to be more balanced between the third and the final quarter. We expect the campaign season has boosted especially Marimekko’s domestic sales. In addition, the Christmas season is ongoing, and the household consumption is more focused on domestic purchases this year. We expect this to have a positive impact on Marimekko’s domestic sales and expect good demand especially in home décor products. However, there are still uncertainties related to the pandemic situation and the customer flows in retail stores. It is also essential to maintain the operational reliability of the distribution centers and logistics.

“BUY” with TP of 50 (44)

We have increased our 20E sales expectation by ~3% and our adj. EBIT expectation by ~12%. We now expect 20E sales of EUR 124.4m (-0.8% y/y) and adj. EBIT of EUR 19.4m. On our estimates, the company trades with 20E-21E EV/EBIT multiples of 18.7x and 18.0x which is a clear discount compared to the luxury peers. We keep our rating “BUY” with TP of EUR 50 (44).