Marimekko - Upswing expected to continue in Q4
Christmas sales expected to boost revenue growth
Marimekko’s upswing has continued in ’19 driven by positive sales development in Finland and increased licensing income from APAC region, resulting in two guidance upgrades in July and October. We expect Q4’19E sales to grow by 16.5% y/y (EUR 34.6m), driven by Christmas sales and representing some 28% of total year-end sales while we expect adj. EBIT to nearly double from Q4’18 to EUR 2.9m (Q4’18: 1.6m) due to improved gross profit and lower relative share of fixed costs. We expect good sales performance to continue in Finland (+15% y/y) but also APAC region (+27% y/y).
A sequel of the UNIQLO collaboration
Marimekko gave its first positive profit warning for ‘19E ahead of Q2 due to increased licensing income from APAC region. Licensing income of EUR 1.2m was booked in Q3 and shortly after the result it was revealed that the collaboration was with UNIQLO, a Japanese global apparel retailer, with who Marimekko partnered also in 2018. The new fall/winter collection was launched in late November ‘19 in all UNIQLO markets except in Japan. We thus see more far reaching positive impacts resulting from the partnership as the collaboration rises Marimekko’s brand recognition globally.
“HOLD” with TP of EUR 39.0 intact
Based on the second guidance upgrade given in October, sales are expected to increase from ‘18 while comparable operating profit is expected be higher than in ’18, amounting approx. EUR 17m. We have made only small adjustments to our estimates and expect 2019E sales of EUR 125.3m (+12% y/y) while our adj. EBIT expectation is in line with the guided EUR 17m (FY18: 12.2m). We expect Marimekko to propose a dividend of EUR 1.14m per share in ‘19. In ‘20E, we expect ~8% sales growth and further EBIT improvement (~21% y/y), driven by positive gross margin development. We keep our rating “HOLD” with TP of EUR 39.0 intact ahead of Q4.