Marimekko - Downgraded to “Sell”

15% int. revenue drop largely attributed to timing issues

Marimekko’s international revenue declined by 15%, or by EUR 2.0m in Q4. This was driven primarily by APAC (-26%, EUR -1.4m) but also by EMEA (-11%, EUR -0.3m) and North America (-12%, EUR -0.3m). Management attributed to decline in APAC largely to a timing issue, as certain wholesale deliveries were postponed to Q1’19. The decline in EMEA and Norther America was also largely attributed to timing of wholesale deliveries.

Finland still strong and a bit better than we expected in Q4

Revenue in Finland grew by +12%, split to +8% own retail (own retail LFL +6%) and +22% wholesale. Wholesale was supported by non-recurring promotional deliveries, but retail revenue continued good growth, even though comps are tougher.

Adj. EBIT in 2019E weighted down by growth investments

Marimekko guides revenue to grow and adj. EBIT to remain flat in 2019E. Revenue will be flat in Finland, as non-recurring promotional deliveries will not reach the level of 2018. Revenue in APAC is expected to grow, supported by start of online sales in China and new stores. Despite revenue growth adj. EBIT will remain flat, as marketing and other growth spend is increased to spur growth in 2019E and beyond. CAPEX will also increase with store refurbishments, IT and HQ premise improvements.

Downgraded to “Sell” (“Buy”), ex-div TP intact at EUR 22

We have slightly cut estimates for 2019E. On our estimates Marimekko now trades at a clear premium to the peer group. While growth appears to remain on the right track also in 2019E, flat adj. EBIT in 2019E is not enough to carry the recent clear increase in valuation multiples, in our view. We downgrade to “Sell” (“Buy”) and keep our ex-div TP at EUR 22.