A Finnish design house aiming to grow globally
Marimekko's Q3 growth was solid although EBIT fell short of our expectations. With higher-than-expected cost development, we modified our EBIT estimates downwards.
Marimekko delivered solid Q3 figures. Net sales came in with single-digit growth and relative profitability was on a robust level.
Marimekko elaborated the details of its revised strategy in its CMD and increased its targets to a more ambitious level. We left our estimates broadly intact with the uncertain market restricting future visibility. With the declined stock price, Marimekko’s valuation seems quite attractive, and we raise our rating to BUY (HOLD) but adjust TP to EUR 12.0 (13.2) reflecting the uncertain market environment.
Marimekko raises its long-term financial targets and reveals its focus areas for the new strategy period of 2023-27.
Marimekko’s Q2 result was strong and broadly in line with expectations. The outlook provided for H2 is solid, but the upside potential is in our view restricted.
Marimekko delivered strong Q2 result, with net sales broadly in line with and EBIT beating our estimates. The growth was strong in domestic market with y/y growth of 25% while int’l sales grew by 5% y/y.
• Q2 group result: net sales increased by 16% y/y to EUR 38.0m, which was broadly in line with our and consensus expectations (37.0/36.6m Evli/cons.). The growth was driven by domestic sales while international growth was a bit moderate. Gross margin was approx. flat y/y. With increased revenue, adj. EBIT amounted to EUR 5.7m (5.3/5.8m Evli/cons.), reflecting an EBIT margin of 15%. EPS amounted to EUR 0.12 (0.10 Evli/ cons.).
• Finland: driven by strong retail sales, Finnish net sales increased by 25% y/y to EUR 23.0m (Evli: 20.5m). Wholesale sales were flat y/y.
• Int’l: with y/y growth of 5%, net sales amounted to EUR 15.0m (Evli: 16.5m). The growth was driven by Scandinavia, the EMEA region, and the APAC region while North America saw low double-digit y/y decrease in its net sales. Int’l business was negatively impacted by a different kind of weighting of wholesale deliveries.
• Category split: Fashion sales amounted to EUR 12.0m (+6% y/y). Home category grew by 11% y/y to EUR 16.9m. Bags and accessories showed strong y/y growth of 48% and amounted to EUR 9.0m.
• Market outlook: Marimekko expects domestic sales to grow as well as APAC sales and int’l sales to increase significantly. Both retail and wholesale revenue are expected to increase in 2022. Licensing income is also estimated to be higher than that of the comparison period. In percentage terms, net sales growth is expected to be stronger at the beginning of 2022 than in H2.
• FY’22 guidance intact: expecting revenue to grow and an EBIT margin ranging between 17-20%.
Marimekko releases its Q2 result on Wednesday. The company delivered strong Q1 result, and we expect the trend to continue also in Q2. The demand for lifestyle products has been favorable in H1, but strong comparison figures, low consumer trust, and an inflationary environment might affect the magnitude of H2 growth.
Marimekko delivered strong Q1 figures by showing double-digit growth in all its markets. Although the market environment includes uncertainties, Marimekko is trading with a quite moderate valuation. We upgrade our rating to BUY (HOLD) and adjust TP to EUR 14.5 (12.8).
Marimekko came in strong with Q1 net sales as well as EBIT growing rapidly. The company’s resilience to weakened consumer confidence was stronger than we were expecting.
We revised our near-term estimates ahead of Q1 due to declined consumer confidence, especially in Finland and Japan. We retain HOLD rating and adjust TP to EUR 12.8 (15.8).
New collaborations incoming
In early 2022, Marimekko announced of few collaborations with global lifestyle brands to enhance its brand awareness in its growing markets. Adidas collaboration got a sequel with new spring/summer collection that dropped during April 2022. In addition, Marimekko collaborates with a luxury brand Mansur Gavriel. The bag collection will be available starting from June 2022. Moreover, Marimekko announced its collaboration with global furniture and décor company IKEA. The collection will be released in spring 2023. Collaborations bring Marimekko highly scalable licensing revenue but, more importantly, by cooperating with popular lifestyle companies Marimekko’s brand awareness improves abroad significantly.
Consumer trust in decline in Marimekko’s main markets
Driven by increased inflation and interest rate pressures as well as geopolitical tenses due to Russia’s attack on Ukraine, consumer trust has been in a trend of decline in the western markets. Also, in Marimekko’s second-largest market, Japan, the inflation has picked up driven by material and energy costs. We expect the declined consumer activity to have a slight impact on Marimekko’s Q1 sales development and thus we have revised our quite optimistic near-term estimates. From what we earlier expected, we have downgraded our 22E topline estimate by 2% while our 22E EBIT estimate faced a decrease of 5% (see report page 2).
HOLD with a target price of EUR 12.8 (15.8)
In recent months, Marimekko’s valuation has melted alongside its peer group’s valuation. With our revised estimates, the company trades with 22E EV/EBIT and P/E multiples of 15x and 19x respectively. Considering our acceptable 22E EV/EBIT and P/E multiples of 17x and 21x respectively, we see slight upside potential in Marimekko’s stock price but, at the same time, remind about the uncertainty concerning the demand for Marimekko’s products. We retain our HOLD rating and adjust TP to EUR 12.8 (15.8).
Yesterday, the AGM approved the BoD’s dividend proposal and decided on a share split with a ratio of 5:1. With our estimates intact, we update our target price to EUR 15.8 (79) and retain HOLD-rating.
Marimekko delivered strong Q4 figures, outpacing our and consensus estimates. Net sales development was very good in both domestic and international markets. We downgrade our rating to HOLD (BUY) and adjust TP to EUR 79 (84).
Marimekko came in strong with Q4 net sales of EUR 48.1m (+29% y/y). The growth was driven by wholesale and retail sales in Finland as well as wholesale sales in the APAC region and Scandinavia, while the EMEA region declined due to the actions to control grey exports. Retail sales in North America developed very strongly. Higher logistical costs reduced the gross margin to 57.9% (prev. 58.9%). Driven by increased net sales, the adj. EBIT improved by 17% y/y to EUR 7.6m (15.9% margin). Increased personnel (one-time bonus) and other costs weakened the adj. EBIT margin from 17.4% to 15.9%. EPS amounted to EUR 0.72 and the BoD proposed a dividend of EUR 3.60 (including an additional EUR 2 dividend).
Confirmation for international growth
International sales got back on a growth path in Q4’21 and the company guided the segment’s largest market, the APAC region, to grow clearly in FY’22. Segment’s strong development speaks about the increased brand awareness, particularly seen in Asia. In FY’22, we expect int’l net sales to grow by 14% y/y, while expecting domestic growth to slow down to 8% y/y due to the lack of large one-time wholesale deliveries. In our estimates, group revenue amounts to EUR 167.9m, and driven by increased logistical costs the gross margin falls below the comparison period to 60%. Driven by reduced gross margin and increased fixed costs, the adj. EBIT margin of 19.3% (adj. EBIT EUR 32.4m) falls also short of the record high comparison period.
HOLD with a TP of EUR 79 (84)
With our revised estimates, Marimekko trades with a 22-23E EV/EBIT multiple of 19-18x. The company’s valuation has historically varied between EV/EBIT multiple of 17-21x. With the slowdown in the earnings growth within the next few years and the decline in the acceptable valuation level, we downgrade our rating to HOLD (BUY) and adjust TP to EUR 79 (84).
Marimekko’s Q4 result outpaced our estimates and the company grew very strongly. The guidance implies the trend to continue in 2022.
• Group net sales increased by 29% y/y to EUR 48.1m (41.6m/42.3m Evli/cons.). The growth was driven by wholesale and retail sales in Finland as well as wholesale sales in the APAC region and Scandinavia. Retail sales in North America developed very strongly.
• Finland: Net sales grew by 32% and amounted to EUR 30.6m (26.8m/26.8m Evli/cons.). Non-recurring promotional deliveries supported the good development of wholesale sales.
• International: Revenue increased by 23% y/y to EUR 17.4m (14.7m/15.5m Evli/cons.), representing 36% of total net sales. Sales development was strong in North America (+57%), Scandinavia (+40%), and the APAC region (+36%). The EMEA region (-21%) declined due to actions to control gray exports.
• Gross profit totaled EUR 27.8m (25.1m Evli). The company reported a gross margin of 57.9% (60.3% Evli). The margin was affected by increased logistical costs.
• Adj. EBIT improved by 35% y/y to EUR 7.6m (5.8m/6.0m Evli/cons.), meaning a 15.8% margin. The improvement in profitability was mainly driven by increased net sales.
• EPS grew by 35.6% y/y to EUR 0.72 (0.54/0.55 Evl/cons.).
• Dividend proposal: The BoD proposes FY’21 DPS of EUR 1.60 and extraordinary DPS of EUR 2.00 (1.60/1.60 Evli/cons.). In addition, the board has decided to pay FY’20 DPS of EUR 1.00.
• Guidance 2022: Revenue is expected to be above that of the comparison period (2021: EUR 152.2m). Adj. EBIT margin is expected to be between 17-20% (2021: 20.5%).
Marimekko released strong Q3 figures that overall outpaced our estimates. Development was strong in its domestic market, but Int’l business was sluggish due to temporal challenges and seasonality. We made only minor adjustments to our estimates.
Strong domestic growth and a record EBIT
Marimekko’s Q3 result came in strong compared to our expectations. Net sales growth of 11% y/y was driven by strong wholesale sales in Finland (+25% y/y). Controls of grey exports and lower licensing revenue decreased international net sales by 10% y/y. Despite the increased fixed costs, the company delivered its record EBIT, totaling EUR 13.3m (31.3% margin). Profitability was boosted by improved gross margin and increased net sales.
Int’l sales to get back on a growth path
We see the decline in international sales to be temporal and expect the company to get back on a growth path in Q4’21. Although the int’l revenue declined, the brand sales increased by 40% y/y in Q3 which indicates that the popularity of the brand is still up and keeps growing. Marimekko has positioned well in its domestic market, but we also expect that new and ongoing brand collaborations are set to increase brand awareness abroad, which eventually grows the share of int’l business. Like most of companies, Marimekko is also facing some challenges in logistics and material availability. Cost inflation has woken up and is raising its head. Due to relatively large inventories, the cost inflation shows in figures with a lag. After considering above mentioned factors, we made only minor adjustments to our estimates, now expecting 21E net sales of EUR 145.7m and adj. EBIT of EUR 30.2m (20.7% margin). During 2022-23, we expect Marimekko to grow by 10.8% and 8.5% respectively as well as reach an adj. EBIT margin of 18.9% and 17.8% respectively.
BUY with a target price of EUR 84.0
In our view, Marimekko has room for an upside as it's valued with a 22E EV/EBIT multiple of 19.8x, reflecting a 20% discount to its luxury peers. We retain our BUY-rating and TP of EUR 84.0.
Marimekko’s Q3 result outpaced our expectations. Net sales grew by 11% y/y to EUR 42.4m and adj. EBIT amounted to EUR 13.3m (31.3% margin). The company reiterated its FY’21 guidance.
• Group result: net sales topped our estimates by growing 11% y/y to EUR 42.4m vs. 40.9m/42.3m Evli/cons. The growth was driven by a favorable trend in wholesales in Finland. Adj. EBIT improved to EUR 13.3m vs. 8.1m/10.1m Evli/cons. with a 31.3% margin. EPS totaled EUR 1.30 and grew by 32% y/y.
• Finland: Marimekko brand’s popularity seemed to continue in Finland and net sales increased by 25% y/y to EUR 28.8m (Evli: 25.3m). The growth was driven by a favorable trend in wholesale sales (+65% y/y).
• International: One of Marimekko’s strategy’s backbones, international sales, fell short of our expectations and was a bit disappointment. Net sales decreased by 10% y/y to EUR 13.6m (Evli: 15.6m). Sales development was weak in the EMEA and APAC regions, but Scandinavia and North-America managed to increase their revenue y/y.
• Adj. EBIT: Adj. EBIT was very strong, totaling EUR 13.3m (31.3% margin) vs. 8.1m/10.1m Evli/cons. Profitability was boosted by net sales growth and improved gross margin. Worth to notice is that fixed costs increased in Q3 and the trend is expected to continue in Q4.
• No changes in FY’21 guidance (revised on Sep 23rd): expecting net sales and adj. EBIT margin to be above that of the comparison period.
• Marimekko’s strong performance in Finland provides continuity, but international sales especially in the APAC region cause some concerns. Our aim is to find more information for the weak performance of international sales in Marimekko’s Q3 webcast (today at 2 pm Finnish time).
Marimekko specified its outlook for FY 2021, now expecting adj. EBIT margin to be above that of the comparison period (2020: 16.3%). Revenue guidance remains intact and is expected to grow from the previous year (2020: EUR 123.6m). Our estimates were already in line with the new guidance; we make no changes to our estimates or recommendation.
Marimekko’s Q2 figures came in above estimates. The company is still only laying out the foundation for sustained international expansion, and we believe this underpins earnings growth potential for years to come.
EBIT margin potential will not fully materialize this year
Finland’s 61% y/y growth drove Q2 top line to EUR 32.7m, up 40% and above the EUR 29.3m/29.3m Evli/cons. estimates (last year’s store closures softened the comparison period). Both Finnish Retail and Wholesale advanced a lot while International, up 20% y/y, was mainly driven by Wholesale. Home wares continued to sell well and in our opinion the offering’s breadth is one point that testifies to Marimekko’s strengths. Q2 EBIT was EUR 5.5m vs the EUR 2.9m/4.0m Evli/cons. estimates; we find the positive surprise relative to our estimates stemmed from the EUR 2.4m gross profit beat. Digital and omnichannel customer experience projects will add to costs in H2 and Marimekko’s guidance moderates estimates for the rest of the year.
We see there is a long earnings runway ahead
Collaborations like the Adidas one show how the strategy works as the Marimekko brand is enjoying a rejuvenation period. We understand the Adidas deal generated ca. EUR 1m in revenue and profits in Q1; we expect license revenue will remain below EUR 3m this year, but the brand benefits extend beyond direct financial gains. Marimekko doesn’t have that much more growth potential in Finland but is still very modest in the global fashion & apparel context; upside potential remains considerable and from this perspective the long-term 10%+ CAGR target doesn’t seem very challenging. Marimekko began to gather pace towards long-term ambitions a few years before the pandemic and has already been able to post above 15% EBIT margins. In our view the company should be able to sustain long-term profitability at least a few percentage points above the stated target level.
Valuation remains reasonable considering the potential
Marimekko’s earnings-based multiples, roughly in the 19-25x EV/EBIT range on our FY ’21-23 estimates, have continued to climb and are now near those of luxury goods peers. Multiples are also high relative to their own historical levels, but we view this justified since the company’s profile now stands on a whole new level. Our new TP is EUR 84 (63); we retain our BUY rating.
Marimekko’s Q2 results came in above our and consensus’ estimates. Top line was driven by 61% growth in Finland and gross margin was also some 120bps above our estimate. Marimekko thus reached high absolute and relative profitability. The company however left its guidance intact, which moderates H2 estimates.
Marimekko showed its strengths once again and delivered very strong Q1 figures. Development was good internationally but also in Finland. Adj. EBIT was clearly above expectations at EUR 5.6m. We have increased our FY21E-23E estimates and keep our rating “BUY” with TP of EUR 63 (58.2).
Clear estimates beat in Q1
Marimekko delivered a very strong Q1 result. Net sales increased by 17% y/y to EUR 29.1m vs. EUR 27.7m/27.6m Evli/cons. Sales were boosted by good wholesale sales development in APAC region, Finland and Scandinavia as well as increased licensing income in EMEA. Net sales in Finland amounted EUR 14.5m (7% y/y) vs. our EUR 14.0m and international sales were EUR 14.6m (29% y/y) vs. our EUR 13.7m. The continuing pandemic situation continued to hamper customer flows in stores, but retail sales were supported by good growth in online sales. Marimekko’s adj. EBIT was 130-140% above expectations at EUR 5.6m. Profitability was supported by increased net sales, improved relative sales margin and reduced fixed costs. EPS was EUR 0.55 vs. EUR 0.21/0.18 Evli/cons.
Aiming to accelerate international growth
Marimekko has constantly been able to deliver solid results, even during times like this. The company has a strong positioning in Finland, but its brand awareness has increased internationally as well which was shown also in Q1 figures. Marimekko plans to accelerate its long-term international growth in 2021 and to invest especially in digital business, seamless omnichannel customer experience, sustainability and brand awareness. This year, the company turns 70 years old, and this should increase brand visibility even more. Despite the strong performance in Q1, we expect a peak in sales once the vaccination coverage increases and restrictions are being lifted. Even though Marimekko had an excellent start of the year, the company indicated that majority of its net sales and earnings will be generated during H2’21E.
“BUY” with TP of EUR 63 (58.2)
Marimekko expects 2021E adj. EBIT margin to be approx. on a par with last year or higher. Net sales are expected to increase from last year. We expect revenue growth of 12% in 21E and 8% in 22E and adj. EBIT margins of 16.7% and 17.0%. On our estimates, the company trades with 21E-22E EV/EBIT multiple of 19.9x and 17.9x which is 40-50% discount compared to the luxury peers. We keep our rating “BUY” with TP of EUR 63 (58.2).
Marimekko’s Q1 result was very strong and it clearly outpaced the expectations. Net sales increased by 17% and were EUR 29.1m vs. EUR 27.7m/27.6m Evli/cons. Sales were driven by good wholesale sales development in APAC region, Finland and Scandinavia as well as increased licensing income in EMEA. Adj. EBIT was EUR 5.6m vs. EUR 2.4m/2.3m Evli/cons.
Marimekko upgraded its 21E earnings guidance last week as sales outlook for the full year has improved. The company said that Q1 has been very strong. We have increased our 21E adj. EBIT estimate by ~9% and keep our rating “BUY” with TP of EUR 58.2 (57). Marimekko reports its Q1 result on this week’s Thursday.
Upgraded guidance due to improved sales outlook
Marimekko upgraded its 21E earnings guidance last week. The company now expects 21E adj. EBIT margin to be similar compared to last year (2020: 16.3%) or higher. Sales guidance remains unchanged and the company expects 21E sales to be higher than last year. Based on the earlier guidance given in February, the company expected 21E adj. EBIT margin to be in line with the company’s long-term target of 15%. According to Marimekko, the upgrade is due, in particular, to improved sales outlook for the full year, supported by a very strong Q1’21. Despite the strong figures in Q1, the company still estimates that the major portion of net sales and earnings are generated during H2’21 due to the seasonality of Marimekko’s business.
We have increased our 21E adj. EBIT estimate by ~9%
We would have hoped more detailed information about the improved sales outlook, but we expect to get more color on this during the Q1 result. Earlier, we expected 21E sales growth of 9.5% y/y and adj. EBIT margin of 15.2% (EUR 20.5m). As a result of the guidance upgrade, we have increased our estimates, especially our Q1’21E estimates. We increased our Q1E sales expectation by ~2% and expect sales of EUR 28m while we have more than doubled our adj. EBIT expectation. We now expect Q1’21E adj. EBIT of EUR 2.4m (8.7% margin). We have increased our FY21E adj. EBIT estimate by ~9% and we expect it to be EUR 22.4m (16.5% margin) while we expect sales growth of ~10% y/y.
“BUY” with TP of EUR 58.2 (57)
Marimekko reports its Q1 result on this week’s Thursday, 20th of May. On our estimates, the company trades with 21E-22E EV/EBIT multiple of 19.0x and 17.1x which is ~50% discount compared to the luxury peers. We keep “BUY” with TP of EUR 58.2 (57) ahead the Q1 result.
Marimekko’s Q4 result met the expectations with revenue growth of 8% y/y. Adj. EBIT improved by ~90%. The outlook remains good despite the uncertainties related to the pandemic. We keep our rating “BUY” with TP of EUR 57 (50).
Q4 result met the expectations
Marimekko’s Q4 result was somewhat in line with the expectations. Revenue increased by 8% y/y to EUR 37m (38m/38m Evli/cons.). Revenue was driven by good wholesale sales development in Finland, EMEA and Scandinavia. Customer numbers in stores declined as the pandemic situation worsened towards the end of the year. This impacted negatively on retail sales. On the other hand, retail sales were supported by strong growth in online sales. Adj. EBIT amounted EUR 5.8 (+90% y/y) vs. 5.0m/4.7m Evli/consensus. Profitability was boosted by increased sales and decreased fixed costs but at the same time, gross margin declined, resulting from increased online sales. 2020 dividend proposal is EUR 1.0 (1.2/1.1 Evli/cons.).
The outlook remains bright
Fashion industry has faced enormous losses due to the pandemic but despite the situation, the management of Marimekko has shown good capabilities of being able to adjust to the current environment. This reinforces our view of the company’s ability to grow profitably in the future as well. Marimekko is also benefiting from the changed consumer behavior where sustainability plays a big role. Marimekko expects sales in Finland and APAC-region to grow in 2021. Domestic wholesale sales will be boosted by nonrecurring promotional deliveries and a vast majority of those will take place in H2’21. Marimekko expects to open ~5-10 new stores and shop-in-shops in 2021 of which most openings will be in Asia.
“BUY” with TP of EUR 57 (50)
The ongoing pandemic situation is still impacting on Marimekko’s sales and we expect the situation to normalize in H2E. Marimekko expects 21E sales to increase from 2020 and adj. EBIT margin to be on a par with the long-term target of 15%. We have slightly increased our estimates and expect 21E sales of EUR 135m (+10% y/y) and adj. EBIT of EUR 20.5m (15.2% margin). On our estimates, the company trades with 21E-22E EV/EBIT multiple of 20.1x and 16.9x which is 50-70% premium compared to the premium peers. We see the premium acceptable due to the strong revenue and profitability development. We keep our rating “BUY” with TP of EUR 57 (50).
Marimekko’s Q4 result was somewhat in line with expectations. Net sales were EUR 37m (8% y/y) vs. EUR 38m/38m Evli/cons. Adj. EBIT was EUR 5.8m vs. EUR 5.0m/4.7m Evli/cons. 2020 dividend proposal is EUR 1.0 vs. EUR 1.20/1.10 Evli/cons.
Marimekko issued a positive profit warning yesterday. The company expects 2020E net sales to be approx. at the same level or slightly lower compared to 2019. Adj. EBIT is expected to be higher compared to last year. We have increased our estimates and keep our rating “BUY” with TP of EUR 50 (44).
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).
Marimekko is a Finnish design and lifestyle company founded in 1951. The company’s largest market area is Finland followed by the APAC region. As we expect further earnings improvement potential via profitable, global growth, we keep our rating “BUY” with TP of EUR 44 (43).
A Finnish design and lifestyle company
Marimekko, founded in 1951 is a Finnish design and lifestyle company. The company is known for its unique colors and prints. The company’s product portfolio includes high-quality clothing, bags and accessories as well as home décor items ranging from textiles to tableware. The company aims to gain profitable growth via broader target audience. The company has approx. 150 stores across the world. Marimekko’s revenue CAGR in 2013-2019 was ~4.9 percent.
20E hampered by the pandemic but outlook remains good
Year 2020 started well but the Covid-19 quickly spread across the world and Marimekko was forced to close its retail stores temporarily in Finland as well as in other market areas. Despite of the challenging times, Marimekko performed relatively well during the lockdown. The company has benefited of having different product segments (i.e. consumers have spent more time at home which has increased the demand of home décor products while fashion sales have dropped). We expect Marimekko’s sales to decline by ~4 percent y/y in 20E. Given the circumstances, we consider this fairly good performance. We expect adj. EBIT to be on a par with last year, totaling EUR 17.3m. We expect revenue to grow by ~8 percent in 21E and ~6 percent in 22E. We expect Marimekko is set to reach its EBIT margin target of 15 percent by 22E.
“BUY” with TP of EUR 44 (43)
We value Marimekko by using valuation multiples. On our estimates, the company trades with 20E P/E multiple of 24.8x and EV/EBIT multiple of 17.9x. Hence the company trades with a discount compared to the premium and luxury peers. Correspondingly, the company trades with 21E P/E multiple of 20.7x and EV/EBIT multiple of 15.6x, which translates into a clear discount compared to the luxury peers. We keep our rating “BUY” with TP of EUR 44 (43).
Marimekko’s Q3 result outpaced the expectations as net sales increased by 10% y/y despite of the challenging times. Adj. EBIT increased by ~35% y/y and totaled EUR 10.5m. We have slightly increased our 20E-22E estimates and keep our rating “BUY” with TP of EUR 43 (42).
Strong growth in Q3
Marimekko delivered extremely strong Q3 result despite of the challenging times. Net sales were EUR 38.0m (+10% y/y) vs. EUR 36.0m/35.3m Evli/cons. Sales growth was driven by good development in wholesale sales in Finland and EMEA. In Finland, wholesale sales included nonrecurring promotional deliveries. Also, retail sales included unrecognized sales from Q2 (EUR ~1m). Further, online sales continued to perform well. Marimekko’s Q3 adj. EBIT totaled EUR 10.5m vs. EUR 9.1m/8.4m Evli/cons. Profitability was boosted by good sales growth and decreased fixed costs. Fixed costs were also reduced by subsidies granted in various countries to mitigate the negative business impacts of the COVID-19.
Fighting against the pandemic
Fashion industry has been suffering from the COVID-19 but so far Marimekko has survived relatively well in the turbulence. The company benefits of having different product lines as the growth in home decor products has been strong in Q3 (+44% y/y) which has compensated the drop in sales in fashion and bags & accessories. The final quarter is important for Marimekko as several sales campaigns take place during the quarter. We expect fairly good development in Finland as currently the household consumption is more focused on domestic purchases. However, sales are dependent on the pandemic situation and the trend in customer numbers in retail stores. International sales are also heavily impacted by the development of the pandemic.
“BUY” with TP of EUR 43 (42)
Marimekko expects 20E net sales to be lower than in the previous year. Adj. EBIT is expected to be approx. at the same level or lower than in 2019. We have made small adjustments to our estimates after the result and expect 20E sales of EUR 121m (-3.5% y/y). We expect adj. EBIT to be in line with last year (EUR 17.3m). In 21E, we expect revenue growth of ~8% y/y and profitability to further improve. On our estimates, the company trades at 20E-21E EV/EBIT multiple of 18.4x and 15.9x which is a clear discount compared to the luxury peers. We keep our rating “BUY” with TP of EUR 43 (42).
Marimekko’s Q3 result outpaced the expectations. Net sales were EUR 38.0m (10% y/y) vs. EUR 36.0m/35.3m Evli/cons. Adj. EBIT was EUR 10.5m vs. EUR 9.1m/8.4m Evli/cons. Marimekko expects 20E net sales to be lower than in the previous year and comparable operating profit is estimated to be approx. at the same level or lower than in the previous year.
Marimekko announced a guidance for 2020E and expects net sales to be lower compared to last year and adj. EBIT to be approx. at the same level or lower than last year. Due to the improved outlook we have increased our estimates. We upgrade to “BUY” (“HOLD”) with new TP of EUR 42.0 (32.0).
Guidance for 20E announced
Marimekko withdrew its earlier 20E guidance in March, solely due to the estimated impacts of the COVID-19. The company stated during its Q2 result that the coronavirus will have a significant negative impact on sales and profitability in 20E. Now the company has announced a guidance for 20E and expects net sales to be lower than in the previous year (EUR 125.4m) and adj. EBIT to be approx. at the same level or lower than in the previous year (EUR 17.1m).
Better than expected trend in sales
According to Marimekko, the improved outlook is mainly due to better than expected trend of Finnish retail sales during the summer and improved outlook of wholesale sales but also due to better fixed cost savings during the rest of 20E. The company however highlights that there are still significant uncertainties caused by the COVID-19. The travel restrictions remained tight throughout the summer thus it is likely that the money normally spent on traveling has now been put into other things. Additionally, during the pandemic, the trend of domesticity has increased among Finnish consumers which should also have a positive impact on domestic sales. According to the company, major portion of its net sales and earnings for H2E will be generated during Q3E.
Upgraded to “BUY” (“HOLD”) with TP of EUR 42.0 (32.0)
We have increased our 20E sales expectation by ~2% and our 20E adj. EBIT estimate by ~21%. In our view, Marimekko’s mid-term outlook is good despite of the challenging times. On our estimates, the company trades at 20E-21E EV/EBIT multiple of 18.6x and 16.4x which translates into a clear discount (~50%) compared to the luxury peers and at 20E-21E P/E multiple of 25.0x and 21.6x – also a clear discount compared to the luxury peers. We upgrade to “BUY” (“HOLD”) with TP of EUR 42.0 (32.0).
Considering the circumstances, Marimekko delivered relatively good Q2 result. Net sales decreased by 20% y/y and amounted EUR 23.3m vs. EUR 18.3m/19.8m Evli/cons. Adj. EBIT clearly beat expectations and was EUR 2.7m vs. EUR 0.6m/0.5m Evli/cons. We keep our rating “HOLD” with TP of EUR 32 (24)
Relatively good result, considering the circumstances
Marimekko’s Q2 net sales were down by 20% y/y and totaled EUR 23.3m (EUR 18.3m/19.8m Evli/cons). Especially retail sales in Finland, Scandinavia and North America faced headwind amid the pandemic but also wholesale sales in the APAC region declined. At the same time, licensing income in the APAC region boosted sales. Adj. EBIT clearly beat estimates and was EUR 2.7m vs. EUR 0.6m/0.5m Evli/cons. Profitability was weighed down by lower net sales and declined relative sales margin (sales margin was negatively impacted by increased logistics costs and bigger discounts). In the early stage of the pandemic situation, the company implemented cost saving measures resulting in decreased fixed costs in Q2. Guidance for 20E was not given.
Sales and earnings depending on the pandemic situation
Even though the Q2 result beat the expectations, the uncertainties hover over the H2’20. Despite of the strong online sales growth (more precise information not disclosed), it is vital especially for the retail stores to remain open. In the case of new infection waves, we expect the customers to become even more price sensitive and cautious with their purchases, impacting negatively on sales. This could also have an impact on the partners’ behavior. However, we expect the mentality of “support your local” among the Finnish consumers to continue, supporting domestic sales together with nonrecurring promotional deliveries of which majority will take place in H2’20E. Marimekko is also planning to reorganize its operations and initiates cooperation negotiations. The aim is to seek annual cost savings of approx. EUR 1.5m.
“HOLD” with TP of EUR 32.0 (24.0)
After the Q2 result we have increased our 20E revenue estimate by ~6% (EUR 116m) and our adj. EBIT estimate by ~27% (EUR 13.7m). We have also slightly increased our 21E-22E estimates. However, we note that there are significant uncertainties not only with our 20E estimates but also with our 21E estimates. On our estimates, Marimekko trades at 20E-21E EV/EBIT multiple of 18.1x and 13.5x, which translates into a clear discount compared to the luxury peers. We keep our rating “HOLD” with TP of EUR 32.0 (24.0).
Marimekko’s Q2 result beat the consensus expectations. Net sales were EUR 23.3m (-20% y/y) vs. EUR 18.3m/19.8m Evli/cons. Adj. EBIT was clearly above estimates at EUR 2.7m vs. EUR 0.6m/0.5m Evli/cons. Marimekko expects the coronavirus to have a significant negative impact on net sales and profitability in 2020. Guidance for ’20E was not given at this point.
Marimekko’s Q1 result was below expectations as net sales declined by 8% y/y, amounting to EUR 24.9m (27.9m/25.4m Evli/cons). Adj. EBIT was EUR 1.2m (1.7m/1.4m Evli/cons). The coronavirus hampered sales in all Marimekko’s market areas. We downgrade to “HOLD” (“BUY”) with TP of EUR 24 (28).
All market areas were impacted by the coronavirus
COVID-19 hampered all Marimekko’s market areas which led to a decline in net sales (-8%). Net sales totaled EUR 24.9m (27.9m/25.4m Evli/cons). Finland was the only market area with a positive sales development (+6%) in Q1. Net sales in the second largest market area APAC, declined by 28% y/y. Wholesale sales in APAC fell by -30% y/y not only due to the coronavirus but also as the corresponding figures in the comparison period were high due to an exceptional delivery pattern. Relative sales margin was affected by increased logistics costs and nonrecurring expenses resulting from the relocation of the company’s main warehouse. Decline in sales and weakened relative sales margin weighed down adj. EBIT which was EUR 1.2m vs. EUR 1.7m/1.4m Evli/cons.
Consumers likely to become more cautious
Our expectations for the upcoming months are not high as the movement restrictions and the temporary closure of stores will no doubt have a significant negative impact on Marimekko’s sales and profit. The company’s online store supports the business in some level as the online sales have increased significantly, though the management did not provide information regarding the magnitude of this. The outlook for ’20 wholesale sales in Asia is affected by the temporary closure of partner-owned stores and changing customer sentiment. At the same time, domestic wholesale sales in ’20 are boosted by nonrecurring promotional deliveries, which will be mainly taking place during H2. Going forward, the globally weakening economic outlook and declining purchasing power will have a negative impact on consumer behavior. We expect retail sales and wholesale sales to decline by 12% and 11%, respectively in 20E.
“HOLD” (“BUY”) with TP of EUR 24 (28)
We have cut our 20E sales expectation by ~4% and adj. EBIT expectation by ~8%. The company expects COVID-19 to have a significant negative impact on sales and profit in ‘20 but did not provide more detailed guidance at this point. Due to the weakening economic outlook we have also cut our 21E-22E sales expectation by 7-9% and adj. EBIT expectation by 10-12%. On our estimates, Marimekko trades at 20E-21E EV/EBIT multiple of 17.3x and 10.3x, which translates into 50-60% discount compared to the luxury peers. We downgrade to “HOLD” (“BUY”) with TP of EUR 24 (28).
Marimekko’s Q1 result was below expectations as net sales decreased by 8%, amounting EUR 24.9m vs. EUR 27.9m/25.4m Evli/cons. Adj. EBIT was EUR 1.2m vs. EUR 1.7m/1.4m Evli/cons. Marimekko expects the coronavirus to have a significant negative impact on net sales and profitability in 2020. Guidance for ’20 was not given at this point.
Marimekko withdrew its guidance for 20E as the consumer demand in all the market areas has dropped due to COVID-19. We now expect 20E sales to decline by 10% y/y and adj. EBIT of EUR 11.7 (-32% y/y) but we note that there are significant uncertainties especially with our short-term estimates. We upgrade to “BUY” (“HOLD”) with TP of EUR 28 (44).
Weakened consumer demand outlook due to COVID-19
Marimekko withdrew its 20E guidance as the situation around COVID-19 has clearly weakened the consumer demand outlook in all Marimekko’s market areas (prev. 20E sales are expected to increase from the previous year and adj. EBIT is expected to be at the same level or higher than on the previous year). At the current stage, the company doesn’t give a guidance for 20E. However, if the situation is prolonged, it will have significant impacts on the company’s sales and profitability. As a result of the current situation, Marimekko is planning to adjust its operations and initiates cooperation negotiations. Marimekko has also changed its proposal for the ’19 dividend payment (prev. dividend proposition of EUR 0.90) and proposes that the AGM would authorize the Board of Directors to decide on a dividend payment of a max. of EUR 0.90 per share to be distributed in one or several instalments at a later stage when the company is able to make a more reliable estimate on the impacts of COVID-19 to the company’s business.
Expecting a significant drop especially in retail sales
As most of the market areas have some level lockdowns and thus many stores are being closed, we expect negative impacts especially on Q2’20E sales. We have lowered our Q2’20E sales estimate by ~44% and our EBIT estimate by ~82%. We expect retail sales to face the hardest hit due to the rapid drop in consumer numbers. We don’t expect as dramatical decline in wholesale sales as the buyers (of distribution channels) should have already ordered the spring/summer lines. However, it is difficult to estimate how the situation will impact on H2’20E sales. We also expect negative impacts on production and supply chain in H1’20E.
“BUY” (“HOLD”) with TP of EUR 28 (44)
We’ve lowered our 20E sales expectation by 17% and adj. EBIT estimate by 42%. We expect 20E sales of EUR 113 (-10% y/y) and adj. EBIT of EUR 11.7 (-32% y/y). We note that there are significant uncertainties with our short-term estimates but we see Marimekko’s mid-term investment case unchanged and positive as we see Marimekko is able to achieve higher sales and margins after this shock. In normal circumstances, Marimekko also offers an attractive dividend yield. On our estimates, Marimekko trades at 20E-21E EV/EBIT multiple of 17.6x and 10.2x which translates into 22-40% discount compared to the luxury peers. We upgrade our rating to “BUY” (“HOLD”) with TP of EUR 28 (44).
Marimekko delivered good Q4 result. Sales grew by 17% y/y to EUR 34.7m (Evli 34.6m). Sales growth was strong especially in Finland and APAC region. Adj. EBIT was EUR 3.0m (Evli 2.9m). We keep our rating “HOLD” with TP of EUR 44 (39).
Q4 revenue driven by strong sales in Finland
Marimekko’s Q4 net sales amounted to EUR 34.7m (17% y/y) vs. our EUR 34.6m (cons. 34.3m). Sales performance was strong especially in Finland, driven by increased retail and wholesale sales (retail LFL growth 21% y/y). APAC region performed well also, as revenue was boosted by increased wholesale sales and licensing income. Q4 adj. EBIT was EUR 3.0m vs. our EUR 2.9 (cons. 3.0m). Profitability was driven by strong sales but weighed down by increased fixed costs. Proposed ’19 dividend of EUR 0.90 was below expectations (Evli/cons EUR 1.14/1.08).
Expecting a strong year in home market
We expect the good performance in Finland to continue in ‘20E, driven by broader target audience. Domestic wholesale sales are expected to be substantially higher than in ‘19, due to nonrecurring promotional deliveries. We expect ‘20E sales growth of 12% y/y in Finland, representing some 58% of Marimekko’s total sales in ‘20E. We also expect sales to increase in APAC region, though the coronavirus and political uncertainties could have a negative impact on sales. The actions taken to control the grey export cases in APAC region will also have an impact on sales and result. We expect APAC ‘20E sales growth of 2.5% y/y (H2’19 sales included nonrecurring licensing income of EUR 1.6m).
Increased investments into growth
We expect profitability improvement of ~12-18% y/y in ‘20E-‘21E, supported by strong sales growth and improved gross margin. According to the company, investments into growth will be higher in ‘20E, resulting in increase in personnel and marketing expenses. Store network will be expanded by ~10 new stores and shop-in-shops and some existing stores will be renewed. The company will also develop further its digital business and IT systems. We expect total OPEX to increase by ~10% y/y, hampering profitability development.
“HOLD” with TP of EUR 44 (prev. EUR 39.0)
We have slightly increased our ‘20E sales expectation and expect sales growth of 9.2% y/y (136.9m) while we expect adj. EBIT of EUR 20.1m (17.5% y/y). We see that Marimekko is able to achieve and maintain higher margins than the premium goods peer group, which justifies higher multiples similar to our luxury goods peer group median. On our estimates, Marimekko trades at ‘20E-‘21E EV/EBIT multiple of 16.7x and 14.6x which translates into ~20% discount compared to the luxury peer group. We keep our rating “HOLD” with TP of EUR 44 (EUR 39).
Marimekko’s Q4 net sales increased by 17% and amounted to EUR 34.7m vs. EUR 34.6m/34.3m Evli/cons. Adj. EBIT was EUR 3.0m vs. EUR 2.9m/3.0m Evli/cons. In 2020E, revenue is expected to be higher than in the previous year while adj. EBIT is estimated to be approximately at the same level or higher than in the previous year.
Marimekko reports its Q4’19 result on 13th of Feb. We expect Q4 sales of EUR 34.6m (16.5% y/y) and adj. EBIT of EUR 2.9m. We have kept our estimates largely intact and expect ’19 dividend of EUR 1.14 per share. We keep our rating “HOLD” with TP of EUR 39.0 intact ahead of 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.
Marimekko delivered good Q3 result, as expected. We saw some concrete actions to reach a wider target audience as the company launched its first streetwear collection KIOSKI. We have slightly increased our estimates for 19E-21E. We keep our rating “HOLD” with TP of EUR 39 (30).
Q3 earnings supported by increased sales both in Finland and international
Marimekko’s Q3 result was strong, as expected. Revenue grew by 15% and was EUR 34.5m vs. EUR 34.7m/33.8m Evli/consensus. Sales is Finland grew by 14% while international sales increased by 17%. Marimekko’s sales grew in all the market areas, growth being particularly good in Finland and APAC region. In Finland, growth was driven by retail sales (16% y/y). In APAC region, retail sales increased by 14% and wholesale sales by 9%. Also, increased licensing income boosted sales in APAC. Comparable operating profit was slightly higher than consensus estimates but in line with our estimate at EUR 7.8m resulting in EBIT margin of 22.7% (vs. EUR 7.8m/7.6m Evli/consensus). Earnings development was boosted by the good growth in net sales but at the same time profitability was impacted by increased fixed costs which were partly due to the share-based incentive scheme for management.
Successful launches appeal to a wider target audience
In Jan-Sept, Marimekko’s sales development has been good especially in Finland (9% y/y) and APAC region (14% y/y), which are the two main markets for the company but also in EMEA (25% y/y). Marimekko’s brand continues strong in Finland and the company has been able to reach new customer groups while keeping the existing customers, resulting higher sales. Marimekko’s first (unisex) streetwear collection KIOSKI, which was launched in Q3 is an example of the actions the company has taken in order to appeal to a wider audience. The launch of the collection was successful and we see the collection to appeal well to a younger customer base in particular. In addition to Marimekko KIOSKI, the new leather bag line supports the company’s strategy as bags and accessories (share of net sales ~26%) provide a convenient way to introduce the brand to new customers. In Q3, Marimekko’s prints were also part of an anniversary collection by Target, bringing a lot of visibility in the US. During Jan-Sept, most of the company’s net sales were generated in Finland (54%) while 21% of net sales came from APAC region. Finland and APAC both represent ~37% of brand sales.
Growth strategy to support outlook for 19E-21E
We expect 19E revenue to grow by 10% y/y in Finland and 14% y/y internationally. In our assumptions, Finland represents ~55% of the total revenue in 19E-20E. We expect retail and wholesale sales to develop favorably in the future resulting from increasing global brand awareness and wider customer base. Increasing retail sales should also support gross margin improvement. We have slightly adjusted our 20E-21E outlook by increasing our revenue expectation by some 1% while increasing our 20E-21E EBIT expectation by 0.5% and 5.7%. We foresee revenue growth of ~8% in 20E-21E. Marimekko’s target is to achieve operating profit margin of 15% which we see achievable given the growth outlook. We also expect increasing e-commerce to support growth.
“HOLD” with TP of EUR 39 (30)
We expect Marimekko’s 2019E sales to grow by 12% and to total EUR 125.3m. We have increased our EBIT expectation to EUR 17.0m (prev. EUR 16.8m), resulting in EBIT margin of 13.6% (2018: 10.9%). We see that Marimekko is able to achieve and maintain higher margins than the premium goods peer group, which justifies higher multiples similar to our luxury goods peer group median. On our estimates, Marimekko trades at 19E-20E EV/EBIT multiple of 18.8x and 15.4x which translates into 14-18% discount compared to the luxury goods peer group median. Our target price translates into EV/EBIT multiple of 19.6x and 16.0x on our 19E-20E estimates, which still are below the EV/EBIT multiples of Marimekko’s luxury goods peer group. We keep our rating “HOLD” with TP of EUR 39 (prev. EUR 30).
Marimekko’s Q3 net sales increased by 15% and was EUR 34.5m vs. EUR 34.7m/33.8m Evli/cons. Adj. EBIT was EUR 7.8m vs. EUR 7.8m/7.6m Evli/cons. Sales grew in all the market areas which boosted earnings development. Marimekko reiterated its guidance for 2019E.
Marimekko updated its 2019E guidance yesterday. The company expects 2019E comparable operating profit to be higher than in the previous year, approximately of EUR 17m. The company reiterated its guidance for FY19E revenue; revenue is expected to be higher than in the previous year. Marimekko will report its Q3 result on November 6th. We retain our rating HOLD with TP of EUR 30.
Updated guidance for 2019E
Marimekko raised its earnings estimates for FY19E and reiterated its FY19E revenue guidance. According to the updated outlook, Marimekko expects FY19E comparable operating profit to be higher than in the previous year, amounting to approximately EUR 17 million (previous guidance; comparable operating profit is expected to amount maximum of EUR 15 million). This is mainly due to stronger than estimated sales growth and improved sales outlook in Finland but also better than estimated trend in relative gross margin. Marimekko did not provide much information other than that, so we wait for more color in the Q3 report.
We expect increase in sales in H2’19
We expect Marimekko’s H2’19 net sales to be EUR 69.4 million (16.4% y/y) while we expect H2’19 adj. EBIT to be EUR 10.5 million (H2’18 adj. EBIT of EUR 7.9m), resulting in EBIT margin of 15.1% (H2’18 EBIT margin of 13.3%). We expect sales and profitability to increase especially in Finland and APAC due to stronger sales growth in Finland and higher license revenue from APAC. We also expect the holiday season in the last quarter to have a considerable impact on Marimekko’s total sales in 2019E.
We maintain “HOLD” with TP of EUR 30
We have updated our estimates after the updated guidance. We have increased our 2019E revenue expectation and expect 2019E sales to total EUR 125.6m (previous: EUR 123.4m). We expect 2019E adj. EBIT of EUR 16.8m (previous: EUR 14.7m) resulting in EBIT margin of 13.4% We maintain our rating “HOLD” with TP of EUR 30.
Marimekko’s H1 has been impressive and we expect the good momentum to continue throughout the year. The company has been able to target broader audience and license sales in APAC is expected to increase in H2, which should support revenue growth. We keep “HOLD” with TP of EUR 30 (26).
Strong Q2 earnings
Marimekko’s Q2 revenue was in line with expectations at EUR 29.1m vs. EUR 31.1m/29.8m Evli/cons. Revenue growth was good especially in Finland where comparable retail sales increased by 17% y/y and totaled EUR 16.8m vs. 16.7m Evli view. Also, growth in wholesale sales in EMEA region was good. Wholesale sales in Finland decreased by 18% y/y as there were large non-recurring wholesale deliveries in Q2’18. International revenue was EUR 12.4m vs. EUR 14.4m Evli view. Adj. EBIT was EUR 3.7m vs. EUR 3.5m/3.2m Evli/cons. Earnings were supported by increased sales and gross margin improvements, which were impacted by moderate sale campaigns and increased retail sales.
Broader customer segments support growth
Marimekko had a strong H1 as the company’s revenue grew by ~8% and adj. EBIT by ~46 % y/y. We expect the good momentum to continue as the company has been able to target wider customer segments and seeks to improve growth through online store, partner-led retail in Asia as well as by increasing the sales/m2 in its physical stores. Marimekko has approximately 150 stores in 15 countries, of which most of the stores are outside of Finland and the company aims to open 10 new shops or shop-in-shops in 2019. In APAC, Japan is the largest market area but the company sees growth opportunities in other countries as well. Net sales from APAC represented 21% of total sales in H1’19. During the last couple of years, the company’s combined revenue from APAC has been flat but the company has indicated that the revenue from APAC is likely to increase in the future as the strategy is to appeal to broader target audience globally. We expect APAC’s retail revenue in 2019E to increase by ~20% y/y and wholesale sales growth of ~13% y/y. In Q2, Marimekko updated its guidance for 2019, mainly as it expects higher licensing income in APAC during H2’19. The company reiterated its guidance for 2019E revenue and expects the revenue to be higher than in 2018 and expects operating profit to be higher than in 2018, approximately maximum of EUR 15m (previous: operating profit expected to be in the same level as in 2018). The company targets 10% y/y revenue growth and EBIT% of 15% in the long-term. We expect 2019E revenue of EUR 123m (prev. EUR 125m) and EBIT of EUR 15m (prev. EUR 14m), resulting in EBIT% of 11.9%.
We retain ”HOLD” with TP of EUR 30 (prev. EUR 26)
We have kept our underlying estimates largely intact but increased our 20E-21E estimates as we expect broader target audience and improved gross margin levels to support growth. We expect the company’s revenue to grow ~8% y/y in 20E-21E and EBIT growth of ~20% y/y. On our estimates, Marimekko trades at 19E-20E EV/EBITDA multiple of 9.7x and 8.6x which translates into ~50% premium compared to the premium goods peer group. We see Marimekko’s current valuation as stretched, but as we expect the company to transition towards new customer segments and markets, which should accelerate growth and enable the company to reach a new profitability level, we accept the premium. Our EBIT% estimates are already shifting towards the luxury goods peer group which also justifies higher multiples. We keep our rating “HOLD” with new TP of EUR 30 (prev. EUR 26).
Marimekko’s Q2 revenue increased by 3% and was EUR 29.1m vs. EUR 31.1m/29.8m Evli/cons. Adj. EBIT was EUR 3.7m vs. EUR 3.5m/3.2m Evli/cons. Revenue was mainly driven by improved relative sales margin and sales growth. Marimekko reiterated its guidance for 2019E.
Marimekko will report its Q2 result on August 15th and the company updated yesterday its guidance for FY19E. The company expects 2019E EBIT to be higher than in previous year, approximately maximum of EUR 15m. The company reiterated its guidance for revenue; revenue is expected to be higher than in previous year. We retain our rating “HOLD” with TP of EUR 26 (25) ahead of Q2.
Updated guidance ahead of Q2
Marimekko updated its 2019E guidance ahead of its Q2 result. The company reiterated its FY19E revenue guidance but updated its guidance for FY19E comparable operating profit. According to the new guidance for 2019E, revenue is expected to be higher than in previous year while operating profit is expected to be higher than in previous year at maximum of EUR 15m (previous: 2019E operating profit expected to be in the same level as in 2018). Marimekko did not provide much information other than that. Increased EBIT guidance for 2019E is mainly due to increased licensing income in APAC. The company also expects H2’19 costs to be higher than in H2’18.
Sales expected to increase in Q2
We expect Marimekko’s Q2 total sales to be EUR 31.1m (10.4% y/y) while we expect Q2’19E adj. EBIT of EUR 3.5m (2018 adj. EBIT of EUR 3.1m) resulting EBIT margin of 11.2% (2018 EBIT margin of 11.1 %). Marimekko’s business is cyclical and H2 and especially the outcome of Q4 holiday sales have a high impact on Marimekko’s total sales and profitability. The company also became aware of grey export in Asia in Q1’19 and the actions taken might have an impact on sales and earnings.
We retain “HOLD” with TP of EUR 26 (25)
We have updated our estimates after the guidance update. We have increased our FY19E revenue expectation to EUR 125m (previous EUR 118m) and adjusted our cost estimates to be in line with the new guidance. We expect 2019E adj. EBIT to be EUR 14.2m (previous estimate EUR 12.5m). We keep our rating “HOLD” with TP of EUR 26 (previously EUR 25).
Marimekko’s Q1 result hit all-time record and beat our estimates. Growth was mainly boosted by strong retail sales in Finland and wholesale sales in APAC. Even though adj. EBIT in 2019E is expected to remain flat, annual growth is likely to continue with good momentum. We upgrade our rating to “Hold” (“Sell”) and our TP to 25 (22).
Growth on the right track
Q1 revenue growth was 13% y/y and totaled EUR 27.1m. This was driven by wholesale sales growth in APAC and retail sales growth in Finland where LFL-growth was 12% y/y. As APAC wholesale sales was mainly impacted by deliveries that were transferred from Q4’18 to Q1’19, we expect wholesale sales to normalize during 2019E. In Finland, similar sized, non-recurring promotional deliveries as in 2018 (in Q2 and Q4 especially) are not expected to occur in 2019E. The company’s total sales are expected to grow from last year.
Investments in growth will increase 2019E expenses
Marimekko’s plan for 2019E is to invest in growth, which increases expenses. Major part of the investments will be used to revamp store network. Marketing expenses are expected to increase in 2019E as well as investments into IT and digitalization. These will weigh down adj. EBIT in 2019E but are likely to boost growth in the upcoming years. Marimekko has also become aware of grey exports in Asia, which could incur further costs.
Upgraded to “Hold” (“Sell”) with TP of 25 (22)
We have updated our estimates to take into account the IFRS 16 changes but kept the underlying 2019E figures mostly intact. We expect 2019E sales of EUR 118m (6% growth) and EBIT of EUR 13m (’18 EUR 12m). We have increased our growth expectations for ‘20E with sales growth of 7% y/y. On our estimates, Marimekko trades at EV/EBITDA 19E-20E multiple of 9.1x and 8.0x, which translate into 19% and 13% premium compared to the premium goods peer group. Investments in 2019E should support future growth but we are not ready yet to put emphasis on ‘20E-‘21E. We upgrade to “Hold” (“Sell”) with TP of 25 (22).
Marimekko’s Q1 revenue increased by 13% and was EUR 27.1m vs. EUR 25.3m Evli view. Adj. EBIT was EUR 2.6m vs. EUR 1.2m Evli view. Revenue was mainly driven by strong wholesale sales in APAC and increased retail sales in Finland. Operating result was boosted by increased sales and improved gross margin. Guidance for 2019E is kept intact.
Marimekko’s soft international sales in Q4 were largely attributed to timing issues of wholesale deliveries . 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 – “Sell” (”Buy”).
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.
Marimekko’s Q4 revenue was EUR 29.7m vs. EUR 31.6m/31.1m Evli/cons expectations, while adj. EBITDA landed at EUR 2.2m vs. EUR 2.3/2.6m Evli/cons views. International sales surprisingly declined by as much as 15% in Q4, explained in part by a timing issue of deliveries in APAC. However, international revenue declined somewhat in others markets as well. Dividend is in line. Guidance is mostly as expected, although the flat adj. EBIT guidance looks somewhat cautious vs. our estimates: we have expected adj. EBIT of EUR 13.1m in 2019E vs. EUR 12.2m in 2018A. Consensus for 2019E has been EUR 12.4m.
Marimekko had a strong Q3 and the company is now on an improved growth trajectory, following own actions that are now bearing fruit. We consider Marimekko’s outlook as being positive and retain “Buy” rating for the shares.
Guidance gives room for only EUR 1.4m EBIT in Q4
Marimekko had a very strong Q3. Performance remained solid in most markets. Despite strong Q3 guidance of max EUR 12m adj. EBIT in 2018E was kept intact. EUR 10.6m has been reached after Q3, implying guidance gives room for only EUR 1.4m for Q4. Earnings in Q4 are to be weakened by a revenue timing issue (part of revenue was timed from Q4 into Q3) and higher costs.
Shares could reach EUR 30 level if EBIT margin meets 15%
Marimekko revised its financial targets. Most notable change is in EBIT margin target, which is now 15% vs. 10% earlier. The 10% will be reached in 2018E. If 15% was reached, our DCF model and multiple exercises imply shares could reach EUR ~30 level, even without assuming higher growth than currently.
Extra dividend of EUR 1.25 to be distributed
Marimekko board proposes to distribute an extra dividend of EUR 1.25 per share, which is EUR ~10m. This corresponds to the divestment proceeds of the Herttoniemi real estate. Net cash was EUR 17m at the end of Q3. The remaining EUR 7m is reserved for general business development needs.
Maintaining “Buy” with an ex-div TP of EUR 22 (18)
We have raised FY19-20E estimates and expect a dividend of EUR 1.85 (0.60 ordinary + 1.25 extra) to be distributed for FY18E. We continue to see Marimekko’s outlook to be positive and valuation attractive. Our TP of EUR 22 (18) values the shares at 12.7x EV/EBIT with our 2019E estimates, or at 11% premium to the peer group, justified by a clear turn in sales and further margin upside upon continued growth.
Marimekko’s Q3 headline numbers are very strong for both revenue and profits. The company keeps 2018E guidance intact, but the max EUR 12m limit for adj. EBIT gives room for only EUR 1.4m adj. EBIT in Q4, which would be weaker than what has been reached during the last two years. Extra dividend of EUR 1.25 is proposed, and financial targets are revised.
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2022 revenue is expected to be higher than in the previous year. Adj. EBIT margin is expected to be between 17-20%.
Annual growth in net sales 15 percent and operating profit margin (EBIT) of 20 percent. Ratio of net debt to EBITDA at year end maximum of 2. A yearly dividend, at least 50% of net result.
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