Apr 27, 2018
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Lindex owner Stockmann loss shrinks, more stores to shut but spring starts well

Apr 27, 2018

Lindex owner and department stores operator Stockmann had a little bit of good news in its Q1 results report, even though it still made a hefty loss and the company’s turnaround programme will see it speeding up its closure programme.

Stockmann has changed its Helsinki flagship's name for a few months to promote gender equality - Stockmann

On the plus side, its losses shrank, its gross margin edged up and its online performance was strong. But while Q2 has started well, there’s clearly still plenty of work to do.

And that work is happening both in operations not visible to consumers as well as in higher-profile ways. For instance, the company is aiming to modernise its approach and engage with consumers more closely and in March, changed the name of its flagship Helsinki store to Stockwomann in honour of International Women’s day. The campaign is running for two months.

Back with the Q1 the numbers, in the three months to the end of March, the company reported consolidated revenue of €202.4 million, down from €216.9 million a year ago. The adjusted operating loss was €24.8 million, marginally better than €25.1 million of a year ago, although on a reported basis, the operating loss widened to €26.9 million from €25.1 million. But at least the gross margin rose to 55.1% from 53.3% and e-commerce was Stockmann's fastest-growing sales channel.

The company expects revenue for the year as a whole to be roughly level with the prior year, although with that gross margin improving, operating profit should rise this time.

CEO Lauri Veijalainen said the quarterly result was as expected and highlighted the margin improvement, also saying that inventories were at a healthy level, which meant the quarter saw fewer markdowns than in the same period a year earlier. And this healthier position is expected to continue throughout 2018.

And those proposed store closures? Veijalainen added that, as the affordable fashion market is “changing rapidly”, its Lindex chain “will look more closely at its store network. Lossmaking stores will be closed.”

It expects to shutter more than 20 stores this year, which is higher than the number it had estimated at the end of last year, reflecting "the weakened development in the Swedish fashion market.”

Clearly, markets remain tough and 2018 will present challenges, despite economic growth and consumer confidence improving in its largest operating countries, Finland and Sweden.

The company said purchasing behaviour is “changing due to digitalisation and increasing competition” and the fashion market doesn’t look to be improving in line with the economy in general. That said, in the Baltic countries, the fashion retail outlook is more upbeat than in the company's other markets.

And in other upbeat news for the future, Stockmann said it has launched a digital acceleration project this year, with the aim of increasing e-commerce and reinforcing its omnichannel approach.

Meanwhile, in physical stores, its sales campaigns seem to have been having a positive impact since Q1 ended. The Crazy Days discount campaign at its Stockmann stores “went very well” with growth being seen both in Finland and the Baltics. 

The sales campaign was held in department stores and online from April 11-15 and overall sales rose 4%. The department store in Tallinn achieved the best performance while the interiors and cosmetics categories areas saw the biggest growth. 

The e-store was the Crazy Days star though and managed to beat all previous sales records. Compared with last spring, the e-store grew 19%, “which demonstrates that Crazy Days now is a truly omnichannel campaign,” it said, adding that “the successful campaign gives us a solid start to the spring sales.”

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