Operating result down due to weak Russian rouble and challenging market Helsinki, Finland, 2014-04-29 07:00 CEST (GLOBE NEWSWIRE) --
STOCKMANN plc, Interim Report 29.4.2014at 8.00 EET January- March 2014: Consolidated revenue was EUR 395.6 million( EUR 431.3 million), down 7.6 per cent excluding terminated franchising operations, or down 4.6 per cent at comparable exchange rates. Operating result was EUR -43.9 million( EUR -34.6 million). Result for the period was EUR -40.1 million( EUR -36.5 million). Earnings per share came to EUR -0.56( EUR -0.51). Revised profit guidance for 2014: Due to the weak currency exchange rates and weaker than expected consumer demand in Russiaand Finland, Stockmannestimates that the Groupís euro-denominated revenue in 2014 will decline on 2013. Operating profit is not expected to exceed the figure for 2013. Stockmannpreviously estimated that the Groupís revenue, at comparable exchange rates, would increase slightly in 2014. Revenue growth was expected to take place in the second half of the year. Operating profit was expected to be somewhat higher than in 2013. CEO Hannu PenttilÄ: ĒThe Russian rouble was at its weakest-ever level against the euro during the first quarter of 2014. The Russian economy has stagnated and consumersí purchasing power has declined. In Finland, the retail market also remained weak. These factors had a clearly negative impact on the Stockmann Groupís performance in the quarter. The Department Store Divisionís rouble-denominated revenue was slightly up, but operations in Russiawere significantly affected by the weak currency. Revenue and operating result in the Baltic countries were up. In Finland, performance improved slightly towards the end of the quarter. Similar development was seen in the Crazy Days campaign in April, which took place after the reporting period. The campaignís revenue was close to the previous yearís level at comparable exchange rates, but euro-denominated revenue was down 6 per cent in total. Revenue was up in the Baltic countries and in Russiain roubles, but euro-denominated revenue was down in Russiaand in Finland, despite the strong sales growth in the online store. Our fashion chains continued their mixed performance in the first quarter. Lindexís revenue was up in local currencies and its operating result improved slightly. SeppÄlÄís result weakened further, despite store closures and other turnaround efforts. There are no signs of a quick recovery for the Russian rouble and the visibility in the Russian market is very weak. The retail market in Finlandalso remains challenging. We have started structural changes at Stockmannto improve the competitiveness in the weak market environment. The new operating model for our department stores in Finlandis vital for ensuring competitive operations in the future.Ē New projects Total capital expenditure for 2014 is estimated to be approximately EUR 60 million, which is less than the estimated depreciation of approximately EUR 75 million. Most of the capital expenditure will be used for expansion and refurbishment of the Lindex stores, department store renovations and IT system renewals. The Tamperedepartment store will gain more retail space in the construction project, due for completion in the last quarter of 2014. Planning for the new Tapiola department store continues, but the timetable is dependent on Espoo Cityís planning for the area. Stockmannís new distribution centre for its department stores and online store in Finlandand the Baltic countries will be taken into use in 2016. The centre will be located in leased premises. Stockmannwill make an investment of approximately EUR 28 millionin the centreís automation technology. Lindex will continue to expand with a net addition of over 20 stores in 2014, including franchising stores. Lindex entered into a franchising partnership with the Chinese company Suning in September 2013. Suning unilaterally withdrew from the franchising agreement at the end of March 2014. Lindex will investigate other opportunities to expand into the Chinese market, but Suningís withdrawal will delay the fashion chainís entry to the market. SeppÄlÄ aims to close down over 20 unprofitable stores in Russiain 2014. Outlook for 2014 The Russian rouble has weakened considerably and economic growth in Russiais estimated to stay on a low level in 2014. The crisis in Ukrainecontinues to affect the Russian economy. As a consequence, the visibility in the Russian retail market is very weak. The European economy is expected to improve slightly in 2014, but uncertainty will continue in the retail market, particularly in Finland. Purchasing power is expected to remain low, which will have a negative effect on consumer purchasing behaviour. The outlook for the affordable fashion market in Swedenis expected to improve slightly in 2014. The retail market in the Baltic countries is expected to remain relatively stable. Low consumer confidence may, however, affect consumersí willingness to make purchases in all market areas. As a consequence of the uncertain outlook, Stockmannlaunched a cost savings programme in spring 2013. The programme will continue in 2014, focusing on long-term structural changes in order to adapt the cost structure to the slow growth and to improve performance. The Groupís capital expenditure is estimated to be lower than depreciation, and to amount to approximately EUR 60 millionin 2014. Revised profit guidance for 2014: Due to the weak currency exchange rates and weaker than expected consumer demand in Russiaand Finland, Stockmannestimates that the Groupís euro-denominated revenue in 2014 will decline on 2013. Operating profit is not expected to exceed the figure for 2013. Earlier profit guidance, published on 13 February 2014: At comparable exchange rates, Stockmannexpects the Groupís revenue to increase slightly in 2014. Revenue growth is expected to take place in the second half of the year. Operating profit is expected to be somewhat higher than in 2013. Key figures 1-3/2014 1-3/2013 1-12/2013 Revenue, EUR mill. 395.6 431.3 2 037.1 Revenue growth, % -8.3 -4.2 -3.7 Gross margin, % 45.5 45.8 48.6 Operating profit, EUR mill. -43.9 -34.6 54.4 Net financial costs, EUR mill. 5.5 6.0 27.6 Profit before tax, EUR mill. -49.3 -40.7 26.8 Profit for the period, EUR mill. -40.1 -36.5 48.4 Earnings per share, undiluted, EUR -0.56 -0.51 0.67 Equity per share, EUR 11.44 11.31 12.42 Cash flow from operating activities, EUR mill. -112.9 -111.3 125.4 Capital expenditure, EUR mill. 9.4 11.5 56.8 Net gearing, % 107.8 116.2 87.3 Equity ratio, % 39.9 37.7 43.8 Number of shares, undiluted, weighted average, 1 72 049 72 049 72 049 000 pc Return on capital employed, 2.8 4.0 3.4 rolling 12 months Personnel, average 14 302 14 829 14 963 This company announcement is a summary of the Stockmann'sInterim Report for 1 January - 31 March 2014and includes the most relevant information of the report. The complete report is attached to this release as a pdf file and is also available on the company's website at stockmanngroup.com. Press and analyst briefing and conference call A press and analyst briefing in Finnish will be held today, on 29 April 2014at 9.15 a.m.at the Fazer À la Carte restaurant on the 8th floor of Stockmann's Helsinkicity centre department store, Aleksanterinkatu 52. A conference call in English will be held today, on 29 April 2014at 11.15 a.m. EET. To participate the conference call, please dial +358 9 8864 8511 and, when requested, key in the meeting room number *657899* including the asterisks. The presentation material will be available for downloading on the company's website from 9.15 a.m. EETonwards. Further information: Hannu PenttilÄ, CEO, tel. +358 9 121 5801 Pekka VÄhÄhyyppÄ, CFO, tel. +358 9 121 3351 www.stockmanngroup.com STOCKMANN plc Hannu PenttilÄ CEO Distribution: NASDAQ OMX Principal media Copyright © 2014 OMX AB (publ).