Stockmann dragged down by Lindex, turnaround is ongoing
Stockmann’s turnaround journey is still a work in progress with the diversified fashion-to-foods-and-real-estate giant’s Q1 results showing it clearly has some way to go to get back to full health.
Its Lindex brand suffered in particular during the first quarter as key Scandinavian markets where it has most of its stores were generally sluggish.
Admittedly, Q1 is traditionally a slow period with the company saying its results in the first three months of the year are usually negative. And so it was this time round.
But CEO Lauri Veijalainen highlighted “enhancements to the range, customer service and shopping environment [that] have begun to show to our customers.”
So what were the numbers? Overall, Stockmann's net sales dropped to €242.7m from €273.1m a year ago and comparable sales fell by 2.9%. The adjusted operating loss was €27.8m in the January-March quarter. But the news wasn’t all bleak. For a start, the loss was lower than the €30.3m of a year ago and the gross margin rose to 51.1% from 50.2%.
Its department store sales may have fallen to €109.5m from €135.2m last time but the fall in core sales in Finland, to €89.9m, was largely the result of Easter falling in Q2 this year. Additionally, non-food sales in its department stores managed to avoid a drop and stayed flat overall. And overseas sales increased 1.8% to €19.5m, growing in both the Tallinn and Riga department stores.
And while a tough environment sent those Lindex sales down 5.4% as both the Swedish and Norwegian fashion retail markets declined during the quarter, the brand showed strength in all other markets.
Real Estate also continued to perform well during the period thanks to increased rental income, particularly in the Nevsky Centre shopping centre. The centre also acquired several new tenants but the company is still mulling whether to sell the property.
Stockmann is not taking any of its woes lying down and said “actions are already being taken to improve the performance,” with efficiency drives and new marketing/sales campaigns. It Crazy Days campaign, which took place in Stockmann stores after the first quarter, saw sales “close to the previous year’s level” and the online store was “very successful during the entire campaign.”
The CEO added: “We are now striving to achieve a strong result during the second quarter. Measures to stabilise sales and growth are implemented in all business units.”
But however many upbeat announcements the company makes, as mentioned, there is a lot to do before the turnaround plan can be declared a success. While the fashion market in the Baltics should grow this year, Sweden is still predicted to decline and even though Russia should also grow, consumer spending power there remains under pressure.
Stockmann still expects overall revenue to decline the year on the back of store closures and changes to the product mix. However, following Q1’s margin rise, the change sit is making should also boost margins in the next few quarters and should feed through into higher operating profit.
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