Marimekko - Accelerating towards year-end
Marimekko’s Q2 EBIT came in strong, and the company’s current profitability potential seems more robust than we earlier anticipated with increased outlook of licensing income. We adjusted our estimates such that 23E EBIT saw a 5% increase.
Strong profitability in Q2
While Marimekko’s Q2 topline was in line with our expectations, the company’s profitability came in strong, beating our estimates. Q2 net sales grew by 6% to EUR 40.3m, supported by strong Int’l growth. Soft wholesale sales pushed domestic sales below the comparison period. With higher licensing sales and lower logistics costs, the company’s gross margin improved to 63.7% which we view as very strong. Traditionally, a higher share of scalable licensing sales boosts the company’s gross margin as the material costs concerning such sales are very minor. By combining solid net sales growth and improved gross margin, Marimekko’s Q2 adj. EBIT improved to EUR 6.8m (16.8% margin). Adj. EPS amounted to EUR 0.12, which could have been stronger without increased net financial costs.
Increased ambition with new store openings
Although economic uncertainty is present globally, we expect that the company’s visibility to new demand in Asia has improved which is now seen in the increased estimate of new stores (15-20). Most of the store openings happen in Asia, which is one of the main drivers of Marimekko’s current strategy. By opening stores in new market areas, such as Singapore, Malesia, and Vietnam, Marimekko starts to build its ecosystem starting from key cities through which it eventually expands also to other cities. This concept has already demonstrated its effectiveness in other Asian countries such as Japan, Thailand, and China. Marimekko’s track record makes us confident in believing in the company’s success in long-term market expansion, especially when collaborating with competent partners.
Share price rally keeps the valuation neutral
We slightly upgraded our 23-24E EBIT estimates with positive profitability development of Q2 and an improved outlook of licensing sales. In our view, the company’s valuation remains neutral with the after-result rally in the share price. We retain our HOLD rating. By valuing Marimekko with the same multiples as earlier (23-24E EV/EBIT 13-11x), our TP is now EUR 10.5 (10.0).
While Marimekko’s Q2 topline was in line with our expectations, the company’s profitability came in strong, beating our estimates. Q2 net sales grew by 6% to EUR 40.3m, supported by strong Int’l growth. Soft wholesale sales pushed domestic sales below the comparison period. With higher licensing sales and lower logistics costs, the company’s gross margin improved to 63.7% which we view as very strong. Traditionally, a higher share of scalable licensing sales boosts the company’s gross margin as the material costs concerning such sales are very minor. By combining solid net sales growth and improved gross margin, Marimekko’s Q2 adj. EBIT improved to EUR 6.8m (16.8% margin). Adj. EPS amounted to EUR 0.12, which could have been stronger without increased net financial costs.
Increased ambition with new store openings
Although economic uncertainty is present globally, we expect that the company’s visibility to new demand in Asia has improved which is now seen in the increased estimate of new stores (15-20). Most of the store openings happen in Asia, which is one of the main drivers of Marimekko’s current strategy. By opening stores in new market areas, such as Singapore, Malesia, and Vietnam, Marimekko starts to build its ecosystem starting from key cities through which it eventually expands also to other cities. This concept has already demonstrated its effectiveness in other Asian countries such as Japan, Thailand, and China. Marimekko’s track record makes us confident in believing in the company’s success in long-term market expansion, especially when collaborating with competent partners.
Share price rally keeps the valuation neutral
We slightly upgraded our 23-24E EBIT estimates with positive profitability development of Q2 and an improved outlook of licensing sales. In our view, the company’s valuation remains neutral with the after-result rally in the share price. We retain our HOLD rating. By valuing Marimekko with the same multiples as earlier (23-24E EV/EBIT 13-11x), our TP is now EUR 10.5 (10.0).