Marimekko - Expecting profitable growth

Marimekko reports its Q3 result 8th of November. We expect pick-up in growth driven by strong overall momentum outside Finland, new store openings and domestic non-recurring wholesale deliveries.

First half of the year was still relatively slow

Marimekko’s revenue grew 2% to EUR 75.6m (H1/22 EUR 74.0m) during the first half of 2023. The company’s growth slowed down during the first half driven by the slowdown in the domestic wholesale business and a tough comparison period. Gross margin was roughly in line with the comparison period at 62.1% (62.8% in H1/22). Comparable EBIT decreased to EUR 10.6m (EUR 12.3m in H1/22) with comparable EBIT margin of 14.0% (16.6% in H1/22) driven by higher fixed costs and lower volumes in Q1. In Q2, the comparable EBIT margin significantly improved year-over-year, reaching 16.8%, compared to 15.0% in Q2/22. The increase was primarily due to the rise in volumes and the manifestation of the company's operating leverage.

 

Expecting profitable growth during the second half of 2023

We expect solid growth for H2 driven by two main factors: non-recurring wholesale promotional deliveries in Finland and new loose franchise store openings in APAC. With the projected growth, we see that the profitability will continue to improve y/y. We expect gross margin to be supported by growth in licensing revenue and lower impact of logistics costs. We forecast net sales of EUR 48.5m and EBIT of EUR 12.6m for Q3. For FY 2023, we project net sales of EUR 178.1m and EBIT of EUR 32.9m. Marimekko expects its net sales to grow in 2023 from the previous year and comparable EBIT margin is expected to be approximately 16-19%. Our current estimate for comparable EBIT margin stands at 18.5%, at the upper end of the current guidance.

 

Valuation remains at a neutral level

With no changes to our estimates, Marimekko’s valuation remains neutral as it currently trades between our luxury (13% discount on 23E EV/EBIT basis) and premium goods (22% premium) peer groups. Marimekko trades at roughly 14-12x EV/EBIT and 18-16x P/E (23-24E). We retain our TP at 10.5 while keeping HOLD-rating intact.

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