Marimekko - First wave survived

Considering the circumstances, Marimekko delivered relatively good Q2 result. Net sales decreased by 20% y/y and amounted EUR 23.3m vs. EUR 18.3m/19.8m Evli/cons. Adj. EBIT clearly beat expectations and was EUR 2.7m vs. EUR 0.6m/0.5m Evli/cons. We keep our rating “HOLD” with TP of EUR 32 (24)

Relatively good result, considering the circumstances
Marimekko’s Q2 net sales were down by 20% y/y and totaled EUR 23.3m (EUR 18.3m/19.8m Evli/cons). Especially retail sales in Finland, Scandinavia and North America faced headwind amid the pandemic but also wholesale sales in the APAC region declined. At the same time, licensing income in the APAC region boosted sales. Adj. EBIT clearly beat estimates and was EUR 2.7m vs. EUR 0.6m/0.5m Evli/cons. Profitability was weighed down by lower net sales and declined relative sales margin (sales margin was negatively impacted by increased logistics costs and bigger discounts). In the early stage of the pandemic situation, the company implemented cost saving measures resulting in decreased fixed costs in Q2. Guidance for 20E was not given.

Sales and earnings depending on the pandemic situation
Even though the Q2 result beat the expectations, the uncertainties hover over the H2’20. Despite of the strong online sales growth (more precise information not disclosed), it is vital especially for the retail stores to remain open. In the case of new infection waves, we expect the customers to become even more price sensitive and cautious with their purchases, impacting negatively on sales. This could also have an impact on the partners’ behavior. However, we expect the mentality of “support your local” among the Finnish consumers to continue, supporting domestic sales together with nonrecurring promotional deliveries of which majority will take place in H2’20E. Marimekko is also planning to reorganize its operations and initiates cooperation negotiations. The aim is to seek annual cost savings of approx. EUR 1.5m.

“HOLD” with TP of EUR 32.0 (24.0)
After the Q2 result we have increased our 20E revenue estimate by ~6% (EUR 116m) and our adj. EBIT estimate by ~27% (EUR 13.7m). We have also slightly increased our 21E-22E estimates. However, we note that there are significant uncertainties not only with our 20E estimates but also with our 21E estimates. On our estimates, Marimekko trades at 20E-21E EV/EBIT multiple of 18.1x and 13.5x, which translates into a clear discount compared to the luxury peers. We keep our rating “HOLD” with TP of EUR 32.0 (24.0).

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