Marimekko - Growth continues with a gentler slope
Marimekko's Q3 growth was solid although EBIT fell short of our expectations. With higher-than-expected cost development, we modified our EBIT estimates downwards.
Decent Q3 result, EBIT below market expectations
Marimekko posted solid Q3 figures. Although, due to strong comparison figures both the top- and bottom line fell short of expectations. Group net sales grew by 4% y/y to EUR 44.1m driven by strong int’l sales and good growth in domestic retail sales. Domestic net sales declined by 7% y/y while int’l sales increased by 28% y/y mostly driven by strong development of the APAC region. Increased logistics costs pressed the gross margin slightly below that of the comparison period. Moreover, fixed costs saw some pressure through elevated personnel and IT-related costs which caused Q3 EBIT to fall below the comparison period. Q3 EBIT amounted to EUR 11.1m, reflecting an EBIT margin of 25.2% which was still on a great level.
Market might challenge the company's increased ambitions
Marimekko renewed its strategy for 2023-27 and consequently raised its growth target to 15%. Currently, against the company's growth ambitions, we see low consumer purchasing power and slowing economy support rather single- than double-digit growth seen during the recent years. On the other hand, increasing brand awareness should support the demand also during uncertain times. We expect the company to perform operatively well in a weaker market driven by lessons learned during the pandemic, but we estimate the demand for Marimekko’s offering to see some slowdown. For that reason, we expect the company not to reach its growth target in the coming years.
Valuation remains favorable
We lowered our estimates, driven by higher-than-expected cost pressures. Despite decreased EBIT estimates, we see upside potential in Marimekko’s current valuation. Currently, Marimekko is valued with 23E EV/EBIT of 11x while we, with our new target price, value the company with a corresponding multiple of 12x. Reflecting estimate adjustments, we adjust our TP to EUR 10.0 (prev. 12.0). With a moderate valuation, we retain our BUY-rating.
Marimekko posted solid Q3 figures. Although, due to strong comparison figures both the top- and bottom line fell short of expectations. Group net sales grew by 4% y/y to EUR 44.1m driven by strong int’l sales and good growth in domestic retail sales. Domestic net sales declined by 7% y/y while int’l sales increased by 28% y/y mostly driven by strong development of the APAC region. Increased logistics costs pressed the gross margin slightly below that of the comparison period. Moreover, fixed costs saw some pressure through elevated personnel and IT-related costs which caused Q3 EBIT to fall below the comparison period. Q3 EBIT amounted to EUR 11.1m, reflecting an EBIT margin of 25.2% which was still on a great level.
Market might challenge the company's increased ambitions
Marimekko renewed its strategy for 2023-27 and consequently raised its growth target to 15%. Currently, against the company's growth ambitions, we see low consumer purchasing power and slowing economy support rather single- than double-digit growth seen during the recent years. On the other hand, increasing brand awareness should support the demand also during uncertain times. We expect the company to perform operatively well in a weaker market driven by lessons learned during the pandemic, but we estimate the demand for Marimekko’s offering to see some slowdown. For that reason, we expect the company not to reach its growth target in the coming years.
Valuation remains favorable
We lowered our estimates, driven by higher-than-expected cost pressures. Despite decreased EBIT estimates, we see upside potential in Marimekko’s current valuation. Currently, Marimekko is valued with 23E EV/EBIT of 11x while we, with our new target price, value the company with a corresponding multiple of 12x. Reflecting estimate adjustments, we adjust our TP to EUR 10.0 (prev. 12.0). With a moderate valuation, we retain our BUY-rating.