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Marimekko - Scaling according to the plan

Marimekko reported Q3 figures that were largely in line with our estimates. We estimate that the company’s current good form will continue to Q4. While the soft domestic market poses challenges for 2024, expected international profitable growth, particularly in the APAC region, is anticipated to support overall performance.

Q3 figures were in line with our estimates

Driven by strong wholesale sales development across the globe, Marimekko’s net sales grew 9% y/y to EUR 47.9m, in line with our estimates (48.5/49.3m Evli/cons.). Int’l sales grew 13% y/y driven by strong wholesale sales especially in APAC, NA and Scandinavia. Finnish retail sales declined by 1% y/y while the non-recurring promotional deliveries supported domestic wholesale figures which grew 18% y/y. Despite the wholesale driven growth, Marimekko’s gross margin improved slightly supported by lower transport costs. The company’s fixed costs kept increasing yet higher volumes and improved gross margin boosted adj. EBIT to EUR 13.1m (12.6/12.8m Evli/cons.), fairly well in line with our estimates.

 

Profitable growth supported by int’l areas going forward

Even with the growth driven by wholesale sales, the company managed to improve its gross margin y/y. Furthermore, the company's EBIT margin saw an uptick due to sales growth, demonstrating the scalable nature of Marimekko's business model and its loose franchise model in Asia. The Finnish consumer confidence has continued to weaken during Q3 and start of Q4 and is currently clearly below the long-term average. We have revised our sales growth estimates upwards for Q4 and 2024 in int’l areas, on the other hand, we have lowered our net sales estimates for Finland. Our updated estimate for FY 2023 net sales is at EUR 176.6m (prev. EUR 178.1m) and adj. EBIT at EUR 33.1 (prev. EUR 32.9m) with adj. EBIT margin of 18.8% (prev. 18.5%).

 

HOLD with a TP of EUR 11.0 (10.5)

With only slight adjustments to our estimates, we continue to consider Marimekko’s valuation neutral. The company trades between our premium (32% premium on 2023E EV/EBIT basis) and luxury goods (7% discount) peer groups. We adjust our TP to EUR 11.0 (EUR 10.5) with HOLD-rating intact.

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