Marimekko - Expecting a slower quarter
Marimekko reports its Q3 results on 6th of November. The company faces challenging year-over-year comparison figures in Finland due to one-time promotional deliveries that boosted Q3/23 growth, whereas this year, larger part of the deliveries occurred in H1.
Domestic consumer confidence remains low
The Finnish consumer confidence improved in Q3/24 both q/q and y/y. Despite the improvement, the levels are still below the long-term average. According to the Finnish Fashion and Sports Commerce association, the consumption of fashion items has remained frequent, yet pricing has become more important factor in consumers purchasing decision due to the low confidence and the economic slowdown. In Asia, the quarters most important news was the far-reaching stimulus package in China. Since spring 2022, consumer confidence in China has remained consistently low. In Japan, the consumer confidence kept increasing from the May lows during the Q3 and was at marginally higher level during the quarter compared to Q3/23. Due to Marimekko's smaller relative size in Asia, macroeconomic trends do not affect its demand as significantly as in more established markets like Finland.
Facing tough comparable figures for Q3 in Finland
In Q3/23, Marimekko’s net sales grew by 9% driven by wholesale growth both internationally and in Finland. The Finnish wholesale sales grew 18% y/y aided by non-recurring promotional deliveries. In 2024, Marimekko expects that the non-recurring promotional deliveries will be significantly lower than in the 2023 and weighted clearly to H1. In line with the outlook, the domestic wholesale sales grew 23% y/y during the first half. We expect domestic wholesale sales to fall way short of the comparison period in Q3/24 driven by the beforementioned dynamics. Geographically, we estimate international growth to continue while the domestic sales decline. We expect net sales of EUR 47m with decline of 1.8% y/y. Due to lower expected net sales, we model slightly lower margins as we forecast EBIT of EUR 12.0m (Q3/23 EUR 13.1m) with a margin of 25.4% (Q3/23 27.4%).
Valuation remains neutral
Marimekko is priced at 21-18x P/E and 16-13x EV/EBIT on our estimates for 2024-2025E. We find the current pricing neutral and in line with the company’s peer group and historical average multiple levels. With no major estimate changes ahead of Q3, we retain TP of EUR 13.0 and recommendation at HOLD.