Marimekko - Flat sales development expected for H2
We expect flat sales for H2 with a decrease in domestic net sales due to non-recurring wholesale delivery timing while international sales should continue to grow.
Q2 net sales beat, margin missed
Marimekko's second-quarter results generally met our expectations. The positive effect of non-recurring wholesale sales was higher than expected while on the other hand profitability suffered from lower licensing sales and higher fixed costs more than we estimated. The group’s net sales grew by 8% to EUR 43.7m (42.4/42.9m Evli/cons.). Domestic retail kept growing above our estimates while APAC revenue development missed our estimates at +2% y/y partly due to wholesale timing differences. Adj. EBIT amounted to EUR 6.4m (EUR 6.8/7.1m Evli/cons.), reflecting a margin of 14.6%.
Domestic sales to decline y/y during H2
Globally, consumer companies have reported deterioration of the market environment during the first half due to macroeconomic and geopolitical challenges. In the domestic market, Marimekko has performed above our estimates, especially on retail as domestic retail grew 4% y/y during the first half. While domestic retail has grown, the wholesale sales has been the main driver for the Finnish market with growth of 23% y/y during H1 driven by the non-recurring promotional deliveries. With promotional deliveries weighted clearly in H1 this year, we expect total sales from Finland to decline y/y during H2 despite estimated growth in retail sales. For int’l sales, we anticipate continued growth in the second half. In APAC, we predict a slightly slower y/y growth rate than in H1. While we expect some pressure for gross margin due to discounting, we model gross margin close to last year’s levels in H2. After adjustments, our estimate for net sales stands at EUR 180.1m and adj. EBIT at EUR 31.8m with a margin of 17.7% for FY 2024E.
HOLD with a TP of EUR 13
With only minor adjustments to our estimates for coming years, we retain our TP at EUR 13.0 and rating at HOLD. The company trades at 15-13x adj. EV/EBIT and 21-17x P/E, the current pricing appears neutral compared to our peer group (aggregate of premium and luxury peer groups).