Lindex owner Stockmann revenue rises but profit is dented in Q3
Lindex owner Stockmann has reported its results for Q3 and the nine months to the end of September with the company hailing its revenue growth and the troubled Stockmann division reaching break-even. But not everything was perfect as margins and profits fell.
In the latest quarter, revenue rose from €237.8 million to €244 million, which was an increase of 4.2% in local currencies. That said, the gross margin fell to 56.8% from 59.5% and adjusted operating profits dropped to €22 million from €32.9 million. The overall operating result was €6 million, down from €32.7 million a year ago, and net profit fell to €0.6 million from €22.9 million.
In the nine months, revenue rose to €709.1 million, an increase of 15.4% in local currencies. The gross margin was down in this period as well, although less sharply with a drop to 58.1% from 59.1%. Adjusted operating profit rose to €53.7 million from €38.6 million and reported operating profit was up to €130.3 million from €31.5 million. Net profit rose to €84.1 million from €12.6 million.
The company kept its guidance unchanged, still expecting an increase in revenue and a better operating result compared to the previous year. This is based on the assumption that there’s no major change in consumer spending during the latter part of the year, as well as assuming that higher inflation and supply chain challenges will continue.
But despite the company’s optimism, it's clear that there were specific challenges in the third quarter that meant the overall performance wasn't as good as it had been earlier in the year. So were these challenges bad enough to cause ongoing problems in Q4 and next year?
Possibly not. CEO Jari Latvanen said: “Stockmann Group’s robust growth in the third quarter is a great achievement in the challenging market conditions within the retail sector. Both divisions increased physical and digital sales in local currencies, thanks to higher number of visitors and increased average purchases.
“The Stockmann division improved the gross margin despite higher costs of purchases, while Lindex’s gross margin decreased due to the unfavourable US dollar-to-Swedish crown exchange rate. To continue growing and maintain a good customer value-based pricing, the currency increase has not been fully implemented to consumer end prices. In addition, Lindex’s other costs have increased due to higher investments within digitalisation and strategic growth expenses for new brands and due to a more normal operational environment without the pandemic’s effects or subsidies.”
So the suggestion is that stabilisation of the inflation rate at some point could improve the situation, while investments made now should pay off in future growth.
What’s clear is that the weaker profitability in the period wasn’t down to fresh weakness at the brands.
In fact, the company also said that tough comparisons made the results this time look worse than they might have otherwise seemed.
Q3 adjusted operating profit for the Stockmann division was actually positive and Lindex continued to deliver good results, but its “extraordinarily good operating result from last year could not be reached owing to strategic growth expenses, unfavourable exchange rates and more normalised costs”.
One-off provisions also affected the figures this time.
The company added that its restructuring process "is proceeding according to plan”, which means that all Stockman’s department store properties have been sold and all interest-bearing debt has been paid except for a bond of €67.5 million.
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