Stockmann going fast backwards: ”A major disappointment”

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Lindex is the light, but the Stockmann Group reports -8,9 percent revenue last quarter.
CEO Hannu Penttilä sees significant changes in Finland’s retail market and problems in Russia and says Stockmann has started a process to review and revise its strategy.
”We at Stockmann have not succeeded in beating this negative market development.”
On the schedule are several omnichannel programs.

For April-June 2014 the consolidated revenue was EUR 495.3 million (EUR 543.6 million), down 8.9 percent, or down 5.1 per ent at comparable exchange rates.
Operating profit was EUR 3.5 million (EUR 30.1 million).
January-June 2014 the consolidated revenue was EUR 890.9 million (EUR 974.9 million), down 8.3 percent excluding terminated franchising operations, or down 4.9 percent at comparable exchange rates.
Operating result was EUR -40.3 million (EUR -4.6 million). Result for the period was EUR -48.2 million (EUR -17.1 million).

”The retail market is undergoing significant changes in Finland. Consumer confidence remains low and demand for non-food products has clearly declined. We at Stockmann have not succeeded in beating this negative market development. Online business is changing consumer behaviour, but online stores are not yet compensating for the dramatic decline in traditional retail. At the same time, the market environment in Russia continues to be challenging, as the Russian rouble remains weak and the country’s future economic direction is unclear. The market environment in the Baltic countries, Sweden and Norway has been stable”, Hannu Penttilä comments.
Lindex continued to perform well and its revenue grew in local currencies. However, Lindex’s euro-denominated revenue declined, due to currency effects. For the Department Store Division and Seppälä, revenue in the second quarter was a major disappointment, according to the report.
The Stockmann Group’s earnings fell significantly below the figure for 2013, particularly in Finland and in Russia. A number of measures have been taken to strengthen sales, improve customer service and bring the cost structure in line with the weak market conditions.
These measures, according to the interim report, include the new sales organisation structure in the department stores in Finland. Something that Stockmann has been criticized for cutting down on service but keeping high prices.
Savings from these changes will mainly be visible from 2015 onwards, but the outlook for the rest of 2014 is challenging, since there are no signs of any significant improvement in the market environment.”
Today’s presentation also included a to do-list:
– Several omnichannel projects are under way ‒ Cosmetics will be in online store in Q4 2014
– Oracle ERP system has replaced all old systems; project finalisation by 2015
– Tampere store renewal and enlargement to be completed in Q4 2014
– Tapiola store scheduled to open in 2017, as the city plans were finally approved
– A completely new store concept with less commercial space than today
– Building works of the new distribution centre for Finland and Baltics started; target to take the centre in use in 2016

The process to review and revise Stockmann’s strategy covers all of the Group’s operations in all markets. Stockmann will introduce a new reporting structure. From 1 January 2015 the new reporting segments will be: Stockmann Retail, Real Estate and Fashion Chains.

Stockmann Retail will consist of the Stockmann department stores, the Academic Bookstore, Hobby Hall, their respective online stores (Stockmann.com, Akateeminen.com and Hobbyhall.fi) and the Stockmann Beauty cosmetic stores. Real Estate will consist of the Group’s real estate holdings in Helsinki, St Petersburg, Tallinn and Riga which are used by the Stockmann department stores and external tenants. Fashion Chains will consist of Lindex and Seppälä.