Good morning, everybody. I think we are ready to start. Welcome to this event. I have with me here, Jari Latvanen, the CEO of Stockmann.
Hello, good morning.
Pekka Vähähyyppä, the CFO of Stockmann. Good morning. Susanne Ehnbåge, who has been with us, is currently skiing as southern Sweden has their winter holiday at the moment. We have agreed with Jari that I will cover the Lindex part today. Very shortly, our strategic transformation has continued as planned. As you remember, we started the rejuvenation program in the spring, and it has continued throughout the year. The cost saving measures started to be visible towards the end of this year. Pekka will elaborate that a little bit more, and they will be clearly visible in 2020 results, so in other words this year. I'm glad to announce that roughly one-third of the savings target was actually achieved during 2019.
As you may remember also, we renewed strategies for both Stockmann and Lindex, and these are being implemented with a concrete investment plan as we speak. The new management is in place since August, both gentlemen who sit here on right-hand side and others. We are continuing the investigations concerning the strategic alternatives for Lindex, including the possible ownership change. We did renegotiate long-term facilities. Pekka will talk more about that as well. We had a successful consent solicitation concerning the hybrid bond. As you may remember, the three largest shareholders subscribed additional hybrid bond securities worth EUR 21 million. Very briefly on Stockmann Group 2019, the revenue was EUR 960 million, down by 4.5% comparable currency rates, which was pretty much as expected. The adjusted operating profit was EUR 29 million compared to EUR 10.4 million excluding the Nevsky Centre last year.
Stockmann Retail and Real Estate divisions merged, as you may recall, July 1st. What we were particularly pleased was that our merchandise gross margin in the group increased from 53.6% to 54.1%. In Lindex, the good development continued. The sales was down as expected a little bit, 2.4%, but we were particularly pleased with the online store growth of 24.3%. Gross margin improved. Operating costs were down by EUR 5.7 million, and the adjusted operating result improved by EUR 4.4 million. A little bit more about Lindex shortly after Jari then. Stockmann revenue was EUR 386.8 million, down mostly due to the divestment of properties. At the same time, the online store grew as we expected. Jari will cover more of that in a few seconds. Operating costs were down by EUR 19.6 million.
Adjusted operating result was below 2018, mostly due to the divestment of Nevsky Centre. That very briefly covers the Stockmann Group. Now I hand over to Jari. Jari, please.
Thank you. All right. Good morning from my side as well. If we look the full year results, as Lauri said, the revenue declined, but when you take away the Nevsky impact, we're roughly there. Online has been our focus and it grew almost 11% last year, and the operating result was still very much negative. If we take the Nevsky away, the comparable number is EUR 11.5 versus EUR -20.4. The adjusted operating result was EUR -17.8, and again, there is the Nevsky impact. As Lauri is saying, the Revisioning strategy implementation has been in full speed all autumn and we have been very persistent in reducing our cost base, and this will continue this year as planned and as agreed before..
We also realized that the online platform needs to be renewed. In October we took a decision that we will launch a new platform mid this year during summer months. This work is ongoing, and we have had very much focus on our working capital, and we can clearly see stock levels much lower than previous years. If we look the full year, all in all, we also launched the crazydays.com for Baltics in October. We renewed last summer our food court in Tallinn, which has been really upgraded and is performing well. A part of our cultural, or part of our strategy rejuvenation, we have also renewed our cultural identity. I will come back to that a bit later. If we look to quarter four, all in all, I would say quarter four went better than expected.
Revenues you have here, gross margin improved when we look take away the divested businesses. We have had a focus all autumn on full price sales, and we've been really changing our boosting strategy, and this we kept throughout the quarter four as well. Operating costs were down EUR 9 million. Personal and support function costs declined clearly, rents were somewhat up. The operating result increased in Q4 to EUR 8.2 million. Also in Q4, we renewed our loyalty system, My Stockmann loyalty program was launched. Now as we speak, we have roughly 200,000 My Stockmann app users already using our new platform. Crazy Days went better than expected. We clearly saw growth in this area.
Part of our strategy, we have also looked into our vision, and we say our vision is the marketplace for a good life. Our mission is we make a new impression every day. What we promise to our customers is a feeling that lasts. As I said, our cultural rejuvenation is also going on. We have renewed our values, focus on customer, act with courage, and we work together, is part of our everyday operational newness as we speak. We have renewed our customer and category-orientated organization, and it was in place beginning of this February. We have several improvements ongoing. We will improve our store experience. We are going to redesign our Jumbo department store completely this year. We are renewing in this flagship our women's fashion on third floor.
End of this month, you will see a new premium handbag area, in first floor, so we coming with more luxury goods. In that area, you will also see a new watches and jewelry accessories, which will bring our offering to new level. Everything is done before the Christmas sales this year. End of March, we will open My Stockmann lounge, which is also a place where we will have a closer contact with our customers, with focus groups, and this will be the inspirational platform going forward. We are renewing our offer in all our core categories within fashion, beauty, and home. You could say newness is coming every week. Quality and sustainability are the key focus areas in everything we do.
You will see more pop-ups, inspirational spots at every store, but also online. We're launching this year over 50 new brands, which means that every week, a new brand is entering to Stockmann. As said, we started already in October upgrading a new platform for stockmann.com, and in our new way of thinking, both department store and online retailing will be as one team. We will combine our online offer and the department store into one team, and this will be visible for our customers mid-summer this year. We will continue developing our My Stockmann class-leading loyalty system, and we are expanding that after the second half this year to our Baltic customers. Part of the strategy rejuvenation is that also our marketing efforts are going to be renewed in a focused way, and here you have a picture of our beauty catalog for March.
With these last slides, you get the first feeling of our women's department. This is part of our denim and the trend area. You will see a new way of offering styles and products to our customers, but we will come back to this later on. Now I would hand over back to Lauri with the Lindex.
Thank you, Jari. We were obviously also very pleased with the performance of Lindex. The operating result amounted to EUR 32.1 million, increased by EUR 3.2 million. Adjusted operating result amounted to EUR 34.8 million, increased by over EUR 4.4 million. What was particularly pleasing was that we increased the profitability in all markets, sales channels, and business areas. We also improved our cross margin, which was very important in this connection. I would underline that our cost efficiency was quite good. Our sales in 2019 in local currencies was on par with the previous year, with the comparable sales it increased a little bit, 1.2%. All in all, revenue was down 2.4%. This is related to a relation between euro and Swedish crown.
As I already said, our online sales increased 24.3%. As in Stockmann we also are launching our new e-com platform in the Nordic region as we speak. It has been introduced in other markets already earlier this year. Some highlights I would like to mention here. We launched a new sustainable baby assortment. We also had a launch of our long-term concept, Your Smart Wardrobe. We also underlined our sustainability promise for the future generations, meaning that we want to cut our CO2 footprint by 10% during the next five years. Lindex' financial performance last quarter was also quite strong. The adjusted operating result was EUR 16.7 million. As I already mentioned earlier, we increased profitability in all markets, sales channels, and business areas.
Going forward, I would like to mention a few things here, which we feel are important and are part of our ReVizionation program, which we also have in Lindex. We obviously have a plan to grow our current business, where we want to drive efficiencies and also explore the new growth opportunities. We continue strengthening our omnichannel setup, and we optimize our inspiring customer offer based on the customer insights and needs. We will launch later this year also online sales for baby assortment in China. We will continue our global online expansion. I'm pleased to say that we just recently signed a contract with Zalando. We recently introduced Lindex Baby Home, which you have seen even here in Finland in our stores.
We are an investor in Closely, a company which is creating a new Swedish underwear brand for women. This is an exercise on online only with two Swedish entrepreneurs. Here are a couple of slides from very successful openings of new stores in Copenhagen and Tunis. We also celebrated a campaign on ladies underwear. We got very much positive attention to this because this shows the essence of Lindex being real, personal, and inclusive. There's a couple of pictures on our launch of Lindex Baby Home. Now I hand over to Pekka. Pekka, please.
Good morning on my behalf as well. To begin with our revenue in this slide, first highlight on the revenue by division. Lindex contributes 60% of our total revenue, and Stockmann 40%. When we look by market, Finland is 38%, and as you see in Lindex' main markets, Sweden and Norway, they are 46%. The other that is mainly Baltics and European countries, where Lindex is present, is 16%. By product category we are clearly a fashion company. 80% of our revenue comes from fashion. Cosmetics 10%. Home, which we have in department stores, 6%.
Food, we have food operations, like Jari said, in his presentation, we have food operations in Baltics, both in Riga and Tallinn. That represents all in all 4% of our revenue. This slide consists of a lot of information, talking about revenue, that for the fourth quarter was EUR 286 million. This is not comparable, because we sold, as I think everyone remembers, the Nevsky Centre in the beginning of 2019. That has a that increases the comparability.
Considering the currencies, like I said in the previous slide, Sweden and Norway, they contribute 46% of our top line and Swedish and Norwegian currencies against euro, they declined roughly 3% during 2019. That had a negative currency impact on our top line. Looking at the graphs, the bottom right-hand side, here you can clearly see how our bottom line fluctuates during the year. First quarter, typically in our business, is challenging, and we make a negative result. Second quarter is positive due to a Crazy Days campaign and due to also a seasonality boom as we start selling summer and spring merchandise.
Most of our profit is made in Q4. Considering this year, or actually 2019, during last quarter, we made most of our full year results. I think most of the other comments were already mentioned in Lauri's and Jari's presentation. Moving on. This is a nice picture to show. We have been decreasing our interest-bearing debt over the years quite sizably. End of last year, we had interest-bearing debt, net debt less than EUR 400 million. When we started, or this picture starts in Q1 2017, we had twice as much. We have been very much focusing on paying the debt back.
What is also visible here, when you look at the quarters in 2019, that the debt level fluctuates very much during the quarters. End of the year, net debt always is at the minimum. Depending on the quarters, as discussed also on the revenue and bottom line, it fluctuates, so seasonality is impacting. Like Lauri said, we did renegotiate our long-term bank financing facilities during Q4. Also the hybrid bond was, say, reagreed and increased. That has also impact on the net debt.
I think on the big picture, you see that we have had ups and downs, started with the negative figures, now we are on a positive profit level. Some key figures. Starting from the right-hand bottom, which is the balance sheet total in 2018. At that time, the balance sheet consisted of EUR 1.8 billion assets. In 2019, we sold the Nevsky, which had a value of EUR 175 million. During 2019, we started to report our figures according to IFRS 16. The total balance sheet amount has increased up to EUR 2.1 billion.
Despite of the fact that we have sold Nevsky, we added the so-called right-of-use assets worth EUR 500 million and equal size of debt in our balance sheet. This is not comparable, but still, I wanted to discuss this with you. The incomparability is visible in many other lines as well. So the depreciation grew from EUR 80 million to EUR 140 million due to the fact that the IFRS 16 reporting motivates us to report it in this way. Some other comments, we did invest EUR 34 million into our business during last year, a slight increase from the previous year.
Worth highlighting, though, is that inventories are out of that EUR 2.1 billion. They represent EUR 146 million, and they grew mainly due to Lindex, as Stockmann inventories went down like Jari has said. Our cash flow was EUR 102 million up from previous year. Earnings per share are negative, and net result for the period was also negative. Net financial items, you may wonder that how come the big difference there, and that is very much dependent on the IFRS 16 reporting because part of the previous lease payments are now presented as the net financial items.
Out of this EUR 53 million net financial items, roughly half is this lease related to costs. The decline in the bank debt which we showed in the previous slide mean that the true or traditional financing costs went down nearly EUR 10 million during or between 2019 and 2018. Our balance sheet is strong. Our equity ratio, excluding IFRS 16 reporting, is more than 50% up from previous year's figures by 5%, and that is due to the fact that we divested Nevsky Centre and paid back debt. Net gearing was also improved comparably, was 1,864, and now it's below 50.
Moving on, maybe the most important, the most interesting thing that how do we see the future. We do expect that uncertainties in the global economy will remain this year. The main markets where Stockmann Group operates, that is Finland, Sweden and Norway and Baltics, we believe that the markets will continue to have moderate growth. On the other hand, we do see that the retail market will remain challenging due to some changes in consumer behavior, and competition is continuing to increase. Like Jari and Lauri said, we expect that.
Not expect, but the rejuvenation program will continue throughout this year, and Lindex will continue to drive efficiencies and explore in new growth opportunities as last year. We continue to invest in our business, and current view on our capital expenditure will be some EUR 45 million. The guidance for this year is that we expect that group operating profit will improve clearly from previous year's figures. That was the guidance, and I think we are all happy to answer any questions you have.
Any questions from the audience or from the web?
Hi, Raul Ojala from Nordea. A question on the potential divestment of Lindex. You said it's proceeding as planned. Since we don't know what the plan is, can you say anything more that when we could expect something tangible, perhaps?
Well, I have said earlier, and I just repeat what I have said earlier, that these types of processes typically take six to nine months. Once we are ready to inform something new, we will do that.
Very good. Thank you.
Pirkko Tammilehto from Kauppalehti. Could you tell a little bit more about Christmas sales? It's very bad for many retail companies, but how was it for Stockmann?
Well, Christmas, the quarter four for us, like I said, the Crazy Days, was better than expected. We grew roughly 2%. Black Friday went well. December, as we look, the total market was almost 11% down. We have managed that better than in general the market. Obviously, the climate has impacted, especially the winter gear sales. Our portfolio is very much, like Pekka said, in fashion, and we changed our boosting strategy this year, more focusing on the traditional Christmas products. All in all, yes, we saw as well decline but managed better than we expected.
What about the Jumbo department store? What's happening there now?
The food court has been already closed. The renovation has kicked off. We renegotiated the lease agreement with the shopping mall, we are downsizing the size of Jumbo, the food court area will be now, as we speak, is under the reconstruction. The new looks of Jumbo will be then throughout the year. This will be challenging for the customers as we need to go department by department, but we are already showing our customers the visibility of the new layout of the new Jumbo Stockmann. I think it's moving quite nicely.
What about the other department stores, Tampere and so on?
Tampere.
Turku.
Tampere we have done, I mean, there is no major reconstruction or renovation ongoing, but we have looked into our categories, especially in fashion, and we changed the sports department now to the first floor. We are renewing how does the new sports look like at Stockmann. In Tampere, we're also expanding our furniture department, so Hakola, Artek. Now we are downtown of Tampere introducing a bigger, how would you say, furniture department, and home is getting more focus in Tampere. As downtown Tampere, there are not really anybody doing it. Tampere is moving well. Turku. In Tampere, I would say now the tram construction finished just before the Christmas sales.
Now the street and access to the department store is good, and the tram is operating only 2021, but we clearly see an uplift how customers find us and move forward. Turku is going as a shopping mall as well, a big reconstruction. Inside the mall, we can already see a new Hansakortteli and new atmosphere, but the open market square is under heavy construction, so it's quite a mess. Easy access to Stockmann in Turku as well. As I said, we are renewing our brand portfolio. We're introducing almost every week a new brand. It means also some brands are flying out. We are really going in the strategy that we have something unique you only can find at Stockmann.
In Turku also, we gave more space for furniture, so we have Hakola and Artek in, but Turku in size is much smaller, so we don't have the same luxury in Turku as we have in Tampere. It is very much now more focusing on the portfolio, how do we really add value to our loyal customers who are visiting the store? As I said in our kind of, the Teemme lähtemättömän vaikutuksen and the loyalty customer system, is very much impacting how the portfolio is built according to our customer visits, so customer is at the center in everything we do.
Any further questions from the audience or from the web?
We have a question from the web about the Tuusula distribution center. How large role the Tuusula distribution center for online sales play in Stockmann's turnaround? How much of the capacity of the distribution center is being used? Will it be possible to order from all department stores in the new online platform? Then there's feedback. As a customer of Stockmann, I see launching a new online platform as positive. Please pay attention to the mobile experience in the new platform. Thank you.
Thank you for the question. I fully agree. If I start with the e-commerce, we took the decision that the current platform is not upgraded anymore. We are sorry about it. It's not the best platform as we speak. As we said, the new platform is visible for our customers in mid-summer this year. When it comes to Tuusula, part of our rejuvenation program, we also evaluated Tuusula efficiency as it is a very new distribution center. The outcome of this work during the autumn is that we have a very efficient logistical center. It's automated. It's operating well. We do see improvement areas in the end-to-end processes. How do we receive goods to Tuusula? Especially when it comes to web store, because we have capacity to increase our web store packaging at Tuusula.
It's well planned. It's really operational. Easy access to the stocks. As we speak, we are still struggling with the amount of offering online. Our future vision is clearly that the broadest offering is online. We are introducing exclusive partners continuously. We need to wait that the new platform is in place. Meanwhile, we are expanding ship from store concept to all our stores, which has been only operational here in Helsinki department store. This way we will be able to serve our customers faster and better with the full assortment.
Any further questions or comments from the audience here or from the web? If not, thank you very much for your attention.
Thank you.
Thank you.
Please continue shopping at Stockmann.
Yeah. Just go and see our summer Juhannus center fourth floor. We have many new brands already visible. Go shopping.