Good afternoon, ladies and gentlemen. My name is Anna Tuominen. I'm the IRO of Marimekko, and it's my pleasure to welcome you to our Q2 result webcast. In a short while, we'll hear a presentation from our president and CEO, Tiina Alahuhta-Kasko, and after that, we'll have time for questions. You can already use the chat function on the webcast platform to ask your questions. With Tiina, we also have our CFO, Elina Anckar, here to answer your questions. Without further ado, Tiina, please go ahead.
Thank you, Anna, and good afternoon, ladies and gentlemen, also on my behalf. I'm very happy to share with you today, a little bit about our performance in the first half of the year of 2022. Let's get started. Overall, the positive development of Marimekko's business continued in the Q2 with both our net sales growing and result improving. Our net sales grew by 16% to EUR 38 million, and they were boosted especially by a favorable trend in retail sales, but also internationally. Our net sales in Finland rose by a very strong 25%, and international sales were up by 5%. However, the rate of growth of international sales was negatively impacted by a different kind of weighting of wholesale deliveries compared to the previous year.
For the full year of 2022, we expect our international net sales to grow clearly. Thanks especially to the increased net sales, our comparable operating profit grew by 17% to EUR 5.7 million, representing 15% of net sales. All in all, I can say that the positive development of Marimekko's business from one quarter to the next really shows that our growth strategy works, and this positions us well to develop and grow our sales also in a more challenging market environment. Let's have a closer look at the different drivers. As said, this is actually the 8th consecutive quarter of growing net sales and result for Marimekko.
When it comes to our net sales development, +16% to EUR 38 million, as mentioned, are boosted especially by a favorable trend in retail sales in Finland, but also internationally. All of our own stores were opened in the Q2 , and the footfall in our stores continued to grow clearly from the comparison period when some of our stores were still temporarily closed due to the pandemic situation. What was very positive was that both our sales in stores as well as online developed strongly. Our retail sales all together in total increased by 37%, with 39% growth in Finland and 33% growth in international retail sales.
When it comes to wholesale, sales were more or less on par to the previous year in the Q2 . What is good to note also here is that the rate, however, of the growth of the international sales was negatively impacted by a different kind of weighting of wholesale deliveries compared to the previous year. When we look at the first half year net sales performance, our net sales grew by 20% to EUR 74 million, with sales growing in all our market areas. The net sales were boosted especially by a favorable both trend in retail and wholesale sales in Finland, but also by growing international sales. The sales in Finland grew by 26%, and international sales were up by 13%.
All together, a very strong first half of the year for 2022 for Marimekko. When we look at our net sales development in the first half of the year per market and per product line, we saw sales increasing in every market, as mentioned, but also in all product lines. Especially the bags and accessories enjoyed a tremendously strong growth in the first half of the year by nearly 40%. The Asia-Pacific region has today already the greatest number of stores when we look at our global map, and our online store serves customers in 35 countries already.
When we look at our brand sales, maybe good to recap that our brand sales is an unofficial estimate of sales of Marimekko products at consumer prices, which is calculated by adding together Marimekko's own retail net sales and the estimated retail value of Marimekko products sold by other retailers. The Marimekko brand sales in the first half a year grew by a strong 34% to EUR 190 million, driven especially by international sales. When we look into our operating profit, we saw an increase of 17% in our comparable operating profit in the Q2, reaching EUR 5.7 million and representing 15% of net sales. The earnings were boosted especially by increased net sales, but also lower depreciation than in the comparison period.
On the other hand, there was an increase in fixed costs that had a weakening impact on the result. We have been also in this quarter continuing investing in the building blocks of our international growth, which showed then in an increase in marketing and personnel expenses, for example. The relative sales margin was on a par with the same period the year before in the Q2 . When looking at the first half year performance, our earnings also improved clearly, reaching EUR 12.3 million with a 17% growth, representing 16.6% of net sales. Similar drivers also in the first half a year, our earnings being boosted especially by increased net sales but also lower depreciation than in the comparison period.
On the other hand, there was an increase in fixed cost as well as lower relative sales margin that had a weakening impact on the results. To elaborate a little bit what are the drivers behind the increase in fixed costs and the lower relative sales margin. Starting with the fixed costs, in the first six months, they were increased particularly by higher marketing expenses as well as new recruitments made to strengthen the building blocks of our international growth and increase personnel costs in the stores. It's good to remember that in the comparison period, there were still some temporary layoffs in the retail organization.
When looking into the lower relative sales margin, it was weakened in the first half a year by increased logistic costs that were resulting from a general increase in transport costs as well as higher discounts. Why higher discounts? In the first half a year, discounts increased due to the successful end of season sales as well as three clearance sales of stores, the lease term of which expired. On the other hand, the relative sales margin was supported by good margins per product, a higher share of retail sales of total net sales, as well as higher licensing income. If we have a look into the key events in the Q2 of this year.
We have had in the Q2 of this year a lot of really exciting news in the area of brand collaborations. At the beginning of April, Marimekko and IKEA announced a brand collaboration inspired by the Nordic sauna culture, which combines in a beautiful way Marimekko's art of printmaking with IKEA's home furnishing knowledge. This limited edition collection will be launched in March 2023 at most IKEA stores worldwide and will certainly support in further increasing Marimekko's international brand awareness also among entirely new consumer groups. In June, we also launched on market a limited edition collaboration collection with the modern luxury brand, Mansur Gavriel.
This capsule celebrating the optimistic lifestyle marries in a beautiful way Mansur Gavriel's quality craftsmanship and most iconic bag styles with two bold and iconic Marimekko prints from the 1960s. In the Q2 of the year, our store network in Asia strengthened. Two new Marimekko stores were opened in mainland China and one in Hong Kong. A pop-up in South Korea became a permanent store, and a Marimekko pop-up cafe was opened in Thailand. Even in this digitalizing new world, we believe that physical stores do play still a very important role for consumers as inspirational experiential meeting places centering around personal service.
In addition, these sort of creative retail concepts, including, for example, the pop-up cafe, they help to further deepen the Marimekko brand experience, creating it even to become an even more holistic one, introducing our brand to new audiences and at the same time further strengthening loyalty of the existing Marimekko fans. After a 2-year break due to the coronavirus pandemic, in May, we had the chance to continue our 30-year tradition of open to all fashion shows in the Esplanade Park in Helsinki. This time around, after the 2-year break, we decided to expand the event to a full Marimekko day around the city with also other connected events. This tradition really reflects strongly several of our core values, including the sense of community, equality, and inclusion.
We have been working for many years with the Helsinki Pride, and this year we were very proud to be one of the main partners of Helsinki Pride. The Marimekko culture is very much based on equality, diversity, and inclusion, and it is really important for us to be able to promote and nurture these values across our entire value chain. In June, we published our sustainability review for 2021, detailing the steps that we take on our ambitious sustainability journey. At Marimekko, we really want to be at the forefront of developing more sustainable products and practices. In 2021, our work included, for example, reducing waste, increasing the share of more sustainable materials in our products, and overall, in various ways, extending the lifetime of our products.
As a result of continuous development work and emission offsetting, our own operations have been carbon neutral since 2020. Moving on to the outlook for 2022. Starting first with a more general view, the development of the pandemic situation in different markets, Russia's war against Ukraine, political tensions, increased inflation and rising interest rates impacting the global economic trend, as well as the development of consumers' purchasing behavior affect the development of the global economy trend, and this way can also have an impact on Marimekko's business. The falling consumer confidence in some of our market areas can affect the business negatively in particular during the second half of the year.
While Russia's war against Ukraine does not directly affect Marimekko's business, Russia's war against Ukraine still causes disturbances in global supply chains and contributes to the general economic situation, consumers' purchasing power and behavior. These factors may impact Marimekko's sales and profitability as well as operational reliability and efficiency of our value chain. Of course, we are closely monitoring the impact of both the war as well as the coronavirus situation and also the development of the general economic situation, consumer confidence and purchasing power, and we will adjust our operations and plans should this circumstances require. What is also good to remember is that because of the seasonal nature of our business, the major portion of our company's euro-denominated net sales and earnings are typically generated during the second half of the year.
In percentage terms, net sales growth expected to be stronger at the beginning of 2020 than in the second half of the year. In 2020, the pandemic still had a negative impact on the footfall in Marimekko's own stores at the beginning of the year, and the net sales in the second half of the year were supported, for example, by substantial non-recurring promotional deliveries in wholesale in Finland. If we look into the net sales development in our two major market areas, Finland and Asia Pacific. In Finland, where the country traditionally represents about half of our company's net sales, we expect the sales to grow on the previous year.
What we have also mentioned before is that the total value of non-recurring promotional deliveries in wholesale in 2022 is estimated to be substantially lower than the year before. It's good to also remember that in 2021, the vast majority of these non-recurring promotional deliveries took place in the second half of the year in 2021. In Asia Pacific, which is our second largest market area playing an important role in our international growth, we do expect net sales in the Asia Pacific region to increase clearly in 2022 as our total international sales, though the accrual of the sales will be weighted differently between the quarters than in the comparison year.
It is our aim to open approximately 5-10 new Marimekko stores and shop-in-shops in 2022, and like in 2021 also this year most of the planned openings will be in Asia. Overall, when it comes to channels, we do estimate both retail and wholesale sales to increase in 2022. Also, licensing income is forecasted to be higher than in the previous year. If we move into the supply chain, it is clear that the coronavirus pandemic-related restrictions and Russia's war against Ukraine cause disruptions in global supply chains, and these disruptions have resulted in delivery delays and thus can impact also Marimekko's net sales and profitability. In addition, disruptions in supply chains increase logistics costs which have also grown overall worldwide.
What is good to of course remember is that net sales and earnings essentially depend on maintaining the operational reliability and efficiency of distribution centers and logistics in the exceptional situation. Overall, the cost of raw and other materials have increased globally. Early commitment to product orders, which is typical of our industry, means that changes in raw and other material prices affect Marimekko with a delay. In addition, the early commitment to product orders further emphasized by this pandemic situation weakens Marimekko's ability to optimize product orders and respond to rapid fluctuations in demand, especially in exceptional situation as well as increases risk related to inventory. We are very actively working on both mitigating these negative effects of disruptions in supply chains and increased costs, as well as to secure sales development also in a weaker general economic situation.
We feel that we're strongly positioned to do that with our very strong desirable brand and collections that speak to an even wider audience around the world. When we look into the growth investments, as we have also communicated earlier in the year, we will be continuing to accelerate our long-term investments to international investments to long-term international growth, and we will be investing especially in increasing brand awareness in digital and omnichannel business, in developing sustainability and in recruitment supporting our growth as well as in IT systems. Therefore, the fixed costs are expected to be up on the previous year. Also, marketing expenses are expected to be up. Good to also keep in mind that in 2021 fixed costs were still decreased by partly temporary cost savings.
We reiterate our financial guidance for 2022, which is that the Marimekko Group's net sales for 2022 are expected to grow from the previous year, and the comparable operating profit margin is estimated to be approximately some 17%-20%. The global supply chain disruptions and generally increased material logistic costs as well as the development of consumer confidence and purchasing power in particular do cause volatility to the outlook for 2022. With these words, I will end my presentation, and we're here ready for any questions. Thank you.
Thank you, Tiina. We do have a couple of questions, but there's still time to post more questions on the chat if you want to. I would like to start with a few detailed questions related to outlook, the market outlook. The first question relates to the Finnish retail. As the years 2020 and 2021 were a bit distorted by corona pandemic, would you say that they're, for example, looking at years 2018 and 2019 would give a good estimate of the seasonal split in Finnish sales, or was the company very different in 2018?
When we look at Marimekko all together, it's good to keep in mind, as I mentioned, I could pull the slide also here, is that there is a seasonal nature in our business, with the major portion of our euro-denominated net sales and earnings traditionally being generated during the second half of the year. That has been quite a typical cycle. I mean, that's a typical seasonality in the longer term. It's nothing new that has happened now in the pandemic period. When we look at our retail sales development, it has been very strong. If you look back to our, like, half year performance in the previous years also in the pre-pandemic times, we are in a much stronger level today. That is, of course, very good, strong development.
Keeping in mind that direct-to-consumer retail is the core of Marimekko's distribution strategy. Very happy to see that and believe that it's also a sign of the ever stronger brand of Marimekko and the strong desirability that we have.
In the outlook, you mentioned also that the non-recurring promotional sales in Finland are expected to be lower than previous year. Are you able to give us an estimate of how much lower?
Unfortunately, we are not able to elaborate further on the size of the non-recurring promotional deliveries more than what we have said in the market outlook.
Yeah. There's questions about the international sales. Would you go through a bit what were the main drivers for the increase? There was an increase of 5% in the international sales.
Sure.
A nd do you have any specific sales targets for coming years in.
Mm
In the strategy for international sales?
Yes. When it comes to the Q2 of the year, and if we look at the different market areas, understanding that the Asia-Pacific really represents the most, like, the second biggest market area for Marimekko, if we start with that, we saw an increase of 9% in the Q2 net sales with both retail and wholesale sales growing. What is good to note, though, in the Asia-Pacific, wholesale sales, this kind of different weighting of wholesale deliveries compared to the previous quarter, as well as the worsened pandemic situation, which had a negative impact on the replenishment orders. They had a negative impact in some countries to the wholesale development in the Q2 , but good development overall in the market.
If we look at the other regions, Scandinavia increased by 4%, EMEA by 7%. We saw a decline of 10% in North America. If one asks what are some of the key drivers there, in the comparison period, in 2021, in Q2, which was kind of the highlight quarter of Marimekko's 70th anniversary, we did a big pop-up campaign with Nordstrom, one of the big department store chains in the U.S., which took place in nine cities and also online. This year we didn't have this campaign, so that of course had an impact.
We have been also closing a couple of stores within the last months in the U.S. due to the expiration of leases, which has then also impacted the growth in retail sales in North America, despite the fact that it still grew.
You also mentioned both in the report and in the presentation that the international sales are expected to grow clearly.
Yes
during the whole year. Are you able to define what clearly means that the growth in the first six months was already 13%, so should one expect accelerating growth from now on, or is that something that you can comment on?
Unfortunately, I'm not able to elaborate that much more deeply, but it's basically exactly, Anna, what you said is that on a full year 2022 level, we do estimate our international sales to grow clearly. We also estimate the Asia-Pacific region sales to grow clearly. I think overall we're on a very good track as a company in terms of our net sales and overall profitability.
Thanks. A few questions related to production and products. Are you planning or is it possible to increase the production in Finland in the coming years?
It's good to remember that Marimekko's lifestyle product range is very wide with different types of product that require also different kinds of production methods and knowledge. The required production capacity, the machinery, the manufacturing skills, materials and supplies required to make these Marimekko lifestyle products unfortunately cannot be found to the scale needed in Finland. However, what is good to keep in mind is that our design, our entire design and product development is actually done in Finland. In addition, actually, we have of course our own textile printing mill here in Helsinki, where we print around 1 million meters of fabric every year for all of our product lines.
Not only in home collections, but actually also for our bags and accessories and fashion lines, which are then sewn into also ready-made products. Actually it plays a really important role also in our production, but then also from the point of view of allowing us to participate in, let's say, sustainability development initiatives in the industry, through our factory. When it comes to our production countries today, the majority of the products of the Marimekko products are produced within Europe. It's good to remember that high quality production knowledge and craftsmanship can be today found all around the world, and our objective is to always find the best possible production place for each of the Marimekko product with sustainability and quality being some of the most important drivers of that decision-making.
There's actually another question related to this production in E.U. As now the euro has a lower value, for example, compared to USD, does that affect your decision-making, for example, in bringing back production more to Europe?
We need to look at the kind of production place choices in a more sort of longer term view, and we very much believe in building strong relationships with our suppliers. They're our partner suppliers and so we're not the ones that would be going around in like very tactical terms when we look at the like short-term tactical terms when we look at the production place choices because we want to ensure that the quality sustainability standards of our products are high and what we expect.
Of course we need to kind of follow the development of the different currencies in the longer term and overall, in this sort of new environment that we're embarking on, you know, coming out from the pandemic. We need to always evaluate our kind of approaches to be the most competitive and value-driving for our customers.
Another question related to products. Will there be a men's collection in Marimekko sometime soon?
Thank you for that question, and I'm very happy to share with you that already for some years, we have been featuring as part of our collections the Marimekko Kioski segment, which is an entity, a genderless or unisex entity that also provides options in ready-to-wear also for men, and it has been really happy to see to have even more men within the community of Marimekko. So this is something that we also hope to continue, the Kioski program.
Thanks. How do you see the North America market development? Is it still a core market? Are you investing there for the future?
Thank you. I already elaborated a little bit on the Q2 development in the North America market. On top of that, what I would say, yes, North America is one of our most, like the key main markets. Actually, at the moment, we are in the process of finalizing the new location of the Marimekko flagship store in New York. We're very excited about that.
There's also a sort of follow-up question related to the Nordstrom campaign in Q1 last year. How long did the campaign last? Did it include also H2? The campaign was ended in mid-July last year.
Yes.
Not really an effect for the second half.
Yes, maybe something to add is that that kind of a pop-up campaign. It's typically something that brands do once, that type of a campaign. That took place last year.
Question related to the shareholder returns and dividends. Marimekko has been paying a yearly dividend. Has there been discussions or has there been consideration of share buybacks, especially in a period of high market volatility when stock prices fall sharply like earlier in June this year? Wouldn't buybacks in favorable market conditions benefit shareholders even more, or is that an issue of liquidity?
We do not have these kind of plans.
Yeah. Actually, the share split done this year was done.
Exactly
To improve the liquidity.
That's right.
Of share.
Yes.
Yeah. Any thoughts of paying dividends quarterly?
We don't have anything to elaborate on that.
Finally, a question related to brand collaboration with IKEA. Some might fear that IKEA as a partner would damage the exclusive and luxurious image of Marimekko brand. How do you see this?
I'm not concerned about that actually at all. IKEA is of course a world leader in their own segment. They have been actually really helping to build the awareness and recognizability of Scandinavian design and lifestyle around the world. They have been also doing these sort of similar limited edition brand collaborations with other leading brands in their own industries. We actually see at Marimekko the collaboration with IKEA as a tremendous opportunity to be able to share the joy and optimism of our art of printmaking now in this context inspired by the Nordic sauna culture to in a very democratic way to people around the world. This is an invitation to also get acquainted with Marimekko and we're very excited about that.
Thank you, Tiina. That was all the questions this time. We hope that you'll join us next time in mid-September when we have our first ever Capital Markets Day.
Hope to see you there. Thank you.