Good afternoon, ladies and gentlemen, and welcome to Marimekka's results webcast. My name is Anna Tuominen, and I'm the IRO of Marimekka. In a short while, our President and CEO, Dean Alahutta Kasko, will walk you through our second quarter and half year results. And after that, we've reserved some time for your questions. You can type in your questions using the chat function of the website webcast platform.
But now, Tina, please go ahead.
Thank you, Anna, and good afternoon also on my behalf. It's my pleasure and joy to be updating you on Marimekko's Q2 and half year performance. So let's get started. Overall, when looking at the Q2 of the year, Marimekko's strong development continued and our net sales and operating profit both increased considerably. Our net sales increased by 40%.
It's good to remember that in the comparison period, pandemic had a significant impact on the net sales, especially in Finland in our home market, where net sales now grew by 61%. Our international sales were up by 20% in the comparison period. The international sales kept Relatively flat, it was only minus 3%. So this is good growth on solid numbers. If we then compare to the time pre pandemic, Namely to Q2 2019, Finland net sales grew by 9% and international sales grew by 16%.
So very happy with the development of our sales across our markets. Then when we Think about the operating environment in the Q2 of this year. Nearly all of the Marimekko stores were open and also footfall in the stores Grew nicely from the comparison period when we were living at the heart of the first wave of the pandemic. And Maremeco's own stores as well as many of our partner operated stores were temporarily closed for part of the quarter during due to the coronavirus pandemic. Then with the nice increase in the net sales, also our operating profit improved significantly nearly or over doubled and landed to €5,500,000 Overall, I would say that this continued strong performance puts Marimekko In a good position to continue on our path investing further for our long term international growth.
So let's then have a closer look at the drivers behind the result. So looking at the net sales, as mentioned, 40% increase To the previous year, driven especially by retail and wholesale sales in Finland as well as wholesale sales in the Asia Pacific region and Scandinavia. Something maybe to be noted is that following some campaigns and holidays at the turn of the There were some temporary delays of a few days in the deliveries of our online store and some NOK 500,000 in Across our key markets. Then when we look at the half year performance, net sales grew by 28% And growth was especially driven by wholesale sales and retail sales development in Finland as well as wholesale sales in the Asia Pacific region and Scandinavia as well as then increased licensing income from the EMEA region. The good development in the wholesale sales in the domestic market in Finland was also partly supported by nonrecurring promotional deliveries.
Something that is also good to note is that the sales growth in the Asia Pacific region was partly due to the transfer of some of the wholesale deliveries for the final quarter of 2020 to the Q1 of the current year. But as you can see, we if you've seen really nice double digit growth across all our key market areas. Then when we look at our net sales development and breakdown Per market area as well as by product line, obviously, the home market, Finland still continues to represent approximately half of our net sales. And our 2nd biggest market area, Asia Pacific region, represents then 21%. So there are no significant changes in the break Down of our net sales base markets.
Then when we look at the breakdown of net sales by product line, Around 55% of the net sales still come from the, let's say, fashion world, meaning our ready to wear as well as bags and accessories. And then 45% of our net sales come from the Home category. When we look at the growth for each For the different product lines, what we were very happy to see was growth across all the product lines, driven especially by strong development for home products. And here we can definitely see the strength and beauty of Marimekko's Lifestyle concept, Marimekko is said to be one of the first real lifestyle brands in the world. And that position is something that we see Very competitive also looking to the future.
Ready to wear represents the spearhead for our lifestyle. And the logic obviously for that is that when we are a credible player within the fashion world, then we're able to leverage That credibility across the full lifestyle concept in a strong way, and this is something that we can now see here in the results as well. When people have been spending more time in their homes during the pandemic time, this has ignited a trend, which we see a long term trend for home decoration. And with our strong lifestyle offering, we've been able to capture the growth opportunities in this area as well. When we look at the Maremeco store network, there are in total 154 Maremeco stores around the world, with the greatest number of stores already being located in the Asia Pacific region.
In the review period, A new Marimekko online store opened in Taiwan operated by our local partner. And today, the Maremeco online store serves customers in 35 countries already. Our brand Sales developed nicely also during the first half a year by 8%. And in the second quarter, Great majority, so 67% of our brand sales came already out outside of our home market, Finland. Then when we have a closer view on our operating profit, so as mentioned already earlier, our result increased substantially During the Q2 and landed to €5,500,000 The comparable operating profit margin in the 2nd quarter was 16.8%, which we can definitely consider a good accomplishment.
Also, the improved relative sales margin supported the result and The key drivers behind the stronger relative sales margin included, for example, relatively lower logistic costs, Improved margins per product, smaller and smaller discounts. The lower licensing income than in the comparison period then had a weakening effect to the sales margin. Overall, on the other hand, when we look at our profitability operating profit, An increase in fixed costs had a weakening impact on earnings. The key driver there was the increase in employee benefit Expenses. It's good to remember that in the comparison period, due to the pandemic situation, Marimekko Carried out extensive temporary layoffs in our retail organization.
And in the period under review, the temporary layoffs We're significantly smaller. Then in addition, as we've discussed already in the previous quarters. Marimekko is investing in accelerating our long term international growth and this way investing in the building blocks to fuel this future growth. And this then its own part had an increasing effect to the employee benefit expenses. Also marketing expenses were higher than in the previous year and temporary cost savings were lower.
Then when we look at the half year operating profit, the comparable operating profit and operating profit grew to €11,100,000 which is almost tripling from the year before. Pretty straightforward drivers behind naturally the increased net sales being the key driver for earnings, But also the improved relative sales margin supported our profitability. The fixed cost then on the other hand had a weakening impact on the result. Then when we look at some of our key events in the Q2, obviously, it has been a very busy Quarter because Marimekko has celebrated our 70th anniversary like real birthday. But before we get to that, We have had some really exciting announcements during the course of this spring.
Mainly in May, we announced our first ever sports Apparel collaboration with Adidas really bringing together the art of print and performance. And it goes without saying that This collaboration with Adidas provides a fantastic opportunity for Marimekko to introduce our brand to a really wide global audience, even to consumers that are newer to the Marimekko brand. We also announced in May a new collaboration with the Japanese A global apparel retailer Uniqlo. This is a continuation for our really nice past collaborations. And This collaboration with Uniqlo was also one of Uniqlo's spearhead collaborations for 2021.
The main objective when it comes to brand collaborations for Marameco is naturally to increase our international awareness. And in addition to that, these collaborations also provide us licensing income, which is also part of our business model. But we really see the collaborations playing a crucial role in supporting our core business through the increased visibility and introduction to the wider audience. And then looking into the 17th anniversary celebrations that really sort of escalated and peaked also during the Q2 when we had the official birthday date. So many of you might know that we have a tradition of decades of organizing Big public fashion shows in the heart of Helsinki in the Esplanade Park every year to celebrate the beginning of summer and Celebrate sort of with our customer community.
Naturally this year again it was not possible to organize this kind of event, But because inclusivity and equality are important values for Marimekko, we still wanted to find a way how in these circumstances we could bring People together and continue this tradition of open fashion events, but now do that in a new innovative way. So what we then did, we actually organized the world's most inclusive fashion party virtually, Where artists from around the globe, from the key markets where we operate, were invited to entertain guests for 12 hours. The program also included some interactive elements. People, for example, had the possibility to try our summer collection virtually and so forth. Overall, we are big believers on the importance of creative retail concepts playing A crucial role as part of the omni channel customer experience in this new reality.
We've been working on this And opportunities on this front for quite some time already. And we were very happy to actually have Around 20 Marimekko pop up stores in our key market areas during the Q2. The pop up stores In Asia, England, Hong Kong, Shanghai and Tokyo were really centered around the 17th anniversary. That was also the case in Australia, where David Jones Department Store Who set 7 Marimekko pop up stores. In North America, one of the leading department stores, Nordstrom Organize and pop in at Maremeco pop in at Nordstrom welcomes Maremeco campaign That was ongoing for a couple of months in 9 different cities in the Nordstrom department stores as well as online.
So again, these are fantastic ways for us to widen our reach, introduce our brand to new audiences. And we are able to do this because we have Such a unique, recognizable design language, relevant value base that resonates with consumers around the world And overall, wonderful, approachable collections that are relevant for this time. We also in the Q2 published our sustainability review. In the past Here, we especially worked with more sustainable materials and decreasing the emissions, among other things. And as a result of continuous Development work and emission offsetting our operations also became carbon neutral in 2020.
The year 2020 was also the final year of our previous sustainability strategy cycle, which began in 2016. And overall, we during this period, we made consistent progress in all the focus areas that we had set for ourselves. As many of you might remember, at the end of last year, we announced our new even more ambitious sustainability strategy for the upcoming years. And it really kind of reflects our ambition to wanting to be at the forefront of developing more sustainable products and practices. Overall, we believe that in the future, timeless and long lasting products We'll be made in balance with the environment according to the principles of circular economy and with full Starting from raw materials.
And our very long term vision is that our operations would leave no trace to the environment. Some of the highlights of our sustainability work in 2020 included the collaboration with the Natural Indigo Finland. And we're very happy of having had the chance to introduce The first products printed using this blue dye obtained from the Wold plant to the stores this summer. These natural dyes really represents one of the multiple ways for us to increase sustainability of our operations. And the fact that we have our own printing factory here at the Marimekko House in Herta Mi offers us the opportunity to take an active role in these Research and Development Initiatives and through this also take the whole industry towards a more sustainable future.
Then a few words about our outlook for 2020, just in brief. So overall, as we know, the coronavirus pandemic has been the worst Crisis experienced by the global fashion industry and it will heavily impact our sector also in 2021. That we can see that the instability caused by the coronavirus pandemic has again clearly increased. But we're Closely monitoring the development of the situation in each of our market areas, and we'll adjust our operations and plans according to the situation. Then when we look at our 2 main market areas, Finland and Asia Pacific, we do expect both the sales in Finland as well as the Asia Pacific region to increase in 2021.
And our new store and shop in shop opening plan is intact, And the plan is to open approximately 5 to 10 new Marimekko stores and shop in shops in 2021 with most of the planned openings focused in Asia. Then overall, we estimate that both our wholesale sales and retail sales will increase in 2021, and we do expect that the growth is to be particularly strong in wholesale sales, which also includes sales to our partners Operating Marimekko stores. The development of overall the coronavirus situation, the vaccine coverage and possible Restrictions of recommendations across market areas on the other hand then has an effect on footfall in the stores and this way also the outlook both in retail and wholesale, including also the non recurring wholesale promotions that We expect in the second half of the year. We have also Experienced some coronavirus related disruptions in our supply chain, which can then have an impact on the availability of our products And so consequently on net sales and profitability. And also the net sales and earnings are essentially dependent on maintaining the operational Reliability and efficiency of distribution centers and logistics in this exceptional situations.
We are continuing our efforts to control gray Sports. And then in addition, actually, our outlook for licensing income has improved, And we do expect our licensing income to be approximately at the same level as in the previous year. We are planning to accelerate our long term international growth in 2021, and therefore, fixed costs are expected to be up Compared to the previous year, especially during the second half of the year, it's also good to remember that fixed costs were indeed reduced by partly temporary cost savings as well as subsidies granted in different countries to mitigate the negative impacts of the coronavirus pandemic in the previous year. Marketing expenses are expected to grow and take place, especially in the second half of the year as we continue our efforts And something also that we would like to highlight here is that The accounting treatment of some cloud based IT capital expenditure is changing. According to the current Preliminary estimate, the change in accounting principles will increase our fixed costs and accordingly lower our company's investment approximately by some €1,000,000 during the financial year of 2021.
We are finalizing the calculations relating to this during The fall this year and the possible impacts will be accounted for retrospectively, latest at the financial statements in 2021. Then finally, because of the seasonal nature of our business, we do Estimate that the major portion of the company's euro denominated net sales and earnings are generated During the last few quarters of the year, as typical is the case in our business, However, the relative development of net sales is expected to slow down during the second half of the year as the coronavirus pandemic Had an exceptionally negative effect on the sales during the 1st 6 months of 2020. Our financial guidance is that our group's net sales for 2021 are expected to be higher than in the previous year And comparable operating profit margin is estimated to be approximately on a par or with or higher than in the previous year. As mentioned, the instability caused by the coronavirus pandemic in our markets has again increased clearly. And therefore, There are significant uncertainties associated with the trend in our net sales and earnings due to this pandemic situation.
With these words, I would like to end my presentation and update on Marimekko's second Quarter and half year results and I think the floor is open for questions.
Thank you, Tina. There's actually quite a few questions. Okay, great. The first question relates to the investments in international growth mentioned in the report. Is it possible to give an estimate What kind of impact these investments will have on personnel costs?
And do you have an estimation on when these inputs Are being are showing in the revenues and results.
So it was about
the personnel? Yes, especially the personnel costs.
Okay. So overall, what we have also previously communicated when it comes to The ways that we are fueling our long term international growth. We believe that by focusing our investments, Especially on developing our digitality, omni channel seamless omni channel experience, brand awareness of sustainability are really key. And also as mentioned now in this interim report, because of these efforts, Also the employee benefit expenses have been increasing. So we have done some recruitments that further support us, especially in these areas.
When it comes to specifically personal costs, we haven't Opened up or shared more outlook on those. But as mentioned, we do expect fixed costs to increase, especially in the 2nd half of the year.
Thank you. There's another question related to the market outlook. The supply chain problems were mentioned in the outlook. Can you elaborate which product groups It's impacting or any more details?
So when it comes to the sort of supply chain related disruptions due to the coronavirus pandemic, these have been in our Global industry, quite common issues. Last year, Maremeco is very lucky in the fact that we were very minimally affected by the supply chain related disruptions. This year, we have experienced some Disruptions at our partner suppliers due to the coronavirus pandemic, which has then meant Some a little bit lower than expected capacity because of the aforementioned situation. Naturally, what we do is Our teams are very much working on to mitigate these situations. We haven't opened up more to which categories these are related These, as I mentioned, are unfortunately quite common issues in our industry today.
And in that way, sort of Part of our normal way of working and mitigating the coronavirus crisis, and our teams are working on these.
There's a few questions related to collaboration with Adidas. First of all, several people are interested in sort of the more detailed breakdown of financial impacts between Quarters, for example, are there revenues on Q2 or more visible on H2 numbers? And then how would you describe the success of the campaign? Has it been according to your expectations or even exceeding them?
So maybe I'll start with the latter part of the question. So we have been, of course, extremely excited to partner up with that. It has been a sort of a long term dream come true, Marrying the art of print and an art of performance via the true brand strengths. So we are very happy about this collaboration, and the news was received very positively. When it comes to the other parts of the question, when it comes to licensing income in general, there are different ways Depending on different types of contracts, when the revenues are recognized, so there is Quite a lot of variation in these type of contracts.
And naturally, we cannot open up more specifically any Single contract that we have or agreement that we have. When it comes to the Adidas partnership altogether, we have announced When we announced the Adidas collaboration that licensing income related to this collaboration has been booked To the Q1 numbers under EMEA licensing.
Then with Uniqlo, you have been collaborating quite many times already. Is this something that we should expect to continue? And how should we think about Marimekko's and Uniqlo's future together?
So I have to say, I'm really happy about the collaborations That we've done during the course of several seasons and years with Uniqlo, I think that again, it's a good marriage in the format of collaboration. The democratic, Of collaboration, the democratic designer approach, Design Made For All from Uniqlo and then Marimekko's Art of Printmaking And positive lifestyle philosophy. And we definitely have seen how these kind of collaborations have increased our international awareness. This way also supported Marimekko's core business. When it comes to the future, unfortunately, we are not able to Disclose anything about our future plans, but what I can say is that we have been very happy about the collaborations with Uniqlo And the fact that our collaborations have been some of the spearhead collaborations of that company, for example, this year.
Sounds good. What about then the collaboration with Nordstrom's? Is that something that will last longer? Or is this something exclusive with limited time span?
So when it comes to the Nordstrom Poppins, that initiative that took place in 9 cities and online in North America. So Nordstrom has this concept of sort of creating inviting interesting brands and phenomena and introducing them through these pop in concepts. And obviously, we were extremely excited of having been selected to this very visible initiative. And we can definitely see that it is very much in line with our overall strategy for North America, which represents one of our Key market areas around the world where wholesale really represents one way for us to reach new audiences and acquire also new customers to our lifestyle brand. Again, unfortunately, when it comes to a single Partner or company, I'm not able to disclose more in detail about the future plans.
But again, I can really say that this initiative has been something that we're very excited about.
There's also a question related to Marimekko share. Now that the stock price is almost €80, are there any plans to split the stock?
Well, at the moment, we do not have those plans, but thank you for this question.
Then there's a question related to products. We've touched upon in this webcast earlier as well, the unisex models and men's wear. A lot of the retailers and retailers as well are selling unisex models under women's sections. Men would be also interested in buying the products. Is it a conscious decision to have the products only on women's sections?
Or could you maybe reach bigger audience by adding these products also to men's categories in e tailers and retailers?
So when it comes to e tailers, where Marimekko products are sold, e tailers make their own choices when it comes to the categorization. So that is Their decision on how they categorize or where they place the Marimekko products. When it comes to Marimekko's own e com, we actually do not categorize our products based on gender. And overall, I have to say that we have been extremely happy to have seen also new customers And also men being excited about our newest collections, for example, the Maremekko Kioski Streetwear collection. And we do see that this sort of genderless unisex approach is something that will be a key part of our collections also in the future.
Thanks. There's a few questions related to international sales. International sales grew by 20% This quarter, it's a good development, but the person asking the question says that maybe not as good as expected. Were there any special reasons behind this?
Thank you. That is a good question. And maybe I would revert to what I mentioned earlier on in my presentation. So when we look at the 20% growth in international sales, So I think we at Marimekko are actually quite happy with this development. In the previous in the comparison year, the international sales despite the pandemic Kept pretty flat.
Actually, they at that point in time declined only by 3%. So if we then compare this 2nd quarter performance of 2021 to the time pre pandemic, so Q2 2019, actually, the international sales growth is 16%. So I would say that we are on good track. And it's also good to remember that our international sales are driven by wholesale sales Because that is the business model that we operate.
Are you expecting then higher international sales in the future? And what could be the main drivers to increase sales internationally.
So when we look at the big picture of where do we want to go as Marimekko, so we definitely Our vision is to be one of the world's most inspiring lifestyle brands renowned for our prints and colors. Our focus is now on fueling our long term international growth. And in order to capture these opportunities that we can see Opening up for Maremeco due to the changing consumer behavior and the disruption happening in the marketplace, We believe that we can capture those opportunities, especially by investing in our digitality, in the seamless omnichannel customer experience, In brand awareness and in sustainability.
Has there been increased demand for Marimekko products in the APAC region, excluding Japan, for instance, in China or the other countries in the region.
So when we look at the Asia Pacific region or Maybe if we look at Asia more specifically, so Japan is still clearly the single largest market in that region where we have Built our network of stores and presence with our current partner for over 15 years. The other markets in Asia are still in relatively earlier stages in development, but those operations are constantly growing. So We are very strongly developing our business in the Asia Pacific region, and that really represents One of our kind of key areas of future international growth.
That would then be actually the last question. How do you see Marimekko's potential in that region in the Couple of years.
So when we look at our current presence in the Asia Pacific region, so the majority of the stores In the Asia Pacific region or in Asia, in particular, are located in Japan. And then in the other markets, if we look at South Korea, China, Hong Kong, Thailand and so forth, we are in, last mentioned, in earlier stages in development. So we have already a good presence of stores, but those markets are growing constantly. So from that point of view, we still have a lot of room for future growth. And I think that is really exciting because we can definitely see that where consumer behavior overall is developing, Preferring brands that have a real story, that are authentic, that have something unique to offer.
For example, Marimekko are recognizable Design Language celebrating art of printmaking that have a sustainable approach to lifestyle overall Are really gaining traction, and we do see an authentic unique opportunity for long term growth in this region.
Thanks. There's actually one more additional question. How much can you control what your wholesalers are selling and the price levels? Maremeco has this distribution model that's selective.
Yes. So when it comes to the wholesalers pricing, of course, wholesalers then They are in charge of their own pricing, naturally. When it comes to what they are selling, so I would say, I think the starting point in everything is what we actually offer. So we put all of our efforts into building the most Inspiring relevant collections that speak to the even wider customer audience all around the world. And then obviously, with the desire that we are able to cater the channels where we wish to be present, where we believe that our Our target customer finds it relevant to find Maremeco.
Thank you, Tina, and thank you for everybody participating with good questions. Wishing you a very good rest of the day.
Thank you.