STOCKMANN slows its expansion due to the Russian crisis

Stockmann was the first foreign distribution group that opened stores in Russia after the fall of the USSR. The emerging local middle class went to Stockmann stores to buy products that were unthinkable to find a few years earlier. Those foreigners, as myself, who lived in Moscow and 90 in St. Petersburg, often visited Stockmann shops to buy Finnish products paying , in many cases, excessively high prices. One of the first buildings to be found in the center of Helsinki, is the great central store Stockmann, which, as the rest of the city, is a beautiful example of functional and elegant architecture.

Zara landed in Russia from Stockmann hand.
The Finnish company, listed on the Helsinki Stock Exchange, signed a franchise contract with Inditex to open Zara stores in both Finland and Russia. In fact in 2003 the first Zara store (1800 m2) in Moscow located at the «Mega Mall» belonged to Stockmann. Inditex acquired three years later and has also purchased the remaining Zara franchises in Finland. We can say that Stockmann showed to the Spanish fashion giant the complicated way of retail trade in Russia. According to the company, the four stores in Finland of the popular Spanish fashion brand had a turnover around 22 million euros/year.

Stockmann, affected by the Russian situation and sluggish domestic consumption, seeking restructure. Stockmann has chosen its strategic direction and has taken the first steps to implement it. As an important part of the answer, Stockmann launched an efficiency program in February 2015, with an annual cost saving target of 50 million euros. The program includes several measures to improve the profitability and competitiveness in its core businesses.

Negotiations for a new lease of its department store in Oulu were unsuccessful and therefore closed that store Stockmann in early 2017 at the latest. The decision will affect all employees, currently around 230 people. Stockmann is also advancing in its plans announced earlier this year and closed three department stores with losses in the Mega shopping centers in Moscow at the end of 2016.

These stores currently employ about 700 people in total. As the next step in its efficiency program, Stockmann plans to restructure its logistics in Finland and Russia, improving efficiency and reducing costs. It is expected that a significant part of the cost savings to be achieved through staff reductions that may affect up to 420 employees in Finland and Russia during 2015 and 2016. According Per Thelin CEO of Stockmann. «The planned reductions are regrettable but necessary in order to Stockmann return to profitability. Our aim is to implement changes in a fair and responsible way for our employees» .The company also aims to reduce inventories, focus on product categories give adequate profitability and improve its computer system.

STOCKMANN in figures (Q1 2015):

• Consolidated revenue in the first quarter of 2015 were 380.4 million euros (395.6 million euros in the same period 2014), down 3.8 percent.
• Operating income before depreciation and amortization (EBITDA) was -29.5 million euros (-25.7 million euros, 2014).

• Operating income was -49.9 million euros (-43.9 million euros).
• The profit for the period was -56.2 million euros (-40.1 million euros).
• Stockmann shares traded in Helsinki Stock ExchangeMay 2014 to 10.25 Eur while now close to 7 Eur (29% drop)
• Stockmann turnover in 2014 1.850 million Euros, which is 12% of the Corte Ingles turnover in the same period. These figures are in line with the population difference between Spain and Finland, which only has 5 million inhabitants.

Disclosure: The author is not responsible for the views expressed in the article. The text has been written freely expressing ideas, without receiving any compensation. The author has no business relationship with any of the companies whose shares are listed in this article.