Our strategic projects are progressing
The finest achievement of the year in the Stockmann Group was Lindex’s successful turnaround after a weak year in 2017. Lindex managed to grow its market share in its primary markets, and its online sales continued to perform well throughout the year. Lindex’s adjusted operating profit almost doubled, thanks to growth in sales, a better gross margin and cost savings, which was reflected as an improvement in the entire Group’s adjusted operating result.
Real Estate proceeded with its projects according to plan. In May, Stockmann sold its Book House property in the centre of Helsinki to AEW Europe City Retail Fund. The strategy of withdrawal from Russia was fulfilled in October, when we signed an agreement for the sale of the Nevsky Centre shopping centre property in St Petersburg to PPF Real Estate, a real estate investment company. The transaction was completed and the property was transferred to its new owner in January 2019. The deal marked the end of Stockmann’s long-standing own operations in Russia, but Stockmann’s presence continues through a licence agreement. Stockmann used the sales proceeds for repaying its bank loans. As a result, the Group’s net debt decreased by EUR 196 million during the year. Net debt was further down by approx. EUR 141 million in January 2019 due to the divestment of Nevsky Centre.
Stockmann Retail did not achieve a positive result, despite our efforts. Full-year sales in 2018 fell considerably short of our target, to our true disappointment. The operating result weakened mostly in the final quarter of the year. In early 2019, we launched a project aiming at reducing the Group’s cost level by EUR 20 million by the end of the year. In addition, we will seek to improve the gross margin and to accelerate our renewal measures, the effects of which will become visible for our customers during the year. The majority of these measures will affect the Retail division.
In early 2018, we launched the digital acceleration project which aimed at growing our online sales and strengthening our multichannel operations. We have focused on increasing digital know-how and recruited a large number of digital experts to fill new positions. Our determined work has produced good results, as late last year the selection in the Stockmann online store was doubled when virtually the entire selection of the Helsinki department store was made available online. We will continue our systematic efforts to develop our digital operations at Stockmann and Lindex in 2019.
In October, we announced our plans to launch a marketplace focusing on fashion, beauty and home design in the spring of 2019. We have been building the marketplace together with our partners since the spring of 2018. The marketplace will enable us to bring new partners, operating models and product areas to our online store, opening up the digital doors to new brands. At the same time, we are considerably expanding our own product selection and digital services at stockmann.com. Our goal is to provide the industry’s best customer experience in the digital space, too.
The highlights of our responsibility work in 2018 included the revision of our CSR strategy, a significant increase in organic cotton and other environmentally friendly fibres in clothes sold under Stockmann’s and Lindex’s own brands, and a reduction in our carbon footprint. We also introduced a larger number of responsible alternative products to our selections in all product areas.
I would like to thank all Stockmann employees as well as our customers, shareholders and stakeholders for their fruitful cooperation and their efforts during the year. Our goal in 2019 is to bolster our position in our markets by enhancing the customer experience, our digital services and the company’s profitability. We will continue to work systematically to achieve our change in direction and to develop our business operations in a comprehensive way.
Chief Executive Officer