Newsroom

12.8.2003

Stock Exchange Release

STOCKMANN GROUP’S INTERIM REPORT JANUARY

STOCKMANN plc STOCK EXCHANGE BULLETIN August 12, 2003, 11.45 a.m.

STOCKMANN GROUP’S INTERIM REPORT JANUARY 1 – JUNE 30, 2003

The Stockmann Group’s sales grew by 8.3 per cent to EUR 801.6 million (EUR
740.3 million in 2002). The Vehicle Division reported especially strong
sales growth. Profit before extraordinary items increased by EUR 5.3
million and was EUR 27.8 million (EUR 22.5 million). Other operating
income increased by EUR 6.6 million on the same period a year ago. Profit
on ordinary operations were down slightly on the previous year. The
earnings estimate for 2003 is unchanged.

Sales and result

Stockmann’s consolidated sales in the first half of 2003 were EUR 801.6
million, up EUR 61.3 million and 8.3 per cent on same-period sales. Net
turnover was EUR 667.0 million, increasing by EUR 50.2 million and 8.1 per
cent on the same period a year ago.

The Group’s gross operating margin grew by EUR 6.4 million to EUR 203.6
million. The relative gross margin weakened and was 30.5 per cent (32.0
per cent). The main factor behind the trend in the gross margin was the
strong growth in the Vehicle Division’s sales. Operating costs increased
by EUR 9.2 million. Depreciation diminished by EUR 0.3 million. Other
operating income increased by EUR 6.6 million on the comparison period and
amounted to EUR 15.4 million. Other operating income consisted mainly of a
capital gain on the Tapiola department store property in Espoo and
goodwill compensation received from the sale of agency sales of magazine
and newspaper subscriptions. Operating profit was up EUR 4.1 million on
the same period of last year, rising to EUR 23.6 million.

Net financial income increased by EUR 1.2 million from the same period a
year earlier and totalled EUR 4.2 million.

Profit before extraordinary items was EUR 27.8 million, up EUR 5.3 million
on the figure a year earlier. Profit on ordinary operations before
extraordinary items was EUR 12.4 million, down EUR 1.3 million on the
comparison period. Direct taxes were EUR 8.1 million, or EUR 1.5 million
more than a year earlier. Net profit for the report period was EUR 19.7
million, compared with EUR 16.0 million a year earlier.

Earnings per share were EUR 0.39 (EUR 0.31). Equity per share was EUR 9.71
(EUR 9.56).

Sales and earnings trend by division

The Department Store Division’s sales grew by 3 per cent to EUR 382.6
million. The overall uncertainty concerning the economy was reflected to
some extent in the sales trend of the department stores in Finland, in
addition to which customer traffic into the centre of Helsinki was
hampered by the construction works at the Kamppi site. Dollar-denominated
sales in Russia increased by about 20 per cent. However, owing to the
weakening in the United States dollar – which is the department stores’
pricing currency – like-for-like sales in euros were at the previous
year’s level. International Operations accounted for 15.2 per cent of the
division’s sales (15.0 per cent). The Department Store Division’s
operating profit was on a par with the previous year, or EUR 6.1 million
(6.1 million). The result was burdened by the pre-opening costs for the
Stockmann Beauty and Zara stores that were opened during the report period
as well as for the Riga department store. Despite these costs, the
division’s second-quarter operating profit improved on the previous year.
The department stores in Finland reported a positive result.

The lowering in the car tax that came into force from the beginning of
January set in motion strong growth in the motor trade, which continued
throughout the first part of the year. The Vehicle Division’s sales soared
27 per cent and totalled EUR 250.5 million. Unit sales of new vehicles
grew by 35 per cent and those of used vehicles by 28 per cent compared
with the same period a year ago. Stockmann’s market share of the motor
trade in the Helsinki metropolitan area grew substantially. The division’s
operating profit increased by EUR 1.0 million to EUR 3.5 million (2.5
million), improving markedly in the second quarter as well.

Sales by the Hobby Hall Division declined by 2 per cent to EUR 111.3
million. Owing to the change in the sales mix, the growth in the package
volume was nevertheless 7 per cent. Towards the end of last year, Hobby
Hall launched a streamlining programme aiming at achieving annual cost
savings of EUR 6 million. Implementation of the programme has moved ahead
according to plans and has had a positive impact on the trend in costs in
the second quarter. Nonetheless, the trend in the division’s sales and
gross margin in the second quarter was clearly weaker than expected. These
developments meant that the division’s operating result during the report
period diminished by EUR 1.8 million and was EUR 1.7 million in the red.
Both second-quarter sales and the operating result were smaller than in
the same period a year earlier.

The Seppälä Division’s sales declined by 4 per cent on the same period of
the previous year and were EUR 56.8 million. Seppälä suffered from the
subdued demand that affected the clothing trade as a whole during the
second quarter. In addition, Seppälä’s largest store in Estonia, which is
located in Tallinn’s Viru Centre, had to be closed in the spring for
refurbishing that will take about a year. The division has succeeded in
trimming its stock level, with the result that the relative gross margin
weakened only slightly. Operating profit was down EUR 1.5 million to EUR
0.8 million (EUR 2.3 million). Both sales and operating profit decreased
in the second quarter.

Financing and invested capital

Liquid assets totalled EUR 71.2 million, compared with EUR 70.5 million at
the end of 2002.

Loan repayments during the first part of the year amounted to EUR 1.0
million. In Latvia a LVL 6.0 million (EUR 9.2 million) loan for the
department store construction project was drawn down. The amount of long-
term loans at the end of June was EUR 44.5 million. The equity ratio grew
from 70.7 per cent in the comparison period to 71.3 per cent. The equity
ratio at the end of 2002 was 69.7 per cent.

In line with its strategy of freeing up capital, at the end of March
Stockmann sold its department store property in Espoo’s Tapiola district
to a wholly-owned subsidiary of the Dutch real-estate investment company
Wereldhave N.V. for a price of just over EUR 36 million. At the same time,
Stockmann leased the divested property from the new owner for the Tapiola
department store’s use under a long-term leaseback agreement.

The return on investment over the past 12 months increased and, lifted by
the growth in earnings, was 13.5 per cent (11.7 per cent). The Group’s
capital employed was at the level of the same period a year ago, or EUR
559,3 million.

Total contingent liabilities diminished by EUR 3.0 million from the end of
2002 and were EUR 65.4 million.

Divestment

Stockmann sold Academic Bookstore’s agency sales of magazine and newspaper
subscriptions to Suomalainen Kirjakauppa Oy. The business was transferred
to the new owner as from June 1, 2003. The deal fits in with the Stockmann
Group’s strategy, which focuses on the consumer trade. Academic Bookstore
will continue acting as an agent for magazine and newspaper subscriptions
ordered by Stockmann’s Loyal Customers and will still handle order-based
book sales to companies and public-sector organizations.

Sales of magazine and newspaper subscriptions through Academic Bookstore
amounted to nearly EUR 13 million in 2002. Because the business is very
seasonal, divesting it will not affect the Stockmann Group’s sales figures
before the early months of 2004.

Capital expenditures

Capital expenditures during the report period totalled EUR 15.2 million
(EUR 19.6 million).

The Department Store Division’s capital expenditures in the report period
came to EUR 7.2 million. The division’s biggest ongoing capital
expenditure is still the Riga department store. During 2003, a total of
about EUR 19.0 million will be invested in the site’s building and
fixturing, and Stockmann’s aggregate investment will be about EUR 24.0
million. The department store will be opened in October.

Moscow’s first Zara store was opened at the end of February in the Mega
Shopping Centre. In April new Zara stores were opened in Finland in
Helsinki’s Itäkeskus Shopping Centre and in Turku’s Hansa Block.
Operations of the new stores have got off to a good start. New stores
that are part of the Stockmann Beauty cosmetics chain have been opened
during the report period in the Forum Shopping Centre in Helsinki and in
Tampere’s Koskikeskus Shopping Centre.

In April Stockmann and IKEA’s Russian subsidiary LLC IKEA MOS entered
into a lease agreement on a Stockmann department store with about 10,000
square metres of retail space that will be located in the Mega Shopping
Centre on the south side of Moscow. The landlord started construction
works on the site in the spring. The department store will be opened in
spring 2004. Stockmann’s capital expenditures on the project will come to
about EUR 20 million. Established by IKEA, Mega is a 150,000 square metre
shopping centre where, among other retailers, the first Zara in Russia has
been in operation since February.

The Hobby Hall Division’s capital expenditures in the report period
totalled EUR 0.8 million. They went for developing the information systems
and starting up mail order sales in Lithuania. Sales in Lithuania have
started up in line with plans.

Investments in real-estate property in the report period amounted to EUR
5.7 million, of which EUR 3.3 million was for the Riga department store.

Other capital expenditures in the report period amounted to EUR 1.5
million.

Current projects

Stockmann has signed a Letter of Intent on opening a department store with
about 11,000 square metres of retail space in leased premises in the
projected enlargement of the Jumbo Shopping Centre in Vantaa. According to
plans, the department store will be completed in 2005. The preliminary
agreement that was signed with ZAO Znamenskaya concerning a department
store in St Petersburg has lapsed for the time being because the owner of
the property has not managed to arrange the financing required for
implementing the shopping centre by the deadline specified in the
agreement. During the autumn Stockmann will explore the feasibility of
continuing the validity of the agreement or opening a department store in
some alternative location in St Petersburg.

A large-scale project for enlargement and modification works on the
department store in the centre of Helsinki is pending. According to the
plan, the department store’s commercial premises will be expanded by about
10,000 square metres by converting existing premises to commercial use and
by building new retail space. In addition, completely new goods handling
and maintenance areas will be built for the department store as well as
access passages to the new customer car park. After the enlargement the
Helsinki department store will have about 50,000 square metres of retail
sales space. The works will be completed stage by stage by the end of
2007, according to a preliminary estimate. Implementation of the project
will call for modifying the town plan, which has already been initiated.

During the late summer IKEA will be taking a decision on building a
shopping centre with about 100,000 square metres of floor space on
Moscow’s north side. IKEA and Stockmann have signed a Letter of Intent on
establishing a Stockmann department store with about 10,000 square metres
of retail space in rented premises in this shopping centre, which is to be
opened to the public at the end of 2004. This would be Stockmann’s third
full-sized department store in Moscow. The department store’s annual sales
are estimated at about EUR 50 million. Stockmann’s capital expenditure for
the site will come to about EUR 20 million.

In autumn 2003 Seppälä will open its first stores in Latvia, one of which
will operate in Stockmann’s department store premises.

Shares and shareholders

At its meeting held on May 20, 2003, Stockmann’s Board of Directors
approved a shareholder’s request to convert 40,000 of the company’s shares
from Series A into Series B shares in accordance with Article 3 of the
Articles of Association. The share conversions were entered in the Trade
Register on June 6, 2003.

A total of 5,580 Stockmann plc Series B shares with a nominal value of 2
euros were subscribed for with Stockmann Loyal Customer share options
during the subscription period from May 2, 2003 to May 31, 2003. The
shares were entered in the Trade Register on June 30, 2003 and they became
available for public trading, together with the existing shares, on
Helsinki Exchanges on July 1, 2003.

As a consequence of the subscriptions, the share capital was increased by
EUR 11,160. Following the increase the share capital is 102,779,282 euros.
The total number of Series A shares is 24,828,893 and the total number of
Series B shares is 26,560,748.

1,382,524 Stockmann plc Loyal Customer share options were subscribed for
in spring 2000. On the basis of the unexercised Loyal Customer share
options, a further total of 1,375,860 new Series B shares with a nominal
value of 2 euros can be subscribed for in disapplication of shareholders’
pre-emptive right to subscribe for shares. On the basis of the
subscriptions the company’s share capital can rise by a further maximum of
2,751,720 euros to a maximum of 105,531,002 euros. The subscription price
is EUR 15.70 less the amount of the per-share dividend distributed after
April 1, 1999. This year the subscription price was EUR 12.16 per share.
The remaining subscription periods with the Loyal Customer share options
are May 2, 2004 – May 31, 2004 and May 2, 2005 – May 31, 2005.

The company’s market capitalization at the end of June was EUR 788.4
million. At the end of 2002 the market capitalization was EUR 710.1
million.

Stockmann’s shares outperformed both the HEX General Index and the HEX
Portfolio Index during the report period. At the end of June the stock
exchange price of the Series A share was EUR 15.28, compared with EUR
13.84 at the end of 2002, and the Series B share was selling at EUR 15.40,
as against EUR 13.80 at the end of 2002.

At the end of June 2003 Stockmann still held 163,000 of its own Series A
shares and 250,000 of its own Series B shares. The nominal value of these
shares is a total of EUR 826,000, and they represent 0.8 per cent of all
the shares outstanding as well as 0.7 per cent of the total votes. The
shares were bought back at a total price of EUR 6.2 million.

The company’s Board of Directors does not have valid authorizations to
increase the share capital or to float issues of convertible bonds or
bonds with warrants or to buy back its own shares.

Personnel strength

During the report period the Stockmann Group had an average payroll of
8,446 employees, or 284 more than in the comparison period. The growth in
staff was due mainly to the Department Store Divison’s new Zara and
Stockmann Beauty stores. Converted to full-time staff, the average number
of employees increased by 166 and was 6,755.

At the end of June 2003 the number of staff working abroad was 1,463
people. At the end of June of last year Stockmann had 1,234 people working
abroad.

Full-year outlook

Despite the uncertain economic situation, the retail trade net of car
sales is estimated to grow further in Finland. Sales of new cars will
continue to grow faster than the rest of the retail trade. The economies
of Russia and the Baltic countries too are anticipated to continue growing
at a faster rate than Finland. The Stockmann Group’s sales growth is
estimated to outpace the overall market growth. Sales in 2003 are
estimated to top EUR 1.7 billion.

The Group’s third-quarter earnings are estimated to improve on the result
reported for the same period of 2002. The Department Store Division’s full-
year operating profit is expected to be at the previous year’s level.
Thanks to the good sales trend, the Vehicle Division’s full-year operating
profit is estimated to exceed the record level reported last year. In
spite of the unsatisfactory trend in the first part of the year, Hobby
Hall’s full-year operating profit is still targeted to be at least at the
previous year’s level. Seppälä’s full-year operating profit is estimated
to be at the previous year’s level. The Stockmann Group’s previously
stated earnings estimate for 2003 is unchanged. The estimate is that
profit before extraordinary items in 2003 will be higher than the figure
reported for 2002.

Helsinki, August 12, 2003

STOCKMANN plc

Profit and loss account, Group EUR millions