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11.8.2004

Stock Exchange Release

STOCKMANN GROUP’S INTERIM REPORT JANUARY

STOCKMANN plc STOCK EXCHANGE RELEASE August 11, 2004, at 12.00

STOCKMANN GROUP’S INTERIM REPORT JANUARY 1 – JUNE 30, 2004

PROFIT ON ORDINARY OPERATIONS IMPROVED MARKEDLY

The Stockmann Group’s sales grew by 2.6 per cent to EUR 822.5 million (EUR
801.6 million in 2003). Profit on ordinary operations improved by EUR 8.0
million on the comparison period. The Department Store Division and
Seppälä Division improved their operating profit significantly year on
year, the operating result of the Hobby Hall Division was at the level of
the comparison period and the Vehicle Division’s operating profit
decreased slightly. Profit before extraordinary items was EUR 22.7
million. The corresponding figure a year earlier, EUR 27.8 million,
included EUR 15.4 million of other operating income. Other operating
income in the report period amounted to EUR 2.3 million. The earnings
estimate for 2004 is unchanged.

Sales and result

Stockmann’s consolidated sales in the first half of 2004 were EUR 822.5
million, up EUR 20.9 million and 2.6 per cent on same-period sales. Sales
by international operations within consolidated sales grew from 10.4 per
cent in the comparison period to 12.4 per cent. Net turnover was EUR 684.8
million, increasing by EUR 17.8 million and 2.7 per cent on the same
period a year ago.

The gross margin on the Group’s operations grew by EUR 18.1 million to EUR
221.7 million. The relative gross margin on operations improved and was
32.4 per cent (30.5 per cent). The relative gross margin improved across
all the divisions. Operating costs were up EUR 10.2 million. Depreciation
increased by EUR 0.8 million. Profit on ordinary operations improved by
EUR 7.1 million. In addition, net financial income increased by EUR 0.9
million. These factors improved the Group’s profit on ordinary operations
before extraordinary items by EUR 8.0 million.

Other operating income came from the compensation received from the sale
of the VW-Audi car dealership in Helsinki’s Herttoniemi district and
amounted to EUR 2.3 million, whereby other operating income decreased by
EUR 13.1 million on the comparison period. Consolidated operating profit
fell by EUR 6.0 million on the comparison period to EUR 17.6 million.

Because of the increase in dividend income and gains on foreign exchange,
net financial income increased by EUR 0.9 million from the same period a
year earlier and totalled EUR 5.1 million.

Profit before extraordinary items was EUR 22.7 million, down EUR 5.1
million on the result a year earlier.

Direct taxes were EUR 4.0 million, decreasing by EUR 4.1 million on the
figure a year earlier. Taxes on earnings amounted to EUR 6.6 million (EUR
8.1 million) and the change in the deferred tax liability was a decrease
of EUR 2.6 million. The change in the deferred tax liability takes into
account the lowering of Finland’s corporate tax rate from 29 per cent to
26 per cent as from the beginning of 2005.

Net profit for the report period was EUR 18.7 million, compared with EUR
19.7 million a year earlier.

Earnings per share were EUR 0.35 (EUR 0.39). Equity per share was EUR 9.39
(EUR 9.66).

Sales and earnings trend by division

The Department Store Division’s sales grew by 8 per cent to EUR 412.1
million. Sales in Finland rose by 3 per cent and sales abroad by 34 per
cent. Sales in Finland were reduced by the divestment of the Academic
Bookstore magazine business in June 2003. Sales in Russia grew both in
rouble and in euro terms. In Russia, Stockmann has used the rouble as a
pricing currency instead of the dollar, as previously, since the end of
January 2004. Sales in Estonia also grew. During the report period, the
Mega South department store was opened in Moscow, as was the Zara store
that is located in the Marina Roscha Shopping Centre. These units,
together with the Riga department store that was opened in October 2003,
boosted the growth in International Operations’ sales. International
Operations accounted for 18 per cent of the division’s sales (15 per
cent). The Department Store Division’s operating profit increased by EUR
3.4 million compared with the same period a year ago to EUR 9.4 million
(EUR 6.1 million). Earnings were burdened by the costs of starting up the
Mega South department store that was opened in Moscow in April 2004 as
well as the Riga department store. Despite these costs, the division’s
second-quarter operating profit improved by EUR 0.9 million on the
previous year.

Following the exceptionally strong growth in vehicle sales in 2003 after
the car tax was lowered, the growth in auto sales in Finland evened out in
the first part of 2004. The Vehicle Division’s sales were down 2 per cent
to EUR 244.3 million. Unit sales of new vehicles were down 12 per cent,
and unit sales of used vehicles were on a par with the comparison period.
Stockmann’s market share of the motor trade in the Helsinki metropolitan
area decreased. The division’s operating profit diminished slightly year
on year and was EUR 3.1 million (EUR 3.5 million). Second-quarter
operating profit was down EUR 0.6 million compared with the figure a year
earlier. In accordance with the agreement made between Stockmann and Kesko
Corporation’s subsidiary VV-Auto Oy, the VW-Audi dealership in Helsinki’s
Herttoniemi district was transferred to Helsingin VV-Auto Oy ahead of
schedule as from July 1, 2004. Stockmann is continuing to devote energetic
efforts to developing VW-Audi sales in the Helsinki metropolitan area.
Finland’s first car dealership in line with the Audi car plant’s
recommendations was opened in Espoo’s Suomenoja district at the beginning
of July and will serve the Helsinki metropolitan area and its environs.

The Hobby Hall Division’s sales declined by 7 per cent on the same period
a year earlier and were EUR 103.6 million. Hobby Hall’s distance retailing
in Finland grew by 2 per cent. Online sales showed further strong growth –
up about 30 per cent. Aggregate sales in Finland, however, fell by 5 per
cent compared with the year-ago figure because three stores were closed
after the end of the comparison period. The division’s sales abroad were
down 16 per cent on the same period of last year. This was attributable to
tightened up credit policy and to the closing of one store in Estonia in
the first part of 2004. The trend in the division’s sales was markedly
weaker than expected. The relative gross margin nevertheless improved on
the comparison period. Thanks to cost savings and the improvement in the
relative gross margin, the division’s operating result was the same as in
the comparison period, or a loss of EUR 1.7 million. The second-quarter
operating result was also at the level of the comparison period.

The Seppälä Division’s sales increased by 9 per cent on the same period of
last year and were EUR 62.1 million. Seppälä’s sales grew both in Finland
and the Baltic countries, where sales were lifted by the five stores
opened in Latvia towards the end of 2003 and in May 2004. Moreover in
April 2004, Seppälä opened the first of its stores in Russia in Moscow.
Thanks to higher sales and an improved relative gross margin, Seppälä’s
operating profit increased by a hefty EUR 2.7 million and was EUR 3.5
million (EUR 0.8 million). Seppälä’s second-quarter operating profit was
EUR 1.6 million higher than a year ago.

Financing and invested capital

Loan repayments were not made during the report period, nor have new long-
term loans been drawn down. The amount of long-term loans at the end of
June was EUR 48.9 million. Capital expenditures came to a total of EUR
27.9 million. The increase in working capital from the beginning of the
year to the end of June was EUR 16.6 million. This increase was
attributable primarily to larger stocks and trade debtors for the new
department stores in Riga and Moscow. EUR 0.3 million was added to
shareholders’ equity through share subscriptions made on the basis of the
1997 share options and EUR 6.5 million was added through the exercise of
Loyal Customer share options. The Group’s capital employed increased by
EUR 8.5 million from the end of the comparison period and stood at EUR
567.9 million.

The equity ratio was 70.3 per cent (71.3 per cent), as against 68.3 per
cent at the end of 2003.

The return on capital employed over the past 12 months was 12.8 per cent
(13.5 per cent). The trend in the return on capital employed was affected
by both the decrease in earnings and the growth in capital employed.

Fine-tuning strategy

In its discussion of strategy in June 2004, the Stockmann Group’s Board of
Directors reconfirmed the company’s strategy, according to which the Group
will grow energetically over the next few years, particularly in the
Russian market. The objective is that by the end of 2008 about a third of
sales and at least the same proportion of earnings will come from the
markets in the Baltic countries and Russia.

Growth abroad will be spearheaded by the department stores, Seppälä and
expansion of the franchising-based Zara chain in Russia. A new possibility
that is being explored for augmenting business operations is also to
expand franchising activities for international brands that have indicated
expressions of interest in utilizing Stockmann’s acquired knowledge of
trading in Russia.

Consolidation is rolling ahead in the distance retailing market in Europe.
As a part of this trend, a number of international industrial players in
the field and private equity investors have expressed interest in the
Stockmann Group’s Hobby Hall, which is the market leader in distance
retailing in Finland and the Baltic countries. This has led to the
starting up of a process whereby different alternatives for developing
Hobby Hall will be explored during the latter part of the year, one of
which is withdrawing from this line of business.

The Vehicle Division’s operations will be developed as part of Stockmann,
with a special emphasis on exploiting the synergies arising via Loyal
Customer marketing in concert with department store operations as well as
the possibilities for business development offered by the amendment of the
Block Exemption regulation.

Capital expenditures

Capital expenditures during the report period totalled EUR 27.9 million
(EUR 15.2 million).

The Department Store Division’s capital expenditures in the report period
came to EUR 19.1 million. The division’s most important investment outlay
was for the new Mega South department store in Moscow that was opened in
April in premises leased from Ikea. Its operations have started up
according to plans. During the report period the site required an outlay
of EUR 13.3 million. The department store has about 10 000 square metres
of retail space. Stockmann’s outlays on the site were about EUR 4 million
under the preliminary estimate and came to a total of EUR 16.0 million.
Also under way in Moscow are construction works, in Ikea-owned premises,
on a second department store, Mega North, that will also have about 10 000
square metres of retail space. According to plans, it will be opened in
December 2004. Stockmann’s investment in this department store will be
about EUR 18 million. In Russia, a new Zara store was also opened at the
beginning of June in the Marina Roscha Shopping Centre in the vicinity of
the centre of Moscow. A third Zara store in Moscow will be opened in the
Mega North Shopping Centre towards the end of the year. The seventh store
in the Stockmann Beauty cosmetics chain in Finland was opened in Kuopio in
March. The eighth Stockmann Beauty store will be opened in Pori in August.

The Hobby Hall Division’s capital expenditures in the report period
totalled EUR 0.7 million. They went mainly for the development of
information systems.

The Seppälä Division’s capital expenditures in the report period amounted
to EUR 0.6 million. Seppälä opened its first store in Russia at the
Stockmann department store in Moscow’s Mega South Shopping Centre in
April. Seppälä will open its second store in Russia in the vicinity of the
centre of Moscow in October 2004, and a third store at the Stockmann
department store in Moscow’s Mega North Shopping Centre in December.

Property investments in the report period totalled EUR 6.8 million, of
which EUR 1.7 million was for the Audi car dealership in Espoo’s Suomenoja
district and EUR 1.5 million for the preparatory works for the enlargement
of the Helsinki department store as well as for upgrading escalators and
lifts.

Other capital expenditures in the report period amounted to EUR 0.7
million.

Current projects

Stockmann will open a department store with about 11 000 square metres of
retail space in leased premises in the new section of the Jumbo Shopping
Centre in Vantaa towards the end of 2005. Stockmann’s share of the cost
estimate for the project is about EUR 10 million.

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 a total of 50 000 square metres of
retail space. The project has a total cost estimate of about EUR 115
million. Implementation of the project will call for modifying the town
plan, which has already been initiated. The works are estimated to be
completed phase by phase by the end of 2009.

Recommendation for the Corporate Governance of listed companies enters
into force on July 1, 2004

July 1 saw the entry into force of a new recommendation for the Corporate
Governance of listed companies. The recommendation set new requirements
for the Corporate Governance of stock exchange companies and also for
their disclosure obligations. As a minimum set of rules, it became part of
the stock exchange’s regulatory regime. Stockmann began complying with the
recommendation, as appropriate, already prior to its official entry into
force and is now observing it in its entirety.

Shares and shareholders

The company’s market capitalization at the end of June was EUR 1 030.9
million (EUR 788.4 million). At the end of 2003 the market capitalization
was EUR 955.6 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 19.20, compared with EUR
18.00 at the end of 2003, and the Series B share was selling at EUR 19.50,
as against EUR 18.30 at the end of 2003.

In January, the 1997 Stockmann share options were exercised to subscribe
for a total of 20 300 Stockmann plc Series B shares with a par value of 2
euros. As a consequence of the subscriptions the share capital was
increased by EUR 40 600. The shares were entered in the Trade Register on
February 20, 2004, and they became available for public trading, together
with the existing shares, on Helsinki Exchanges on April 5, 2004.

At its meeting held on February 12, 2004, Stockmann plc’s Board of
Directors approved a shareholder’s request to convert 163 000 of the
company’s shares from Series A into Series B shares in accordance with
Article 3 of the Articles of Association. The share conversion was entered
in the Trade Register on February 20, 2004. The converted shares became
eligible for public trading together with the existing shares as from
February 23, 2004.

A total of 597 118 Stockmann plc Series B shares with a par value of 2
euros were subscribed for with Stockmann Loyal Customer share options in
May. As a consequence of the subscriptions, the share capital was
increased by EUR 1 194 236. Following the increase, the share capital is
EUR 106 493 518. The shares were entered in the Trade Register on June 30,
2004, and they became available for public trading, together with the
existing shares, on Helsinki Exchanges on July 1, 2004. Following the
share conversion and the share option subscriptions, the total number of
Series A shares is 24 575 893 and the number of Series B shares is 28 670
866. Because of the subscriptions on the basis of the Loyal Customer share
options, the number of the company’s shareholders more than doubled and is
now almost 34 400.

In spring 2000, a total of 1 382 524 Stockmann plc Loyal Customer share
options were subscribed for. On the basis of the unexercised Loyal
Customer share options, a further total of 778 742 new Series B shares
with a par 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 EUR 1 557 484 to a maximum of EUR 108 051 002. 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 10.81 per

share. The remaining subscription period for the Loyal Customer share
options is from May 2, 2005, to May 31, 2005.

Stockmann held 406 939 of its own Series B shares (treasury shares) at the
end of June 2004. The par value of these shares is a total of EUR 813 878,
and they represent 0.8 per cent of all the shares outstanding as well as
0.1 per cent of the total votes. The shares were bought back at a total
price of EUR 6.1 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. The Board of Directors
has valid authorizations to transfer 406 939 company-owned Series B
treasury shares up to March 30, 2005.

Personnel strength

During the report period the Stockmann Group had an average payroll of 9
025 employees, or 579 more than in the comparison period. The growth in
the number of employees is attributable mainly to the new department
stores in Riga and Moscow. Converted to full-time staff, the average
number of employees increased by 563 and was 7 318.

At the end of June 2004, Stockmann had 2 205 employees working abroad. At
the end of June of last year Stockmann had 1 463 people working abroad.
The proportion of the total personnel who were working abroad increased
from 17 per cent in the comparison period to 23 per cent.

Full-year outlook

Retail sales are estimated to grow further in Finland. In the latter part
of the year, vehicle sales are expected to remain below the year-ago
level. The economies of Russia and the Baltic countries are anticipated to
continue growing at a faster rate than Finland. The Stockmann Group’s
sales in 2004 are expected to come in at about EUR 1.75 billion.

Of the Group’s divisions, the Department Store Division and Seppälä
performed excellently in the first part of the year. Although earnings,
especially for these units, are generated substantially during the latter
part of the year, the trend at the present time points to a marked
improvement in the full-year earnings of both the Department Store
Division and Seppälä. Measures to restore Hobby Hall’s profitability are
on track and their effects will show up particularly during the last
quarter. Hobby Hall’s full-year result will improve but still fall short
of the target. Within the Vehicle Division, the transfer of the profitable
unit in Herttoniemi to Kesko Group six months earlier than planned will
mean that the division’s full-year earnings come in below the figure a
year ago.

Consolidated third-quarter profits are expected to be at least at the
previous year’s level and the last quarter is anticipated to improve on
the previous year.

The earnings estimate for 2004, which was stated in the Annual Report, is
unchanged. Stockmann’s target is for profit before extraordinary items in
2004 to be higher than the figure reported for 2003.

Helsinki, August 11, 2004

STOCKMANN plc

Profit and loss account, Group EUR millions