FINANCIAL

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21

CONTENTS

Report by the Board of Directors

3

Key figures

17

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated cash flow statement

26

Notes to the consolidated financial statements

28

PARENT COMPANY FINANCIAL STATEMENTS

Parent company income statement

71

Parent company balance sheet

72

Parent company cash flow statement

74

Notes to the parent company

financial statements

75

Board proposal for disposal of distributable

funds and net result of the financial year

87

Auditor’s report

88

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REPORT BY THE BOARD OF DIRECTORS

The Stockmann Group’s consolidated revenue in 2021 was EUR 899.0 million (790.7), up 11.2% in comparable currency

rates. Gross margin was 58.6% (56.1). Operating result was EUR 82.1 million (-269.6). The adjusted operating result

was EUR 68.3 million (-12.3). Earnings per share were EUR 0.42 (-3.89). Adjusted earnings per share were EUR 0.30

(-0.46). The Board of Directors will propose for the Annual General Meeting, that no dividend will be paid for the financial

year 2021.

STRATEGY

Stockmann Group consists of two business divisions; the Lindex fashion group and Stockmann department stores and

webstores.

Lindex’s purpose is to empower and inspire women everywhere. We do that through actions as a company and through

a progressive fashion experience. Our customers, co-workers and partners are all part of this ambition. We are digital

first and powered by people. We promise customers fashion that feels and looks good.

To fulfilour purpose and vision,

we have made a promise – to make a difference for future generations. The purpose includes all dimensions of

sustainability and is divided into three areas: empower women, respect the planet and ensure human rights.

According to Lindex’s long-term strategy, we aim to be a global, brand-led, sustainable fashion company.This means

growth in digital revenue, both in our own e-commerce as well as in collaborations with global digital platforms, improved

cost efficiency and also growth with new businesses, while at the same time meeting our sustainability targets.

Stockmann’s purpose in all encounters with its customers, partners, employees and other stakeholders is to make a new

impression, every day. Our vision is to create a marketplace for a good life. Customer centricity,i.e., the capability to

understand customers and to serve them in the way they choose and to provide a unique customer experience, is the

core of the strategy. We provide a curated merchandise selection in fashion, beauty,home and food combined with

various services for our customers in our eight department stores as well as in the online store. For customers the

Stockmann promise is to create a feeling that lasts, which we provide with our professional and service-minded

personnel.

Stockmann’s financial priorities for the strategy period are: Revenue growth and to improve profitability and return on

investments.

CORPORATERESTRUCTURING PROGRAMME

In a decision on 9 February 2021, the Helsinki District Court approved Stockmann plc’s restructuring programme, and the

restructuring proceedings were ended. The restructuring programme is based on the continuation of Stockmann’s

department store operations, the sale and leaseback of the department store properties located in Helsinki, Tallinn and

Riga and the continuation of Lindex’s business operations as a fixed part of the Stockmann Group. The aforementioned

properties were initially required to be sold by 31 December 2021 at the latest at the risk of the lapsing of the

restructuring programme, unless the supervisor decided to postpone the deadline for the sale until 31 December 2022 for

a justified reason. The supervisor subsequently accepted a timeline with the estimated sale of the properties at the latest

during Q1 2022 in order to reach the optimal outcome for the company and the creditors. Stockmann signed on 29

December 2021 agreements to sell its department store properties in Tallinn and Riga and to continue with long-term

leaseback with the new owner. The sale and leaseback of the department store property in Tallinnwas booked in the

fourth quarter of 2021. The sale and leaseback of the department store property in Riga will be booked in the first quarter

of 2022 because the registration of the sold shares could not be made until in January 2022. The proceeds from the

sales of the properties were used, according to the restructuring programme, in full to reduce the secured restructuring

debts.The sale and leaseback process of the department store property in the centre of Helsinki is proceeding as

planned.

On 18 May 2021, the Board of Directors resolved, pursuant to the authorisation granted by the General Meeting, on a

share issue of at most 100 000 000 new shares of the company, carried out in deviation from the shareholders’ pre-

emptive subscription rights. Furthermore, pursuant to the restructuring programme, the creditors of unsecured

restructuring debt were entitled to convert their receivables under the payment programme of the restructuring

programme to new senior secured bonds issued by the company.

A total of 79 335 175 conversion shares were subscribed for in the share issue, and the total number of Stockmann

shares increased to a total of 154 436 944 shares. Trading with the conversion shares commenced on Nasdaq Helsinki

Ltd on 7 July 2021. The subscription price was EUR 0.9106 per share and, as a result, approximately EUR 72.2 million of

Stockmann's unsecured restructuring debt and hybrid loan debt were converted into Stockmann shares. The remainder

of that part of the confirmed unsecured restructuring debt and hybrid loan debt which would have been eligible for share

conversion in the share issue will be cut in accordance with the restructuring programme (Stock Exchange Release, 5

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July 2021). Other operating income includes a restructuring debt cut of EUR 2.6 million.

On 18 May 2021, Stockmann plc announced an offering of senior secured bonds to certain unsecured creditors of the

issuer under the restructuring. Pursuant to the restructuring programme, the unsecured creditors were entitled to convert

their receivables under the payment programme of the restructuring programme that have been confirmed to unsecured

debt, by way of set-off, to senior secured bonds on a euro-for-euro basis. The aggregate principal amount of the bonds

validly subscribed for by the unsecured creditors was EUR 66.1 million. Accordingly, Stockmann issued bonds to the

aggregate principal amount of EUR 66.1 million. The issue date of the bonds was 5 July 2021. Trading of the bonds on

the official list of Nasdaq Helsinki Ltd commenced on 7 July 2021 under the trading code ‘STCJ001026’.

Following the share and bond conversions, the remaining confirmed unsecured restructuring debt under the payment

programme of the restructuring programme amounts to approximately EUR 21.8 million. Under the restructuring

programme, Stockmann also has restructuring debt that is conditional, the maximum amount or disputed in respect of

which the amount subject to the payment programme will be confirmed later and the creditors of such restructuring debt

will be entitled to convert their receivables to shares and bonds after their respective receivables have been confirmed

(Stock Exchange Release, 5 July 2021).

COVID-19

The COVID-19 pandemic, which broke out in Europe after the first week of March 2020, is still causing significant

changes in Stockmann Group’s operating environment and customer volumes. During the first half of 2021, the

pandemic continued to have a negative impact on business, especially in customer volumes in the brick-and-mortar

stores. The online sales were not able to fully compensate for the decline despite the strong increase in e-commerce. In

the third quarter of 2021, the lifted restrictions related to COVID-19 had a positive effect on Stockmann Group’s operating

environment and customer volumes. In the fourth quarter of 2021, the Group’s sales increased in both divisions despite

the uncertainty regarding multiple changes in the COVID-19 restrictions.

The online sales grew rapidly in 2020 due to uncertainty surrounding the pandemic and government restrictions, which

reduced customer traffic in the brick-and-mortar stores. This development was partly reversed in the second half of 2021

with vaccine rollout and eased restrictions, enabling the customers to return to the brick-and-mortar stores.

In the Lindex division, sales during the fourth quarter in brick-and-mortar stores were affected by new COVID-19

restrictions that closed stores in some markets. However, growth in online sales continued to increase significantly and

more than fully compensated for the drop in sales in brick-and-mortar stores compared to 2019.

The Stockmann division’s visitor and customer volumes were on a par or above the previous year in the fourth quarter

despite rising COVID-19 cases. The rising number of Covid-19 cases led to new government-issued restrictions during

the final days of December. The Stockmann division’s fourth quarter sales exceeded the previous year’s sales. This

improvement is evenly distributed across all months of the quarter.

OPERATING ENVIRONMENT

The fashion sales in Finland grew by

13% in the fourth quarter and by 8% in the whole year 2021. The fashion sales are

still at a considerably lower level than before the COVID-19 pandemic. The fashion sales recovered steadily during the

autumn, and the Christmas sales were clearly better than expected. The online sales slowed down during 2021 but sales

are still increasing compared to the brick-and-mortar stores. The fashion industry has now been struggling with the

pandemic for two years, although stores in Finland mainly have been kept open. Repeated restrictions and

recommendations have had a direct impact on the fashion sales during this period. Older people in particular have been

avoiding shopping at the stores. (Source: Fashion and Sports Commerce association).

In Sweden, fashion sales continued to increase in the fourth quarter. The fashion sales in January–December were up by

17.4%. Fashion sales in 2021 are still below sales in 2019, at -6.1%. (Source: Swedish Trade Federation, Stilindex).

The COVID-19 pandemic had a negative impact on retail trade in the Baltic countries in 2021 due to lockdown periods at

the stores, limitations on the opening times and fewer tourists. Retail trade showed some recovery during the second half

of the year and there was swift growth in the retail trade during the fourth quarter.

REVENUE AND EARNINGS

The Stockmann Group’s revenue for the period amounted to EUR 899.0 million (790.7). Revenue was up by 13.7% from

the previous year in euros, or up by 11.2% in comparable currency rates against the Swedish krona.

Revenue in Finland was up by 5.8%, to EUR 294.9 million (278.7). Revenue in the other countries was up by 18.0%, to

EUR 604.1 million (512.0), or up by 14.1% in comparable currency rates.

Gross profit was EUR 527.0 million (443.7) and the gross margin was 58.6% (56.1). The gross margin was up for both

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Lindex and Stockmann.

Operating costs were up by EUR 30.2 million, or up by EUR 26.6 million including adjustments related to restructuring

and other transformation measures. Operating costs totalled EUR 374.0 million (343.8).

The operating result for the period was EUR 82.1 million (-269.6). The adjusted operating result for the period was EUR

68.3 million (-12.3).

Net financial expenses amounted to EUR 16.9 million (24.6). The result before taxes was EUR 65.2 million (-294.2).

Taxesfor the period totalled EUR 17.3 million (-2.4). On 21 May 2021, the Finnish Supreme Administrative Court handed

down its decision on intra-group financing in the Stockmann Group during 2009–2011 in favour of Stockmann. The

decision overturned an earlier decision handed down by the Administrative Court of Helsinki, and the Finnish tax

authorities will change Stockmann’s taxation for the years 2009–2011 and refund the overpaid taxes and related interest.

Therefore, Stockmann recognised a tax and interest refund total of EUR 2.9 million during the period.

The result for the period was EUR 47.9 million (-291.8). Earnings per share for the period were EUR 0.42 (-3.89).

Adjusted earnings per share were EUR 0.30 (-0.46). Equity per share was EUR 1.74 (2.86).

ITEMS AFFECTING COMPARABILITY

EUR million

1–12/2021

1–12/2020

Operating result (EBIT)

82,1

-269,6

Adjustments to EBIT

Gain on sales of real estate

-21,7

Lindex goodwill impairment

250,0

Restructuring and transformation measures

10,9

7,3

Employee insurance refund

-3,0

Adjusted operating result (EBIT)

68,3

-12,3

The 2020 figures are restated for costs related to SaaS arrangements. Additionally, the costs related to landlords’

disputed claims for terminated lease agreements in 2020 have been reclassified from financing items to operating costs.

FINANCING AND CAPITAL EMPLOYED

Cash flow from operating activities came to EUR 150.4 million (146.6) in January–December. Stockmann and Lindex

utilised possibilities to delay certain VATand tax payments, as a part of governmental Covid-19 subsidies during 2020

and 2021.

Interest for the secured restructuring debt has been paid, in accordance with the restructuring programme. In the

restructuring programme a repayment schedule has been prepared for the unsecured restructuring debt of EUR 21.8

million. The repayments will begin in April 2022 and continue until April 2028.

The proceeds, EUR 48.5

million, from the sale and leaseback of the department store property in Tallinn were used to

partly repay the secured restructuring debt in December 2021.The remaining secured restucturing debt as per the end

of December 2021 of EUR 381.5 million will be repaid by 31 December 2022.

Totalinventories were EUR 154.8 million (135.3) at the end of December. Inventories increased from the previous year

at both Lindex and Stockmann.

At the end of December, interest-bearing liabilities totalled EUR 784.7 million (859.4). The interest-bearing liabilities,

which are included in the restructuring debt, and which according to the situation on31 December 2021 are classified in

full as current liabilities, were EUR 381.5 million (488.2). The non-current senior secured bonds were EUR 66.0 million

(-). The lease liabilities according to IFRS 16 were EUR 337.2 million (371.2). EUR 85.7 million of the lease liabilities

were related to Stockmann and EUR 251.5 million to Lindex (31 December 2020: Stockmann 92.9, Lindex 278.3).

Cash and cash equivalents totalled EUR 213.7 million (152.3) at the end of December. Assets on the balance sheet

totalled EUR 1 416.5 million (1 425.3) at the end of December.

The equity ratio was 18.9% (14.5) and net gearing was 212.8% (340.7) at the end of December. IFRS 16 has a

significant impact on the equity ratio and net gearing. Excluding IFRS 16, the equity ratio would have been 27.3% and

net gearing would have been 76.8%.

The Group’s capital employed at the end of December was EUR 1 052.9 million, or EUR 751.5 million excluding IFRS 16

items (1 065.6 or 707.2).

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CAPITAL EXPENDITURE

Capital expenditure totalled EUR 16.9 million (18.5) in January–December. Most of the capital expenditure was used for

both Lindex’s and Stockmann’s digitalisation projects, the renovation of the Stockmann Delicatessen in Riga and the

Stockmann department stores in the Jumbo shopping centre and the centre of Helsinki, and Lindex’s store

refurbishments.

REVENUE AND EARNINGS BY DIVISION

The Stockmann Group’s reporting segments are Lindex and Stockmann. The segments are reported in accordance with

IFRS 8. Unallocated items include Corporate Management, Group Finance Management, Group Treasury and Internal

Audit.

LINDEX

1–12/2021

1–12/2020

Revenue, EUR mill.

607,4

507,1

Gross margin, %

65,4

63,0

Operating result, EUR mill.

74,6

38,8

Adjusted operating result, EUR mill.

80,3

39,6

Capital expenditure, EUR mill.

12,0

8,2

Lindex’s revenue increased by 19.8%, to EUR 607.4 million (507.1), or up by 16.8% in local currency rates compared to

the previous year. Compared to 2019, revenue in local currency rates increased by 4.1%. Lindex’s revenue for the full-

year 2021 is the highest revenue ever. Growth in online sales during the period was 47.0% and accounted for 20.6%

(15.6) of total sales.

The gross margin was 65.4% (63.0) for the period. The gross margin was up due to lower markdowns, better start

margins and a high currency effect from the stronger USD against SEK compared to the previous year.

Operating costs inreased by EUR 46.6 million, to EUR 254.2 million (207.6). Due to increased sales, the costs were

higher. Also, the previous year’s strong cost cuts affected the comparability.

The operating result for the period was EUR 74.6 million, which is almost double that compared to 2020 (38.8).

Lindex's adjusted operating result for the period doubled and amounted to EUR 80.3 million (39.6). This was Lindex’s

best result ever.

During the year Lindex continued to make progress within its sustainability promise and the circular transformation.

Climate matters have been in focus throughout the year, both regarding the reduction of emissions in transportations and

own operations and at the same time the continuation of the transformation towards a circular business model.

Empowering women is another focus area for Lindex where the fashion company has made continued progress in its

supply chain. Lindex’s sustainability report, which summarises the year 2021 and describes the fashion company’s

progress in detail, will be released in Q1 2022.

Lindex has great ambitions going forward on its journey as a global, brand-led and sustainable fashion company. Lindex

plans to make extensive investments in logistics and digitalisation in the coming years to enable a significant growth and

at the same time transform to a more sustainable business and maintain strong profitability. Important investments will

create long-term resilience in the ever-changing industry and enable Lindex to continue to stand strong and well

positioned for the future.

Store network

Lindex had 441 stores in total at the end of the fourth quarter: 409 own stores and 32 franchise stores. Lindex

opened 1 new store and closed 5 stores during the quarter. In addition to Lindex’s own online store, the division also

sells its products in third parties’ digital platforms.

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STOCKMANN

1–12/2021

1–12/2020

Revenue, EUR mill.

291,6

283,6

Gross margin, %

44,5

43,9

Operating result, EUR mill.

11,6

-48,2

Adjusted operating result, EUR mill.

-9,9

-48,2

Capital expenditure, EUR mill.

4,9

10,3

The Stockmann division’s revenue amounted to EUR 291.6 million (283.6). The increase was derived from the brick-and-

mortar sales as the easing of the COVID-19-related restrictions increased visitor volumes in the stores. Consequently,

online sales and visitor volumes in the online store decreased compared to the previous year. The online store declined

during the period by 2.2% and accounted for 15.9% (16.8) of total sales.

Revenue in Finland amounted to EUR 226.7 million (220.2), an increase of 3.0% from the previous year. Revenue in

department stores in the Baltics was up 2.3%, to EUR 64.8 million (63.4).

The gross margin was up, to 44.5% (43.9). The gross margin increased mainly because regular sales consistently made

up a higher share of sales than in the previous year.

Operating costs decreased by EUR 8.9 million, to EUR 124.1 million (133.0). The cost provision for landlords’ disputed

claims resulted in higher cost forthe previous year.

The operating result for the period was EUR 11.6 million (-48.2).

The adjusted operating result for the period was EUR -9.9 million (-48.2).

Stockmann conducted a CSR survey of all its stakeholders for a materiality assessment, which will form the basis for a

CSR strategy renewal in Q4 2021–Q1 2022.

Properties

The restructuring programme is based on the sale and leaseback of the department store properties in Helsinki, Tallinn

and Riga. Agreements about sale and leaseback of Tallinn and Riga propertieswere signed in December 2021. (Stock

Exchange Release 29 December 2021). The sales of the department store property in Riga will be booked in the first

quarter of 2022 because the closing of the sales of the Riga shares could not be made until January 2022.

The book value of the Helsinki property is EUR 227.1 million as at 31 December 2021, and it is presented as assets held

for sale

SHARES AND SHARE CAPITAL

On account of the combination of the A and B share classes of Stockmann plc a total of 3 053 086 new shares issued to

holders of A shares in a directed share issue without payment were registered with the Trade Register on 9 April 2021, in

accordance with the resolution made by the Annual General Meeting on 7 April 2021. Simultaneously, the combination of

the company's share classes as well as the amendments to the Articles of Association related thereto were registered

with the Trade Register. (Stock exchange release 9.4.2021)

The company has a single class of shares. Each share shall carry one (1) vote at a general meeting of shareholders.

At the end of December, Stockmann had a total of 154 436 944 shares. The number of votes conferred by the shares

was 154 436 944.

The Annual General Meeting resolved, in accordance with the proposal by the Board of Directors, to use the invested

unrestricted equity fund, the other funds consisting of unrestricted equity on the company's balance sheet, and the share

premium fund in their entirety to cover losses. The Annual General Meeting also decided that after covering the losses,

the company's remaining share capital will be further reduced by EUR 67,556,538.26 by transferring these funds to the

invested unrestricted equity fund. However, some creditors objected to the reduction of the company’s share capital and

the process for reduction of the company’s share capital lapsed. According to the Finnish Companies Act, distributions to

shareholders during the three years following the registration of the reduction of share capital in order to cover losses

can only be made by following the creditor protection procedure. According to the restructuring programme, the company

may not distribute the company’s assets to shareholders during the implementation of the repayment schedule under the

restructuring programme either.

At the end of December the share capital was EUR 77.6 million. At the end of December, the market capitalisation stood

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at EUR 333.6 million (86.9).

The price of a STOCKA share was EUR 2.16 at the end of December, compared with the price of a Series A share EUR

1.27 and the price of Series B share 1.16 at the end of 2020.

A total of 90.8 million shares were traded on Nasdaq Helsinki during the period. This corresponds to 79.6% of the

average number of shares.

The company does not hold any of its own shares, and the Board of Directors has no valid authorisations to purchase

company shares or to issue new shares.

At the end of December, Stockmann had 45 054 shareholders, compared with 43 656 a year earlier.

DISCLOSURE OF NON-FINANCIAL INFORMATION

The Stockmann Group is a Finnish listed company, engaging in the retail trade, whose business operations focus on

offering a comprehensive range of high-quality products and services in multi-channel department stores, fashion stores

and e-commerce. The product and service range is being developed in line with sustainable values, so that customers

can be provided with an increasing volume of sustainable options. It consists of fashion, beauty and home products, as

well as the supporting services. Stockmann is committed to a responsible business strategy and responsible business

development in all its divisions. The company has 8 department stores and 441 fashion stores spread over 19 countries,

including franchising stores.

Its daily operations are based on the Group’s strategy and values, Stockmann’s Code of Conduct, and the corporate

social responsibility (CSR) strategies of its divisions. The CSR focus areas are identified through materiality assessments

and stakeholder dialogue, CSR targets and indicators are then integrated into business operations, and their

development is monitored on a regular basis. Thus, in 2021, a stakeholder survey was conducted in all countries of

operation in order to update the Stockmann Division’s CSR strategy, and a materiality assessment was carried out on

the basis of its results. The Lindex division also conducted a comprehensive stakeholder survey to further develop its

CSR work. More detailed information about the updated CSR strategy and programme will be provided during 2022.

The Group’s continuous CSR development work is guided by Stockmann’s CSR strategy and promise. According to its

CSR promise, Stockmann will inspire and support its customers in making responsible choices, and will work for a more

sustainable future. Lindex, on the other hand, commits to empowering and inspiring women everywhere, while respecting

the planet and defending human rights.

Stockmann communicates openly about its CSR work and reports annually on its CSR focus areas, targets and

developments in the Group’s CSR Review, which is prepared under Global Reporting Initiative (GRI) standards. The

CSR Review will be published in the week beginning 28 February 2022 at ‘year2021.stockmanngroup.com’. Lindex will

report on its sustainability in a separate report that will be available at lindex.com.

Key commitments, codes of conduct and policies

Stockmann’s operations comply with international and national laws and regulations as they stand at the time in question

in its countries of operation. The Group’s operations are also guided by international treaties and recommendations, such

as the UN Universal Declaration of Human Rights, the UN Convention on the Rights of the Child, the ILO Declaration on

Fundamental Principles and Rights at Work, the OECD Guidelines for Multinational Enterprises, the UN Sustainable

Development Goals and the UN Guiding Principles on Business and Human Rights. In addition, Stockmann is committed

to the UN Global Compact initiative, and promotes human rights, labour rights, environmental protection and anti-

corruption measures in accordance with the initiative.

In 2021, the Stockmann Group was among the first companies to sign the new expanded International Accord for Health

and Safety in the Textile and GarmentIndustry. The accord is a successor to the so-called Bangladesh Accord on Fire

and Building Safety, which was signed by Stockmann in 2013, thus becoming the first company in Finland to do so.

Further information about other international commitments is provided in Stockmann’s CSR Report 2021 and on the

Group’s website.

The Stockmann Group’s Code of Conduct and other Group policies determine the way in which all personnel and

partners operate. This Code and the related clarifications have been included in the Group’s Collaboration Agreements,

and Stockmann requires all of its suppliers and partners to commit to and comply with the Code of Conduct, or to

demonstrate their commitment to equivalent principles. As part of responsibility management, the principles are

communicated to both internal and external stakeholders. The Code of Conduct covers compliance with laws and ethical

practices, free competition and consumer rights, employees and working conditions, the environment, and corruption and

conflicts of interest.

By the end of 2021, 89% (76) of the Stockmann Division’s personnel in Finland and 100% (81) of its personnel in Latvia

had completed online training on the Code of Conduct. Online training is not yet in use in Estonia, but it will become part

of training practices during 2022. During 2021, however, the Code of Conduct was implemented in Estonia at personnel

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information meetings by updating local guidelines to align with the Code’s principles and by discussing the subject with

every new employee. In Finland, 90% (64) of the members of the management teams of Stockmann’s support functions

and department stores have completed training. For Estonia and Latvia, the corresponding figure is 100%. Our target is

for 100% of the Group’s personnel in all countries to have completed the training.

Respecting human rights

Stockmann respects and promotes all human rights in accordance with its Code of Conduct and human rights policy. The

company is committed to ensuring that fundamental rights are respected, and that people are treated with dignity and

respect. We implement due diligence as required by the UN Guiding Principles on Business and Human Rights, in order

to identify and prevent any negative human rights impacts caused by or resulting from our business operations.

Stockmann has recognised that the most significant human rights risks related to its business operations lie in the

product supply chains and concern working conditions. A significant portion of Stockmann’s own fashion brands, 94%

(93), and those of Lindex, 98% (96), are manufactured in areas classified as high-risk by amfori BSCI. We are aware that

these countries involve a risk that our Code of Conduct will be violated, and we are actively working to ensure

compliance.

The Stockmann Group has been a member of amfori BSCI since 2005, and therefore is committed to systematically

improving the working conditions at its production facilities over the long term. In addition, Stockmann has been

committed to promoting fire and construction safety in Bangladesh through the Accord it signed in 2013. In 2020, Lindex

transferred from amfori BSCI to compliance with the SEDEX standard. As a member of SEDEX, Lindex applies the

SMETA (Sedex Members Ethical Trade Audit) method. Factories in all high-risk countriesthat manufacture Stockmann’s

and Lindex’s own-brand products undergo regular in-house audits by Stockmann’s local personnel, as well as amfori

BSCI, SEDEX or SA8000 audits conducted by a third party. Toensure transparency and traceability, both Stockmann

and Lindex publish a comprehensive list of their own-brands’ suppliers and factories on their websites.

Product safety and responsible supply chain

Stockmann offers a wide range of safe and durable products and focuses on the responsibility, transparency and

traceability of its supply chain. In Stockmann’s department stores, the majority of the selection consists of international

branded products, complemented by a wide range of Stockmann’s own-brand products in the fashion and home

categories, designed by Stockmann’s own designers and leveraging the synergy created by a joint procurement

organisation with Lindex. Most of the Lindex selection consists of its own brands.

As part of responsible supply chain management, Stockmann’s own-brand suppliers and producers are required to

comply with Stockmann’s Supplier Code of Conduct. All manufacturers of Stockmann’s own products have signed the

Stockmann Supplier Code of Conduct, the amfori BSCI Code of Conduct or a similar commitment. The Group’s

purchasing offices have local personnel at six main production sites to monitor production quality and compliance with

the Code of Conduct. In addition, producers in high-risk countries are subject to third-party liability audits. The long-term

target is for 100% of Stockmann’s own-brand producers in high-risk countries to have undergone an amfori BSCI or

similar audit.

The Stockmann Group is responsible for the safety of the products it sells, ensuring that they do not pose a risk to

customers’ health or property. Product safety is ensured in collaboration with suppliers. Product testing and quality

checks are carried out to ensure that the products fulfil all statutory quality and safety requirements and any stricter

requirements set by the company. During the reporting year,Stockmann and Lindex had no public product recalls.

Prevention of corruption and bribery

The Stockmann Group’s policies related to anti-corruption and anti-competitive practices are included in its Code of

Conduct and are further specified in the Group’s anti-corruption policy. Stockmann has zero tolerance towards all forms

of bribery and corruption. Stockmann’s employees and management are expected, at all times, to perform their duties

honestly and with integrity, in the best interest of the company,avoiding any conflicts of interest and complying with local

laws.

The Stockmann Group uses a Group-wide whistleblowing channel operated by an external supplier, which can be used

anonymously by employees, partners and other stakeholders to report any suspected or detected violations of the Code

of Conduct or other Group guidelines. Stockmann’s employees can also report any suspicions to their supervisor, their

unit’s security manager, the Group management, the legal department or the Group’s Internal Audit. All whistleblowing

reports and discussions are taken seriously and handled confidentially. All incidents are reported to Internal Audit and to

the Director of Legal Affairs. In 2021, one incident was reported through the channel. The incident was not related to

corruption. It was investigated, and the necessary measures were carried out. Stockmann was not made aware of any

legal cases, proceedings or decisions concerning corruption, anti-competitive behaviour or anti-trust practices in 2021.

Customers

Stockmann engages in continuous dialogue with its customers to maintain and improve customer satisfaction. Efforts

towards more effective customer dialogue include close cooperation with customers in service development, customer

pilots and testing, customer surveys and panels, and customer satisfaction measurements. In addition, Stockmann

actively uses social media and other feedback channels to better understand customer needs and expectations.

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In 2021, the Stockmann Division’s overall Net Promoter Score (NPS) was 46 (58). The department stores’ scores were

54 (58) in Finland, 64 (63) in Estonia and 73 (66) in Latvia. The NPS for the Stockmann.com online store was 47 (34).

The long-term NPS target level for the department stores was 70. In 2021, the Stockmann Division selected the

Emotional Value Index (EVI), which measures emotional experience, as its new performance indicator.The division-level

EVI targets will be revised separately for the first half (H1) and second half (H2) of each year. The Net Promoter Score

(NPS) will no longer be used as of the beginning of 2022. The division-level EVI result for 2021 was 49. The EVI result

was 65 for the department stores, 5 for customer service and 48 for the online store.

Due to a revised measurement method and a change in measurement volumes, the NPS for 2021 is not fully comparable

to the result for 2020. We will continue to develop the customer experience systematically and purposefully in 2022, as

well.

Toinspire and support its customers in making responsible choices, Stockmann openly shares information about its CSR

work, actively promotes the sustainability of its selection and services, and regularly participates in sustainability and

charity projects. Sustainability aspects are part of customer satisfaction measurements. A separate sustainability survey

for customers is carried out twice a year. The target score to be achieved by the end of 2022 is 4 (on a scale of 1 to 5).

The result for 2021 was 3.7. Stockmann will continue to make systematic efforts to improve sustainability.

In its operations, Stockmann complies with the current competition and privacy laws and promotes free competition in its

sector. There were no GDPR incidents in the Stockmann Division in 2021. A notification concerning Lindex was filed with

the local data protection ombudsman, but no further measures were deemed necessary. Stockmann’s annual target is

zero incidents of customer privacy breaches.

Personnel

Highly motivated and committed personnel are the backbone of Stockmann’s business. The Stockmann Group’s Human

Resources (HR) policies are based on the company’s values, strategy and Code of Conduct. Ensuring a safe working

environment, promoting equality and diversity, and supporting the professional growth and wellbeing of employees are

an essential part of Stockmann’s responsible HR practices. The implementation of good HR policies is monitored through

personnel surveys, performance appraisal discussions and other feedback channels. Cooperation also takes place in

local personnel committees and the Group’s Employee Council.

The coronavirus pandemic that broke out in the spring of 2020, continued to pose challenges for Stockmann’s business

operations. In 2021, the constraints resulting from the pandemic were addressed through country-specific temporary

adjustment measures. The year was demanding for our employees, as the company continued to adjust its operations

and cost levels to the changes in the operating environment caused by the coronavirus pandemic in all of the Stockmann

Group’s countries of operation. The company continued to implement cost-saving measures in both business divisions to

improve cost efficiency in the exceptional circumstances caused by the pandemic. At the same time, the company

implemented its revised strategy and process modifications to improve business performance and customer satisfaction.

Organisational changes to improve profitability continued in the Stockmann Division. Major investments were also made

in further developing employees’ competence and work culture.

The Group’s average number of employees was 5 649 (5 991) in 2021. In terms of full-time equivalents, the average

number of employees was 3 886 (3 973). At the end of the year, the Group had 5 833 (5 639) employees, of whom 1 512

(1 616) were working in Finland. The number of employees working outside Finland was 4 321 (4 023), or 74.1% (71.3)

of the total number of personnel. Among the Stockmann Group’s employees, women represented 91% (90) and men 9%

(10).

The Group’s wages and salaries amounted to EUR 149.3 million in 2021, compared with EUR 140.8 million in 2020. The

total employee benefit expenses were EUR 194.6 million (181.9), or 21.6% (23.0) of revenue.

The environment

The goal of Stockmann's responsibility management is to reduce and prevent the negative environmental impact of the

company's business by reducing emissions, improving energy efficiency and reducing water consumption, as well as

sorting and recycling waste. To ensure continuous improvement, Stockmann monitors compliance with and development

of the environmental goals of the department stores' environmental system. All of Stockmann’s operations in Finland

have an ISO 14001 environmental management system in place. The same operating methods have been adopted in

the department stores in the Baltic countries.

Energy efficiency is an important part of Stockmann’s environmental work, as the energy consumption in Stockmann’s

own operations has been identified to be the most significant source of carbon dioxide emissions. The Group’s energy

consumption mainly consists of electricity and district heating and cooling. Energy is consumed by the lighting,

ventilation, heating and cooling systems in the stores, distribution centres and offices, as well as by other equipment and

machinery in these facilities, such as lifts and escalators. As part of active environmental efforts to reduce climate

impacts, employees’ environmental awareness is maintained through training and regular internal communications.

Reporting on GHG emissions serves as a management tool in the Stockmann Group, providing a basis for determining

11

where emissions should be reduced and for setting reduction targets. Stockmann’s carbon footprint in 2021 covers the

Stockmann and Lindex divisions in all countries of operation, excluding Lindex’s franchising operations. Stockmann

reports annually on its carbon dioxide emissions in the Group’s CSR Review and in the international Carbon Disclosure

Project (CDP) climate change survey. In 2021, Stockmann’s CDP result continued to be on a good level of B- (B), similar

to the three previous years. Stockmann’s rating is higher than the global average (C) and on a par with the regional

average for Europe (B). The rating reveals that Stockmann has taken coordinated action on climate issues.

During 2021, the Group’s divisions continued to promote measures to reduce emissions. In keeping with its goal-oriented

work, Stockmann made a commitment to set emission reduction targets in accordance with the criteria of the Science

Based Targetsinitiative (SBTi). The goal is to set science-based climate targets to reduce greenhouse gas emissions in

the Group’s own operations and value chain.

The Stockmann Group has operations in 19 countries, which means that significant emissions arise from the distribution

of goods to the stores and from imported freight. In order to reduce these emissions, we cooperate actively with transport

partners, paying attention to the efficient and environmentally friendly logistics of product flows.

In 2021, the Stockmann Group’s comparable GHG emissions decreased by 27% (14) and amounted to 24,700 tC02e

(33,700). The largest share of emissions, around 68%, came from the generation of purchased energy, especially

electricity (Scope 2). The share

of certified renewable energy purchased in the Stockmann Group in 2021 was

55%

(

34,580 MWh, of which Stockmann's share is 11 % and Lindex's 89 %

)

.

Stockmann has identified the circular economy as one of the key themes in promoting sustainable business, and thus

seeks to act accordingly, in line with the principles of the circular economy.Stockmann aims to reduce the environmental

impacts of own-brand products and to increase the use of more sustainable materials in its own-brand products. Lindex

aims to have 80% of its garments made from more sustainable materials, using more sustainable processes and more

sustainable production facilities. In 2021, 78% (68) of the Lindex range was made from more sustainable materials, and

around 99% (99) of all Lindex cotton was sustainably produced, such as organic cotton or Better Cotton. In 2021, 60%

(60) of Stockmann’s own-brand garments was made from more sustainable materials, and 90% (91) of its own brand

knitwear was made from more sustainable cotton. Both indicators exceeded their target level. Stockmann’s target was

that, by 2021, 50% of its own-brand garments would be made from more sustainable materials, and that 80% of its own-

brand knitwear would be made from more sustainable cotton. Active collaboration and dialogue with goods suppliers will

continue so that information on the origin of products and sustainable materials can be made available to customers in a

transparent manner, for both our own brands and our partners’ brands.

CSR risks and risk management

The Stockmann Group's most significant CSR-related risks have been identified as related to the supply chains of the

product selections. The well-known international and domestic branded products in Stockmann's department stores form

the majority of the department store's range. The suppliers of these products are expected to commit to the Stockmann

Code of Conduct or to demonstrate a similar commitment. In addition, Stockmann’s department stores have a wide

range of Stockmann’s own brands. The majority of the Lindex range consists of its own-brand products. A significant

proportion of the Group’s own-brand products are manufactured in regions classified as high-risk countries by amfori

BSCI. This proportion is 94% (93) for Stockmann, and 98% (96) for Lindex. In the management of its own-brand supply

chains, the Group is exposed to various risks, such as the traceability and transparency of supply chains, the

implementation of human and labour rights, and the environmental impacts of production and raw materials.

Stockmann manages these risks through responsible purchasing practices and established policies and risk

management methods. The risks are monitored in accordance with the CSR strategy and good corporate governance as

part of business risk management. All suppliers of the Group’s own brands are required to comply with Stockmann’s

Supplier Code of Conduct, which is based on the 11 core labour rights of amfori BSCI, or on a similar commitment. The

Group’s purchasing offices have local staff at six main production sites and monitor the quality of production and

adherence to ethical principles. In addition, third-party sustainability audits are carried out for producers in high-risk

countries.

Other identified CSR-related risks related to the Group’s business operations include risks related to the employees’

competence and wellbeing, product safety and environmental awareness. Failure to respond to risks within these areas

could have an impact on the Group’s business development, brand and reliability. Open dialogue and cooperation with

the Group’s stakeholders, as well as transparent CSR communication, are an essential part of Stockmann’s risk

management activities.

12

STOCKMANN’S ASSESSMENT OF EU TAXONOMYELIGIBLE ACTIVITIES

The objective of the European Union's classification system for sustainable financing is to link financing and climate

targets in order to attain the targets set in the Paris Agreement. It is also intended to help investors, businesses and

other economic actors and EU Member States direct their investments to sustainable targets. The classification system

defines criteria for investments that promote a carbon-neutral and environmentally sustainable economy and are an

important part of the EU’s future climate policy actions. The sectors included in the criteria account for around 94 per

cent of the EU’s CO2 emissions. The TaxonomyRegulation currently applies to listed companies with more than 500

employees, financial market participants, insurance companies and EU Member States. Stockmann, which is listed on

the stock exchange and employs more than 500 people, must assess its EU taxonomy eligibility. The EU’s taxonomy

does not define criteria that are specific to Stockmann’s business in the retail sector. Currently,criteria exist for 13

different sectors, including energy production, transport and forestry. The development of EU taxonomy will be monitored

and internal understanding of the possible impact of the EU taxonomy framework on Stockmann Group’s business

operations will be enhanced.

Stockmann’s business in the retail sector

At the time of preparing this report, Stockmann’s retail business is not included in the sectors that are within the scope of

EU taxonomy, which means that the portion of revenue and capital and operating expenses within its scope is 0 per cent.

However, the retail sector may have a significant impact on the other environmental objectives of the taxonomy, suchas

the circular economy, but applicable criteria have not yet been published. Stockmann has assessed the impacts of its

business operations and has actively promoted the circular economy by optimising the use of packaging materials, using

high-quality and sustainable materials in products, making increasing use of recyclable and recycled materials,

enhancing the recycling of waste, increasing services that support sustainability and attempting to promote sustainable

consumption habits. Stockmann has also systematically increased the energy efficiency of its operations and disclosed

its greenhouse gas emissions at the Group level for ten years. Stockmann has thus recognised the climate impact of its

operations throughout the value chain and has undertaken measures and is committed to setting science-based SBT

climate targets.

Stockmann’s real estate holdings

EU taxonomy defines criteria for sustainable financial operations in the real estate business. Under the Taxonomy

Regulation, the acquisition and ownership of buildings (activity 7.7 ‘Acquisition and ownership of buildings’) is classified

as a sector covered by the taxonomy. At the time of preparing this report, Stockmann is in possession of real estate, the

sale of which should be carried out by 31 March 2022 in accordance with the restructuring programme target timetable.

In this respect, Stockmann’s real estate business in its entirety is covered by the taxonomy classification.

In this report, Stockmann has assessed the eligibility of its business operations in the retail sector and its real estate

business as follows for EU taxonomy:

KPI

Total (EUR

million)

Eligible %

Non-eligible %

Turnover

899.0

1.3%

98.7%

CapEx

64.8

0.5%

99.5%

OpEx

374.0

0.4%

99.6%

BUSINESS CONTINUITY,RISKS, AND FINANCING SITUATION

Totalcash as at 31 December 2020 was EUR 152.5 million. Due to normal business seasonality, the figure declined

during the first quarter of the year but improved during Q2-Q4 and amounted to EUR 213.8 million at 31 December 2021.

Both divisions have taken and will take action to improve the cash flow and net working capital position. The restructuring

proceedings caused uncertainty among suppliers, but business relations are gradually returning to normal. Measures to

adjust the cost structure and product intake due to the coronavirus situation have been implemented from the second

quarter of 2020 onwards. During the restructuring proceedings, Stockmann plc renegotiated all department store lease

agreements and office lease agreements. Thereby, lease costs and store sizes were adjusted downwards. These

measures support the cash flow from 2021 onwards.

The Helsinki District Court approved the restructuring programme on 9 February 2021. The restructuring programme is

based on the continuation of Stockmann’s department store operations, the sale and leaseback of the department store

properties located in Helsinki, Tallinnand Riga, and the continuation of Lindex’s business operations as a fixed part of

the Stockmann Group. The proceeds from the sale and leaseback of the department store properties will mostly be used

for repayment of the secured restructuring debt by 31 December 2022 at the latest. The aforementioned properties were

initially required to be sold by 31 December 2021 at the latest at the risk of the lapsing of the restructuring programme,

unless the supervisor decided to postpone the deadline for the sale until 31 December 2022 for a justified reason. The

supervisor subsequently accepted a timeline with an estimated sale of the properties at the latest during Q1 2022 in

order to reach the optimal outcome for the company and the creditors. The sales process of the department store

property in the centre of Helsinki is proceeding as planned. Stockmann signed agreements to sell its department store

properties in Tallinnand Riga on 29 December 2021 and to enter into long-term leaseback agreements with the new

13

owner. The proceeds from the sales of the Tallinnproperty were, according to the restructuring programme, used in full

to reduce the secured restructuring debts in December 2021. Thereafter the remaining secured restructuring debt was

EUR 381.5 million. The sale and leaseback transaction of the Riga property was completed and the proceeds from the

sale, EUR 38.7 million, were used to repay the secured restructuring debt in January 2022

As a part of the restructuring programme, the company’s A and B share series were combined as of 12 April 2021 so that

each one (1) A share was entitled to receive 1.1 B shares. The combination is intended to improve the liquidity of the

share and the company’s ability to secure financing from the market.

Efforts have been made to build some flexibility into the restructuring programme by converting some of the unsecured

debts into the company’s shares or cutting them. Half of the hybrid bond was cut during Q1 2021 and the other half was

mostly converted to equity in July 2021 and partly cut. In addition, 20% of the other undisputed restructuring debt was

mostly converted into equity in July and partly cut.

An unsecured creditor was entitled to exchange the payment described in the repayment schedule for a secured bond

issued by the company with a five-year bullet principal repayment. The conversions were completed in July and the size

of the bond is EUR 66.1 million (Stock Exchange Release, 5 July 2021).

Stockmann plc has pledged Stockmann Sverige AB’s (SSAB) shares and its receivables from SSAB as a security for the

bond. The different maturity profile of the secured bond provides the company with flexibility for the initial years of the

restructuring programme. The programme enables Stockmann to make up a EUR 50 million tap issue on the above-

mentioned secured bond. This tap issue can be used to cover short-term liquidity needs.

The remaining unsecured restructuring debt is EUR 21.8 million. A repayment schedule in accordance with the

Restructuring Act has been prepared for the remaining part of the unsecured debt. The repayments will begin in April

2022.

Lindex opened foreign exchange hedging limits in September and is gradually increasing the hedging levels towards the

normal level.

The Group’s scope for arranging new financing is limited during the execution of the corporate restructuring

programme. This may have an effect on sufficiency of liquidity and on the financial position. Failure to meet the

requirements, sale and leaseback of properties, and repayment of restructuring debt according to Stockmann plc’s

corporate restructuring programme may lead to termination of the restructuring or bankruptcy.

The prolonged effects of the COVID-19 pandemic will have an impact on Stockmann’s liquidity and financial position and

the value of its assets. Risks related to production and supply may arise from unusual situations such as an escalation in

the COVID-19 pandemic or a new epidemic leading to government-imposed restrictions, a lack of transport capacity,

strikes, political uncertainties or disputes, any of which may stop or cause delays in production or supply of merchandise

and which in turn may affect business negatively. The management and the Board of Directors regularly assess the

operational and strategic risks associated with the current situation.

The Swedish tax authorities have taken a negative stance on the taxation of Stockmann’s subsidiary Stockmann Sverige

AB regarding its right to deduct interest expenses during the years 2013–2019 for a loan raised for the acquisition of AB

Lindex. In their reply, the Swedish tax authorities concluded that Stockmann does not have the right to appeal to the

European Court of Justice to gain the rejected interest deductions, and that the decision of the European Court of Justice

of 20 January 2021 is of no significance regarding Stockmann’s right to deduct these interest expenses. The processing

of the case continues in the Court of Appeal (Stock Exchange Release, 14 May 2021).

LähiTapiolaKeskustakiinteistöt Ky, the landlord of Stockmann’s Tapioladepartment store, has initiated arbitration

proceedings against Stockmann in which the company claims up to EUR 43.4 million compensation from Stockmann in

accordance with section 27, subsection 1 of the Restructuring Act. The administrator of the restructuring proceedings has

disputed the claim of LähiTapiolaKeskustakiinteistöt Ky in the restructuring programme to the extent that it exceeds EUR

3.5 million. In connection with the same, LähiTapiolaKeskustakiinteistöt Ky has filed a claim against Stockmann,

Stockmann AS and the administrator and/or the supervisor at the Helsinki District Court to leave the matter in abeyance.

In addition, LähiTapiolaKeskustakiinteistöt Ky has appealed to the Court of Appeal regarding the decision of the Helsinki

District Court to certify the restructuring programme on 9 February 2021 to the extent that the Helsinki District Court has

investigated a claim by Stockmann AS instead of rejecting the claim and instructing LähiTapiola Keskustakiinteistöt Ky to

deliver its claim to be reviewed in a different process. In addition, Nordika II SHQ Oy, the landlord of Stockmann’s

Takomotieoffice space, has filed a claim with the Helsinki District Court, in which the company claims compensation

amounting to a maximum of EUR 14.5 million from Stockmann in accordance with section 27, subsection 1 of the

Restructuring Act. This claim has been disputed by the supervisor in the restructuring programme to the extent that it

exceeds EUR 1.2 million. In the same claim, Nordika II SHQ Oy has named the administrator and Stockmann as

respondents.

The lessor of the Tampere department store,Mutual Insurance Fund Fennia, has commenced arbitration proceedings

against Stockmann, in which the company claims up to EUR 11.9 million in compensation from Stockmann in

accordance with section 27, subsection 1 of the Restructuring Act. The administrator of the restructuring proceedings has

disputed the claim to the extent that it exceeds EUR 2.8 million. In addition, Mutual Insurance Fund Fennia has filed two

claims with the Helsinki District Court with Stockmann, with the administrator and the supervisor as respondents in the

14

first claim and Stockmann AS as respondent in the other claim. In the claims to the Helsinki District Court, Mutual

Insurance Fund Fennia requests the court to confirm that the damages payable to Fennia are the maximum amount of

EUR 12 million. Moreover, the second lessor of the Tamperedepartment store, Tampereen SeudunOsuuspankki, has

initiated proceedings at the Pirkanmaa District Court, in which the company claims up to EUR 20.3 million compensation

from Stockmann in accordance with section 27, subsection 1 of the Restructuring Act. In the restructuring programme,

the supervisor has disputed the claim presented by TampereenSeudun Osuuspankki during the restructuring

proceedings (at which time the maximum amount of the claim was EUR 17.7 million) to the extent that it exceeds EUR

2.0 million.

In addition to the above claims, the former subtenant of the Tampere department store, Pirkanmaan Osuuskauppa, has

initiated arbitration proceedings in which it claims up to EUR 5.4 million compensation from Stockmann in accordance

with, among others, section 27, subsection 1 of the Restructuring Act. The supervisor of the restructuring proceedings

has disputed the claim for the most part. Pirkanmaan Osuuskauppa has also appealed regarding the decision of the

Helsinki District Court on 9 February 2021 to certify the restructuring programme to the extent that the Helsinki District

Court viewed that the damages payable to Pirkanmaan Osuuskauppa are restructuring debt instead of debt that has

arisen after the application for restructuring proceedings came into force pursuant to section 32 of the Restructuring Act.

The Helsinki Court of Appeal rejected Pirkanmaan Osuuskauppa's appeal in its court decision on 4.11.2021.

Furthermore, ECR Finland Investment I Oy, the owner of Kirjatalo, has appealed the decision by Helsinki District Court

on 9 February 2021 to certify the restructuring programme. ECR Finland Investment I Oy has requested that the Appeal

Court confirm that its claim is based on an obligation in accordance with section 15 of the Restructuring Act, and thus,

such a claim would be considered debt that has arisen after the application for restructuring proceedings came into force.

Alternatively, if the court considers that the claim of ECR Finland Investment I Oy concerns restructuring debt within the

meaning of section 3 of the Restructuring Act, ECR Finland Investment I Oy requests that it would in any case be entitled

to receive a payment for its receivable despite the payment block in accordance with section 17 of the Restructuring Act.

The Helsinki Court of Appeal rejected ECR Finland Investment I Oy’s appeal in its court decision on 4.11.2021.

With regard to the other disputed receivables mentioned in the restructuring programme, conciliation negotiations are

underway and some of them have already been settled amicably. The disputes mentioned in the corporate restructuring

programme concerning HOK-Elanto Liiketoiminta Oy and the landlord of the Jumbo department store have been settled.

RISK FACTORS

Stockmann is exposed to risks that arise from the operating environment, risks related to the company’s own operations

and financial risks. The general economic situation and the COVID-19 pandemic affect consumers’ purchasing behaviour

and purchasing power in all of the Group’s market areas. Consumers’ purchasing behaviour is also influenced by

digitalisation, the growth of remote working and changing purchasing trends as well as emerging inflationary pressures.

Rapid and unexpected movements in markets and the geopolitical situation may influence on the financial markets,

logistics and consumer behaviour. Uncertainties related to changes in purchasing behaviour are considered to be the

principal risk arising from the operating environment that could affect Stockmann also in the future. The uncertainty in the

operating environment may continue to affect the operations of Stockmann’s tenants and may consequently have a

negative impact on rental income.

Stockmann’s business is affected by normal seasonal fluctuations during the year. The first quarter is typically low in

revenue and the fourth quarter is typically higher in revenue. Fashion accounts for approximately 80% of the Group’s

revenue. An inherent feature of the fashion trade is the short lifecycle of products and their dependence on trends, the

seasonality of sales and the susceptibility to abnormal changes in weather conditions. These factors may have an impact

on the Group’s revenue and gross margin.

In the retail sector, the value chain of products from raw material to customers often contains many stages and involves

risks related to the fulfilment of human rights, good working conditions, and environmental and other requirements set

out in Stockmann’s Code of Conduct and other policies. Responsible management of the supply chain and sustainable

use of natural resources are important for the Group’s brands in order to retain customer confidence in Stockmann.

Risks related to production and supply may arise from unusual situations such as an escalation in the COVID-19

pandemic or a new epidemic leading to governmental restrictions, strikes, political uncertainties or conflicts which may

stop or cause delays in production or supply of merchandise, which in turn may affect business negatively. The Group’s

operations are based on flexible logistics and the efficient flow of goods and information. Delays and disturbances in

logistic and information systems, as well as uncertainties related to logistics partners, can have an adverse effect on

operations. Every effort is made to manage these operational risks by developing appropriate back-up systems and

alternative ways of operating, and by seeking to minimise disturbances to information systems.

The Group’s revenue, earnings and balance sheet are affected by changes in exchange rates between the Group’s

reporting currency, which is the euro, and the Swedish krona, the Norwegian krone and the US dollar and certain other

currencies. Currency fluctuations may have an effect on the Group’s business operations. The group is currently only

partly hedging the foreign exchange risks due to the corporate restructuring. Interest rate fluctuations may also have an

impact on goodwill.

15

The Group’s possibilities to arrange new financing are limited during the execution of the corporate restructuring

programme. This may have an effect on the sufficiency of liquidity and on the financial position. Failure to meet the

requirements, the sale and leaseback of properties and repayment of restructuring debt according to the Stockmann plc’s

corporate restructuring programme may lead to the termination of the restructuring or bankruptcy.

EVENTS AFTER THE REPORTING PERIOD

The sales of the department store property in Riga will be booked in the first quarter of 2022 because the closing of the

sales of the Riga shares could not be made until in January 2022.

On 27 January 2022, the company announced that it had received and verified three subscription forms from entitled

persons whose previously conditional or disputed receivables subject to the payment programme of the restructuring

programme have been clarified and the final amounts of such receivables have been confirmed. The subsequent bonds

duly subscribed for by such entitled persons amount to the aggregate principal amount of EUR 94,333. The receivables

of the entitled persons will be converted, by way of set-off, to subsequent bonds. The subsequent bonds are settled

through the clearance system of Euroclear Finland Ltd and will be recorded on the book-entry accounts maintained by

Euroclear Finland Ltd as soon as practicably possible.

Pursuant to the restructuring programme, the entitled persons are also entitled to convert 20% of their receivables that

have been confirmed by 1 December 2021 to the shares in the company. Stockmann announced the results of the share

issuance with a separate release.

The company still has disputed, conditional and maximum amount-based restructuring debt under the restructuring

programme in respect of which the final amount subject to the payment programme will be confirmed later, and the

creditors of such restructuring debt will be entitled to convert their receivables to shares and bonds after their respective

receivables have been confirmed.

Stockmann submitted an application for the issued subsequent bonds to be admitted to trading on the list of Nasdaq

Helsinki Ltd together with the fungible bonds already trading under the trading code "STCJ001026". Trading on the

subsequent bonds is expected to commence on or about 1 February 2022. (Stock Exchange release 27.1.2022)

On 27 January 2022, the Company’s Board of Directors decided, in accordance with the restructuring programme and

pursuant to the authorisation granted by the Annual General Meeting, to issue 28,139 new shares of the Company (the

"

Conversion Shares

") in deviation from the shareholders’ pre-emptive subscription rights to creditors whose previously

conditional or disputed restructuring debts under the restructuring programme were confirmed to their final amounts by 1

December 2021 (the "

Share Issue

") and has approved the subscriptions made in the Share Issue.

The subscription price in the Share Issue was EUR 0.9106 per share, which has been paid by setting off restructuring

debt in accordance with the restructuring programme. As a result of the Share Issue, the total number of shares in the

Company will increase by 28 139 shares to a total of 154 465 083 shares. After the Share Issue, the Company will

continue to have restructuring debt under the restructuring programme that is conditional, a maximum amount or

disputed, in respect of which the amount subject to the payment programme will be confirmed later, and the creditors of

such restructuring debt will be entitled to conversion after their respective restructuring debt receivables have been

confirmed. (Stock Exchange release 27.1.2022)

On 28 January 2022, the 28 139 Conversion Shares subscribed for in the Share Issue were registered in the trade

register maintained by the Finnish Patent and Registration Office. Following the registration of the Conversion Shares,

the total number of issued shares in the Company is 154 465 083. The Conversion Shares will, as of their registration

and recording on the book-entry accounts of the subscribers, confer same rights as the company’s other shares,

including a right to dividends and other shareholder rights. The recording on the book-entry accounts of the subscribers

is expected to take place on or about 1 February 2022. Trading with the Conversion Shares is expected to commence on

or about 1 February 2022 under the trading code "STOCKA". (Stock Exchange release 28.1.2022)

The Supreme Court has granted Pirkanmaan Osuuskauppa leave to appeal to the extent that the appeal concerns the

claim for damages arising from the termination of the sublease agreement are restructuring debt or debt that has arisen

during the corporate restructuring proceedings. LähiTapiola KeskustakiinteistötOy and ECR Finland Investment I Oy

were not granted leave to appeal.

16

GUIDANCE FOR 2022

Stockmann expects an increase in the Group’s revenue and that the adjusted operating result will be clearly positive

assuming that no major COVID-19 restrictions are imposed.

MARKET OUTLOOK FOR 2022

Uncertainty in the global economy is expected to persist throughout 2022, and the COVID-19 pandemic will continue to

have an impact on the economy across the world, until the coronavirus situation is under better control. The retail market

is expected to remain challenging due to changes in consumer behaviour and confidence as well as inflatory pressures.

The Stockmann division will continue to execute the restructuring programme and Lindex to explore new growth

opportunities.

CORPORATEGOVERNANCE STATEMENT

Stockmann will publish a separate Corporate Governance Statement for 2021 in line with the recommendation by the

Finnish Corporate Governance Code. The statement will be published during the week starting on 28 February 2022

(week 9).

Helsinki, 24 February 2022

STOCKMANN plc

Board of Directors

17

2021

2020**)

2019**)

2018

2017

Revenue *)

EUR mill.

899,0

790,7

960,4

1 018,8

1 055,9

Gross profit *)

EUR mill.

527,0

443,7

540,9

580,1

588,8

Gross margin *)

%

58,6

56,1

56,3

56,9

55,8

EBITDA *)

EUR mill.

184,9

109,6

153,0

76,0

67,6

Adjustments to EBITDA *)

EUR mill.

13,8

-7,3

-15,6

-8,4

-5,6

Adjusted EBITDA *)

EUR mill.

171,1

116,9

168,6

84,3

73,2

Operating result *)

EUR mill.

82,1

-269,6

24,1

-5,0

-148,4

Share of revenue *)

%

9,1

-34,1

2,5

-0,5

-14,1

Adjustments to operating result *)

EUR mill.

13,8

-257,3

-15,6

-33,4

-160,6

Adjusted operating result *)

EUR mill.

68,3

-12,3

39,8

28,4

12,3

Result for the period

EUR mill.

47,9

-291,8

-45,6

-45,2

-209,4

Share capital

EUR mill.

77,6

144,1

144,1

144,1

144,1

A share

EUR mill.

61,1

61,1

61,1

61,1

B share

EUR mill.

77,6

83,0

83,0

83,0

83,0

Return on equity

%

20,2

-86,7

-9,3

-5,2

-21,3

Return on capital employed

%

8,0

-20,1

1,6

-0,4

-9,1

Capital employed

EUR mill.

1 059,2

1 237,4

1 529,1

1 540,1

1 745,4

Capital turnover rate

0,8

0,6

0,6

0,7

0,7

Inventories turnover rate

2,4

2,6

2,9

3,1

3,4

Equity ratio

%

18,9

14,5

27,8

46,2

43,0

Net gearing

%

212,8

340,7

191,7

64,5

83,8

Capital expenditure

EUR mill.

16,9

18,5

33,8

29,3

34,7

Share of revenue *)

%

1,9

2,3

3,5

2,9

3,3

Interest-bearing net debt

EUR mill.

570,8

702,5

900,2

543,3

739,4

Net debt / EBITDA

EUR mill.

3,1

6,4

5,9

7,2

10,9

Totalassets

EUR mill.

1 416,5

1 425,3

1 690,3

1 827,9

2 061,4

Staff expenses *)

EUR mill.

194,6

181,9

211,1

222,0

236,2

Personnel, average *)

persons

5 649

5 991

7 002

7 241

7 360

Average number of employees, converted

to full-time equivalents *)

persons

3 886

3 973

4 891

5 299

5 426

Revenue per person *)

EUR

thousands

159,1

132,0

137,2

140,7

143,5

*) continuing operations

**) Key figures 2019-2020 are adjusted for comparison purposes.

Stockmann changed its accounting principle according to IFRIC agenda decisions on configuration or customisation

costs in a cloud computing arrangement (IAS 38) in the financial year 2021. Additionally, the costs related to disputed

landlords’ claims for terminated lease agreements in 2020 were reclassified from financial items to other operating

expenses.

Stockmann changed from its previous revaluation model to a cost model for its property, plant and equipment in the

financial year 2020. The change in accounting method was applied retrospectively as of 1 January 2019 according to the

IAS 8 standard. The change in the accounting policy had a remarkable impact on the comparability of certain key figures.

IFRS 16 implementation in 2019 had a significant impact on the comparability of certain key figures.

Stockmann Delicatessen in Finland was reported as discontinued operations for financial years ended 31 December

2018 and 2017.

18

2021

2020*)

2019*)

2018*)

2017*)

Earnings per share, continuing operations

EUR

0,42

-3,88

-0,69

-0,65

-2,71

Earnings per share, discontinued operations

EUR

-0,02

-0,15

Earnings per share (undiluted and diluted)

EUR

0,42

-3,89

-0,69

-0,67

-2,86

Cash flow from operating activities per share

EUR

1,32

2,03

1,42

1,15

0,26

Equity per share

EUR

1,74

2,86

6,52

11,71

12,29

Dividend per share

EUR

Dividend per earnings

%

P/E ratio of shares

A share

-0,3

-3,1

-2,9

-1,5

B share

5,1

-0,3

-2,9

-2,7

-1,5

Share quotation at 31.12.

EUR

A share

1,27

2,26

2,00

4,60

B share

2,16

1,16

2,06

1,92

4,35

Highest price during the period

EUR

A share

3,59

3,16

5,64

8,20

B share

2,44

3,22

2,74

5,13

8,00

Lowest price during the period

EUR

A share

0,88

1,90

1,84

4,22

B share

1,07

0,65

1,78

1,65

4,05

Average price during the period

EUR

A share

1,87

2,41

2,53

5,29

B share

1,61

1,45

2,12

3,31

6,19

Share turnover

thousands

A share

576

2 102

1 281

3 875

1 996

B share

90 210

30 258

13 127

13 952

13 664

Share turnover

%

A share

0,5

6,9

4,2

12,7

6,5

B share

79,1

72,9

31,6

33,6

32,9

Market capitalisation at 31.12.

EUR mill.

333,6

86,9

154,5

140,8

321,0

Number of shares at 31.12.

thousands

154 437

72 049

72 049

72 049

72 049

A share

30 531

30 531

30 531

30 531

B share

154 437

41 518

41 518

41 518

41 518

Weighted average number of shares

thousands

114 009

75 102

75 102

75 102

75 102

A share

B share

114 009

75 102

75 102

75 102

75 102

Weighted average number of shares, diluted

114 009

75 102

75 102

75 102

75 102

Totalnumber of shareholders at 31.12.

45 054

43 656

43 394

44 396

46 672

*) Key figures per share 2017-2020 are adjusted for comparison purposes.

19

Stockmann uses Alternative Performance Measures according to the guidelines of the European Securities and Market

Authority (ESMA) to better reflect the operational business performance and to facilitate comparisons between financial

periods.

Adjusted operating result (adjusted EBIT) is calculated from operating result excluding any adjustments related to

acquisitions and disposals, restructuring, impairment losses, litigation fees and settlements as well as value adjustments

to assets.

EUR mill.

2021

2020*)

2019*)

2018

2017

Adjusted EBITDA

171,1

116,9

168,6

84,3

73,2

Adjustments to EBITDA

Restructuring arrangements

-10,9

-7,3

-15,2

-3,3

-9,6

Fair value gains and losses on investment

properties

4,0

Gain on sale of properties

21,7

-0,4

6,8

Value adjustment to assets held for sale

-11,9

Refunds of health insurance premiums (years

2004-2008)

3,0

Adjustments total

13,8

-7,3

-15,6

-8,4

-5,6

EBITDA

184,9

109,6

153,0

76,0

67,5

Adjusted operating result (EBIT)

68,3

-12,3

39,8

28,4

12,3

Adjustments to EBIT

Goodwill impairment

-250,0

-25,0

-150,0

Restructuring arrangements

-10,9

-7,3

-15,2

-3,3

-14,6

Fair value gains and losses on investment

properties

4,0

Gain on sale of properties

21,7

0,0

-0,4

6,8

Value adjustment to assets held for sale

0,0

0,0

0,0

-11,9

Refunds of health insurance premiums (years

2004-2008)

3,0

Adjustments total

13,8

-257,3

-15,6

-33,4

-160,6

Operating result (EBIT)

82,1

-269,6

24,1

-5,0

-148,4

*) Figures 2019-2020 are adjusted for comparison purposes.

20

Definitionofkeyfigures

Performance measures according to IFRS

Earnings per share,

continuing operations

Result for the period attributable to the parent company’s shareholders from continuing

operations − tax-adjusted interest on hybrid bond / Average number of shares, adjusted

for share issue

Earnings per share,

discontinued operations

Result for the period attributable to the parent company’s shareholders from discontinued

operations − tax-adjusted interest on hybrid bond / Average number of shares, adjusted

for share issue

Earnings per share

Result for the period attributable to the parent company’s shareholders − tax-adjusted

interest on hybrid bond / Average number of shares, adjusted for share issue

Alternative performance measures

Gross profit

Revenue - costs of goods sold

Gross margin

Gross profit / revenue x 100

EBITDA

Operating result + depreciation, amortisation and impairment losses

Adjusted EBITDA

EBITDA – adjustments, see items affecting comparability

Adjusted operating result

Operating result − adjustments,see items affecting comparability

Return on equity, %

Result for the period / Equity total (average for the year) x 100

Return on capital employed,

%

Result before taxes + interest and other financial expenses /

Capital employed x 100

Capital employed

Totalassets − deferred tax liability and other non-interest-bearing liabilities (average for

the year)

Capital turnover rate

Revenue / Totalassets − deferred tax liability and other non-interest-bearing liabilities

(average for the year)

Inventories turnover rate

365 / Inventories turnover time

Equity ratio, %

Equity total / Totalassets − advance payments received x 100

Net gearing, %

Interest-bearing liabilities − cash and cash equivalents

− interest-bearing receivables / Equity total x 100

Interest-bearing net debt

Interest-bearing liabilities − cash and cash equivalents

– interest-bearing receivables

Key figures per share

Equity per share

Equity attributable to the parent company’s shareholders /

Number of shares on the balance sheet date

Cash flow from operating

activities per share

Cash flow from operating activities / Average number of shares without the own shares

owned by the company

P/E ratio of shares

Share quotation on balance sheet date / Earnings per share

Share turnover

Number of shares traded during the period

Market capitalisation

Number of shares multiplied by the quotation for the respective share series on balance

sheet date

21

Shares and share capital

Stockmann plc has one class of shares, the shares of which carry one (1) vote per share and otherwise similar rights.

The company’s share is listed on the Helsinki Stock Exchange and its trading code is STOCKA and ISIN number is

FI0009000251.

The company’s share capital on 31 December 2021 was EUR 77 556 538 and number of shares was 154 436 944.

The number of registered shareholders was 45 054 (43 656 shareholders 31 December 2020).

The company’s market capitalisation on 31 December 2021 was EUR 333.6 million (EUR 86.9 million on 31 December

2020).

Number of shares, 31 December 2021

Number

Shareholders %

Percentage of shares %

Percentage of votes %

1-100

27 604

61,2

0,7

0,7

101-1000

13 074

29,0

3,1

3,1

1001-10000

3 737

8,3

6,9

6,9

10001-100000

538

1,2

11,1

11,1

100001-1000000

85

0,2

14,3

14,3

1000001-

16

0,1

63,9

63,9

Total

45 054

100

100

100

Ownership structure, 31 December 2021

Number

Shareholders %

Percentage of shares %

Percentage of votes %

Households

43 710

97,0

21,9

21,9

Private and public

corporations

903

2,0

18,8

18,8

Foundations and

associations

203

0,5

32,8

32,8

Nominee registrations (incl.

foreign shareholders)

201

0,4

21,7

21,7

Financial and insurance

companies

37

0,1

4,8

4,8

Unregistered shares

0,1

Total

45 054

100

100

100

22

Major shareholders, 31 December 2021

Percentages of

shares %

Percentages of

shares %

1

Föreningen Konstsamfundet Grouping

10,5

10,5

2

Varma Mutual Pension Insurance Company

7,9

7,9

3

Society of Swedish Literature in Finland

7,5

7,5

4

HC Holding Oy Ab

4,2

4,2

5

Etola Group

3,9

3,9

6

Niemistö Kari Pertti Henrik

3,3

3,3

7

eQ Nordic Small Cap Mutual Fund

1,7

1,7

8

Ilmarinen Mutual Pension Insurance Company

1,5

1,5

9

Samfundet Folkhälsan i Svenska Finland

1,1

1,1

10

OP-Henkivakuutus Ltd.

0,9

0,9

11

Jenny and Antti Wihuri Foundation

0,9

0,9

12

Folkhälsan i Svenska Finland rf Inez och Julius Polins Fond

0,7

0,7

13

Mandatum Life Insurance Company Ltd.

0,7

0,7

14

Cumulant Capital Pohjois-Eurooppa

0,5

0,5

15

Intertrust (finland) Oy

0,5

0,5

16

Markku Petteri Kaloniemi

0,5

0,5

17

LähiTapiolaMutual Life Insurance Company

0,5

0,5

18

Wilhelm och Else Stockmanns Stiftelse

0,4

0,4

19

Pakkanen Mikko Pertti Juhani

0,4

0,4

20

eQ Finland Investment Fund

0,3

0,3

Other

52,1

52,1

Total

100,0

100,0

23

EUR mill.

Note

1.1.-31.12.2021

1.1.-31.12.2020

REVENUE

2.2

Other operating income

2.2

Materials and consumables

2.3

Wages, salaries and employee benefit expenses

2.5, 5.5

Depreciation, amortisation and impairment losses

3.1

Other operating expenses

2.6

Total expenses

OPERATING PROFIT/LOSS

2.1

Financial income

4.1

Financial expenses

4.1

Total financial income and expenses

PROFIT/LOSS BEFORE TAX

Income taxes

2.7

NET PROFIT/LOSS FOR THE PERIOD

Profit/loss for the period attributable to:

Equity holders of the parent company

Earnings per share, EUR:

4.13

From the period result (undiluted and diluted)

Consolidated Statement of Comprehensive Income

EUR mill.

Note

1.1.-31.12.2021

1.1.-31.12.2020

PROFIT/LOSS FOR THE PERIOD

Other comprehensive income:

Items that may be subsequently reclassified toprofit and loss

Exchange differences on translating foreign operations,before tax

Exchange differences on translating foreign operations,net of tax

2.7, 4.12

Cash flow hedges, before tax

Cash flow hedges, net of tax

2.7, 4.12

Other comprehensive income for the period, netof tax

TOTAL COMPREHENSIVE INCOME FOR THE PERIOD

Total comprehensive income attributable to:

Equity holders of the parent company

The figures of 2020 are restated accordingto a change in accounting policy. More information thereof is provided in notes1.2 and

3.2. Additionally, the costs in 2020 related to disputed landlords' claims for terminatedlease agreements are reclassified from

financial income to other operating expenses.

24

EUR mill.

Note

31.12.2021

31.12.2020

ASSETS

NON-CURRENT ASSETS

Intangible assets

Goodwill

Trademark

Intangible rights

Other intangible assets

Advance payments and construction in progress

Intangible assets, total

3.2

Property, plant and equipment

Machinery and equipment

Modification and renovation expenses for leased premises

Right-of-use assets

3.5

Advance payments and construction in progress

Property, plant and equipment, total

3.3

Investment properties

3.4

Non-current receivables

4.10, 4.11

Non-current lease receivables

4.10

Other investments

4.10

Deferred tax assets

2.8

NON-CURRENT ASSETS, TOTAL

CURRENT ASSETS

Inventories

2.4

Current receivables

Lease receivables

Income tax receivables

Non-interest-bearing receivables

Current receivables, total

4.3

Cash and cash equivalents

4.4

CURRENT ASSETS, TOTAL

NON-CURRENT ASSETS CLASSIFIED AS HELD FORSALE

5.1

ASSETS, TOTAL

25

EUR mill.

Note

31.12.2021

31.12.2020

EQUITY AND LIABILITIES

EQUITY

Share capital

Share premium fund

Invested unrestricted equity fund

Other funds

Translation reserve

Retained earnings

Hybrid bond

Equity attributable to equity holders of theparent company

4.12

EQUITY, TOTAL

NON-CURRENT LIABILITIES

Deferred tax liabilities

2.8

Non-current interest-bearing financing liabilities

4.5

Non-current lease liabilities

4.5

Non-current non-interest-bearing liabilities and provisions

4.9, 4.10,

5.3

NON-CURRENT LIABILITIES, TOTAL

CURRENT LIABILITIES

Current interest-bearing financing liabilities

4.6

Current lease liabilities

4.6

Current non-interest-bearing liabilities

Trade payables and other current liabilities

4.6, 4.9

Income tax liabilities

4.6

Current provisions

5.3

Current non-interest-bearing liabilities, total

CURRENT LIABILITIES, TOTAL

LIABILITIES DIRECTLY ASSOCIATED WITH NON-CURRENT ASSETS

CLASSIFIED AS HELD FOR SALE

5.1

LIABILITIES, TOTAL

EQUITY AND LIABILITIES, TOTAL

Change in accounting principle has been presentedretrospectively for year 2020 according toIAS 8. More information is

provided in notes 1.2 and 3.2.

26

EUR mill.

Note

1.1.-31.12.2021

1.1.-31.12.2020

CASH FLOWS FROM OPERATING ACTIVITIES

Profit/loss for the period

Adjustments for:

Depreciation, amortisation and impairment losses

Gains (-) and losses (+) of disposals of fixed assetsand other non-

current assets

Interest and other financial expenses

Interest income

Income taxes

Other adjustments

Working capital changes:

Increase (-) /decrease (+) in inventories

Increase (-) / decrease (+) in trade andother current receivables

Increase (+) / decrease (-) in current liabilities

Interest expenses paid

Interest received from operating activities

Income taxes paid from operating activities

Net cash from operating activities

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from sale of tangible and intangible assets

Purchase of tangible and intangible assets

Security deposit

Exchange rate gain on the hedge of a net investmentand internal

loan*)

Dividends received from investing activities

Net cash used in investing activities

CASH FLOWS FROM FINANCING ACTIVITIES

Loan conversion costs

Proceeds from issue of hybrid bond

Proceeds from current liabilities

0,0

Repayment of current liabilities

Proceeds from non-current liabilities

Repayment of non-current liabilities

Payment of lease liabilities

Interest on hybrid bond

Net cash used in financing activities

NET INCREASE/DECREASE IN CASH AND CASHEQUIVALENTS

Cash and cash equivalents at the beginningof the period

Cheque account with overdraft facility

Cash and cash equivalents at the beginningof the period

Net increase/decrease in cash and cash equivalents

Effects of exchange rate fluctuations on cash held

Cash and cash equivalents at the end of the period

Cheque account with overdraft facility

Cash and cash equivalents at the end ofthe period

4.4

*) Realised foreign exchange rate gain on thehedge of a net investment in a foreign operationand internal loan.

The proceeds from the sales of the Tallinn real estate property were paid directlyto the secured creditors of the restructuring

programme. The transaction is presented as proceedsfrom sale of tangible assets and repaymentof current liabilities.

27

EQUITY 1.1.2020, as previously reported

Impact of change in accounting method

EQUITY 1.1.2020, restated

Profit/loss for the period

Exchange differences on translating foreign

operations *)

Cash flow hedges *)

Total comprehensive income for the period,

net of tax

0,0

0,0

0,0

0,0

0,0

Interest paid on hybrid bond

Other changes in equity total

0,0

0,0

0,0

0,0

0,0

0,0

0,0

EQUITY 31.12.2020

Retained earnings for financial year 2020 are adjusteddue to change in accounting method, see note 1.2.The impact of the

change on profit/loss of the period was EUR -0.2million and on retained earnings EUR -2.7 million.

EQUITY 1.1.2021

Profit/loss for the period

Exchange differences on translating foreign

operations *)

Cash flow hedges *)

Total comprehensive income for the period,

net of tax

0,0

0,0

0,0

0,0

0,0

Reduction of share capital to cover losses

Usage of funds to cover losses

Share issue to creditors for unsecured

restructuring debt

Hybrid bond cut

Other changes in equity total

0,0

EQUITY 31.12.2021

*) Notes 2.7, 4.12

28

Notestotheconsolidatedfinancial

1

Basis of preparation.................................................................................................................................................. 29

1.1

General............................................................................................................................................................ 29

1.2

Changes in accounting policies ....................................................................................................................... 29

1.3

Corporate restructuring programme................................................................................................................. 30

1.4

Transactions resulting from the corporate restructuring programme ............................................................... 30

1.5

Accounting policies requiring management’s judgment and key sources of uncertainty concerning estimates31

1.6

Going concern ................................................................................................................................................. 31

1.7

Principles of consolidation ............................................................................................................................... 32

1.8

Items denominated in foreign currency............................................................................................................ 32

1.9

Application of new or revised IFRS standards and interpretations...................................................................33

2

Key numbers ............................................................................................................................................................ 34

2.1

Segment information........................................................................................................................................ 34

2.2

Operating income ............................................................................................................................................ 35

2.3

Gross margin ................................................................................................................................................... 37

2.4

Inventories....................................................................................................................................................... 37

2.5

Employee benefits ........................................................................................................................................... 38

2.6

Other operating expenses ............................................................................................................................... 38

2.7

Income taxes ................................................................................................................................................... 39

2.8

Deferred tax assets and deferred tax liabilities................................................................................................ 40

3

Intangible and tangible assets and leasing arrangements........................................................................................ 42

3.1

Depreciation, amortisation and impairment losses .......................................................................................... 42

3.2

Goodwill and other intangible assets ............................................................................................................... 42

3.3

Property, plant and equipment......................................................................................................................... 45

3.4

Investment property......................................................................................................................................... 47

3.5

Leases............................................................................................................................................................. 47

4

Capital structure ....................................................................................................................................................... 50

4.1

Financial income and expenses....................................................................................................................... 50

4.2

Financial instruments....................................................................................................................................... 50

4.3

Current receivables.......................................................................................................................................... 51

4.4

Cash and cash equivalents.............................................................................................................................. 52

4.5

Non-current liabilities, interest-bearing ............................................................................................................ 52

4.6

Current liabilities .............................................................................................................................................. 53

4.7

Reconciliation of liabilities arising from financing activities .............................................................................. 54

4.8

Financial risk management.............................................................................................................................. 55

4.9

Derivative contracts ......................................................................................................................................... 60

4.10

Financial assets and liabilities by measurement category and hierarchical classification of fair values........... 61

4.11

Financial instruments subject to netting arrangements.................................................................................... 62

4.12

Shareholders’ equity........................................................................................................................................ 62

4.13

Earnings per share .......................................................................................................................................... 63

5

Other notes............................................................................................................................................................... 65

5.1

Non-current assets classified as held for sale .................................................................................................65

5.2

Joint arrangements.......................................................................................................................................... 65

5.3

Provisions........................................................................................................................................................ 66

5.4

Contingent liabilities......................................................................................................................................... 67

5.5

Related party transactions............................................................................................................................... 68

5.6

Events after the reporting period...................................................................................................................... 70

29

1Basis of preparation

Company name

Parent company

Ultimate parent of Group

Change in company name

Legal form

Domicile

Country of incorporation

Registered address

Primary field of business

Principal place of business

The parent company’s shares are listed on the Helsinki exchange (Nasdaq Helsinki Ltd). A copy of the consolidated

financial statements is available at www.stockmanngroup.com or from the parent company.

1.1General

Stockmann’s consolidated financial statements have been prepared in accordance with International Financial Reporting

Standards (IFRS), complying with the IAS and IFRS standards and IFRIC and SIC interpretations in force on 31

December 2021. In the Finnish accounting legislation and the regulations issued pursuant to it, International Financial

Reporting Standards (IFRS) refer to the standards and their interpretations that have been approved for application in the

EU in accordance with the procedure stipulated in EU regulation (EC) No 1606/2002. The notes to the consolidated

financial statements are also in accordance with Finnish accounting and company legislation that supplements IFRS

regulations. The information in the financial statements is based on original acquisition costs, unless stated otherwise in

the accounting policies. The financial statements are presented in millions of euros.

The Board of Directors of Stockmann plc decided to file for corporate restructuring proceedings with the District Court of

Helsinki on 6 April 2020. By a decision on 9 February 2021, the Helsinki District Court has approved Stockmann plc’s

restructuring programme. The corporate restructuring and its effects are described in more detail below.

1.2Changes in accounting policies

As from 1 January 2021, the Stockmann Group has applied the following new and revised standards and interpretations:

Interest Rate Benchmark Reform – Phase 2 – Amendments to IFRS 9 Financial Instruments, IAS 39 Financial

Instruments: Recognition and Measurement, IFRS 7 Financial Instruments: Disclosures, IFRS 4 Insurance Contracts and

IFRS 16 Leases:The amendments provide temporary reliefs which address the financial reporting effects when an

interbank offered rate (IBOR) is replaced with an alternative nearly risk-free interest rate (RFR). The amendments

include the following practical expedients:

●

Torequire contractual changes, or changes to cash flows that are directly required by the reform, to be treated

as changes to a floating interest rate, equivalent to a movement in a market rate of interest

●

Topermit changes required by IBOR reform to be made to hedge designations and hedge documentation

without the hedging relationship being discontinued

●

Toprovide temporary relief to entities from having to meet the separately identifiable requirement when an RFR

instrument is designated as a hedge of a risk component

These amendments had no impact on the consolidated financial statements.

Covid-19-Related Rent Concessions beyond 30 June 2021 Amendments to IFRS 16:

Amendment to IFRS 16 Leases, effective for financial years beginning on or after 1 June 2020. The amendment was

intended to apply until 30 June 2021, but as the impact of the Covid-19 pandemic is continuing, on 31 March 2021, the

IASB extended the period of application of the practical expedient to 30 June 2022. The amendment allows the lessees

not to account for rent concessions as lease modifications if the concessions are a direct consequence of the Covid-19

pandemic and only if certain conditions are met. The amendment has not had impact on the consolidated financial

statements.

The International Financial Reporting Standards Interpretations Committee (IFRIC) has issued two final agenda

decisions which impact SaaS arrangements:

●

Customer’s right to receive access to the supplier’s software hosted on the cloud (March 2019) – this decision

considers whether a customer receives a software asset at the contract commencement date or a service over

the contract term.

30

●

Configuration or customisation costs in a cloud computing arrangement (April 2021) – this decision discusses

whether configuration or customisation expenditure relating to SaaS arrangements can be recognised as an

intangible asset and if not, over what period the expenditure is expensed.

The Group’s accounting policy has historically been to capitalise all costs related to SaaS arrangements as intangible

assets in the Statement of Financial Position. The adoption of the above agenda decisions has result in a reclassification

of these intangible assets to either a prepaid asset in the Statement of Financial Position and/or recognition as an

expense in the Statement of Comprehensive Income, impacting both the current and prior periods presented. The new

accounting policy is presented in note 3.2.

1.3Corporate restructuring programme

In a decision on 9 February 2021, the Helsinki District Court approved Stockmann plc’s restructuring programme, and the

restructuring proceedings were ended. The restructuring programme is based on the continuation of Stockmann’s

department store operations, the sale and leaseback of the department store properties located in Helsinki, Tallinn and

Riga and the continuation of Lindex’s business operations as a fixed part of the Stockmann Group. The properties must

be sold by 31 December 2021 at the latest at the risk of the restructuring programme lapsing unless the Supervisor

postpones the deadline for the sale until 31 December 2022 for a justified reason. The supervisor has subsequently

accepted a timeline with an estimated sale of the properties latest during Q1 2022 to reach an optimal outcome for the

company and the creditors. Stockmann entered into sales agreements to sell its department store properties in Tallinn

and Riga on 29 December 2021 and continues with long-term leaseback agreements made with the new owner. The

sale and leaseback process of the department store property in Helsinki city center is proceeding as planned.

On 18 May 2021, the Board of Directors resolved, pursuant to the authorisation granted by the General Meeting, on a

share issue of at most 100 000 000 new shares of the company, carried out in deviation from the shareholders’ pre-

emptive subscription rights. Furthermore, pursuant to the restructuring programme, the creditors of unsecured

restructuring debt were entitled to convert their receivables under the payment programme of the restructuring

programme to new senior secured bonds issued by the company.

A total of 79 335 175 conversion shares were subscribed for in the share issue, and the total number of Stockmann

shares increased to a total of 154 436 944 shares. Trading with the conversion shares commenced on Nasdaq Helsinki

Ltd on 7 July 2021.The subscription price was EUR 0.9106 per share and, as a result, approximately EUR 72.2 million of

Stockmann's unsecured restructuring debt and hybrid loan debt were converted into Stockmann shares. The remainder

of that part of the confirmed unsecured restructuring debt and hybrid loan debt which would have been eligible for share

conversion in the share issue will be cut in accordance with the restructuring programme. Other operating income

includes a restructuring debt cut of EUR 2.6 million.

On 18 May 2021, Stockmann plc announced an offering of senior secured bonds to certain unsecured creditors of the

issuer under the restructuring. Pursuant to the restructuring programme, the unsecured creditors were entitled to convert

their receivables under the payment programme of the restructuring programme that have been confirmed to unsecured

debt, by way of set-off, to senior secured bonds on a euro-for-euro basis. The aggregate principal amount of the bonds

validly subscribed for by the unsecured creditors was EUR 66.1 million. Accordingly, Stockmann issued bonds to the

aggregate principal amount of EUR 66.1 million. The issue date of the bonds was 5 July 2021.

Following the share and bond conversions, the remaining confirmed unsecured restructuring debt under the payment

programme of the restructuring programme amounts to EUR 21.8 million. Under the restructuring programme,

Stockmann also has restructuring debt that is conditional, the maximum amount or disputed in respect of which the

amount subject to the payment programme will be confirmed later and the creditors of such restructuring debt will be

entitled to convert their receivables to shares and bonds after their respective receivables have been confirmed.

Rent guarantee deposits of EUR 0.1 million, which Stockmann plc had received from tenants of Tallinn department store,

were included in restructuring debt in February 2022.

Note 4.6 presents an itemisation of the Stockmann Group’s secured and unsecured restructuring debts and note 4.8

presents the maturities of all the Group’s debts as on 31 December 2021

.

1.4Transactions resulting from the corporate restructuring programme

Following the initiation of the restructuring proceedings, some suppliers and lessors presented Stockmann plc with

additional claims, the largest of these additional claims are related to the termination of a long-term leases for premises

in accordance with the Restructuring of Enterprises Act with a notice of two months. The Administrator considered it

justified to take the creditors’ claims for damages corresponding to the amount of eighteen months’ rent into account in

the restructuring programme. The eighteen month’s period began from the date on which the terminated lease

agreement ends. Tothe extent that the landlord creditors presented more specific calculations of the damages that they

will incur because of the termination of the relevant lease agreements, these claims have been assigned to resolution in

separate proceedings. A provision for the claims of EUR 17.5 million has been recognised in the Statement of Financial

Position. The amount corresponds to the company's estimate of the probable amount of these liabilities and corresponds

31

to the amount considered as restructuring debt. At reporting date some of the disputed receivables have already been

settled and the creditors’claims presented decreased to a maximum amount of EUR 102 million. The claims are either

disputed,conditional or conditional and maximum, and the time of their realisation and amount is uncertain. The amount

in excess of the provision, EUR 85 million, is therefore presented in the Financial Statements as a contingent liability.

As part of the initiation of the restructuring proceedings, the financing banks that served as derivative counterparties

closed all Stockmann plc’s derivative contracts on 6 April 2020. Consequently, the Group did not hedge against risks

arising from fluctuations in foreign exchange rates until August 2021. Lindex opened foreign exchange hedging limits in

September and is gradually increasing the hedging levels towards the normal level.

Stockmann entered into sales agreements and long-term leaseback agreements with the new owner related to its

department store properties in Tallinnand Riga on 29 December 2021. According to the terms of the agreements, the

sale-and-leaseback transaction for Tallinn propertywas recognised in the reporting period and the proceeds from the

sales was, in accordance with the restructuring programme, used in full to reduce the secured restructuring debts in

December 2021. The sale-and-leaseback has been treated in the Consolidated Financial Statements by reducing the

amount of assets classified as held for sale, determining a lease liability for the initial lease period of 10 years and an

amount of the right-of-use asset that Stockmann retains and recognising a gain on rights transferred. The transaction has

reduced the amount of assets classified as held for sale by EUR 7.6 million, increased the lease liabilities by EUR 22.2

million and increased the amount of right-of-use assets by EUR 3.5 million. The net of gain on rights transferred and the

cost related to sales transaction of EUR 21.7 million has been recognised under other operating income in the income

statement. The corresponding transaction of Riga property was realised in January 2022.

Group’s financial statements do not present or account for the consequences of the restructuring programme, such as

the realisable value of the Group’s assets or whether they are sufficient for covering all debts, the amounts and seniority

of the loans being restructured or other debts, or the impacts on the consolidated income statement of the changes that

potentially could be made to the Group’s business because of the restructuring programme.

1.5Accounting policies requiring management’s judgment and key sourcesof uncertainty

concerning estimates

The COVID-19 pandemic, which broke out in Europe after the first week of March 2020, is still causing significant

changes in Stockmann Group’s operating environment, customer volumes and cash flows. Uncertainty in the global

economy will continue and the retail market is expected to remain challenging due to changes in consumer behaviour

and confidence as well as inflatory pressures. Since the duration and the impacts of the pandemic cannot be reliably

forecasted, its effects on the actual results, financial position and cash flows are unpredictable.

In preparing the consolidated Financial Statements in compliance with the recognition and valuation principles of IFRS, it

has been necessary to make forward-looking estimates and assumptions. The estimates and assumptions presented in

the financial statements are based on management’s best knowledge at the financial statements date. At the Financial

Statements date, the assumptions are related particularly to the basis for continuity, valuations of assets, exercising

lease options, contingent liabilities and provisions recognised. The principal assumptions concerning the future and the

main uncertainties relating to estimates at the end of the reporting period that constitute a significant risk of causing a

material change in the carrying amounts of assets and liabilities within the next financial year, concern the value of right-

of-use asset and lease liabilities, depreciation and leasing periods, demand for inventories and turnover rate as well as

classifying asset items as held for sale and the impairment testing of Lindex goodwill and the brand. More detailed

information on these is provided in notes 2.4, 3, 5.1 and 5.3.

The recognition of deferred tax assets involves significant discretion and estimates on the management’s part. These

estimates and assumptions involve risks and uncertainties. Deferred tax assets from the confirmed losses of the previous

financial periods are recognized only if the company’s management estimates that as adequate amount of taxable

income can be generated in the future to utilise the unused losses. As part of Stockmann plc's restructuring programme

approved by the Helsinki District Court on 9 February 2021, the company has sold and leased back the real estate

properties in Tallinnand Riga. The sale-and-leaseback process of the department store property in Helsinki is

proceeding as planned. The proceeds from the sales of properties will mainly be used to repay the secured restructuring

debt by 31 December 2022. Stockmann's management estimates that the gains from sales of properties will significantly

exceed the amount of accumulated tax losses. In the company's view, the sale of properties thus generates sufficient

taxable income to utilise tax losses and to recognise deferred tax assets in accordance with the convincing evidence

criterion of IAS 12.35. More detailed information on deferred taxes is provided in the note 2.8.

1.6Going concern

Stockmann Group Consolidated Financial Statements have been prepared based on the principle of business continuity.

The Group’s ability to continue its operations is dependent on the profitability of its business and the implementation of

the restructuring programme prepared for Stockmann Plc. The profitability of the Group’s business is dependent on

future market conditions and the Group’s ability to execute its business plan successfully.

Helsinki District Court approved Stockmann plc´s restructuring programme in February 2021.The eight-year

restructuring programme is based on the continuation of the Company’s department store operations, the sale and lease

32

back of the department store properties in Helsinki, Tallinn and Riga and the continuation of Lindex business operations

under the ownership of the Stockmann Group.

As a part of the restructuring programme, the company’s A and B share series were combined so that each one (1) A

share was entitled to receive 1.1 B shares. The combination aimed to improve the liquidity of the share and the

company’s ability to secure financing from the market. Stockmann also issued new shares to holders of restructuring

debt and hybrid bond, and thereby the equity was strengthened.

Debt financing was also restructured in line with the programme. A new secured five-year bond was issued to the holders

of the restructuring debt, and a seven-year repayment schedule was established for the remaining restructuring debt.

Secured restructuring debt has been partly repaid in 2021 and 2022 with the proceeds from the sale and leaseback -

transactions of the department store properties in Tallinnand Riga. The remaining secured restructuring debt will be

repaid by the end of 2022 with the proceeds from the sale and leaseback -transaction of the department store property in

Helsinki.

Stockmann group cash increased during 2021 and amounted to EUR 213.7 million end of the year. Implementation of

the restructuring programme is progressing as planned. Stockmann assesses that the requirements in the programme

will be duly completed. However, management has assessed that a risk of uncertainty exists as to the sale of the

Helsinki real estate. If the sale of the Helsinki real estate is not finalised and the remaining secured restructuring debt

paid by the end of 2022, there may be a significant uncertainty concerning the continuity of Stockmann’s business

operations. The management’s conclusion is that with the sale of Helsinki real estate the company is a going concern.

Stockmann group’s scope for arranging new financing is limited during the execution of the corporate restructuring

programme. However, the programme enables Stockmann to raise up to EUR 50 million new debt funding via the

secured bond, which was issued 2021.

Stockmann does not currently have any legal disputes or claims not already reported in the financial statements and

there are no further indications of material threats for continuing operations or cash outflows.

Due to the nature of business, Stockmann revenues are divided to large number of customers and no single customer

pose a significant threat to company cash flows.

The Board of Directors of Stockmann has carefully analysed the company’s overall situation in connection with the

deployment of the corporate restructuring programme and with respect to the uncertainty due to still ongoing coronavirus

pandemic, and its analysis confirms the adequacy of liquidity and financing for the following twelve months and thus

supports the preparation of this consolidated financial statements in accordance with the principle of business continuity.

1.7Principles of consolidation

The consolidated financial statements include the parent company, Stockmann plc, as well as all the companies in which

the parent company holds, either directly or indirectly, over 50 per cent of the number of votes conferred by the shares or

over which the parent company otherwise has control. The criteria for control are fulfilled when the Group is exposed, or

has rights, to variable returns from its involvement with an entity and could affect those returns through its power over the

entity.

Inter-company share ownership within the Group has been eliminated using the acquisition method, according to which

the consideration transferred, and all the identifiable assets and liabilities of an acquired company are measured at fair

values at the date of acquisition. Goodwill is recognised as the amount by which the combined total of the consideration

transferred the non-controlling interests in the acquisition and the previous ownership interest exceeds the fair value of

the acquired net assets. Intra-Group transactions, receivables, liabilities, unrealised margins and internal distribution of

profits are eliminated in the consolidated financial statements. The profit or the loss as well as the comprehensive

income for the financial period are distributed to the parent company’s owners and to non-controlling interests. Non-

controlling interests are presented as an individual item in the Group’s equity. Acquired subsidiaries are presented in the

consolidated financial statements from the moment that the Group gains control and divested subsidiaries up to the time

the control ends. Changes in the parent company’s ownership interest in a subsidiary, which do not lead to loss of

control, are dealt with as equity transactions.

Joint arrangements in which Stockmann and another party, based on an agreement or the Articles of Association, have

rights to the assets and obligations for the liabilities of the joint arrangement are dealt with as joint operations. The

shares in real estate companies that fulfil the criteria of being a joint operation in the Group have been dealt with as joint

operations in the consolidated financial statements. The consolidated financial statements include Stockmann’s share of

the joint operations’ income, expenses and items of other comprehensive income, and assets and liabilities, from the

date when joint control was obtained up to the date when it ends. The Stockmann Group does not have any joint

ventures or associates.

1.8Items denominated in foreign currency

The consolidated financial statements are presented in euro, which is the functional and presentation currency of the

Group’s parent company.

33

Transactions in foreign currency are recognised in the amounts of each company’s functional currency,applying the

exchange rate of the date of the transaction. Receivables and liabilities at the financial statements date are translated at

the exchange rate of the financial statements date. Exchange differences arising on translation are recognised through

profit and loss.

The income statements and statements of other comprehensive income of foreign group companies are translated into

euro at the average rate during the financial period, and the statement of financial position at the rate at the financial

statements date. The exchange rate difference from translating the income statement and other comprehensive income

at the average rate and the statement of financial position at the financial statements date is recognised as a separate

item in other comprehensive income. The goodwill arising from the acquisition of foreign operations and the fair value

adjustments made in the carrying amounts of the assets and liabilities of such operations in connection with acquisition

of foreign operations are treated as assets and liabilities of foreign operations and converted into euro using the

exchange rates at the financial statements date. When a foreign subsidiary or joint arrangement is divested in whole or in

part, the cumulative translation difference is recognised in the income statement as part of the gain or loss on disposal.

1.9Application of new or revised IFRS standards and interpretations

The Group adopts each standard and interpretation as from the date it becomes effective or, if the effective date is not

the first day of the financial period, as from the beginning of the next financial period provided that they are approved by

EU. IASB has published the following new or revised standards and interpretations, which the Group has not yet applied.

Property, Plant and Equipment — Proceeds before Intended Use – Amendments to IAS 16 Property,Plant and

Equipment, which have to be applied from 1 January 2022. Under the amendments, proceeds from selling items before

the related item of PPE is available for use should be recognised in profit or loss, together with the costs of producing

those items. The amendments are not expected to have effect on the consolidated financial statements of the Group.

Onerous Contracts – Costs of Fulfilling a Contract – Amendments to IAS 37 Provisions, Contingent Liabilities and

Contingent Assets, which have to be applied from 1 January 2022. When an onerous contract is accounted for based on

the costs of fulfilling the contract, the amendments clarify that these costs comprise both the incremental costs and an

allocation of other direct costs. The amendments are not expected to have effect on the consolidated financial

statements.

Annual Improvements to IFRS Standards 2018–2020, which have to be applied from 1 January 2022. The annual

improvements process provides a mechanism for minor and non-urgent amendments to IFRSs to be grouped together

and issued in one package annually. The amendments are not expected to have effect on the consolidated financial

statements. The amendments clarify the following standard:

●

IFRS 9 Financial Instruments – Fees in the ‘10 per cent’ test for derecognition of financial liabilities: This

amendment clarifies that – for the purpose of performing the ‘’10 per cent test’ for derecognition of financial

liabilities – in determining those fees paid net of fees received, a borrower includes only fees paid or received

between the borrower and the lender, including fees paid or received by either the borrower or lender on the

other’s behalf.

Definition of Accounting Estimates – Amendments to IAS 8 Accounting Policies, Changes in Accounting Estimates and

Errors: The amendments introduce a definition of ‘accounting estimates. The amendments clarify the distinction between

changes in accounting estimates and changes in accounting policies and the correction of errors. Also, they clarify how

entities use measurement techniques and inputs to develop accounting estimates. The amendments have to be applied

from 1 January 2023. The amendments are not expected to have effect on the consolidated financial statements.

Disclosure of Accounting Policies – Amendments to IAS 1 Presentation of Financial Statements and IFRS Practice

Statement 2: The amendments and the statement provide guidance and examples to help entities apply materiality

judgements to accounting policy disclosures. The amendments aim to help entities provide accounting policy disclosures

that are more useful by replacing the requirement for entities to disclose their ‘significant’ accounting policies with a

requirement to disclose their ‘material’ accounting policies and adding guidance on how entities apply the concept of

materiality in making decisions about accounting policy disclosures. The amendment to IAS 1 has to be applied from 1

January 2023. Amendments to the Practice Statement 2 provide non-mandatory guidance on the application of the

definition of material to accounting policy information. The Group is currently assessing the impact of the amendments to

determine the impact they will have on the Group’s accounting policy disclosures.

Classification of Liabilities as Current or Non-current - Amendments to IAS 1 Presentation of Financial Statements, which

has to applied from 1 January 2024.The amendments are to promote consistency in application and clarify the

requirements on determining if a liability is current or non-current. The amendments are not expected to have effect on

the consolidated financial statements.

Other upcoming published new or revised standards are not expected to have a significant impact on Stockmann’s

consolidated financial statements.

34

2Key numbers

2.1Segment information

Accounting policies

The Stockmann Group’s reportable segments are Lindex which engages in the fashion trade and Stockmann which

engages in the department store trade. Segments are divisions of the Group that are managed and monitored as

separate units selling different products and services.

The segment information presented by the Group is based on the management’s internal reporting, in which

management’s assessment of the profitability of the segments is based on monitoring of the segments’ operating profits,

and in which the measurement principles for assets and liabilities accord with IFRS regulations. The highest level of

operational decision-making is vested in the Group’s CEO, who regularly examines the operational performance of the

divisions.

2.1.1Operating segments

Lindex

The Lindex fashion chain has a total of 441 stores in 19 countries and sales online worldwide through third-party

partnerships. Lindex offersinspiring and affordable fashion, and the assortment includes several different concepts within

womenswear, kidswear,lingerie and cosmetics.

Stockmann

Stockmann offers premium selections of brands, excellent customer service and experiences in its 8 department stores

in 3 countries and Stockmann online store. Stockmann’s selection is focused on fashion, beauty and home products and

in the Baltics also on the Stockmann Delicatessen. The offering is complemented by partner’s high-quality products and

services.

EUR mill.

Revenue

2021

2020

Lindex

607,4

507,1

Stockmann

291,6

283,6

Group total

899,0

790,7

Operating profit/loss

2021

2020

Lindex

74,6

38,8

Stockmann

11,6

-48,2

Unallocated

-4,1

-10,2

Goodwill impairment

-250,0

Group total

82,1

-269,6

Financial income

2,7

20,7

Financial expenses

-19,6

-45,4

Consolidated profit/loss before taxes

65,2

-294,2

Depreciation, amortisation and impairment losses

2021

2020

Lindex

-77,3

-81,4

Stockmann

-25,5

-47,8

Goodwill impairment

-250,0

Group total

-102,9

-379,2

Capital expenditure

2021

2020

Lindex

54,9

27,4

Stockmann

9,9

58,3

Group, total

64,8

85,8

35

Assets

2021

2020

Lindex

941,0

881,2

Stockmann

460,1

543,7

Unallocated

15,3

0,4

Group, total

1 416,5

1 425,3

Segment information for financial year 2020 is adjustedfor comparison purposes.Notes 1.2 and 3.2 contain more detailed

description of the change in accounting policy itseffects on the figures. Additionally, other operating profit/loss and financial items

have been adjusted, more information is availablein notes 2.6 and 4.1.

2.1.2Information on market areas

In addition to Finland, the Group operates in two geographical regions: Sweden and Norway as well as Baltics and other

countries.

EUR mill.

Revenue

2021

2020

Finland

294,9

278,7

Sweden*) and Norway

466,0

389,2

Baltic countries and other countries

138,0

122,8

Group total

899,0

790,7

Finland, %

32,8 %

35,2 %

International operations, %

67,2 %

64,8 %

Operating profit/loss

2021

2020

Finland

-15,2

-55,2

Sweden*) and Norway

68,6

34,4

Baltic countries and other countries

28,6

1,2

Market areas total

82,1

-19,6

Goodwill impairment

-250,0

Group total

82,1

-269,6

Non-current assets

2021

2020

Finland

352,9

398,8

Sweden and Norway

578,2

606,0

Baltic countries and other countries

47,0

58,5

Group total

978,1

1 063,4

Finland, %

36,1 %

37,5 %

International operations, %

63,9 %

62,5 %

*) Includes the sales of goods and services to thefranchising partners.

Segment information for financial year 2020 is adjustedfor comparison purposes.Notes 1.2 and 3.2 contain more detailed

description of the change in accounting policy itseffects on the figures. Additionally, other operating profit/loss and financial items

have been adjusted, more information is availablein notes 2.6 and 4.1.

2.2Operating income

2.2.1Revenue recognition

Accounting policies

Revenue is recognised as the performance obligation is satisfied by transferring a promised good or service to a

customer and the customer obtains control of that good or service. Most of the Group’s income comes from the retail

sale of goods or services that are paid for with cash or credit card and revenue is recognised at the time of sale. Online

store sales and sales to franchising partners are recognised as revenue when all goods or services related to the order

are delivered to the customer or the franchising partner and the customer obtains control over goods or services at a

point in time.

Customers have a right to return the products purchased from store or online store within a certain time frame, in the

financial statements provision is made for returns by creating a return accrual. The accrual is calculated as an

experience-based percentage of sales, and it is recognised as accrued liability in the balance sheet and a deduction of

revenue. Cost of goods for anticipated returns has been recognised as an adjustment in the materials and consumables

used and the inventory value.

36

Income from Loyal Customer cooperation is recognised as revenue. An amount corresponding to the estimated stand-

alone selling price of unused bonus points accumulated by customers is recognised, with a deduction from sales, as

short-term interest-free debt for customers. The debt is recognised in the same financial period as the related sale.

When a customer uses accumulated points as a payment at a store, the value of the points used is recognised as a sale

and a reduction of a short-term debt. If bonus points are not used by their expiry date, the value of the unused points is

recognised as a sale and a reduction of a short-term debt.

Lease income of lease agreements classified as operating leases recognised on the income statement as revenue in

even instalments over the lease term. Lease income tied to the tenant’s revenue will be recognised on the basis of the

tenant’s actual revenue.

In calculating revenue indirect taxes and discounts granted have been deducted from the sales.

2.2.1.1

Revenue

EUR mill.

2021

2020

Merchandise revenue

871,4

756,4

Rental income and service charges

27,6

34,3

Total

899,0

790,7

2.2.1.2

Disaggregated revenue information

1.1.-31.12.2021, EUR mill.

Lindex

Stockmann

Total

Revenue streams

Merchandise revenue

607,2

264,2

871,4

Rental income and service charges

0,2

27,4

27,6

Total

607,4

291,6

899,0

Market areas

Finland

68,2

226,7

294,9

Sweden and Norway

466,0

0,0

466,0

Baltic countries and other countries

73,2

64,8

138,0

Total

607,4

291,6

899,0

1.1.-31.12.2020, EUR mill.

Lindex

Stockmann

Total

Revenue streams

Merchandise revenue

506,4

250,0

756,4

Rental income and service charges

0,7

33,6

34,3

Total

507,1

283,6

790,7

Market areas

Finland

58,5

220,2

278,7

Sweden and Norway

389,2

389,2

Baltic countries and other countries

59,4

63,4

122,8

Total

507,1

283,6

790,7

2.2.1.3

Contract balances

EUR mill.

2021

2020

Receivables that are included in assets held for sale

0,1

0,5

Contract assets

0,6

0,2

Contract liabilities

7,1

5,4

No information is provided about remaining performance obligations that have an original expected duration of one

year or less, as allowed by IFRS 15.

37

2.2.2Other operating income

Accounting policies

Among items included in other operating income are both sale and sale-and-leaseback of property, plant and equipment

as well as income received on the sale of a business. The gain on sale-and-leaseback of the real estate property in

Tallinndeducted with the cost of sales was recognised as other operating income.

Grants from the governments or other similar public entities that become receivable as compensation for expenses

already incurred are recognised as other operating income in the income statement on the period on which the company

complies with the attached conditions. During the period, the Stockmann Group received in its various operating

countries government grants related to the COVID-19 situation.

The Helsinki District Court approved Stockmann Plc’s restructuring programme on 9 February 2021. Pursuant to the

programme the creditors of unsecured restructuring debt were entitled to convert 20 % of their receivables under the

payment programme to Stockmann shares. The remainder of that part of the confirmed restructuring debt which would

have been eligible for share conversion was cut in accordance with the restructuring programme. The aforementioned

restructuring debt cut is included in other operating income.

EUR mill.

2021

2020

Gains on sales of non-current assets, total

21,8

COVID-19 support received

4,5

9,7

Refunds of health insurance premiums from years 2004-2008 due to the

surplus of asset management in Sweden

3,0

Income from restructuring debt cut

2,6

Total

31,9

9,7

2.3Gross margin

EUR mill.

2021

2020

Revenue

899,0

790,7

Materials and consumables used

372,0

347,0

Gross profit

527,0

443,7

Gross margin, % of revenue

58,6%

56,1%

2.4Inventories

Accounting policies

Inventories are measured at the lower of acquisition cost and net realisable value. In normal operations the net realisable

value is the estimated obtainable selling price less the estimated costs incurred in bringing the product to a finished

condition and the estimated necessary selling costs.

The inventories turnover rate and the potential decline of the net realisable value below the acquisition cost are

estimated regularly and if necessary,an impairment is recognised for inventories. Lindex recognises a provision for

obsolete inventories, which is a percentage of the acquisition price of the goods in the stores. A provision for obsolete

inventories is not recognised at Lindex’s central warehouse as all the goods are transported from the central warehouse

to the stores. Stockmann recognises a provision for obsolete inventories, which is a percentage of the acquisition price of

the slow-moving goods in the central warehouse and department stores.

The value of inventories is determined using the weighted average cost method and it includes all the direct costs of the

purchase.

EUR mill.

2021

2020

Materials and consumables

154,8

135,3

Total

154,8

135,3

The value of inventories has been written off by EUR 6.4 (6.4) million for obsolete assets.

38

2.5Employee benefits

Pension obligations

Accounting policies

Pension plans are classified as defined benefit and defined contribution plans. In Stockmann Group’s countries of

operation, statutory and voluntary pension plans are defined contribution plans.

Payments for defined contribution plans are made to a pension insurance company. Payments made for defined

contribution plans are recognised as expenses in the income statement for the financial period to which the debit relates.

Defined benefit pension plans are based on the calculations of authorised actuaries. The pension expenditure based on

the work performance during the period and the net interest of the net debt of the defined benefit plan are recognised in

the income statement and presented as expenses arising from employee benefits. The net debt of the defined benefit

pension plan is entered in the statement of financial position. The Group had no defined benefit pension plans in the

financial year 2021.

Other long-term employee benefits

Accounting policies

The Stockmann Group operates a length of service reward system, which comes under other long-term employee

benefits. Employees who complete the specified years of service are entitled to extra paid leave. The present value of

the obligation arising from this long-term employee benefit at the close of the reporting period is recognised as a liability

in the statement of financial position. Items arising from the definition of a liability are recognised in the income

statement.

EUR mill.

2021

2020

Wages and salaries

149,3

140,8

Pension expenses, defined contribution plans

14,1

12,4

Other employee benefits expenses

31,2

28,7

Total

194,6

181,9

Information on management's employee benefits is given in note 5.5, Related party transactions.

2.6Other operating expenses

Accounting policies

Other operating expenses include the expense relating to short-term leases, the expense relating to leases of low-value

assets and the expense relating to variable lease payments not included in the measurement of lease liabilities and the

sale of property, plant and equipment and other expenses not related to the actual sale of goods and services as well as

valuation losses related to assets classified as held for sale.

Year 2020 figures have been restated according to IFRS Interpretations Committee (IFRIC) agenda decision given in

April 2021

on configuration and customisation costs in a cloud computing arrangement (IAS 38 Intangible assets).

Additionally, the costs related to disputed landlords' claims for terminated lease agreements in 2020 have been

reclassified from financial items to other operating expenses.

EUR mill.

2021

2020

Site expenses

63,5

66,5

Marketing expenses

31,7

25,2

Goods handling expenses

24,0

20,1

ICT expenses

20,2

17,1

Professional services

10,5

11,9

Leased workforce

10,3

6,8

Voluntary social security expenses

3,0

2,2

Credit losses

-0,2

0,3

Other expenses

16,5

11,9

Total

179,4

161,9

39

Fees to the auditors

EUR mill.

2021

2020

Auditing/EY

0,4

Auditing/KPMG

0,3

0,4

Taxadvisory/KPMG

0,2

0,2

Other services/KPMG

0,0

0,1

Total

1,0

0,7

2.7Income taxes

Accounting policies

Taxexpenses in the income statement comprise taxes based on taxable income for the period and deferred taxes.

Taxesbased on taxable income for the period are calculated on taxable income using the tax rate that is in force in the

country in which the particular Group company is based. The amount of tax is adjusted for any taxes concerning previous

periods. Income taxes are presented in the income statement unless the transaction relating to the taxes is presented

directly in equity or in the statement of comprehensive income, in which case the tax effect is also stated in equity or in

the statement of comprehensive income.

Deferred taxes are calculated on temporary differences between the carrying amount and the tax base. The largest

temporary differences arise from the differences between the carrying amounts and tax bases of property, plant and

equipment, unused tax losses, adjustments based on fair value of assets and liabilities in business combinations and the

fair value measurement of derivative contracts.

Deferred taxes are not recognised on goodwill impairment, which is non-deductible in taxation. Deferred taxes have been

calculated by applying the tax rates that are laid down by law or have been accepted in practice by the financial

statements date.

Deferred tax liabilities are recognised in full, except on the profit made by the Estonian and Latvian subsidiaries and

Stockmann plc’s branch in Estonia, because the Group is able to determine when a reversal of the temporary difference

will occur, and no such reversal will occur in the foreseeable future. Deferred tax assets are recognised to the extent that

it is probable that taxable profit will arise in the future against which the deferred tax asset can be utilised.

The Group deducts deferred tax assets and liabilities from each other in the event that it has a legally enforceable right to

set off tax assets against liabilities, based on taxable income for the period, and the deferred tax assets and liabilities are

associated with income taxes collected by the same tax authority, either from the same taxable entity or a different

taxable entity, which is going to set off the tax assets against liabilities based on taxable income for the period or realise

the receivables and pay the debts at the same time.

EUR mill.

2021

2020

Income taxes for the financial period

-12,0

-5,3

Income taxes from previous financial periods

2,1

4,3

Change in deferred tax liability/assets

-7,3

3,4

Total

-17,3

2,4

Reconciliation between the income tax expense in the income statement and the Group's tax expense at the

Finnish tax rate of 20%

EUR mill.

2021

2020

Profit before taxes

65,2

-294,0

Income taxes at current tax rate

-13,0

58,8

Income taxes from previous financial periods

-2,1

4,3

Tax-exempt income

0,2

0,3

Differing tax rates of foreign subsidiaries

-0,3

-0,8

Non-deductible expenses

-6,2

-62,6

Previous periods' confirmed losses for which deferred tax assets has

been booked

4,2

Deferred tax on results from previous financial periods

2,4

Income taxes in the income statement

-17,3

2,4

40

The Swedish tax authorities have taken a negative stance on the taxation of Stockmann’s subsidiary Stockmann Sverige

AB regarding its right to deduct interest expenses during the years 2013–2019 for a loan raised for the acquisition of AB

Lindex. Consequently, Stockmann Sverige AB is requested by the tax authorities to pay EUR 35 million in additional

taxes, including related interest. Stockmann has appealed against decisions in Sweden to the Court of Appeal in

Gothenburg. On 20 January 2021, the European Court of Justice ruled that the Swedish interest rate deduction

regulations were in some respects contrary to European Union law. The Swedish tax authorities have concluded that the

decision of the European Court of Justice is of no significance regarding Stockmann’s right to deduct the interest

expenses and that Stockmann does not have the right to appeal to the European Court of Justice to gain the rejected

interest deductions. The processing of the case continues in the Court of Appeal.

The profits of Stockmann Plc’s Branch in Estonia have been included in the taxable income of the parent office in

Finland. The profits of the Branch will be income taxable in Estonia, at the time when the profits are distributed to the

parent office in Finland. The untaxed retained earnings in Estonia including the profit of the reporting period total EUR

86.6 million and the calculated Estonian income tax would be EUR 17.3 million. According to the tax treaty between

Estonia and Finland, the income tax which will be paid in Estonia is deductible from the income tax in Finland under

certain conditions.

2.8Deferred tax assets and deferred tax liabilities

Confirmed losses

16,6

-4,2

12,4

Difference between carrying amounts and tax bases of property, plant

and equipment

1,6

-0,0

1,5

Lease liability

4,4

0,3

-0,1

4,7

Other temporary differences

5,2

0,1

-0,1

5,2

Total

27,8

-3,8

-0,2

23,8

Confirmed losses

9,7

10,3

20,0

Difference between carrying amounts and tax bases of property, plant

and equipment

1,5

0,1

1,6

Lease liability

2,8

1,5

0,1

4,4

Other temporary differences

2,3

-0,0

-0,5

1,8

Total

16,3

11,8

-0,3

27,8

More information on deferred tax assets is provided in note 1.5.

41

Cumulative depreciation differences

7,2

4,4

-0,2

1,7

13,1

Difference between carrying amount and tax bases of prop., plant and

equip.

5,1

-0,1

-0,1

4,9

Measurement at fair value of intangible and tangible assets

15,1

-0,3

14,8

Lease receivables

1,1

-1,1

Other temporary differences

7,4

0,3

0,0

7,7

Total

35,9

3,5

-0,6

1,7

40,6

Cumulative depreciation differences

20,9

0,2

0,3

-14,1

7,2

Difference between carrying amount and tax bases of prop., plant and

equip.

8,5

-0,3

-0,2

-2,9

5,0

Measurement at fair value of intangible and tangible assets

14,5

0,6

15,1

Lease receivables

0,7

0,4

1,1

Other temporary differences

-0,7

8,2

-0,0

7,5

Total

43,8

8,4

0,7

-17,0

35,9

In accordance with IAS 12 paragraph 52 A, deferred tax liabilities have not been recorded on the accumulated

distributable earnings, EUR 7.1 million (6.8), of the Estonian and Latvian subsidiaries. Neither has deferred tax liability

been recorded on the accumulated distributable earnings of Stockmann Plc’s branch in Estonia, which amount to EUR

86.6 million and which has been included in the taxable income of the parent office in Finland during previous years.

42

3Intangible and tangible assets and leasing arrangements

3.1Depreciation, amortisation and impairment losses

EUR mill.

2021

2020

Intangible assets*)

13,0

15,0

Buildings and constructions

0,0

10,2

Machinery and equipment

13,3

16,8

Modification and renovation costs for leased premises

1,6

0,7

Right of use assets

75,0

86,4

Depreciation and amortisation, total

102,9

129,2

Goodwill

0,0

250,0

Impairment losses, total

0,0

250,0

Depreciation, amortisation and impairment losses, total

102,9

379,2

*) Figure of financial year 2020 is adjusted due to change in accounting principle, more information in notes 1.2 and

3.2.

3.2Goodwill and other intangible assets

Accounting policies

The Group’s goodwill is the difference between the consideration transferred, measured at fair value, and the identifiable

net assets acquired, measured at fair value. Neither goodwill nor the Lindex brand are amortised. The brand is deemed

to have an indefinite useful life due to high brand awareness. The goodwill and the brand are measured at original

acquisition cost less impairment losses.

Other intangible assets include intangible rights and software that are measured at original acquisition cost. Other

intangible assets are amortised on a straight-line basis over their estimated useful lives.

The amortisation periods of intangible assets are:

software5–10 years

other intangible rights5 years

Subsequent expenditure related to intangible assets is capitalised only if the economic benefits of the asset increase as

a result of such expenditure. Otherwise, the costs are recorded as expenses in the income statement when they are

incurred.

Accounting policy was changed in 2021 according to IFRIC agenda decisions on configuration and customisation costs

in a cloud computing arrangement (IAS 38). In cloud computing (Software-as-a-Service or SaaS) arrangements are

service contracts providing the Group with the right to access the cloud provider’s application software over the contract

period. Implementation costs including costs to configure or customise the cloud provider’s application software are

recognised as operating expenses when the services are received. Where the SaaS arrangement supplier provides both

configuration and customisation services, judgement has been applied to determine whether each of these services are

distinct or not from the underlying use of the SaaS application software. Distinct configuration and customisation costs

are expenses as incurred as the software is configured or customised. Non-distinct configuration and customisation costs

are expensed over the SaaS contract term.

Stockmann conducted an analysis of its SaaS contracts and adjusted its intangible assets, amortisations, other operating

expenses and retained earnings of financial year 2020 according to the IFRIC agenda decisions retrospectively.

43

Acquisition cost 1.1.

700,3

90,9

90,7

10,6

1,6

894,1

Translation difference +/-

-14,8

-1,9

-1,3

0,0

-0,0

-18,0

Increases during the period

6,3

1,9

8,2

Decreases during the period

-4,8

-6,4

-0,0

-11,3

Transfers between items during the period

7,4

0,6

-1,4

6,6

Acquisition cost 31.12.

685,5

89,0

98,2

4,8

2,1

879,6

Accumulated amortisation 1.1.

-422,8

-0,3

-63,1

-9,2

-495,4

Translation difference +/-

8,8

0,0

0,3

-0,0

9,1

Amortisation on reductions during the period

4,7

6,4

11,2

Transfers between items during the period

-0,4

-0,4

Amortisation and impairment losses during the period

-12,5

-0,5

-13,0

Accumulated amortisation 31.12.

-414,0

-0,3

-70,6

-3,7

-488,5

Carrying amount 1.1.

277,5

90,6

27,6

1,4

1,6

398,7

Carrying amount 31.12.

271,5

88,7

27,6

1,1

2,1

391,1

Intangible assets, EUR mill. 2020

Acquisition cost 1.1.

672,6

87,3

93,6

10,4

2,6

866,5

Translation difference +/-

27,7

3,6

1,9

0,3

33,4

Increases during the period

1,0

3,5

4,5

Decreases during the period

-10,3

-10,3

Transfers between items during the period

4,5

-4,5

Acquisition cost 31.12.

700,3

90,9

90,7

10,6

1,6

894,1

Accumulated amortisation 1.1.

-166,1

-0,3

-57,2

-8,5

-232,1

Translation difference +/-

-6,7

-0,0

-1,5

-0,2

-8,4

Amortisation on reductions during the period

10,2

10,2

Amortisation and impairment losses during the period

-250,0

-14,6

-0,4

-265,0

Accumulated amortisation 31.12.

-422,8

-0,3

-63,1

-9,2

-495,4

Carrying amount 1.1.

506,6

87,0

36,5

1,8

2,6

634,5

Carrying amount 31.12.

277,5

90,6

27,6

1,4

1,6

398,7

Figures for financial year 2020 are adjusted according to the change in accounting principle.

Impairment testing

Accounting policies

The carrying amounts of asset items are assessed regularly to determine whether there is any indication that an asset

may be impaired. If there are indications of impairment, the recoverable amount of the asset is determined. Goodwill and

the brand are allocated to cash-generating units,and they are tested annually to determine any impairment. An

impairment loss is recognised when the value of the asset item or cash-generating unit in the statement of financial

position is greater than its recoverable amount. Impairment losses are recognised in the income statement.

An impairment loss on a cash-generating unit is allocated first as a reduction to the goodwill of the cash generating unit

and thereafter it is allocated to reduce the unit’s other asset items on an equal percentage basis.

The recoverable amount of intangible and tangible assets is defined as the higher of its fair value less costs to sell and its

value in use. In determining value in use, the estimated future cash flows are discounted to their present value based on

discount rates that reflect the average capital costs before taxes of the cash generating unit in question.

An impairment loss on property, plant and equipment as well as other intangible assets, except for goodwill, is reversed if

a change has occurred in the estimates used in determining the recoverable amount of the asset item. An impairment

loss is not, however, reversed beyond what the carrying amount of the asset would have been if no impairment loss had

been recognised in previous years.

The Stockmann Group’s reportable segments under IFRS 8, fashion chain Lindex and Stockmann for department store

business, are cash-generating units. Their accumulated cash flows are largely independent of the cash flows

accumulated by the other classes or groups of assets. In Stockmann Group, asset items are tested for impairment when

preparing the financial statements or if there are indications that assets may be impaired.

There are less uncertainties in the forecast period than a year ago. Impact of COVID-19 will still exist, but Stockmann

assumesthat restrictions in most countries will be eased or removed. As a result of this, in an impairment test concluded

for Lindex's goodwill in connection with the financial statements, has been applied using higher growth assumptions for

44

the revenue development.There are no indications for impairment need.On 31 December 2021 the goodwill of EUR

271.5 million is allocated to the Lindex segment.

The Lindex trademark of EUR 88.7 million is allocated in its entirety to the Lindex segment. The Lindex brand is deemed

to have an indefinite useful life due to high brand awareness. The Lindex brand has existed more than 60 years and the

Group will continue to use the brand both in its present markets and when the Lindex product range and business model

are introduced into new markets.

Main assumptions and variables used in the calculation of the value-in-use of Lindex

In the impairment testing, the cash flow forecasts for Lindex are based on market-area forecasts and are approved by

management. The cash flow forecasts cover a five-year period with an average of 4.5 per cent growth and also have an

effect on the terminal period. Long-term forecasts, which were updated during the financial year, take into account

changes in the economy compared with the previous year. Lindex’s cash flows beyond this management-approved

forecast period were extrapolated using a steady 2.5 per cent growth rate. For Lindex’s Gross Margin beyond this

management-approved forecast period a gross margin ratio of 60.2 per cent was set.

Main variables used in the value-in-use calculation:

1.Volume growth, which is based on an estimate of the sales growth at existing stores and online store.

2.Profitability improvement based on the growth in gross margin ratio.

3.Discount rate, which is determined using the weighted average cost of capital, based on the optimal finance

structure or the average finance structure of industry peers (reflects the total cost of equity and debt). The

components of the discount rate are:

●

market-specific risk-free rate

●

market risk premium

●

business-specific beta, which is a measure of the market’s view of the unit’s risk premium

●

country risk premium

●

size risk premium

●

cost of debt

●

debt-to-equity ratio, which corresponds to the capital structure in retail industry

●

lease liabilities have been taken into account in the calculation of the discount rate and

correspondingly the right-of-use asset is included in the value of asset.

Management has determined components of discount rate so that market-specific risk-free rate, market risk premium,

business-specific beta, country risk premium and size risk premium are consistent with external sources of information

and a cost of debt reflects the industry average.

The discount rate determined is a pre-tax rate. The discount rate of Lindex is based on the market interest rate and

country-specific risk pertaining to Sweden and Finland; the discount rate used for Lindex is 11.5% (9.7% in 2020).

Sensitivity in the determining of the recoverable amount

In the impairment testing the recoverable amount of Lindex is approximately 35.8 percent higher than the carrying

amount of the non-current assets and the working capital in the balance sheet. Due to the competition and general

economic situation affecting consumers’ purchasing behaviour and purchasing power, any changes in the variables used

can lead to a situation in which the recoverable amount Lindex would be less than the segment’s carrying amount which

leads to need for impairment.

A sensitivity analysis was carried out on Lindex using downside scenarios. The scenarios involved reducing either the

sales growth from the level given in the management’s estimates for the cash flow period also reflecting to the sales

value of the terminal period or raising the discount rate. A change in an assumption that would cause the recoverable

amount to equal the carrying amount is presented in the table below.

Change, percentage points

2021

Discount rate increase

3.3

Decline in sales growth

4.4

Based on the impairment testing carried out, there is headroom of EUR 220.2 million.

45

3.3Property, plant and equipment

Accounting policies

Machinery and equipment comprise the bulk of property, plant and equipment. Property,plant and equipment also

includes modification and renovation costs of leased premises that are due, for example, to the finishing work on the

interiors of commercial premises located in leased buildings.

Property, plant and equipment are measured in the statement of financial position at their original acquisition cost less

accumulated depreciation and any impairment losses. The acquisition cost of self-constructed assets includes materials

and direct labour. If the item of property,plant and equipment is comprised of several components having useful lives of

differing length, the components are treated as separate items. Subsequent costs concerning the item are recognised as

a part of the acquisition cost when they increase the future useful life of the asset. Other costs, such as normal

maintenance and repair measures, are recognised in the income statement as expenses when they are incurred.

On 9 February 2021, the District Court of Helsinki approved Stockmann plc’s restructuring programme. As a part of the

restructuring process, Stockmann is obliged to sell its real estate properties and negotiate leaseback arrangements. Real

estate properties of Helsinki and Riga are classified as assets held for sale in the consolidated financial statements 31

December 2021.

Straight-line depreciation is recognised on property, plant and equipment in accordance with each item’s useful life.

The depreciation periods for property, plant and equipment are:

●

Costs of leased premises5–20 years

●

Machinery and equipment4–10 years

●

ICT equipment3–5 years

●

Lightweight store fixtures and equipment3–5 years

46

Acquisition cost 1.1.

-0,0

254,1

8,5

476,9

11,6

751,1

Translation difference +/-

-0,1

-8,3

-0,1

-8,5

Increases during the period

2,3

47,9

6,4

56,6

Decreases during the period

-16,1

-1,0

-47,9

-65,0

Transfers to non-current assets classified as held

for sale

-1,0

-0,7

-0,0

-1,7

Transfers between items during the period

13,3

2,3

-16,8

-1,2

Acquisition cost 31.12.

-0,0

252,4

9,2

468,6

1,2

731,3

Accumulated depreciation 1.1.

-209,6

-4,4

-125,5

-339,5

Translation difference +/-

-0,4

2,9

2,5

Depreciation on reductions during the period

15,5

1,0

25,6

42,1

Accumulated depreciation on transfers to non-

current assets classified as held for sale

0,9

0,6

1,5

Transfers between items during the period

-5,0

-5,0

Depreciation and impairment losses during the

period

0,0

-13,3

-1,6

-75,0

-89,8

Accumulated depreciation 31.12.

0,0

-211,8

-4,4

-172,0

-388,2

Carrying amount 1.1.

-0,0

44,5

4,1

351,4

11,6

411,7

Carrying amount 31.12.

-0,0

0,0

40,6

4,8

296,6

1,2

343,2

Tangible assets, EUR mill. 2020

Acquisition cost 1.1.

17,5

379,9

259,8

37,0

570,1

5,6

1 269,8

Translation difference +/-

1,7

14,3

0,2

16,2

Increases during the period

0,3

0,0

67,2

13,6

81,2

Decreases during the period

-2,0

-12,5

-28,4

-174,8

-0,0

-217,8

Transfers to non-current assets classified as held

for sale

-17,5

-378,7

-2,1

-0,0

-398,3

Transfers between items during the period

0,9

6,9

0,0

-7,8

0,0

Acquisition cost 31.12.

0,0

0,0

254,1

8,6

476,9

11,6

751,1

Accumulated depreciation 1.1.

-142,4

-204,4

-32,1

-84,4

-463,3

Translation difference +/-

-1,6

10,5

8,9

Depreciation on reductions during the period

1,9

12,1

28,4

34,9

77,4

Accumulated depreciation on transfers to non-

current assets classified as held for sale

150,7

1,0

151,8

Depreciation and impairment losses during the

period

-10,2

-16,8

-0,7

-86,4

-114,2

Accumulated depreciation 31.12.

-209,6

-4,4

-125,5

-339,4

Carrying amount 1.1.

17,5

237,4

55,4

4,9

485,7

5,6

806,5

Carrying amount 31.12.

0,0

0,0

44,5

4,2

351,4

11,6

411,8

In 2021 and 2020 advance payments for plant, property and equipment and construction in progress included mainly

store furniture as well as modification and renovation costs for business and real estate premises.

47

3.4Investment property

Accounting policies

When the Group holds a land area or building for lease income and appreciation in value rather than using it for its own

retail or administrative purposes, the property is classified as an investment property in accordance with IAS 40.

An investment property is initially valued at acquisition cost. The acquisition cost of a purchased investment property

comprises its purchase price and any directly attributable expenditure. The acquisition cost of a self-constructed

investment property is the acquisition cost accumulated at the date that construction or development is completed. IAS

16 is applied to the investment property up until the day of completion and IAS 40 is applied as of the day of completion.

Investment properties are not depreciated, but any gains or losses due to changes in fair value are recognised through

profit or loss for the period during which they arise.Gains or losses arising from changes in the fair value of investment

properties must be recognised separately in profit or loss.

The TapiolanSäästötammi property in Espoo, of which Stockmann owns 37.8 per cent, were classified as investment

properties in accordance with IAS 40 on 31 December 2021.

EUR mill.

2021

2020

Fair value at 1.1.

0,5

0,5

Fair value at 31.12.

0,5

0,5

3.5Leases

Group as lessee

Accounting policies

A right-of-use asset and a lease liability is recognised at the lease commencement date. The right-of-use asset is initially

measured at cost, which comprises the initial amount of the lease liability adjusted for any lease payments made at or

before the commencement date, plus any initial direct costs incurred and an estimate of costs to dismantle and remove

the underlying asset or to restore the underlying asset or the site on which it is located, less any lease incentives

received. The right-of-use asset in the Stockmann Group is composed of leased business premises, warehouses, cars,

and other machinery and equipment.

The right-of-use asset is subsequently depreciated using the straight-line method from the commencement date to the

end of the lease term. If the lease transfers ownership of the underlying asset to the Group by the end of the lease term

or the cost of the right-of-use asset reflects that the Group will exercise a purchase option, the right-of-use asset will be

depreciated over the useful life of the underlying asset. In addition, the right-of-use asset is periodically reduced by

impairment losses, if any, and adjusted for the amount of the remeasurement of the lease liability.

At the commencement date the lease liability is measured at the present value of the lease payments that are not paid at

that date. The lease payments are discounted using the interest rate implicit in the lease, if that rate can be readily

determined. If that rate cannot be readily determined, the incremental borrowing rate is used. The incremental borrowing

rate is the average rate of interest that the Group would have to pay to borrow over a similar term, and with a similar

security, the funds necessary to obtain an asset of a similar value to the right-of-use asset in a similar economic

environment.

Lease payments included in the measurement of the lease liability comprise the following:

- fixed lease payments

- variable lease payments that depend on an index, initially measured using the index as at the commencement date

- amounts expected to be payable under residual value guarantees

- the exercise price of a purchase option if it is reasonably certain that the option will be exercised

- payments of penalties for terminating the lease, if is reasonably certain that that option will be exercised

The lease liability is later measured at amortised cost using the effective interest method. The lease liability is

remeasured when there is a change in future lease payments arising from a change in an index or if there is a change in

the estimate of the amount expected to be payable under a residual value guarantee or if the assessment of whether

purchase, extension or termination option will be exercised. When the lease liability is remeasured, a corresponding

adjustment is made to the carrying amount of the right-of-use asset or is recorded in profit or loss if the carrying amount

of the right-of-use asset has been reduced to zero.

The lease term is determined as the non-cancellable period of a lease, together with periods covered by an option to

extend the lease if it is reasonably certain to exercise that option. In the Stockmann Group Lindex uses a scoring system

based on the operating profit to determine if prolongation of original rental period is included in the lease term. Operating

profit is measured as a percentage compared to turnover and the higher the percentage the more likely the option to

extend will be exercised.

The Group presents right-of-use assets that do not meet the definition of investment property in property, plant and

equipment and lease liabilities in liabilities in the statement of financial position. When right-of-use assets are transferred

to the lessee under a sublease agreement and are classified as a finance lease the right-of-use assets are derecognised

48

and presented as a lease receivable in the balance sheet.

Based on the exemption provided by IFRS 16 the Group has elected not to recognise right-of-use assets and lease

liabilities for short-term leases and leases of low-value assets, including IT-systems and office equipment. The Group

recognises the lease payments associated with these leases as an expense on a straight-line basis over the lease term.

Sale and leaseback

Accounting policies

Stockmann sold its department store property in Tallinnon 29 December 2021 and continues with a long-term leaseback

agreement with the new owner.

According to the Group’s determination the transfers to the buyer-lessor are qualified as sales according to IFRS 15 and

consequently the sale and leaseback rules in IFRS 16 are applied. In sale and leaseback transactions Stockmann

measures the right-of-use asset arising from the leaseback at the proportion of the previous carrying amount of the asset

that relates to the right-of-use retained by the Group. Accordingly, Stockmann recognises only the amount of any gain or

loss that relates to the rights transferred to the buyer-lessor.

The impact of the sales of the Tallinndepartment store property on financial statements is described in note 1.4.

Right-of use assets

2021, EUR mill.

Buildings

Machinery and

equipment

Total

Right-of-use assets 1.1.

475,0

1,9

476,9

Translation difference +/-

-8,2

0,0

-8,3

Increases during the period

43,7

0,6

44,2

Increase relating to sale and leaseback arrangement

3,6

3,6

Decreases during the period

-47,3

-0,6

-47,9

Acquisition cost at the end of the period

466,7

1,8

468,6

Accumulated depreciation and impairment losses at the

beginning of the period

-124,6

-0,9

-125,5

Translation difference +/-

2,9

0,0

2,9

Depreciation on reductions during the period

25,2

0,5

25,6

Depreciation, amortisation and impairment losses during

the period

-74,4

-0,6

-75,0

Accumulated depreciation and impairment losses at the end

of the period

-170,9

-1,0

-172,0

Carrying amount at the beginning of the period

350,5

1,0

351,4

Carrying amount at the end of the period

295,8

0,8

296,6

Decreases of right-of use assets are mainly due to changes in terms of lease agreements for business premises.

49

2020, EUR mill.

Buildings

Machinery and

equipment

Total

Right-of-use assets 1.1.

567,8

2,3

570,1

Translation difference +/-

14,3

0,0

14,3

Increases during the period

67,2

67,2

Decreases during the period

-174,3

-0,5

-174,8

Acquisition cost at the end of the period

475,0

1,9

476,9

Accumulated depreciation and impairment losses at the

beginning of the period

-83,7

-0,7

-84,4

Translation difference +/-

10,0

0,5

10,5

Depreciation on reductions during the period

34,9

0,1

34,9

Depreciation, amortisation and impairment losses during

the period

-85,7

-0,7

-86,4

Accumulated depreciation and impairment losses at the end

of the period

-124,6

-0,9

-125,5

Carrying amount at the beginning of the period

484,1

1,6

485,7

Carrying amount at the end of the period

350,5

1,0

351,4

Carrying amount 31.12. by operating segments

EUR mill.

2021

2020

Lindex

236,7

265,7

Stockmann

60,0

85,8

Total

296,6

351,4

Leases recognised in profit and loss

EUR mill.

2021

2020

Interest expenses on lease liabilities

-12,2

-21,2

Interest income from sub-leasing right-of-use assets

0,0

0,7

Expenses relating to leases of low-value assets

-1,1

-0,5

Expenses relating to short-term leases

-0,1

-1,6

Expense relating to variable lease payments not included in lease

liabilities

-5,1

-2,2

Total

-18,5

-24,8

Totalcash outflow for leases in 2021 was EUR 78.5 million (101.4).

Group as lessor

Accounting policies

When the Group acts as a lessor, each lease is it determined at lease inception whether a finance lease or an operating

lease. The lease is a finance lease if substantially all of the risks and rewards incidental to ownership of the underlying

asset are transferred to lessee, if not, then it is an operating lease. All leases in which Stockmann Group acts as a lessor

on 31 December 2021 are operating leases. The Group recognises lease payments received under operating leases as

income on a straightline basis over the lease term as part of revenue.

Stockmann owns the Helsinki department store property located in Helsinki, Finland. The area of the property is 50 940

square meters. Approximately 70 per cent of the gross leasable gross area of the properties is used by Stockmann and

the remaining area is used by external tenants.

50

4Capital structure

4.1Financial income and expenses

Financial income

EUR mill.

2021

2020

Dividend income from other investments

0,0

1,6

Interest income on bank deposits, other investments and currency

derivatives

1,0

0,0

Interest income from lease contracts

0,0

0,7

Other financial income

1,7

17,8

Foreign exchange differences

0,5

Total

2,7

20,7

Financial expenses

EUR mill.

2021

2020

Interest expenses on financial liabilities measured at amortised cost

derivatives

-7,2

-20,3

Interest expenses from lease contracts

-12,2

-21,2

Other financial expenses

-3,8

Foreign exchange differences

-0,2

Total

-19,6

-45,4

EUR mill.

2021

2020

Financial income and expenses, total

-16,9

-24,6

2021 includes EUR 1.7 mill. gain on the changein the lease agreements and EUR 0.9 mill. interestdue to tax return.

Figures for financial year 2020 are adjusted withcosts related to disputed landlords' claims forterminated lease agreements of EUR

17.0 million. They are reclassified to other operatingexpenses, as they were previously netted againstfinancial income.

4.2Financial instruments

Accounting policies

Financial instruments are classified under IFRS 9 into the following groups: financial assets and liabilities at amortised

cost, at fair value through other comprehensive income and at fair value through profit or loss and other investments. The

classification is made at the time of the original acquisition based on the objective of the business model and the

characteristics of contractual cash flows of the investment

.

At reporting date, Stockmann Group did not hold any financial

assets classified at fair value through other comprehensive income.

Trade receivables and other receivables which are not derivatives are measured at amortised cost. They are included in

either current or non-current assets in the statement of financial position, as appropriate. Receivables are deemed non-

current assets if they mature after more than 12 months. Trade receivables are recognised at their fair value in the

statement of financial position on initial recognition. Stockmann Group applies the IFRS 9 simplified approach to

measuring expected credit losses which uses a lifetime expected loss allowance for all trade receivables, customer

contract assets and lease receivables. The amount of future credit losses is estimated on the basis of experience and

recognised in profit or loss as a percentage of all outstanding trade and lease receivables.

Other investments include the Group’s investments in shares, and they are measured at fair value through profit or loss.

The fair value of publicly quoted shares is the market price at the financial statements date. Unlisted shares are stated at

cost less any impairment loss, if their fair values cannot be measured reliably.

Purchases and sales of financial assets are recognised at the trade date, which is the day when the company made a

commitment to purchase or sell the asset item. An item belonging to financial assets is derecognised from the statement

of financial position when the company relinquishes the contractual rights to the item, the rights expire, or the company

loses control over the item.

Liabilities that are not derivatives are classified at amortised cost and are recognised at their fair value in the statement of

financial position on initial recognition. Transaction costs are included in the original carrying amount of interest-bearing

liabilities. Subsequently, interest-bearing liabilities are measured at amortised cost using the effective interest method.

Non-current liabilities fall due in 12 or more months and current liabilities have a maturity of less than 12 months.

51

Derivative financial instruments are classified as financial assets or liabilities at fair value through profit or loss, and

changes in their fair value are recognised through profit or loss, except for derivatives to which hedge accounting for

cash flow hedges or for hedges of net investments are applied and which meet the criteria for hedge accounting defined

in IFRS 9.

Hedge accounting is applied to certain currency derivatives that are used in hedging forecasted foreign currency

denominated sales and purchases and which meet the hedge accounting requirements of IFRS 9. The hedged cash flow

must be highly probable and ultimately affect profit or loss. Changes in the fair value of derivative contracts taken out to

hedge cash flows are recognised in the statement of comprehensive income and presented in the fair value reserve

under equity, and any ineffective component is recognised through profit or loss. Cumulative changes in fair value in

equity are recognised in items adjusting sales or purchases through profit or loss in the same period as that in which the

forecast transactions covered by hedge accounting are recognised in the income statement. If a hedged cash flow is no

longer expected to be realised, the related fair value change that has been recognised for the hedging instrument directly

to equity is transferred to the income statement.

Hedge accounting is also applied to certain currency derivatives that hedge foreign currency denominated net

investments in foreign operations. Changes in the fair value of the hedging instrument are recognised in the statement of

comprehensive income and presented in the translation difference in shareholders’ equity. Gains and losses from the

hedging of net investments that are recognised in translation differences are transferred to the income statement when

the net investment is disposed of in full or in part. Realised foreign exchange rate gain on the hedge of a net investment

in a foreign operations and internal loans are included in a cash flow from investment activities in the consolidated cash

flow statement.

The hedging relationship between the hedged item and the hedging instrument is documented at the inception of the

hedge. The documentation includes identification of the hedging instrument and the hedged item, the nature of the risk

being hedged, the objectives of risk management and calculations of hedge effectiveness. The hedging relationship must

be effective, and the effectiveness is reviewed both at the inception of the hedge and subsequently. Effectivenesstesting

is carried out at each financial statements date.

The fair value of interest rate swaps is defined on the basis of the present value of future cash flows, applying market

prices at the financial statements date. Changes in the fair value of interest rate swaps are recognised in financial

income and expenses in the income statement. At the financial statements date, the Group did not have any outstanding

interest rate swaps.

The fair value of currency forwards and currency swaps is calculated by measuring them at their market prices at the

financial statements date. The fair value of currency options is calculated using the Black-Scholes model. The results of

the measurement of currency derivatives are recognised through profit or loss, except for currency derivatives to which

hedge accounting for cash flow hedges or hedges of net investments as defined in IFRS 9.

4.3Current receivables

EUR mill.

2021

2020

Non-interest-bearing trade receivables

11,9

12,6

Lease receivables

0,0

0,5

Receivables based on derivative contracts

1,6

Other receivables

2,4

0,8

Prepayments and accrued income

29,7

31,6

Income tax receivables

0,1

0,3

Current receivables, total

45,8

45,8

The carrying amount of trade receivables corresponds to their fair value. The maximum amount of the credit risk for trade

receivables and other current receivables is their carrying amount.

52

Prepayments and accrued income

EUR mill.

2021

2020

Prepaid rents

15,0

9,5

Merchandise prepayments

4,4

Periodised ICT expenses

2,7

1,6

Receivable from credit card co-operation

2,0

2,2

Periodised restructuring expenses

1,9

Receivable from trademark co-operation

0,8

1,0

Periodised indirect employee expenses

0,2

0,1

Derivative receivable

8,9

Prepaid interest expenses

3,7

Periodised loan arrangement expenses

0,8

Others

2,8

3,7

Total

29,7

31,6

4.4Cash and cash equivalents

Accounting policies

Cash and cash equivalents consist of cash on hand, current bank deposits as well as other current, highly liquid

investments with a maturity of no more than three months at the date of acquisition. The fair values of cash and cash

equivalents are assumed to approximate to their carrying amounts because of their short maturities.

EUR mill.

2021

2020

Cash and cash equivalents

213,7

152,3

Total

213,7

152,3

4.5Non-current liabilities, interest-bearing

EUR mill.

Carrying amount 2021

Carrying amount 2020

Bond issues

66,1

Periodised loan arrangement expenses

-0,2

Lease liabilities

264,3

290,7

Total

330,3

290,7

The carrying amount of bond issues and other liabilities have been calculated using the effective interest method, and

fair value has been defined using the discounted cash flow method by discounting at the market interest rate at the

reporting date.

In May 2021, Stockmann plc announced an offering of senior secured bonds to certain unsecured creditors of the issuer

under the restructuring. Pursuant to the restructuring programme, the unsecured creditors were entitled to convert their

receivables under the payment programme of the restructuring programme that have been confirmed to unsecured debt,

by way of set-off, to senior secured bonds on a euro-for-euro basis. The aggregate principal amount of the bonds validly

subscribed for by the unsecured creditors was EUR 66.1 million. Accordingly, Stockmann issued bonds to the aggregate

principal amount of EUR 66.1 million. The bonds are presented as non-current interest-bearing financing liabilities in the

Consolidated Statement of Financial Position on 31 December 2021.

53

4.6Current liabilities

EUR mill.

Carrying amount 2021

Carrying amount 2020

Loans from financial institutions

381,5

434,6

Lease liabilities

72,9

80,5

Other interest-bearing liabilities

0,0

53,5

Trade payables

61,8

53,2

Other current liabilities

77,7

112,7

Accruals and prepaid income

83,5

83,7

Derivative contract liabilities

0,1

0,0

Income tax liability

46,4

39,6

Current provisions

0,0

17,0

Total

724,0

874,9

of which interest-bearing

454,4

568,6

The following current liabilities are included in Stockmann Plc’s restructuring debt: loans from financial institutions EUR

381.5 million and other current liabilities EUR 2.0 million.

In 2020 the following current liabilities were included in Stockmann Plc’s restructuring debt: loans from financial

institutions EUR 435.4 million, other interest-bearing liabilities EUR 53.5 million, other current liabilities EUR 58.2 million

and current provisions EUR 17.0 million. The current provision was reclassified into non-current provisions in 2021.

Restructuring debt

EUR mill.

31.12.2021

31.12.2020

Non-current non-interest-bearing restructuring debt, unsecured *)

19,8

Current interest-bearing restructuring debt, secured

381,5

435,4

Current interest-bearing restructuring debt, unsecured

53,5

Current non-interest-bearing restructuring debt, secured

7,1

Current non-interest-bearing restructuring debt, unsecured **)

2,0

51,1

Restructuring debt total

403,3

547,1

Restructuring debt related to non-current provisions

17,5

Restructuring debt related to current provisions

17,0

Provisions related to restructuring debt ***)

17,5

17,0

Hybrid Bond (booked to Equity) + interest for the period 31.1. -

8.4.2020

108,1

Total

420,8

672,3

Stockmann plc's intra-group restructuring liabilities amount to EUR 63.9 million.

*) Non-current part of the remaining unsecured restructuring debt after the debt cut and conversions into equity and a

secured interest-bearing 5-year bullet bond. The non-current part will be paid according to the restructuring

programme during 2023-2028.

**) Current part of the remaining unsecured restructuring debt after the debt cut and conversions into equity and a

secured interest-bearing 5-year bullet bond. The current part will be paid in April 2022.

***) Consists of disputed landlords' claims for terminated lease agreements.

54

Accruals and prepaid income

EUR mill.

2021

2020

Personnel expenses

35,2

36,2

Periodised purchases

19,4

10,1

Customer loyalty programme MORE

7,1

5,7

Reserve for returns

3,1

2,0

Accrued site expenses

0,3

1,6

Interest and other financial expenses

0,2

13,9

Other accruals and prepaid income

17,4

14,2

Total

82,6

83,7

4.7Reconciliation of liabilities arising from financing activities

Non-current liabilities, interest-

bearing

-0,2

66,2

66,0

Current liabilities, interest-

bearing

488,1

-48,5

-58,2

381,5

Lease liabilities

371,2

-66,3

37,9

-5,6

337,2

Total liabilities from

financing activities

859,3

-114,9

37,9

-5,6

8,0

784,7

Non-current liabilities, interest-

bearing

364,5

69,0

-433,5

0,0

Current liabilities, interest-

bearing

46,7

7,9

433,5

488,1

Lease liabilities

529,8

-81,5

-85,3

8,2

371,2

Cheque account with overdraft

facility

1,1

-1,1

0,0

Total liabilities from

financing activities

942,1

-5,7

-85,3

8,2

0,0

859,3

Loan arrangement expenses are included in cash flows from financing activities in the cash flow statement.

55

4.8Financial risk management

The Group’s financing and the management of financial risks are handled on a centralised basis within Stockmann plc’s

Treasury function in accordance with the policy adopted by the Board of Directors.

The Board of Directors of Stockmann filed for corporate restructuring of the parent company Stockmann plc on 6 April

2020 and corporate restructuring proceedings were initiated on 8 April 2020. As a result of the filing for restructuring the

District Court of Helsinki ruled a temporary prohibition of collection for Stockmann plc and the company’s external debts

were subject to restructuring. The banks closed all derivative positions on 6 April 2020 and cancelled all hedging

facilities. In a decision on 9 February 2021, the Helsinki District Court approved Stockmann Plc’s restructuring

programme and the restructuring proceedings have ended. However, since the restructuring proceedings were initiated,

Stockmann has had limited possibilities to manage financial risks according to its financial policy. This note mainly

describes the management of financial risks in a situation where Stockmann has standard hedging instruments available.

The implications of the restructuring programme for financial risk management are described more in detail below.

The objective of financial risk management is to ensure reasonable financing for the Group in all circumstances and to

reduce the effects of market risks on the Group’s profit and balance sheet. Group Treasury,which reports to the Chief

Financial Officer of Stockmann plc, manages financial exposures and executes hedging strategies at Group level.

Treasury also acts as the internal bank of the Stockmann Group. Treasury acts in accordance with more detailed

guidelines setting out the principles of managing financial risks as well as the management of liquidity and financing. In

addition,the divisions may have additional instructions for hedging their foreign exchange exposure.

The Group’s main financial risks are currency risk, interest rate risk, financing and liquidity risk, credit and counterparty

risk and electricity price risk.

Currency risk

The Group’s currency risk consists of sales and purchases made in foreign currency as well as balance sheet items and

also foreign-currency-denominated net investments in units abroad.

Transaction risk

Stockmann’s transaction risk derives from the currency flows connected with sales and purchases of the Group’s

divisions as well as from loans and receivables denominated in foreign currency. The most important sales currencies

during 2021 were the euro, the Swedish krona, and the Norwegian krone. The primary purchasing currencies were the

euro, the United States dollar, and the Swedish krona. In 2021, non-EUR sales accounted for 56 per cent of the Group’s

entire sales (2020: 52 per cent). Purchases with a transaction risk made up 53 per cent of the Group's purchases (2020:

48 per cent). In addition, the Group has purchases in foreign currency without a transaction risk, mainly local purchases

in Sweden. In 2021 these purchases accounted for 4 per cent of the Group’s total purchases (2020: 3 per cent).

The divisions are responsible for forecasting future net cash flows denominated in foreign currency and for managing the

currency risk connected with them. The management of currency risk related to operational cash flows is based on cash

flow forecasts for the coming 6 months. The hedging period is generally a maximum of 6 months and the degree of

hedging for individual currencies can vary in the range of 0–100%. Contracted cash flows can be hedged for longer

periods. During the restructuring proceedings, the Group has not had possibilities to hedge its foreign exchange

positions. Lindex obtained hedging facilities in September 2021 and has started to hedge its transaction exposure in

accordance with the treasury policy. Stockmann plc currently has no hedging facilities.

Currency derivatives that are used to hedge forecasted cash flows are classified as cash flow hedges. The main

transaction risks arise in Lindex. Stockmann division operates mainly in local currency and its transaction exposure is

limited. The outstanding cash flow hedges are hedging Lindex’s purchases in US-dollar and sales in Swedish Krona,

Norwegian Krona and euro and will mature during the first 7 months of 2022. The gain/loss of these hedge instruments

will affect the Group’s operating profit in the same period during which the forecasted hedged items affect profit, which is

on average 4 months after maturity. Information about the fair value of these hedges is provided in Note 4.9

.

The table

below shows the distribution of currency for outstanding derivatives hedging cash flows. For each derivative, the

amounts are shown for both the bought and the sold currency. No ineffectiveness arose on cash flow hedges during the

year 2021.

Foreign exchange derivatives hedging cash flows

EUR Mill.

2021

2020

USD

47,1

0,0

SEK

-21,2

0,0

NOK

-14,9

0,0

EUR

-9,8

0,0

At the end of 2020, there were no outstandingderivatives hedging cash flows.

56

Sensitivity Analysis, cash flow hedges, effect on equityafter tax

2021, EUR Mill.

USD

SEK

NOK

Change + 10 %

-3,4

-0,7

1,1

Change - 10 %

4,2

0,9

-1,3

At the end of 2020, there were no outstandingderivatives hedging cash flows.

All outstanding derivatives hedging cash flows relate to Lindex. The functional currency of Lindex is the Swedish Krona.

At year-end, the outstanding cash flow hedges in US-dollars covered approximately 66 % of the Stockmann Group’s

estimated net USD flows for the coming 6 months.

Foreign subsidiaries are financed primarily in local currency, whereby the foreign subsidiary does not incur significant

transaction risk other than from sales and purchases in foreign currency. Group Treasury is managing the currency risk

of the foreign-currency-denominated receivables and liabilities in Stockmann’s balance sheet. The degree of hedging can

vary in the range of 0 – 100%.

The following table shows the Group’s transaction exposure including foreign-currency-denominated assets and liabilities

as well as outstanding derivatives hedging these items. Future forecasted cash flows and derivatives hedging forecasted

cash flows are not included.

The Group’s transaction exposure

2021, EUR Mill.

SEK

GBP

NOK

CZK

USD

Receivables

12,9

4,8

23,9

9,2

6,7

Trade payables and other current liabilities

-9,5

0,0

-10,8

-0,5

-23,2

Foreign currency exposure in the balance sheet

3,4

4,7

13,2

8,7

-16,5

Foreign exchange derivatives hedging balance sheet items

22,8

Net position in the balance sheet

3,4

4,7

13,2

8,7

6,3

2020, EUR Mill.

SEK

GBP

NOK

CZK

USD

Receivables

17,9

1,8

13,6

4,7

3,5

Trade payables and other current liabilities

-11

-2,5

-7,7

-22,9

Foreign currency exposure in the balance sheet

6,9

-0,7

5,9

4,7

-19,4

Net position in the balance sheet

6,9

-0,7

5,9

4,7

-19,4

A 10 % strengthening or weakening of the euro against other currencies would create the following effect in profit after

tax. The sensitivity analysis is based on the exposures in the table above.

Sensitivity Analysis, effect on income statement after tax

2021, EUR Mill.

SEK

GBP

NOK

CZK

USD

Change + 10 %

-0,2

-0,3

-1,0

-0,6

-0,4

Change - 10 %

0,3

0,4

1,2

0,8

0,5

2020, EUR Mill.

SEK

GBP

NOK

CZK

USD

Change + 10 %

-0,5

-0,4

-0,3

1,4

Change - 10 %

0,6

-0,1

0,5

0,4

-1,7

Translation risk

The Stockmann Group incurs translation risk when the financial statements of foreign subsidiaries are translated into

euro amounts in the consolidated financial statements.

For foreign-currency-denominated net investments, the effects of changes in foreign exchange rates appear as the

translation difference in the Group’s equity.Under normal circumstances Stockmann hedges translation risk for net

investments selectively by means of loans in foreign currency or with derivatives. When making hedging decisions any

effect the hedging measure may have on the Group’s earnings, balance sheet and cash flows as well as hedging costs

are taken into account.

During 2018 Stockmann has reclassified a major part of the Swedish krona denominated intra-group loan, granted for the

acquisition of the shares in Lindex, as part of its net investment to a foreign subsidiary. The net investment has been

designated in a net investment hedge and was hedged to 50% by currency derivatives until 6 April 2020 when

outstanding derivatives were closed by the banks. The degree of hedging can vary from 0 to 100% according to the

policy approved by the Board. The objective of the hedge is to reduce the effect of EUR/SEK currency rate changes to

57

translation difference. At the end of 2021 the translation risk was not hedged since Stockmann plc didn’t have any

hedging facilities.

The following table shows how a 10% change of the euro against the Group companies’ functional currencies would

affect the Group’s equity.The sensitivity analysis includes effects from the translation of foreign-currency-denominated

net investments into euro.

Sensitivity Analysis, effect on equity

2021, EUR Mill.

SEK

Change + 10 %

-49,0

Change - 10 %

59,8

2020, EUR Mill.

SEK

Change + 10 %

-28,2

Change - 10 %

34,4

Interest rate risk

Fluctuations in the level of interest rates affect the Group’s interest expenses and interest income. The Group has large

Swedish Krona-denominated assets originating from the acquisition of Lindex. Until 6 April 2020 these assets were partly

financed with debt swapped to Swedish Krona but are now financed with debt in euro. The objective of the Group’s

management of interest rate risk is to reduce the uncertainty to which Stockmann’s earnings may be subject due to

changes in the level of interest rates. A dual approach is employed in managing interest rate risk. The Group’s

borrowings and investments are diversified across different maturities and, furthermore, floating rate and fixed-interest

instruments are used. The duration of the loan and investment portfolio is a maximum of five years. Interest rate

derivatives can be used in managing interest rate risk. Interest rate derivatives were not in use.

According to the restructuring programme, that was approved on 9 February 2021, the interest rate to be paid on the

secured restructuring debt as of 9 February 2021 is 1.2% in 2021 and 1.4% in 2022. On 5 July 2021 Stockmann issued a

five-year bullet bond to certain unsecured creditors who were entitled to convert their receivables to senior secured

bonds. The issued amount was EUR 66 149 032,00 and the interest rate of the bond is 0.10 % per annum No interest is

paid on the unsecured restructuring debt.

Interest terms of the Group's interest-bearing liabilities and bank receivables on 31 December 2021:

Interest rate adjustment, period, EUR mill

< 12 months

1–3 years

3–5 years

Total

Bond Issues

0

66,00

66,0

Loans from financial institutions

381,5

1

-1

381,5

Other interest-bearing liabilities

-1

1

0,0

Total

381,5

0

66

447,5

Cash and bank receivables*)

-213,8

-213,8

Total

167,7

0

66

233,7

*) Including cash assets classified as held for sale.

Interest terms of the Group's interest-bearing liabilities and bank receivables on 31 December 2020:

Interest rate adjustment, period, EUR mill

< 12 months

1–3 years

3–5 years

Total

Bond Issues

249,2

0

249,2

Loans from financial institutions

185,4

1

-1

185,4

Other interest-bearing liabilities

53,5

-1

1

53,5

Total

488,2

488,2

Cash and bank receivables

-152,5

-152,5

Total

335,7

0,0

335,7

58

A rise or a decline of one percentage point in market interest rates would have only a minor effect on Stockmann’s profit

after taxes, since all loans have fixed interest rates. At the balance sheet date there were no items that were recognised

directly in equity.

Electricity price risk

Stockmann Group normally hedges the price risk affecting future electricity procurements. In accordance with the

financial policy, the degree of hedging of future electricity prices is a maximum of 70 % for current year and for the next

year, and a maximum of 50 % for the following two years. Lindex continues to hedge for electricity price risk, but

Stockmann division has had no access to new hedges since first half of 2021. At the balance sheet date, 31 December

2021, a change of 10 percentage points in the market price of electricity has no material impact on Stockmann’s profit

and equity after taxes.

Financing and liquidity risk

Financing risk is defined as the risk of not being able to meet payment obligations as a result of insufficient liquid funds,

breaking the terms of the financing facilities or difficulties in finding financing. In order to minimise financing risk, the

Group's financing need for the coming years should be covered by long-term committed credit facilities. The Group also

has to maintain a sufficiently large liquidity reserve. The liquidity reserve must be at least an amount corresponding to an

average month's operational cash disbursements. Cash and cash equivalents as well as unused committed and

uncommitted credit facilities may be included in the liquidity reserve.

Prior to the restructuring Stockmann’s financing consisted of bank loans, credit facilities, corporate bonds and a

commercial paper programme. Additionally, Stockmann had a hybrid bond, which was treated as equity in the company’s

consolidated financial statements

According to the restructuring programme, which was approved by the District Court on 9 February 2021, Stockmann’s A

and B share series were combined in July 2021. The combination is intended to improve the liquidity of the share and the

company’s ability to secure financing from the market.

In line with the restructuring programme, the confirmed debt was classified as secured restructuring debts, which

consists of secured bank debt and secured bond, and restructuring debts consisting mainly of accounts payable, short

term unsecured notes as well as other debts. The unsecured restructuring debts were subject to 20 % cut or 20 %

conversion to Stockmann shares. The remaining 80 % was partly either converted to a secured 5-year bullet bond or

subject to a repayment schedule during years 2022-2028. The secured restructuring debt will be repaid by the end of

2022.

According to the restructuring programme Stockmann will sell and lease back the real estate properties of Helsinki,

Tallinnand Riga department stores. Funds received from these sales will be primarily used for repayment of secured

restructuring debt.The sale and leaseback transactions for Tallinn and Riga department store properties were signed in

December 2021. The proceeds from Tallinntransaction were used for secured debt repayment in December 2021, and

the proceeds from Riga in January 2022.

In line with the restructuring programme half of the hybrid bond was cut and the remaining half was converted into

Stockmann shares or cut.

Stockmann does not expect to have any need to acquire new equity or interest-bearing debt during the restructuring

programme with the exception of possible need to take seasonal working capital and a need for Lindex to secure

financing for a significant investment in the next few years. Stockmann trusts that Lindex will be able to acquire the

necessary financing in the form of a sale and lease back arrangement, equipment credit or some other interest-bearing

debt or as a combination thereof.

Stockmann has covered all new payment obligations that have arisen since the restructuring proceedings started.Cash

flow, liquidity and cash assets have developed positively.At the end of the year Stockmann had EUR 213,8 million

(EUR152.5 million) in cash assets. Stockmann did not acquired any new external financing during the restructuring

proceedings.

Cash and bank receivables as well as unused committedcredit facilities

EUR Mill.

2021

2020

Cash and bank receivables*)

213,8

152,5

Total

213,8

152,5

*) Including cash assets classified as held for sale.

59

Cash flows based on agreements in financial liabilities,including financing costs, on31 December

2021

EUR Mill.

Carrying

amount

2022

2023

2024

2025

2026-

Total

Non-current restructuring debts

19,8

-2,0

-2,0

-2,0

-13,9

-19,8

Current restructuring debts

383,5

-384,7

-384,7

Restructuring debts total

403,3

-384,7

-2,0

-2,0

-2,0

-13,9

-404,5

Non-current bond (5-y bullet)

66,0

-0,1

-0,1

-0,1

-0,1

-66,2

-66,5

Current trade payables and other

current liabilities

137,9

-137,9

-137,9

Non-current lease liabilities

264,3

-66,8

-57,3

-48,5

-121,4

-293,9

Current lease liabilities

72,9

-74,0

-74,0

Lease liabilities, total

337,2

-74,0

-66,8

-57,3

-48,5

-121,4

-368,0

Total

944,4

-596,7

-68,8

-59,3

-50,5

-201,5

-976,9

Currency derivatives

0,1

0,0

Assets

14,1

14,1

Liabilities

-14,3

-14,3

Total

0,1

-0,1

0,0

0,0

0,0

0,0

-0,1

The cash flows presented are based on the restructuringprogramme approved on 9 February 2021 andthey include financing

costs.

Assumption in the calculation is that the realestate properties will be liquidated, andthe secured restructuring debt paid by the end

of Q1 2022.

At the end of June 2021 Restructuring debts amountedto EUR 539.9 mill. In July 2021 EUR 66.1 mill.was converted into a new

bond, which will be repaid in 2025 andto which annual interest of EUR 0.1 mill. will be paid.EUR 19.1 mill. was converted into

equity in July 2021 and EUR 2.7 mill. was cut. EUR381,5 mill. presented in current financing liabilitieswill be repaid during Q1 2022

together with interest. Secured restructuring debt wasreduced in January 2022 by EUR 38,7 mill. withproceeds from sales of Riga

real estate. The remaining unsecured restructuring debtEUR 21.8 mill. will be paid according tothe restructuring programme during

2022-2028. Provisions regarding disputed landlords'claims are not included in the cash flows.

Carrying amount of lease liabilities is discountedin accordance with IFRS 16. Annual cash flowsare presented in nominal values.

Cash flows based on agreements in financial liabilities,including financing costs, on 31 December

2020

EUR mill.

Carrying

amount

2021

2022

2023

2024

2025-

Total

Secured restructuring debt*)

442,5

-449,8

-449,8

Unsecured restructuring debt**)

121,6

-8,8

-8,8

-8,8

-71,0

-97,4

Cash flow from restructuring debt total

564,1

-449,8

-8,8

-8,8

-8,8

-71,0

-547,2

Trade payables and other current liabilities

107,7

-107,7

-107,7

Lease liability

371,2

-93,2

-80,3

-70,3

-58,9

-144,5

-447,2

Total

1 043,0

-650,7

-89,1

-79,1

-67,7

-215,5

-1102,1

The cash flows presented are based on the approvedrestructuring programme.

*) Assumption in the calculation is that the real estateproperties will be liquidated, and the secured restructuringdebt paid by 31

December 2021.

**) Unsecured restructuring debts have been cut20 %. The remaining 80 % will be paid 2022-2028or alternatively the debtor can

convert this part to a secured 5-year bullet bond.

Credit and counterparty risk

Trade receivables as well as receivables based on investments and derivative contracts expose the Group to credit risk.

The counterparty risk associated with investments is managed by means of counterparty limits approved by the Board of

Directors. Derivative contracts are entered into only with counterparties that are judged to be highly creditworthy and

financially solid. Cash assets are invested in financial instruments that are judged to be liquid and to have a low risk. At

the balance sheet date, 31 December 2021, the Group's liquid assets consisted mainly of deposits in banks, with a very

short maturity. The Group does not incur major credit risk relating to commercial trade receivables because its

outstanding receivables consist of a large amount of small receivables, and customers are primarily private individuals

whose creditworthiness has been checked.

60

Aging of trade and lease receivables

31 December 2021

EUR mill.

Gross carrying amount

Loss allowance

Trade receivables not due

10,6

0,0

Trade receivables fallen due in 1–30 days

0,7

Trade receivables fallen due in 31–60 days

0,3

0,0

Trade receivables fallen due in over 120 days

0,2

0,0

Total

11,9

0,0

31 December 2020

EUR mill.

Gross carrying amount

Loss allowance

Trade receivables not due

10,7

0,0

Trade receivables fallen due in 1–30 days

1,2

0,0

Trade receivables fallen due in 31–60 days

0,4

0,0

Trade receivables fallen due in 61–90 days

0,2

0,0

Trade receivables fallen due in over 120 days

0,8

0,0

Total

13,2

0,1

Stockmann Group recognises impairment provisions based on lifetime expected credit losses from trade and lease

receivables in accordance with IFRS 9. Stockmann applies a simplified credit loss matrix for trade and lease receivables.

Accordingly, the credit loss allowance is measured at an amount equal to the lifetime expected credit losses. The

expected credit loss model is forward-looking and expected default rates are based on historical realised credit losses.

The lifetime expected credit loss allowance is calculated using the gross carrying amount of outstanding trade

receivables in each aging bucket and an expected default rate. The changes in expected credit losses are recognised in

other operating expenses.

4.9Derivative contracts

Nominal values of derivative contracts

Derivative contracts, hedge accounting applied

EUR mill.

2021

2020

Cash flow hedges, currency forwards

45,9

Total

45,9

Derivative contracts, hedge accounting not applied

EUR mill.

2021

2020

Electricity forwards

1,1

1,6

Total

1,1

1,6

Fair value of derivative contracts 2021

Derivative contracts, hedge accounting applied

EUR mill.

Positive

Negative

Net

Cash flow hedges, currency forwards

1,3

-0,1

1,1

Total

1,3

-0,1

1,1

Derivative contracts, hedge accounting not applied

EUR mill.

Positive

Negative

Net

Electricity forwards

0,4

0,4

Total

0,4

0,4

At the end of 2020, there were no hedging derivatives.

61

Currency swaps and forwards have been measured at fair value using market prices on the balance sheet date.

Changes in the fair values of currency derivatives are recognised either in equity or in the profit and loss depending on

whether hedge accounting has been applied to them. Currency derivative contracts did not result in hedge accounting-

related ineffectiveness that was to be recorded through profit and loss in 2021. The fair values of electricity derivatives

are based on market prices on the balance sheet date and the changes in the fair values are recognised in the profit and

loss.

4.10Financial assets and liabilities by measurement category andhierarchical

classification of fair values

The Group uses the following hierarchy of valuation techniques to determine and disclose the fair value of financial

instruments:

Level 1: Quoted (unadjusted) prices for identical assets or liabilities in active markets.

Level 2: The valuation techniques use as input data quoted market prices which are regularly available from stock

exchanges, brokers or pricing services. Level 2 financial instruments are: over-the-counter derivative contracts which are

classified either for recognition at fair value on the income statement or as hedging instruments.

Level 3: Techniques,which require most management’s judgment.

There were no transfers between the levels during the financial year.

Derivative contracts, hedge accounting applied

2

1,3

1,3

Financial assets at fair value through profit or

loss

Derivative contracts, hedge accounting not applied

Electricity derivatives

1

0,4

0,4

Financial assets at amortised cost

Non-current receivables

3,8

3,8

1,7

1,7

Non-current lease receivables

2

3,9

3,9

Current lease receivables

2

0,5

0,5

Current receivables, non-interest-bearing

44,1

44,1

45,0

45,0

Cash and cash equivalents

213,7

213,7

152,3

152,3

Other investments

3

0,2

0,2

0,2

0,2

Financial assets, total

263,4

263,4

203,6

203,6

Derivative contracts, hedge accounting applied

2

-0,1

-0,1

Non-current interest-bearing liabilities

2

66,0

55,1

Non-current lease liabilities

2

264,3

264,3

290,7

290,7

Non-current non-interest-bearing liabilities

20,3

20,3

Current liabilities, interest-bearing

2

381,5

381,5

488,2

468,0

Current lease liabilities

2

72,9

72,9

80,5

80,5

Current liabilities, non-interest-bearing

223,0

223,0

249,6

249,6

Financial liabilities, total

1 027,8

1 016,9

1 109,0

1 088,8

In the balance sheet, derivative contracts are included in the following categories: Non-current and current receivables,

non-interest-bearing and non-current and current liabilities, non-interest-bearing.

Financial assets on level 3 are investments to shares of unlisted companies. The fair value of the shares is determined

by techniques based on the managements’ judgment. Profits or losses from the investments are recorded to other

operating income or expenses in the income statement, because acquisition and divestment decisions on the

investments are made for business reasons. The following calculation illustrates changes in financial assets valuated at

fair value during the reporting period.

62

Change in fair value of other investments,EUR mill.

2021

2020

Carrying amount 1.1.

0,2

0,3

Total

0,2

0,2

4.11Financial instruments subject to netting arrangements

The Group has entered into derivative transactions under agreements that include a master netting arrangement. The

agreements stipulate that in certain circumstances, e.g., when a credit event such as a default occurs, all outstanding

transactions under the agreement are terminated and only a single net amount is payable in settlement of all

transactions.

The agreements do not meet the criteria for offsetting in the statement of financial position.

The following table sets out the amounts of recognised financial instruments that are subject to the above agreements.

31 December 2021

Financial assets, EUR mill.

Carrying amount

Items under netting

arrangements

Net

Currency derivatives, hedge accounting applied

1,3

-0,1

1,1

Electricity derivatives, hedge accounting not applied

0,4

0,4

Financial assets, total

1,6

-0,1

1,5

Financial liabilities, EUR mill.

Currency derivatives, hedge accounting applied

-0,1

0,1

0,0

Financial liabilities, total

-0,1

0,1

0,0

At the end of 2020, there were no outstanding derivatives subject to netting agreements.

4.12Shareholders’ equity

EUR mill.

Entered in

trade

register

Number of

shares, A

Number of

shares, B

Total

Share

capital

Share

premium

fund

Invested

unrestricte

d equity

fund

Total

31 Dec 2019

30 530 868

41 517 815

72 048 683

144,1

186,1

250,4

580,6

31 Dec 2020

30 530 868

41 517 815

72 048 683

144,1

186,1

250,4

580,6

Combination of

share classes

9.4.2021

-30 530 868

33 583 954

3 053 086

Share issue

6.7.2021

79 335 175

79 335 175

31 Dec 2021

0

154 436 944

154 436 944

77,6

72,0

149,6

Share capital

On 7 April 2021 the Stockmann Plc’s Annual General Meeting approved the proposal by the Board of Directors to

combine the A and B share classes without increasing the share capital so that following the combination, the company

has only a single class of a shares, all shares of which carry one (1) vote per share and have equal rights also in all other

respects. In accordance with the AGM resolution, the company’s A and B series were combined as of 12 April 2021 so

that each one (1) A share was entitled to receive 1.1 B shares.

In connection with the combination of the share classes, the Annual General Meeting resolved to remove the provisions

concerning the maximum and minimum amount of share capital, the par value of the shares as well as the different share

classes, their associated voting rights and conversion procedures in the Articles of Association.

In May 2021, Stockmann Plc’s Board of Directors resolved, pursuant to the authorisation granted by the Annual General

Meeting, on a directed share issue of at most 100 000 000 new shares of the company to the unsecured and hybrid bond

creditors of the company’s restructuring debt, carried out in deviation from the shareholders’ pre-emptive subscription

rights. A total of 79 335 175 conversion shares were subscribed for in the share issue, and the total number of

Stockmann shares increased to a total of 154 436 944 shares. The subscription price was EUR 0.9106 per share and, as

a result, approximately EUR 72.2 million of Stockmann's unsecured restructuring debt and hybrid loan debt were

converted into Stockmann shares.

63

On 31 December 2021 Stockmann Plc’s share capital was EUR 77.6 million. All the shares issued have been fully paid

in.

Redemption obligation

A shareholder whose proportion of all the company’s shares or the number of votes conferred by the shares either alone

or together with other shareholders reaches or exceeds 33 1/3 per cent or 50 per cent is liable, at the

demand of the other shareholders, to redeem their shares in the manner specified in the Articles of Association.

Share premium fund

On 31 December 2020 the share premium fund contained cash payments in excess of the nominal value that were

received from share subscriptions, less the transaction costs. During the reporting period the fund has been used to

cover losses.

Invested unrestricted equity fund

The invested unrestricted equity fund contains other equity-like investments and the share subscription price, less

transaction costs, to the extent that this is not entered in share capital under a specific decision. The balance of the fund

reported on 31 December 2020 was used to cover losses. The previously mentioned share issue in 2021 is reported as

invested unrestricted equity fund.

Translation differences

The translation differences reserve comprises the translation differences on equity that have arisen in consolidating the

financial statements of foreign subsidiaries and translation differences arisen in consolidating net investment in foreign

currencies.

Other funds

EUR mill.

2021

2020

Reserve fund

0,1

0,1

Hedging reserve

1,1

Other funds

43,7

Total

1,2

43,8

On 7 April 2021 the Annual General Meeting resolved, in accordance with the proposal by the Board of Directors, to use

the invested unrestricted equity fund, the other funds consisting of unrestricted equity on Stockmann Plc’s balance sheet,

and the share premium fund according to the statement of financial position at 31 December 2020 in their entirety to

cover losses of the prior years.

Other funds comprise on 31 December 2021:

●

invested unrestricted equity fund, which is distributable equity and consists of the funds converted in the

directed share issue to the restructuring creditors

●

a reserve fund, which contains an amount transferred from unrestricted shareholders’ equity on the basis of

local regulations

●

a hedging reserve, which contains changes in fair value of derivatives that are used to hedge cash flows, less

the deferred tax liability.

Hybrid bond

On 31 December 2020 total equity included a hybrid bond of EUR 105.8 million. The hybrid bond in an aggregate

nominal amount of EUR 85 million was issued in December 2015 and further capital securities in an aggregate nominal

amount of EUR 21 million was issued in November 2019. The hybrid bond was unsecured and subordinated to the

company’s other debt obligations. A holder of hybrid bond notes had no shareholder rights. The hybrid bond was treated

as part of the restructuring debt in the restructuring procedure, it was included in equity in statement of financial position

according to IFRS. According to the restructuring programme 50 % of the hybrid bond was cut and the remaining 50 %, if

the creditors so wished, was converted into the company’s B shares. If a creditor did not wish to convert the uncut part,

this part was also fully cut.

Dividends

The dividend payout proposed by the Board of Directors has not been recognised in the financial statements. Dividends

are recognised on the basis of a resolution passed by a General Meeting of the shareholders.

According to the Finnish Companies Act, distributions to shareholders during the three years following the registration of

the reduction of share capital in order to cover losses can only be made by following the creditor protection procedure.

During the restructuring programme Stockman Plc is not allowed to distribute funds either.

4.13Earnings per share

Earnings per share are calculated by dividing the profit for the period attributable to the parent company's shareholders

less the tax-adjusted interest on hybrid bond by the weighted average number of shares outstanding during the financial

64

period. The outstanding shares do not include treasury shares held by the Group. In calculating earnings per share

adjusted for dilution, the dilutive effect resulting from conversion of all share options into shares is taken into account in

the average weighted number of shares. Options have a dilutive effect when the subscription price of the options is lower

than the share’s fair value.As of 31 December 2021, there were no options outstanding that would have had a diluting

effect.

EUR mill.

2021

2020

Profit/loss for the period attributable to the equity holders of the parent

company

47,9

-291,8

47,9

-291,8

Share issue-adjusted number of outstanding shares, weighted average

114 008 608

75 101 769

From the period result (undiluted and diluted)

0,42

-3,89

No interest has accrued on the hybrid loan sincethe filing for restructuring.

65

5Other notes

5.1Non-current assets classified as held for sale

Accounting policies

Asset items under the heading ‘Non-current assets held for sale and discontinued operations’ are measured in

accordance with IFRS 5 at the lower of their carrying amount and fair value less estimated selling costs. When an asset

item is classified within non-current assets as held for sale or a disposal group, it is not depreciated. A non-current asset

held for sale or asset items included in a disposal group are presented in the statement of financial position separately

from other asset items. Likewise, liabilities connected with a disposal group are presented as a separate item in the

statement of financial position.

By a decision on 9 February 2021, the Helsinki District Court approved Stockmann plc’s restructuring programme. As

part of the restructuring process, Stockmann is obliged to sell its real estate properties and negotiate leaseback

arrangements. In December 2021 Stockmann entered into sales agreement regarding its department store properties in

Tallinnand Riga with long-term leaseback agreements made with the new owner. According to the terms of the

agreements, the sale-and-leaseback transaction for the Tallinn propertywas recognised in the reporting period, whereas

the corresponding transaction for the Riga property was realised in January 2022. In the consolidated financial

statements of 2021, the Helsinki and Riga department store properties are classified as assets held for sale.

Assets classified as held for sale and the relating liabilities

EUR mill.

2021

2020

Intangible assets and property, plant and equipment

239,3

246,6

Inventories

Other receivables

0,1

0,5

Cash and cash equivalents

0,1

0,2

Deferred tax liabilities

15,3

17,0

Other liabilities

0,4

0,4

Net assets

223,8

230,0

5.2Joint arrangements

Joint operations

The Group has a 37.8% shareholding in Kiinteistö Oy Tapiolan Säästötammi Fastighets Ab. The real estate company is

based in Espoo. The joint operation is not essential for Stockmann.

The Group had a 63% shareholding in real estate company SIA Stockmann Centrs, which has entitled the company to

63% control of the real estate company’s premises, so the Group had a 63% involvement in the joint operation. SIA

Stockmann Centrs owns a shopping center property in Latvia. Stockmann’s share of the joint operation covered the

commercial premises of Stockmann’s department store in Latvia. The joint operation was essential for Stockmann. On 29

December 2021 Stockmann entered into sales agreement to sell its ownership of SIA Stockmann Centrs with a long-term

leaseback agreement with the new owner. According to the terms of the sale agreement the ownership of the shares was

transferred to the buyer in January 2022.

At reporting date, the share corresponding to the Group’s ownership of both the assets and liabilities and income and

expenses of the joint operation is included in the Group’s consolidated financial statements.

Assets and liabilities of joint operations

EUR mill.

2021

2020

Non-current assets

13,2

13,7

Current assets

0,6

1,6

Current liabilities

0,2

0,2

66

Income and expenses of joint operations

EUR mill.

2021

2020

Income

2,6

2,2

Expenses

1,4

1,5

5.3Provisions

Accounting policies

A provision is recognised when the Group has a legal or factual obligation as a result of a past event and it is probable

that a payment obligation will be realised and the amount of the obligation can be estimated reliably. An onerous contract

is a contract in which the unavoidable costs under the contract exceed the expected economic benefits. A restructuring

provision shall be recognised if the Group is committed to a sale or a termination of the significant line of business or a

closure of business in the geographical area.

Non-current provisions

Other provisions

EUR mill.

2021

2020

Transfer between items

17,0

Increase in provisions

1,4

Used provisions

-1,0

-0,0

Carrying amount 31.12.

17,5

Non-current provisions total

17,5

Current provisions

Restructuring provision

EUR mill.

2021

2020

Carrying amount 1.1.

1,1

Used provisions

-1,1

Carrying amount 31.12.

Provision for onerous contracts

EUR mill.

2021

2020

Carrying amount 1.1.

2,9

Used provisions

-0,1

IFRS 16 Transfer against right-of-use assets

-2,7

Carrying amount 31.12.

Other provisions

EUR mill.

2021

2020

Carrying amount 1.1.

17,0

Increase in provisions

17,0

Transfer between items

-17,0

Carrying amount 31.12.

0,0

17,0

Current provisions total

0,0

17,0

Other provisions consist of a provision for landlords' claims related to terminated lease contracts.

67

5.4Contingent liabilities

Loans from credit institutions

381,5

1 500,0

435,4

1 670,0

Other commitments

1,7

1,7

Total

381,5

1 501,7

238,9

435,4

1 671,7

246,2

*) Cost method applied

Other collaterals given for own liabilities

EUR mill.

2021

2020

Guarantees

0,1

0,2

Electricity commitments

0,3

0,7

Liabilities of adjustments of VATdeductions made on investments to

immovable property

2,5

2,9

Total

2,9

3,8

Contingent liabilities, total

EUR mill.

2021

2020

Mortgages

1 501,7

1 671,7

Guarantees

0,1

0,2

Electricity commitments

0,3

0,7

Liabilities of adjustments of VATdeductions made on investments to

immovable property

2,5

2,9

Total

1 504,6

1 675,5

Electricity commitments relate to agreements to buy electricity for certain price in years 2022-2024.

Investments in real estate

Certain group companies are required to adjust the VATdeductions made on real estate investments completed in

2012–2021 if the VAT-liable use of the real estate decreases during the adjustment period. The last adjustment year is

2031, and the maximum liability is EUR 2.5 million (2.9).

Landlords' disputed claims

Some landlords have presented Stockmann Plc with claims for damages related to termination of long-term lease

agreements. Stockmann has recognised a provision for the claims corresponding to 18 months rents, which is in

accordance with the restructuring programme. The contingent liability related to the claims is EUR 85 million (EUR 102

million in 2020), which is the amount of the claims in excess of the provision recognised. More information on the

claims is provided in note 1.4.

Riga lease liability

The sale-and-leaseback agreement for the Riga department store property was signed on 29 December 2021. A lease

liability of EUR 17.6 million was recognised in thefinancial statements in January 2022.

68

5.5Related party transactions

Members of the Board of Directors and Management Team belong to the Group’srelated party, as well as the parent

company, subsidiaries and joint operations.

Members of the Board of Directors and Management Team belonging to the Group’srelated party during financial year

2021:

●

Roland Neuwald, Chairman of the Board of Directors as of 7 April 2021

●

Lauri Ratia, Chairman of the Board of Directors until 7 April 2021

●

Stefan Björkman, Member of the Board of Directors

●

Anne Kuittinen, Member of the Board of Directors as of 7 April 2021

●

Esa Lager, Member of the Board of Directors

●

Leena Niemistö, Vice Chairman of the Board of Directors and Member of the Board of Directors

●

Tracy Stone, Member of the Board of Directors

●

Dag Wallgren, Member of the Board of Directors until 7 April 2021

●

Harriet Williams, Member of the Board of Directors as of 7 April 2021

●

Jari Latvanen, CEO

●

Susanne Ehnbåge, CEO, Lindex

●

Annelie Forsberg, CFO, Lindex

●

Jukka Naulapää, Chief Legal Officer

●

ToveWestermarck, Chief Operating Officer

●

Pekka Vähähyyppä, CFO

Members of the Board of Directors and Management Team belonging to the Group’srelated party during financial year

2020:

●

Lauri Ratia, Chairman of the Board of Directors

●

Stefan Björkman, Member of the Board of Directors

●

Eva Hamilton, Member of the Board of Directors until 18 March 2020

●

Esa Lager, Member of the Board of Directors

●

Leena Niemistö, Vice Chairman of the Board of Directors and Member of the Board of Directors

●

Tracy Stone, Member of the Board of Directors

●

Peter Therman, Member of the Board of Directors until 18 March 2020

●

Dag Wallgren, Member of the Board of Directors

●

Jari Latvanen, CEO

●

Susanne Ehnbåge, CEO, Lindex

●

Annelie Forsberg, CFO, Lindex as of 1 August 2020

●

Jukka Naulapää, Chief Legal Officer

●

ToveWestermarck, Chief Operating Officer

●

Pekka Vähähyyppä, CFO

The relationships between the company's parent company and subsidiaries are shown in notes to the parent company's

financial statements, under the header "Shares and participation”.

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The following transactions were carried out with relatedparties:

Management's employee benefits

Emoluments

Employee benefits of the Chief Executive Officer

and other members of the Management Committee,

EUR2021

Chief Executive

Officer

Other members of

the Management

Committee

Total

Short-term employee benefits

604 252

1 607 896

2 212 148

Other long-term employee benefits

160 912

160 912

Employee benefits total

604 252

1 768 808

2 373 060

Remunerations to the Board of Directors, EUR 2021

Fixed annual

remuneration *)

Remuneration

based on

participation

Total

Neuwald Roland

80 000

16 100

96 100

Niemistö Leena

50 000

16 400

66 400

Björkman Stefan

40 000

17 200

57 200

Kuittinen Anne

40 000

7 800

47 800

Lager Esa

40 000

17 400

57 400

Ratia Lauri **)

6 100

6 100

Stone Tracy

40 000

10 200

50 200

Wallgren Dag **)

4 600

4 600

Williams Harriet

40 000

7 800

47 800

Remunerations to the Board of Directors total

330 000

103 600

433 600

Fees and remunerations to key personnel total, EUR

0

0

2 806 660

*) paid in 91 791 company shares and cash

**) resigned from the Board of Directors on 7 April 2021

Employee benefits of the Chief Executive Officer

and other members of the Management Committee,

EUR 2020

Chief Executive

Officer

Other members of

the Management

Committee

Total

Short-term employee benefits

528 270

1 485 934

2 014 204

Other long-term employee benefits

179 600

179 600

Employee benefits total

528 270

1 665 534

2 193 804

Remunerations to the Board of Directors, EUR 2020

Fixed annual

remuneration *)

Remuneration

based on

participation

Total

Ratia Lauri

80 000

7 700

87 700

Björkman Stefan

40 000

5 800

45 800

Hamilton Eva **)

1 800

1 800

Lager Esa

40 000

6 400

46 400

Niemistö Leena

50 000

4 200

54 200

Stone Tracy

40 000

9 000

49 000

Therman Peter **)

2 600

2 600

Wallgren Dag

40 000

5 800

45 800

Remunerations to the Board of Directors total

290 000

43 300

333 300

Fees and remunerations to key personnel total, EUR

1 232 817

1 934 321

2 527 104

*) paid in 112 891 company shares and cash

**) resigned from the Board of Directors on 18 March 2020

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Management's pension commitments

The CEO Jari Latvanen’s retirement age is determined in accordance with Finnish employment pension legislation. The

CEO’s pension will accrue on the basis of the Employees’ Pensions Act. A separate voluntary pension is not paid.

The retirement age of the Management Teammembers is 63 or 65, depending on the particular executive agreement in

question. In 2021 two of the Management Team membershad voluntary defined contribution pension insurance taken by

the company. The costs of the insurances in 2021 amounted to EUR 160 912 (EUR 170 600 in 2020).

Other related party transactions

In 2021 the Board members were paid no other compensations.

5.6Events after the reporting period

The sales of the department store property in Riga was recognised in January 2022 because the closing of the sales of

the SIA Stockmann Centrs shares could not be made until on 10 January 2022. The proceeds from the sales EUR 38.7

million were used to amortise Stockmann Plc’s secured restructuring debt.

During the reporting period previously conditional or disputed receivables subject to the payment programme of the

Restructuring Programme were clarified for three creditors and the final amounts of such receivables were confirmed. In

January 2022, pursuant to the Restructuring Programme, Stockmann Plc issued 28 139 new shares and the creditors

converted 20 per cent of their receivables to the Company’s shares at subscription price of EUR 0.9106 per share. As a

result of the share issue, the total number of shares in the Company increased to a total of 154 465 083 shares. Also, the

Company received subscription forms from the creditors for subsequent bonds to the amount of EUR 94 333, by which

amount their receivables were converted to the bonds.

The Supreme Court has granted Pirkanmaan Osuuskauppa leave to appeal to the extent that the appeal concerns the

claim for damages arising from the termination of the sublease agreement are restructuring debt or debt that has arisen

during the corporate restructuring proceedings.