Stockmann’s Q2 report and July sales

Stockmann Group (OMX: STCAS, STCBV)second quarter interim report and July sales report were an initial disappointment for the markets and the more traded B-share tanked 6% on the release date of Wednesday. The stock climbed back with the rest of the market on Wednesday to finish the week clearly on the plus.

Second quarter consolidated revenue increased by 13% but operating profit was down by 17% to 25.6 million. Profit for the period tanked even more to 14.7 million from 25.7 million. New department stores in St Petersburg and Ekaterinburg aided revenue growth. Profit was down on lower gross margin, higher depreciation and expansion costs.

Stockmann feels that earnings trend has turned positive and second half of 2011 should outperform 2010 levels. The group still targets operating profit growth for 2011, a tall order since current 2011 operating profit stands at -4.4 million and last year Stockmann reached operating profit of 88.8 million. The company does feel that consumer confidence in its main markets is at a good level.

Department store revenue growth in Russia is expected to be faster than in Nordic countries. Affordable fashion chains Lindex and Seppälä performed worse than expected. Production capacity problems in the Far East are now resolved. Price rice pressured have eased and Stockmann expects the segment to improve towards the end of the year.

July sales numbers also came out on Wednesday. Revenue was up by 8.6 per cent, with majority of the gains coming outside of the home market, particularly from the department store expansion mentioned above. Stockmann says that five Sundays in 2011 compared to 4 in July 2010 affected Nordic market sales comparison. Lindex’s and Seppälä’s revenue was flat.