April 6, 2020 / 6:56 AM / 4 months ago

UPDATE 2-Finnish retailer Stockmann files for corporate restructuring

(updates with share reaction, details, background)

By Anne Kauranen

HELSINKI, April 6 (Reuters) - Finnish department store owner Stockmann has decided to file for a corporate restructuring after the drop in customer volumes caused by the coronavirus outbreak, it said on Monday, sending shares in the company down 32%.

Stockmann said its main creditors had given a positive initial response to the move, which is a form of administration in which a court appointee is charged with restructuring the company to avoid bankruptcy.

Known for its upmarket department stores, Stockmann has struggled in recent years in the face of a consumer shift to online shopping, prompting cost cuts and divestments.

The retailer had invested heavily in department stores in Russia but never recovered from the rouble’s crash in 2014 and in 2018, Stockmann sold all its remaining operations in Russia.

The company has reported annual net losses since 2013 and at the end of last year its net debt amounted to 900 million euros ($973.1 million).

Its largest owners are wealthy associations that have been patient with Stockmann’s woes, partially because they represent Finland’s Swedish speaking minority of which many have traditionally been fond of the prestigious department store.

“The company has discussed its intention to file for corporate restructuring with its banking syndicate and certain other major creditors. The creditors in question, who represent over a fifth of the known creditors of the company, have preliminarily indicated a positive stance to the filing,” it said.

A year ago in March, Stockmann’s owners nominated renowned cost-cutter Lauri Ratia to chair its board and to salvage the 157-year-old company who immediately announced job cuts and set a goal to reduce costs by at least 40 million euros by spring of 2021.

Stockmann said its business performance had improved significantly year on year in January-February 2020.

“The company’s total debt decreased significantly during 2019, for example, with the sale of the Nevsky Centre property,” it said, referring to its divestments in Russia.

Stockmann warned that the coronavirus and restrictions it has caused would continue to have a significant impact on customer volumes and cashflow.

“Despite continued strong growth in recent weeks in the webstores of Stockmann and Lindex, the online sales growth cannot compensate for the drastic decline in customer volumes in the current exceptional situation,” Stockmann said.

Lindex, which is a separate fashion chain owned by Stockmann, as well as Stockmann’s department stores in the Baltics are not in the scope of the restructuring, it said. ($1 = 0.9249 euros) (Reporting by Anne Kauranen, Tarmo Virki and Anna Ringstrom Editing by David Goodman and David Evans)

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