Baltika suffers loss of million in half year

Photo: Andres Haabu / Postimees

Once a flagship of Estonia's light industry, brand garment maker and seller Baltika was hit so hard in financial crisis at end of last decade that it still staggers to this day. As evidenced by first half year report revealed yesterday, loss amounted to €1.1m. 

True: the loss occurred in first quarter of the year while the second one yielded a small profit of €67,000. Last year, however, the second quarter profit amounted to €0.65m.

Since 2008, only two years have proven (slightly) profitable for Baltika, at €0.8m in 2012 and €0.1m last year. As for the other four years, total loss accumulated was €24m. The year at hand looks not too profitable either; rather, they will be in the red again, or barely break even.

Also: almost every year, Baltika has asked investors for extra cash. The company’s last year’s report reveals that this is not planned in 2015.

As explained via press release by the company’s head and majority owner Meelis Milder, Baltika is taking measures to adjust to negative external factors affecting result of 2015: the unfavourably strong dollar vs euro affecting buying-in price, the shrinking retail market caused by condition of Russian economy, the thinning ranks of Finnish and East-European tourists, and spending in the Baltics.    

Though the overall retail growth has been considerable, Baltika’s turnover has remained flat for years on end. Second quarter turnover rose by 2 percent to €13.2m, and the first half year’s a meagre percent to €25.5m.

In Estonia, which provided for over third of Baltika’s sales, turnover growth was somewhat better: over the first half of the year, it was up by almost six percent to €9.2m. Meanwhile, competitors Hennes & Mauritz (H&M) and Lithuania’s Apranga showed much more impressive sales growth in Estonia.

While Baltica refuses to see the Swedish H&M as its rival, it is still interesting to compare the sales results. «The arrival of a strong brand like that will naturally impact retail as a whole, but they are not our direct competitors. Mainly, they compete with cheaper and fast fashion brands, and such as target kids and the youth. A glance at their so-called women’s floor shows that a half of that is goods for children and young people,» Meelis Milder told Postimees a year and half ago.

While Baltika’s sales went up six percent in Estonia, the turnover of H&M in Estonia performed a whopping 45 percent leap to 137 million Swedish kronor i.e. €14.5m. It took less than two years for H&M to blast ahead of Baltica by turnover.

As for the Lithuanian Apranga’s turnover, one to sell garments of their own and according to franchise, their Estonian turnover grew 22.4 percent €12.9m in first half of 2015.

These past years, Baltika has banked on e-commerce, where they invested rather solidly last year. Long-term, this seems to be the way to go while the initial impact on sales is feeble. In second quarter and first half as a whole, it increased three and a half times. Alas, first half year e-sales turnover was under half million euros, a mere two percent of the group’s total.  

From the beginning of the year, Baltika’s shares have dropped by a fifth, and by a quarter over a year while stick exchange OMXT index is up 16 and 10 percent respectively. Also, Baltika is among the few listed which pays no dividends to shareholders nor is it probably planning to, in foreseeable future.