March 18, 2014 / 4:50 PM / 4 years ago

Stockmann says Ukraine crisis has clouded profit outlook

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HELSINKI, March 18 (Reuters) - Finnish department store chain Stockmann said the Ukrainian crisis had made it more difficult to make forecasts for 2014 and could lead to changes in its profit guidance.

Expansion in Russia had been one of the firm’s strengths over the past decade but a slowdown in the country’s economy has hit sales in the past year. Sanctions levied against Russia as result of Moscow’s seizure of Crimea could exacerbate the situation.

Stockmann said sales so far this year had been very poor, but that there had been an improvement in March.

“The Ukraine crisis is reducing the prospects for forecasting the state of the economy,” it said in a statement on Tuesday after its annual shareholders’ meeting.

“Stockmann is monitoring economic developments and will update its guidance regarding the group’s earnings performance for 2014 if necessary.”

Analysts said the vague formulation of the statement made it difficult to gauge the risk of a profit warning.

“The fact that they wrote down the possibility of a guidance downgrade, combined with weak sales early this year, gives rise to the idea that the development (of the business) is not what it was expected to be,” said Nordea analyst Rauli Juva.

Last month, the company said it expected operating profit to increase slightly in 2014 compared with 2013, when it stood at 54.4 million euros ($75.8 million).

Russian President Vladimir Putin, defying Ukrainian protests and Western sanctions, signed a treaty on Tuesday making Crimea part of Russia but said he did not plan to seize any other regions of Ukraine.

Stockmann said the current political tensions and economic climate could make it reconsider its strategy for Russia.

“A substantial weakening in the value of the rouble, a decline in the purchasing power of Russian consumers, economic sanctions imposed on Russia and possible counter-measures will force Stockmann to carefully weigh up the future strategic options for the entire company,” it said, without elaborating.

Russia and Ukraine accounted for 17 percent of the company’s revenue in 2013, according to Thomson Reuters data.

Shares in the company were trading up 0.7 percent at 11.19 euros by 1525 GMT. ($1 = 0.7180 euros) (Reporting by Sakari Suoninen; Editing by Pravin Char)

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