2004 Annual Report Frenckellin Kirjapaino Oy, Espoo 2005 Contents

Stockmann in brief ...... 2 Stockmann in 2004 ...... 4 Divisions in short ...... 5 Important events in 2004 ...... 6 Information for shareholders ...... 7 CEO’s review ...... 8 Board of Directors and auditors ...... 10 Corporate management ...... 11

Review of operations Department Store Division ...... 12 Stockmann Auto ...... 18 Hobby Hall ...... 22 Seppälä ...... 26 Corporate Governance ...... 30 Risk management ...... 33 Personnel ...... 35 Corporate social responsibility ...... 37

Report and accounts, December 31, 2004 Board report on operations ...... 40 Shares and share capital ...... 46 Key figures ...... 51 Per-share data ...... 52 Profit and loss account ...... 53 Balance sheet ...... 54 Funds statement ...... 56 Notes to the accounts ...... 57 Proposal for the distribution of parent company profit ...... 66 Auditors’ report ...... 67 Contact information ...... 68

CONTENTS • STOCKMANN 1 Stockmann in brief

Stockmann is a Finnish listed company which was established in 1862 and is engaged in the retail trade. It has about 33 000 shareholders. Customer satisfaction is the central objective of Stockmann’s trading in all its areas of business. Stockmann’s four divisions are the Depart- ment Store Division, Stockmann Auto, Hobby Hall, which is specialized in distance retail, and

Seppälä, a chain of fashion stores. Stockmann operates in Finland, Russia, Estonia, Latvia and

Lithuania.

Cover pictures

Customers in the Delicatessen of the Stockmann department store in the Mega South Shopping Centre, Moscow. Stockmann opened two new department stores in the city in 2004.

The new 2005 Ford Focus in front of the Helsinki department store. Stockmann has operated a Ford dealership for 50 years.

In Tallinn. Hobby Hall is the market leader in distance retailing in Estonia too.

Seppälä began operations in Russia in 2004. This photo was taken in the store in the Marino Shopping Centre.

2 STOCKMANN • STOCKMANN IN BRIEF Stockmann Group’s core values

Profit orientation Commitment We are in business to make money; all our operations should In all our activities, success calls for an understanding of the support this goal. Healthy earnings mean a good return for importance of Stockmann’s company-wide success factors investors and latitude of movement and risk-taking ability and the role of our own unit in achieving them as well as a for the company. For good people who are committed to commitment to the goals we all share together. our common goals, it means a highly respected job and an opportunity for self-development. Respect for our people We respect and value people’s capacity for commitment, Customer orientation taking calculated risks and producing results. We reward We earn money only by offering benefits which the customer success. perceives as real and better than those of our competitors. The sum total of these benefits is high customer satisfac- Social responsibility tion and loyalty. Competitive pricing, reliable quality and Our way of operating is ethical, just and shows respect for good customer service are vital elements in achieving these environmental values. goals.

Efficiency By performing better than our competitors, we boost sales, secure high cost-effectiveness and use capital efficiently.

Stockmann Group’s growth strategy

The Group’s strategic objective is to grow profitably. Over the Growth abroad will be spearheaded by the department next few years, growth will be achieved increasingly abroad, stores and Seppälä. The Group’s long years of business in particularly in Russia. The objective is that by the end of 2008 Russia and knowledge of the market have opened up fran- about one third of sales and at least the same amount of earn- chising as a new opportunity, the first examples of which are ings will come from the Baltic and Russian markets. the fast-growing Zara and Bestseller chains.

Long-term financial targets

Target set 2001 2002 2003 2004 in 2001

Return on capital employed Minimum 15% 9.8% 12.6% 13.2% 14.3% EBIT on turnover Minimum 5% 3.6% 4.7% 4.7% 4.9% Sales growth Above industry average Achieved Achieved Achieved Achieved The objective is to reach the long-term targets set by the Board of Directors in 2001 during 2005.

Dividend policy

Stockmann’s Board of Directors has set the dividend pay- required to grow operations is nevertheless taken into ac- out target at a minimum of half of the earnings derived count in determining the dividend. from the company’s ordinary operations. The financing

STOCKMANN IN BRIEF • STOCKMANN 3 Stockmann in 2004

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Operating profit by quarter 2003-2004, EUR mill. 4 4 4 4 4 4 4 4         'HSDUWPHQW6WRUH'LYLVLRQ         9HKLFOH'LYLVLRQ         +REE\+DOO         6HSSlOl         5HDO(VWDWH         2WKHURSHUDWLQJLQFRPH         (OLPLQDWLRQV         7RWDO         Sales Profit before extraordinary items by quarter 2003-2004 by quarter 2003-2004 EUR mill. EUR mill. 500 50

400 40

300 30

200 20

100 10

0 0 1-3 4-6 7-9 10-12 1-3 4-6 7-9 10-12

2004 2004

2003 2003

Other operating income

4 STOCKMANN • STOCKMANN IN 2004 Divisions in short

Divisions and their Offerings Locations Share of management Stockmann’s sales

Department Offers customers a know- • 6 department stores, 5 Academic EUR 938.8 mill. Store Division ledgeable shopping environ- Bookstores, 3 Zara stores and Jukka Hienonen ment and good service in a 8 Stockmann Beauty stores in Finland congenial atmosphere. The • 3 department stores, 3 Zara stores key to Stockmann’s suc- and a boutique in Moscow, Russia cess is a unique and broad • 2 speciality stores in St Petersburg, 54% assortment of good products Russia at competitive prices. • A department store in Tallinn, Estonia • A department store in Riga, Latvia

Offers a very wide range of • 9 outlets in the Helsinki metropolitan EUR 437.1 mill. Stockmann Auto high quality car makes and area: Ford, Volkswagen and Audi cars, a Klaus Sundström models. Reliable quality and wide selection of trade-in vehicles as well customer service are espe- as vehicle servicing and repair centres cially important advantages • An outlet in Turku: Ford dealership, within servicing, repair and a wide selection of trade-in vehicles 25% spare parts for customers’ as well as vehicle servicing and repair vehicles. centre • An outlet in Tampere: Škoda dealer- ship, a wide selection of trade-in vehi- cles as well as vehicle servicing and repair centre • An outlet in Oulu: BMW and MINI dealership, a wide selection of trade-in vehicles as well as vehicle servicing and repair centre

Hobby Hall Hobby Hall offers an easy, • Finland’s largest mail order sales com- EUR 214.4 mill. Raija Saari reliable and pleasant alterna- pany and leading online store tive for buying quality prod- • 2 stores in Finland: in Helsinki and ucts at affordable prices. Its Vantaa offerings consist primarily • Estonia’s largest mail order sales com- of household and leisure pany, an online store, a store in Tallinn 13% articles. • Latvia’s largest mail order sales com- pany

Seppälä Offers customers women’s, • Finland’s and Estonia’s most extensive EUR 143.7 mill. Heikki Väänänen men’s and children’s apparel, chain of fashion stores shoes and cosmetics at rea- • 123 stores in Finland sonable prices. The collec- • 14 stores in Estonia tions are based on Seppälä’s • 6 stores in Latvia own product design and own • 3 stores in Russia 8% brands. Seppälä’s expertise rests on the correct combi- nation of basic and trendy products.

Sales by market Sales by sector

86.0% Finland 36% Fashion 7.1% Russia 25% Motor vehicles 4.4% Estonia 13% Home 2.3% Latvia 12% Food 0.2% Lithuania 10% Leisure 4% Books, publications, stationery

DIVISIONS IN SHORT • STOCKMANN 5 Major events in 2004

March August • Klaus Sundström, M.Sc. (Econ.), was appointed the new • The results of the open S-Style garment design competition director of Stockmann’s Vehicle Division and a member arranged by Seppälä were published at the Vateva Fashion of the Group’s Management Committee, effective April 2, Fair in Helsinki. The entry by Veera Lassila of Niinikoski 2004. was chosen as the best among the 92 entries in the compe- • Stockmann’s Annual General Meeting, held on March 30, tition. Seppälä arranged this competition to support Finn- 2004, passed a resolution to pay a basic dividend for the ish design and to create top-calibre Finnish casual wear. previous financial year of EUR 0.90 and a bonus dividend of EUR 0.45, or a total of EUR 1.35 per share. The Annual October General Meeting also resolved to amend the Articles of As- • Stockmann bought the Oulu car dealership Autotalo sociation such that, in accordance with the new Corporate Jurvakainen, which operated as a BMW-MINI dealer. At all Governance recommendation, the members of the Board the department store localities in Finland, Stockmann now of Directors are elected for one year at a time. also serves its customers by operating a car dealership and servicing centre. BMW and MINI are new marques April in Stockmann’s range of vehicle brands. • Stockmann’s second department store in Moscow, with • Bestseller A/S and Stockmann signed a cooperation about 10 000 square metres of retail space, was opened in agreement on establishing a chain of stores in Russia. The the Mega South Shopping Centre in premises leased from Bestseller brands include Jack & Jones, Only, Vero Moda, Ikea. Exit and Selected. The first store specializing in Bestseller • Seppälä opened its first store in Russia at the Stockmann de- fashions was opened in Moscow’s Mega North Shopping partment store in Moscow’s Mega South Shopping Centre. Centre in February 2005. During 2004 Seppälä opened two more stores in Moscow. • Stockmann announced the spin-off of its Vehicle Division as an independent company. The spin-off was carried out May as a transfer of business operations, on January 1, 2005, • Subscription rights under Stockmann’s Loyal Customer to Stockmann’s wholly owned subsidiary Stockmann Auto share option programme for the year 1999 were exercised Oy Ab, and Klaus Sundström, head of Stockmann’s Vehicle by 21 114 Loyal Customers, who subscribed for a total of Division, was appointed as its managing director. Stock- 600 269 of the company’s Series B shares. The number of mann Auto continues the Vehicle Division’s operations Stockmann’s shareholders more than doubled as a result with the same familiar staff. of these subscriptions. At the end of 2004 the company had 33 029 registered shareholders, compared with 15 591 a November year earlier. • Raija Saari, M.Sc. (Econ.), was appointed as Hobby Hall’s new managing director and a member of the Stockmann June Group’s Management Committee, effective November 15, • Stockmann’s Board of Directors confirmed the company’s 2004. strategy, according to which the Group will grow energeti- • Jukka Hienonen, the Group’s executive vice president and cally over the next few years, particularly in the Russian head of the Department Store Division, was appointed the market. The objective is that by the end of 2008 about a third CEO’s alternate, effective November 15, 2004. of sales and at least the same proportion of earnings will come from the markets in the Baltic countries and Russia. December • An extraordinary general meeting of Stockmann’s share- July holders passed a resolution on December 8, 2004, to dis- • In Espoo’s Suomenoja district Stockmann opened Fin- tribute an extra dividend for the previous financial year of land’s first Audi dealership in line with the manufacturer’s EUR 1.00 per share in addition to the EUR 1.35 dividend international recommendations. resolved by the Annual General Meeting. • Stockmann’s Volkswagen-Audi car dealership business that • Stockmann’s third department store in Moscow was was located in Helsinki’s Herttoniemi district was trans- opened at the Mega North Shopping Centre in premises ferred to Kesko Corporation’s subsidiary VV-Auto Oy. leased from Ikea. The new department store has about • The company’s millionth Loyal Customer, Hanna Vasiljev 10 000 square metres of retail space. Seppälä’s and Zara’s of Helsinki, received a bouquet of flowers at Stockmann’s third stores in Moscow were also opened in the same shop- Helsinki department store. Now there are over 830 000 ping centre. holders of a Stockmann Loyal Customer card in Finland and a total of more than 270 000 in Russia, Estonia and Latvia, so the number of Stockmann’s Loyal Customers totals more than 1 100 000 already.

6 STOCKMANN • MAJOR EVENTS IN 2004 Information for shareholders

Annual General Meeting Changes in name and address The 2005 Annual General Meeting of the shareholders of We kindly request shareholders to report changes of address Stockmann plc will be held on Tuesday, March 29, 2005, at to the bank or to Finnish Central Securities Depository Ltd 4.00 p.m. in the Concert Hall of Finlandia Hall at the address in accordance with the place where the shareholder’s book- Karamzininkatu 4, Helsinki. entry account is kept. Registrations for the meeting must be received no later than on March 24, 2005, at 4.00 p.m., telephone +358 9 121 4010 or Financial information on Stockmann the company’s website www.stockmann.fi. Stockmann will publish the following financial reports in 2005: Those shareholders are entitled to participate in the Annu- al General Meeting, who have been entered, no later than on - January-March Interim Report April 21, 2005 March 18, 2005, as shareholders in the Shareholder Register - January-June Interim Report August 11, 2005 kept by Finnish Central Securities Depository Ltd. - January-September Interim Report October 26, 2005 Also a shareholder whose shares have not been transferred to the book-entry system has the right to participate in the In addition to these reports, we will release a monthly re- Annual General Meeting if that shareholder has been regis- port on the sales of the units. tered in the company’s Share Register before September 28, Financial reports and bulletins are published in Finnish, 1994. In this case the shareholder must present, at the An- Swedish and English. nual General Meeting, his share(s) or other documentation All of Stockmann’s stock exchange bulletins will be avail- indicating that title to the shares has not been transferred to able on the Internet on their date of publication. Address: the book-entry system. http://www.stockmann.fi.

Payment of dividend Investor Relations: The Board of Directors proposes to the Annual General e-mail [email protected] Meeting that a dividend of EUR 1.00 per share be paid for the 2004 financial year. The dividend decided by the Annual Report and bulletin requests: General Meeting will be paid to a shareholder who on the STOCKMANN, Corporate Communications, record date for dividend payment, April 1, 2005, has been P.O. Box 147, FI-00381 Helsinki, Finland entered in the Shareholder Register kept by Finnish Central Telephone +358 9 121 3089 Securities Depository Ltd. The Board proposes to the Annual Fax +358 9 121 3153 General Meeting that the dividend be paid on April 8, 2005, e-mail [email protected] upon termination of the record period.

Information on Stockmann for investors

According to information we have received, the analysts mentioned below follow Stockmann on their own initiative. The list may be incomplete. Stockmann does not assume responsibility for analysts’ assessments.

ABG Sundal Collier ENSKILDA SECURITIES AB MANDATUM STOCKBROKERS LTD Mattias Karlkjell Kari Paajanen Noora Alestalo Biblioteksgatan 3 Eteläesplanadi 12 Unioninkatu 22 103 89 Stockholm 00130 Helsinki 00130 Helsinki Tel. +46 8 5662 8627 Tel. +358 9 6162 8900 Tel. +358 10 236 4794

Alfred Berg ABN AMRO EVLI BANK PLC OPSTOCK SECURITIES Tia Lehto Mika Karppinen Jari Räisänen Kluuvikatu 3 Aleksanterinkatu 19 A Teollisuuskatu 1 B 00100 Helsinki 00100 Helsinki 00510 Helsinki Tel. +358 9 228 321 Tel. +358 9 476 690 Tel. +358 10 252 012

CARNEGIE INVESTMENT BANK AB FIM SECURITIES LTD STANDARD & POOR’S / Nordea Finland Branch Kim Gorschelnik Daniel Schmidt Eteläesplanadi 12 Pohjoisesplanadi 33 A Box 1753 00130 Helsinki 00100 Helsinki 111 87 Stockholm Tel. +358 9 618 711 Tel. +358 9 613 4600 Tel. +46 8 440 5953

DEUTSCHE BANK GLOBAL EQUITIES HANDELSBANKEN CAPITAL MARKETS Kaivokatu 10 A Tom Skogman 00100 Helsinki Aleksanterinkatu 11 Tel. +358 9 252 5250 00100 Helsinki Tel. +358 10 444 2752 eQ BANK LTD Kalle Karppinen KAUPTHING BANK OYJ Kaivokatu 12 A Mika Metsälä 00100 Helsinki Pohjoisesplanadi 37 A Tel. +358 9 6817 8654 00100 Helsinki Tel. +358 9 478 4000

INFORMATION FOR SHAREHOLDERS • STOCKMANN 7 CEO’s review

Profit on ordinary operations up by a third

Private consumption grew strongly in the Stockmann Group’s Surging profits reported by main market areas in Finland, the Baltic countries and Russia the department stores and Seppälä in 2004. Disposable income increased and consumer confi- The Department Store Division improved its previously high dence remained at a high level. In Russia and the Baltic coun- earnings level with an incremental leap of one third. Earnings tries, growth was again clearly faster than in Finland. from department store operations in Finland again improved Consolidated profit on ordinary operations improved markedly. Profits in International Operations also improved, by 30 per cent thanks to the substantial earnings increase though in just over a year, three full-scale department stores turned in by the Department Store Division and Seppälä. have been opened abroad, resulting in store opening costs Hobby Hall improved too, and its result headed upwards, that burden the overall results significantly. This indicates a though it was still in the red. The Vehicle Division posted marked improvement in the earnings level of the department lower earnings, because it had to relinquish the very profit- and other stores that have already gained an established po- able dealership in Helsinki’s Herttoniemi district midway sition abroad. The Department Store Division’s return on through the year. Other operating income fell markedly capital employed rose to 24 per cent thanks to the growth short of the previous year’s figure and consisted primarily in earnings. of the compensation paid for the transfer of the Herttoniemi In relative improvement of earnings, Seppälä is in a class car dealership business. Consolidated profit before extraor- by itself. After a number of modest years, the company’s sales dinary items improved and was EUR 79.1 million, up 7 per swung sharply upwards in 2004. By simultaneously lifting the cent on 2003. The return on capital employed rose to 14.3 gross margin to the level of the best international competi- per cent and the operating profit margin to 4.9 per cent, tors in the fashion trade whilst achieving peak efficiency in boosted by higher earnings and a lightened balance sheet. costs and stock management, Seppälä racked up a 62 per The objective is to reach the long-term targets set by the cent improvement in operating profit over its previously high Board of Directors in 2001 – a 15 per cent return on capital level. The return on capital employed hit three digits, reach- employed and an operating profit margin of at least 5 per ing 128 per cent. In the space of three years of determined cent – during 2005. work, Seppälä has been turned into a hugely profitable and The Group’s sales last year totalled EUR 1.735 billion, rep- credibly internationalizing chain of fashion stores that is resenting an increase of EUR 31.3 million, or 2 per cent. The playing an important role in realizing the Stockmann Group’s like-for-like sales growth was about 4 per cent. Sales grew growth strategy. Seppälä is also a good example of the fact by 1 per cent in Finland and by 29 per cent abroad. Sales by that economies of scale are not after all the be-all and end-all the units abroad rose to 14 per cent of the Group’s aggregate factor in competition. sales.

8 STOCKMANN • CEO’ S REVIEW Hobby Hall’s earnings curve headed upwards in the latter For Hobby Hall, Russia offers interesting possibilities in half of the year. The slowness of the turnaround was never- the future. New steps in this direction will not, however, be theless a disappointment, and the company’s result was still taken during 2005, but instead Hobby Hall will concentrate loss-making, as it was a year earlier. A process aiming at on improving the profitability of its operations in its existing exploring different alternatives for developing Hobby Hall market areas. The focus for the motor trade will also be on was started in the summer. One of the alternatives looked the home market, but the dropping of the Block Exemption into was to sell the company to a new owner. The outcome Decree’s clause restricting the siting of business locations of the assessment was nevertheless an alternative in which may suggest a closer look at possibilities in the Baltic area. Hobby Hall will be developed further as a part of the Stock- mann Group. Hobby Hall will redouble its focus on develop- A bumper year for dividends ing distance retailing in the Finnish, Estonian and Latvian Stockmann paid its owners record-high dividends for the markets. During just over a year, three stores were closed 2003 financial year: a total of EUR 123.3 million, or EUR 2.35 and at the beginning of 2005 the company withdrew from the per share. The positive trend in the company’s operational distance retailing market in Lithuania, which had proved to result, its strong balance sheet and high equity ratio coupled be unsatisfactory. The positive earnings trend in the last part with the fact that tax surpluses for previous years have now of 2004 indicates that, after the streamlining programme that become worthless in the wake of the reform of corporate has been carried out, Hobby Hall has everything it takes to taxation that entered into force in 2005 were good grounds restore its operations to profitability during 2005. for paying out such high dividends. The Vehicle Division’s earnings diminished because it had The dividend payout had a positive effect on the company’s to give up the very profitable car dealership in Herttoniemi, capital structure. Despite the contraction in total assets, the Helsinki, at the beginning of July. The Volkswagen and Audi equity ratio remained at a very high level of 65 per cent. The importer, who owns the dealership premises, decided to go company has a good cash flow and an excellent ability to into retail vehicle sales in Herttoniemi. This showed up im- cope with capital expenditure needs in future years – and to mediately in the weaker profitability of sales of Volkswa- still keep paying good dividends in the years ahead. gen-Audi products in the Helsinki metropolitan area. The The company’s market capitalization rose smartly. Over Vehicle Division’s like-for-like sales improved. New marques the past four years, the value of Stockmann’s shares has more that joined Stockmann’s family of vehicles were BMW and than doubled, in addition to which the dividends paid out MINI, following the purchase of a dealership in Oulu. With have raised the share’s total yield so that it now ranks as one the abolishment of restrictions on the location of vehicle sales of the best on the Helsinki Stock Exchange. outlets in October 2005, the competitive situation in the mo- Share turnover increased and was in the moderate range, tor trade will change. Consolidation in the field is continuing. because about 23 per cent of the entire shares outstanding As a strong player in the motor trade, Stockmann is taking changed owners during the year. Foreign ownership grew an active part in this process. and rose to 7 per cent of all the company’s issued shares.

A new kingpin of growth abroad A streamlined Group structure; Following the opening of Stockmann’s seventh department IFRS reporting to be adopted store in Finland in the extension to the Jumbo Shopping In order to streamline the Group structure, the Vehicle Divi- Centre in Vantaa in October 2005 and the completion of the sion’s operations were spun off into the Stockmann Auto Oy extensive enlargement project at the Helsinki department Ab subsidiary from the beginning of 2005. store by about the end of 2009, the Group must seek organic Like other Finnish listed companies, IFRS reporting was growth largely abroad. The objective is that by the end of adopted on January 1, 2005. In the Interim Reports, the com- 2008 a third of sales and at least an equal proportion of prof- parative figures for 2004 will be presented in accordance its will come from abroad. In 2004, sales at the units abroad with IFRS. The changes resulting from the new accounting accounted for 14 per cent of the Group’s aggregate sales. The practice are discussed in the Board report on operations. share for the Department Store Division was already 21 per The Group’s equity ratio will weaken by about 3 percentage cent and it will rise to around 30 per cent in 2005. points due to changes in the recording of liabilities. The Department Store Division and Seppälä will spear- head growth abroad. The Department Store Division now Targeting higher earnings again in 2005 has more than 15 years of experience of operating in Russia’s The Group’s profit on ordinary operations improved mark- still difficult business environment. During this time, a well- edly in 2004, and total earnings were likewise higher than the functioning and competent local organization has been built figure a year ago. in Russia, and this will enable the Group to expand its opera- The aim is again to achieve an improvement in profit on tions rapidly, at the same time opening up new business op- ordinary operations during 2005. The biggest growth poten- portunities. A case in point is the international name-brand tial lies in improving the result of the Department Store Di- companies that would like to set up in the Russian market vision’s International Operations and in turning Hobby Hall but who lack hands-on experience there or a reliable partner around. The Group is seeking to generate earnings in 2005 for carrying on business in Russia. Thanks to its long years that are better than the previous year’s figure. of Russia savvy, Stockmann has been chosen to operate the My warm thanks go to our customers for the confidence Zara business in the entire area of the Russian Federation, they have shown in us and to our staff across the entire and these operations will be expanded swiftly. A similar new Group for a job well done in 2004. partner is the Bestseller Group of Denmark, whose brands are Vero Moda, Jack & Jones, Only, Exit and Selected. The first store offering all the Bestseller brands will be opened Helsinki, February 15, 2005 in Moscow this spring. This business too will be built out rapidly. For Seppälä, Russia and partly, for the time being, the Bal- tic countries as well, offer a natural avenue for expansion. Seppälä’s network of stores will grow in Russia during 2005. A new market area is Lithuania, where the first stores will Hannu Penttilä be opened. The store network in Latvia will be expanded further.

CEO’ S REVIEW • STOCKMANN 9 Board of Directors and auditors

Lasse Koivu Erkki Etola Eva Liljeblom

Kari Niemistö Christoffer Taxell Carola Teir-Lehtinen

Henry Wiklund Janne Heiskanen Tuula Grönvall

Board of Directors Christoffer Taxell * Janne Heiskanen (b. 1948), LL.M., ministeri1. Member of (b. 1970), sales manager, the department CHAIRMAN the Board since 1985. store in Turku. Personnel representative Lasse Koivu * SHARES: A 2 250, B 3 489 on the Board, elected by Stockmann’s (b. 1943), B.Sc.(Econ.), managing senior salaried employees. director, Föreningen Konstsamfundet rf. Carola Teir-Lehtinen ** Member of the Board since 1991. (b. 1952), M.Sc., senior vice president, Tuula Grönvall SHARES: B 4 854 corporate communications, Fortum Cor- (b. 1942), salesperson, chief shop steward, poration. Member of the Board since 2004. Seppälä. Personnel representative on the VICE CHAIRMAN SHARES: B 1 399 Board, elected by the Group Council. Erkki Etola ** (b. 1945), M.Sc.(Eng.), managing direc- Henry Wiklund * Auditors tor, Oy Etola Ab. Member of the Board (b. 1948), kamarineuvos1, managing since 1981. director, Svenska litteratursällskapet i Wilhelm Holmberg SHARES: A 1 841 676, B 993 331 Finland rf. Member of the Board since (b. 1950), M.Sc.(Econ.), Authorized 1993. Public Accountant. Stockmann’s regular Eva Liljeblom ** SHARES: A 720, B 3 364 auditor since 2000. (b. 1958), D.Sc.(Econ.), professor, Svenska Handelshögskolan. Member of Personnel representatives on the Henrik Holmbom the Board since 2000. Board April 1, 2004 – March 31, (b. 1970), M.Sc.(Econ.), Authorized SHARES: A 243, B 2 264 2005 Public Accountant. Stockmann’s regular At meetings of the Board of Directors, auditor since 2003. Kari Niemistö * personnel representatives have the right (b. 1962), M.Sc.(Econ.), managing to attend and to speak. They are not DEPUTY AUDITOR director, Selective Investor Oy Ab. members of the Board of Directors. KPMG Wideri Oy Ab Member of the Board since 1998. SHARES: A 2 801 876, B 962 335

1 a Finnish title * Independent of the company Information on the main job experience of the Board of Directors and their principal ** Independent of the company and major shareholders positions of trust is available on Stockmann’s website at the address www.stockmann.fi.

10 STOCKMANN • BOARD OF DIRECTORS AND AUDITORS Corporate management

Hannu Penttilä Jukka Hienonen Pekka Vähähyyppä

Klaus Sundström Raija Saari Heikki Väänänen

Jukka Naulapää

Management Committee Klaus Sundström The Stockmann plc shares and options in (b. 1950), B.Sc.(Econ.), managing direc- the personal ownership of the members Hannu Penttilä tor, Stockmann Auto. Joined Stockmann’s of the Board of Directors and Manage- (b. 1953), LL.M., CEO. Joined Stockmann’s and at the present position since 2004. ment Committee as well as in the owner- 1978, at the present position since 2001. OPTIONS 2000: 40 000 ship of institutions under their control SHARES: A 105, B 334 and persons under their guardianship OPTIONS 2000: 150 000 Raija Saari at December 31, 2004, are reported (b. 1961), M.Sc.(Econ.), managing Jukka Hienonen exclusive of the 1999 Loyal Customer director, Hobby Hall. At Stockmann’s options, a total number of 641 of which (b. 1961), M.Sc.(Econ.), executive vice 1995-2001 and since 2004, at the present president with responsibility for the were in the ownership of the members position since 2004. of the Board and a total number of 212 Department Store Division. Joined OPTIONS 2000: 10 000 Stockmann’s 1995, at the present position in the ownership of the members of the since 2001. Heikki Väänänen Management Committee. Information SHARES: A 1 600, B 4 500 (b. 1958), B.Sc.(Econ.), managing on Stockmann plc shares and options on OPTIONS 2000: 100 000 director, Seppälä. Joined Stockmann’s page 46 of the Annual Report. and at the present position since 2001. Pekka Vähähyyppä SHARES: B 2 000 (b. 1960), M.Sc.(Econ.), CFO. Joined OPTIONS 2000: 80 000 Stockmann’s 2000, at the present position since 2001. Jukka Naulapää SHARES: B 1 000 (b. 1966), LL.M., company lawyer, OPTIONS 2000: 80 000 secretary to the Management Committee. Joined Stockmann’s 1998, at the present position since 2001. OPTIONS 2000: 20 000

CORPORATE MANAGEMENT • STOCKMANN 11 Stockmann now has three department stores in Moscow. This photo was taken in the Mega South department store.

12 STOCKMANN • DEPARTMENT STORE DIVISION Department Store Division

Stockmann’s department stores in the centre of Helsinki and in the Itäkeskus Shopping Centre in eastern Helsinki, Tapiola in Espoo, Oulu, Tampere and Turku along with five Academic Bookstores offer customers a knowledgeable shopping environment and excel- lent service in a congenial atmosphere. The key to Stockmann’s success is a unique and broad assortment of branded products at competitive prices. The International Operations’ units comprise department stores in Moscow, Tallinn and Riga together with the speciality stores in Moscow and St Petersburg. New expanding chains are Stockmann Beauty within cosmetics as well as Zara and Bestseller in the fashion segment.

The department stores turn in profitable growth

The Department Store Division’s sales inclusive of VAT were EUR 938.9 million, up 10 per cent on the previous year. The division had net turnover of EUR 789.3 million and posted operating profit of EUR 53.0 million. Op- Development of the Department Store erating profit improved by 33.3 per cent on the figure a year earlier. Division's sales 2000-2004 Sales by the department stores in Finland and the Academic Bookstores EUR mill. were EUR 725.1 million, an increase of EUR 24.5 million, or 4 per cent. 1000 The strongest growth in sales, 43 per cent, was reported by International Operations. During the year two new department stores were opened in 800 Moscow, lifting sales in Russia by 40 per cent. International Operations’ share of the division’s sales rose to 21 per cent. 600 The cornerstone of the division’s strategy is to seek profitable growth in Finland and the country’s nearby areas. The department stores operat- 400 ing in the mature home market in Finland generate strong cash flow and rank in profitability among the top names in the industry in Europe. The 200 primary economic objectives have been an improvement in the gross 0 margin level, effective employment of capital and rigorous cost manage- 2000 2001 2002 2003 2004 ment. During the year the gross margin rose to 40.9 per cent (40.2 per cent) and the return on capital employed was 23.7 per cent (21.1 per cent). International operations Owing mainly to the establishment of new units abroad, the division’s Finland total expenses increased by 9 per cent, while the gross margin rose by 13 per cent. The department stores in Finland registered a cost increase of one per cent, with the gross margin rising correspondingly by 5 per cent. The division’s operating profit improved by EUR 13.2 million, even Development of the Department Store though opening expenses for new units of EUR 11.5 million were booked Division's operating profit 2000-2004 to the financial year. Ö EUR mill. % 60 12

50 10

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DEPARTMENT STORE DIVISION • STOCKMANN 13 Muscovites have taken a shine to Zara. This photo was taken in the Mega Rome, the eternal city, was featured impressively in Stockmann’s special South Shopping Centre. autumn campaign.

A tiger’s jump service quality measurement. Above all, products and electronics was 5 per cent in service measurement this is about people’s motivation, the and was in line with the general pace in In the department stores, service has a frontline sales staff’s desire and ability the trade, but the growth in the book crucial impact on the customer’s shop- to do good customer service work. trade (2 per cent) and leisure products ping experience. Service sector em- Forecasts point to an increasing (3 per cent) did not suffice to maintain ployment in the retail trade is facing difficulty in obtaining high-calibre ser- market shares. considerable cost pressures, and this is vice staff over the next few years. It is why it is important to direct personal important for Stockmann to be a top- Surging growth for service towards areas where the cus- flight company in terms of its reputa- International Operations tomer needs assistance and expert in- tion as an employer, so that people seek Stockmann has set itself the ambitious formation in making a purchase. Serv- jobs with us. According to the Univer- target of lifting the share of interna- ice quality and the staff’s professional sum Graduate Survey that is conducted tional operations within the Group to skill must be developed continuously. amongst commercial studies students, a third of sales and profits by the end To achieve this objective, since 1997 the Stockmann was again the most at- of 2008. The Department Store Division Department Store Division has meas- tractive employer in the retail field in is doing its part to realize this ahead of ured service quality by means of the so- Finland and ranked 8th among the 130 the target. Since October 2003, three called Mystery Shopping method. The companies in the survey. new full-scale department stores have measurements are made by an external been opened abroad in just over a year, assessment consultancy. Service activi- A good year in fashion sales one in Riga and two in Moscow. In ad- ties can be managed and developed The trend in fashion sales in Finland dition to these, the Zara chain already systematically on the basis of the as- was good, showing growth of about 4 had three stores in Moscow at the end sessment material gathered by profes- per cent. For Stockmann, the fashion of 2004, and agreements on open- sional test shoppers. During this meas- trade is a mainstay of the business: it ing five new stores have been signed. urement programme, 9 000 test shop- makes up nearly half of the Depart- Alongside the department stores, fran- ping visits to Stockmann department ment Store Division’s aggregate sales. chising operations have thus rapidly stores have been made and written Stockmann racked up growth in fash- become a cornerstone of the division’s evaluations of them have been turned ion sales of 8 per cent, which can be operations. in. On the basis of them, a service level considered a good achievement for Operating in the Russian market is a index has been worked out for each a company defending a large market challenge for any retailer, at the level department store and its individual de- share in a tough competitive environ- of both perceptions and everyday real- partments. This index is also part of the ment. The best same-store growth fig- ity. The country’s constantly changing incentive system for the personnel and ures were registered in the footwear (11 legislation, the wide discretionary pow- managers. In 2004 the figure measured per cent), cosmetics (10 per cent) and ers of the authorities and the undevel- for the service level index went over clothes (9 per cent) areas. Growth in oped state of the administrative culture the 70 point mark for the first time. The cosmetics sales got an extra boost from lead to surprises and difficulties. Most 5-point rise from the previous year is an the opening of two new Stockmann western companies have opted for the important achievement, and it didn’t go Beauty speciality shops in Kuopio and easiest way of entering the Russian up by accident. In developing service Pori, bringing the number of shops in market: by farming out their business quality, the division employs a dozen the chain to eight. The growth in food concept to a local operator via a fran- or so different programmes, projects sales was a modest 2 per cent. For the chising agreement. A local partner is and reward systems. A comprehensive sector as a whole, growth was roughly often necessary if the company does management system based on them has the same, mainly due to the deflation- not want to obtain the requisite hands- been created in the background of the ary price trend. Growth in household on grasp of Russian conditions for its

14 STOCKMANN • DEPARTMENT STORE DIVISION Academic Bookstore always draws big turnouts at its events. Adorable Falabella horses were a big hit at the pet show in the Helsinki department store’s Argos Hall.

own organization. The upshot is that of the Zara chain, with whom franchis- operations. A track record of 15 years the know-how acquired in daily opera- ing cooperation in Russia got started of uninterrupted operations in Rus- tions accumulates outside the company in 2003. In 2004, Stockmann signed a sia have given Stockmann a lead that itself, and control of the business may cooperation agreement with Bestseller, competitors can catch up with only if slip away. For example, in the depart- its long-time Danish partner, concern- they are ready to undertake onerous ment store field, not a single western ing implanting of Bestseller’s Jack & up-front investments and make heavy company in the industry, except for Jones, ONLY, Vero Moda and Selected outlays on marketing. In the depart- Stockmann, has embarked on setting chains in Russia. Because it is possible ment store field there are still no evi- up in Russia on its own. In the depart- to make use of experiences obtained dent western players who are ready to ment store field, attempts to enter the in department store operations in car- tackle by themselves the task of learn- Russian market by means of franchis- rying on franchising business, it is ing how to operate in the Russian busi- ing agreements have ended up being of believed that franchising will quickly ness environment. short duration either because of busi- become a strong supporting leg for the New department stores are custom- ness difficulties or failure in the choice Department Store Division’s operations arily able to reach the breakeven point of partners. Nor has the word that has abroad. Thanks to department store in 2-3 years from their opening. The op- come from Russia about the lack of pro- operations, a franchising business can erating result for the first year is gener- tection of property and good business also tap into significant advantages of ally in the red, as customers gradually practices as well as the unforeseeability scale in, say, administration, logistics learn to shop at the new location and of events in the operating environment and the lease terms of business loca- as the company gears its offerings to been apt to increase the willingness of tions. For partners in cooperation, in the target market. The losses in the first western companies to invest in Russia. turn, it offers a fast and safe channel for year are also generally the biggest in entering Russia’s ever-growing con- the department store’s life cycle. Af- Stockmann’s Russia sumer market together with a reliable ter reaching the breakeven point, the savvy is in demand and financially solid Stockmann. growth in the department store’s sales A number of international retail chains On an international yardstick, the and earnings can continue uninter- and fashion brands have shown inter- rental level for commercial sites in rupted for quite a long time – even for est in the know-how Stockmann has Russia is very high. The biggest bottle- decades. Nearly all of Stockmann’s new acquired of the Russian market. Few neck to expansion is the availability openings in recent years have adhered of these companies have the willing- of high-quality and reasonably priced to this curve. Operations in 2004 were ness, or perhaps the ability either, to commercial sites. In seeking out loca- loss-making in Riga and at both of the establish themselves in Russia through tions for both the department store new department stores in Moscow’s a self-operated and owned chain. In the and franchising chains, Stockmann is Mega Shopping Centres. speciality goods trade and particularly aiming for profitable, long-term and in the fashion trade, operations can be sustainable contractual relationships Focus of growth in Finland on made profitable by means of a strong that are duly registered by the authori- the Helsinki metropolitan area brand and well-functioning chain con- ties and whose payment transfers are In its strategy, Stockmann has decided cept clearly more quickly than in the transparent. to concentrate on operating with large department store field. Stockmann has A stabilizing business environment, department store units having over set out resolutely to build a franchising more straightforward tax regulations 10 000 square metres of retail space. network consisting of strong fashion and Russia’s imminent membership of International comparisons indicate that brands alongside its department store the World Trade Organization mean large units have better economic per- trade in Russia. The first partner in co- substantial earnings potential from the formance than small ones do. In the operation was Inditex of Spain, owner standpoint of Stockmann’s business Finnish market, units in this size Ö

DEPARTMENT STORE DIVISION • STOCKMANN 15 There are already more than 1 100 000 Stockmann Loyal Customers, over 270 000 of them abroad. The millionth Loyal Customer was Hanna Vasiljev of Helsinki, whose gifts included a surprise 15-minute free shopping spree in Stockmann’s Delicatessen.

class can only be established in ag- ing in operation in autumn 2004 of a these eight annual Crazy Days already glomerations with a population of over renewed two-way escalator adjacent account for 8 per cent of the Depart- 200 000 people. With the opening of to the Aleksanterinkatu entrance. The ment Store Division’s total annual sales. a Stockmann department store in the integrated project aiming at extending In 2004 the aggregate sales during the Jumbo Shopping Centre in Vantaa in the life cycle of the Helsinki department Crazy Days came to EUR 73 million, an autumn 2005, a gap in the network has store has a cost estimate of EUR 115 increase on the corresponding Crazy now been filled in the growth zone million and it is expected to increase Days a year earlier of 21 per cent in north of Metropolitan Helsinki. Hence- the Helsinki department store’s annual April and 19 per cent in October. What forth, it is improbable that room can sales by EUR 50 million. started out as a trial campaign has now be found in Finland – in line with the reached such proportions that both present strategic choices – for a new The stellar success customers and suppliers find it hard to full-scale Stockmann department store story of Crazy Days miss out on the Crazy Days. in the foreseeable future. Department stores everywhere are in Stockmann has forged close ties with Yet we must see to the development danger of becoming labelled as com- its Loyal Customers and offers them of our existing department stores. Now panies in the narrow and pricy upper timely benefits each month. During 2004 that the local department stores have segment of the market: as shop win- the cohort of Loyal Customers topped gone through a series of upgrading in- dows for expensive brands. Especially the one million cardholder mark. In Fin- vestments at the beginning of the 2000 in Finland and the Baltic countries, with land there are nearly 830 000 Loyal Cus- decade, they are in very good shape. their small populations, this would be tomers and a total of more than 270 000 In the immediate future, resources will a perilous equation for a department in the Baltic countries and Russia. In be channelled into refurbishing the store’s business idea and for finan- Finland, Stockmann has pioneered loyal chain’s flagship, the department store cial performance based on high-vol- customer systems ever since 1986. For in the centre of Helsinki. The modifi- ume sales. For years, Stockmann has our best customers, we have developed cation works to the town plan that are worked hard to keep its department the Exclusive group, whose emblem is required for the project are under de- stores, with their good quality image their own platinum-coloured Stock- liberation in the decision-making bod- at the top of the league in volume sales mann card. Contacts with this group ies of the City of Helsinki. The final too. To do this, Stockmann has sought are maintained through the Stockmann decisions, after which the construction to offer its customers a wide price scale Exclusive customer magazine. Premium works can be started, are expected dur- in all product groups and an assort- Loyal Customers are invited personally ing 2005. When completed, the project ment that matches the best speciality to the department stores’ themed Loyal will bring to the Helsinki department stores in each sector. Customer evenings, one of which was store 10 000 square metres of new re- Stockmann has succeeded in mak- arranged to coincide with the opening tail space, modern logistics solutions ing its Crazy Days campaign Finland’s ceremony of the Italy sales campaign. and new social facilities for the staff. largest and best-known individual cam- Over 20 000 people participated in For our customers, the most appar- paign in the retail field. Selling quality these events in 2004. ent manifestations of the remake will products at unbelievably crazy prices is be a new car park with space for 600 a formula which has enabled the Stock- Tracking product levels with vehicles, a Stockmann Delicatessen mann department stores to rack up a a new cash register system with more than 3 500 square metres new sales record twice a year without A new generation cash register system of shopping space on one floor, new interruption for 36 times in succession. became operational in the department and more spacious sales areas and im- The department stores’ sales nearly stores during 2004. The new equipment proved passageways. The first step in quintuple during the four days of each enables staff to track the Department carrying out the project was the plac- campaign in April and October, and Store Division’s annual inventory of

16 STOCKMANN • DEPARTMENT STORE DIVISION Crazy Days turned in another smashing sales record both in the spring Stockmann’s familiar Delicatessen is now serving Muscovites in three and the autumn. department stores.

nearly a million articles right down to Finland and abroad. Despite the ener- the level of the size and colour of prod- getic pace of capital expenditures, the ucts. This steps up both stock manage- division’s return on capital employed ment and customer service. The new over the same period has risen from Distribution of the Department cash register system makes possible 13.0 per cent to 23.7 per cent. Store Division's sales by unit 2004 product turnover-based replenishment Gauged by profitability, Stockmann’s in all product areas and, depending on department stores are top-ranking in- the supplier’s capabilities, even topping ternationally. At the same time, Stock- up directly on the shelf. mann is one of the few department store In November 2004, Stockmann joined companies that has been able to achieve the international BSCI system (Busi- growth – and which have any growth ness Social Compliance Initiative). The strategy at all in this mature industry. aim of this database of dozens of major In 2004 the Department Store Division retailers with its centralized auditing improved its operating profit by 33.3 per register is to supervise the compliance cent on the previous year, even though of suppliers with their social obliga- the year was marked by an exception- 37.7% Helsinki department store tions. Companies who are part of the ally large number of openings, resulting 41.7% Other units in Finland system give their commitment, among in heavy expenses that burdened earn- 13.0% Russia other things, to prevent the use of child ings for the year. In 2005 one depart- labour, to observe the legality of work- ment store will be opened, in the Jumbo 4.9% Estonia ing conditions, to prohibit employee Shopping Centre in Vantaa. 2.7% Latvia discrimination and to promote political Consumer demand in Finland is fore- freedoms in countries where there are cast to continue growing at a moderate risks hindering the realization of these rate of 2-3 per cent. In the Baltic coun- rights. tries and Russia, growth is expected to slow down somewhat, but nonetheless Distribution of the Department Department store its rate will be about double Finland’s. Store Division's sales by sector 2004 situation and outlook for 2005 Operating profit, especially for Inter- Stockmann’s Department Store Divi- national Operations, is expected to im- sion has been able to increase its sales prove by a big margin. The operating by nearly 40 per cent over the past five profit of the entire Department Store years (EUR 672.5 million in 1999 and Division is estimated to continue on an EUR 938.8 million in 2004). During upward trend in 2005. c the same period, operating profit has grown nearly 21/2-fold (EUR 21.4 million in 1999 and EUR 52.9 million in 2004). The division has succeeded in raising the operating profit margin from 3.8 48% Fashion per cent to 6.7 per cent in five years. 22% Food During the five-year period, a total of 12% Leisure EUR 101.6 million has been invested 10% Home in building new department stores and developing existing units both in 8% Books, publications, stationery

DEPARTMENT STORE DIVISION • STOCKMANN 17 The Audi Center Espoo that was opened by Stockmann Auto in summer 2004 is Finland’s first car dealership in accordance with the international Audi concept. The Audi A3 Sportback and Audi A6 Sedan were new models introduced in 2004.

18 STOCKMANN • STOCKMANN AUTO Stockmann Auto

Stockmann Auto caters for customers who wish to buy or service a vehicle in all the Group’s department store localities in Finland. In the metropolitan Helsinki area, the marques sold by Stockmann Auto are Ford, Volkswagen and Audi; in Turku, Ford; in Tampere, Škoda; and in Oulu, BMW and MINI. The servicing centres cover an even larger range of makes. Stockmann Auto’s strengths are a well-regarded brand, professional and service-minded staff, high-quality products and versatile services – all backed by customer loyalty that has been earned over the years.

Service in all Stockmann department store localities in Finland

The Stockmann Group’s vehicle business and the premises serving it were spun off on January 1, 2005. The new company is Stockmann Auto Oy Ab, and the name Stockmann Auto is used in marketing. Development of the Vehicle Division's sales 2000-2004 A buoyant car market EUR mill. New vehicle sales remained at a high level, with 142 642 car registrations 500 and 15 679 for vans. The private consumer market was down 6 per cent, whereas the company car market grew by 3 per cent. 400 Prices of new vehicles did not rise mentionably. The price level of used vehicles declined in the first half of the year but evened out towards the 300 end of the year. The volume of servicing and spare part sales grew in step with an in- 200 crease in motoring, and ever more demanding automotive technology is putting upward pressure on servicing prices. 100 A total of 32 724 used cars were imported. The importation of used 0 vehicles boosts servicing sales because the number of Stockmann Auto- 2000 2001 2002 2003 2004 represented BMW, Audi and Volkswagen vehicles on the road grows and, due to their high average age, imported used vehicles have considerable repair needs.

Operations scaled back in the Helsinki metropolitan area The Vehicle Division’s sales were EUR 437.1 million, down 9 per cent on the previous year. Net turnover was EUR 358.0 million. The growth in the Development of the Vehicle Division's vehicle market and the solid success of the marques for which the Vehicle operating profit 2000-2004 Division – now Stockmann Auto – acts as a dealer spurred sales growth in EUR mill. % the first half of the year. The Vehicle Division’s position in the competitive 6 6 line-up in the Helsinki metropolitan area changed markedly on Ö 5 5

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STOCKMANN AUTO • STOCKMANN 19 The new Škoda Octavia has racked up a number of test wins in its class. The Volkswagen Touran is a pacemaker in creating extra space through Praise has been heaped on its interior, driveability and economy. the use of progressive technology. Among the features it sports is a revo- lutionary DSG direct shift gearbox.

July 1, 2004. At that time Stockmann Sales to Stockmann’s Loyal Custom- Due to the fall in relative operating divested the Volkswagen-Audi deal- ers accounts for about a third of sales profit, the return on capital employed ership in Helsinki’s Herttoniemi dis- to private customers. The Vehicle Divi- did not reach the target set. It averaged trict in accordance with an agreement sion made ten special offers to Loyal 10.2 per cent (13.2 per cent in 2003). made with VV-Auto Oy, a subsidiary Customers, two to Exclusive Loyal Cus- of Kesko Corporation. The divested tomers and two during the Crazy Days. Service extended to Oulu dealership had annual sales of over 100 There were six after-sales offers to Loyal In accordance with the confirmed strat- million euros and its operations were Customers. The division has close coop- egy, the Vehicle Division expanded its very profitable. A cooling market and eration with Stockmann’s Department operations to the Oulu economic area by the gap left by the Herttoniemi outlet Store Division and Hobby Hall. acquiring the entire shares outstanding led to a decline in sales in the second in the Autotalo Jurvakainen Oy dealer- half of the year. Profitable sales through ship on November 1, 2004. Thanks to the The Vehicle Division delivered a total improved stock structure deal, Stockmann gained the dealerships of 9 417 new vehicles and 8 909 used The profitability of vehicle sales weak- for BMW and MINI, which are new ones. The volume of new vehicle sales ened, and sales of used vehicles were brands in its line. The central location was down 17 per cent and used vehi- loss-making in the first half of the year and spacious facilities of the Oulu deal- cles fell by 4 per cent. The like-for-like in the wake of falling prices. In order ership will make possible a significant trend in total deliveries was up one per to keep prices of original spare parts increase in operations. cent. Deliveries of new cars came in at competitive, manufacturers have cut Stockmann Auto is seeking to sell to 8 219 (9 745 in 2003) and 1 198 new vans distributors’ margins. The profitabil- Stockmann’s more than 800 000 Loyal were delivered (1 590 in 2003). ity of servicing and spare part sales Customers. The geographical coverage The Vehicle Division was clearly the have nevertheless been maintained at of the network of dealerships is more largest seller of new and used vehicles a good level thanks to growing sales than 50 per cent of Finland’s car and in the Helsinki metropolitan area up to and efficiency-boosting measures. The van market. July 1, 2004, after which it still ranks division’s operating profit was EUR 4.2 Stockmann’s competitiveness in the near the top, with a market share of million. Helsinki metropolitan area strengthened about 15 per cent. The amount of capital tied up in the significantly with the opening of the Of the marques Stockmann repre- Vehicle Division’s operations has dimin- Audi Center Espoo in Espoo’s Suomeno- sents, Volkswagen was second in reg- ished, and the stock structure has im- ja district on July 1, 2004. At the same istrations of both cars and vans, and proved. The Vehicle Division’s average time, the Audi dealership in the nearby Ford was third in both categories. Of capital turnover was 34 days. Continu- Stockmann outlet in the Merituuli Shop- vehicle makes, Volkswagen Golf rose to ous enhancement of capital employed ping Centre as well as in Stockmann's second place in total registrations and is a key target of operations. Pitäjänmäki outlet were discontinued. Ford Focus placed fourth. The division succeeded well in gaug- The Audi Center is the country’s first During the year a large number of ing coming demand. Major shortages dealership that has been built in accord- new products were unveiled, of which or overstocking situations were not en- ance with the concept recommended by the most important for the Vehicle Divi- countered during the year. the manufacturer. The investment in sion were the Audi A3 Sportback, Audi A good deal of working capital is tied modifying the premises was over 4 mil- A6 and Škoda Octavia. up in the stock of used vehicles, and it lion euros. Stockmann’s Vehicle Division carried is therefore an essential factor for the out over 200 000 servicing jobs during return on capital employed. As the aver- Beefing up customer the year, including related sales of spare age price level falls, a fast stock turnover service and efficiency parts. The volume of servicing jobs was is an absolute must for achieving profit- Major resources are being devoted to on a par with the previous year. ability in the used vehicle trade. service and product know-how. Under

20 STOCKMANN • STOCKMANN AUTO Stockmann Auto expanded its range of marques. The new BMW and MINI dealership is located in Oulu.

the incentive system, employees are In Finland, vehicle sales are already rewarded for their customer service exceptionally centralized, compared with achievements. Stockmann Auto meas- other European countries. The shakeout ures continuously its success in car sales in the trade is nonetheless continuing. and servicing by monitoring customers’ Single-site companies will disappear Distribution of the opinions. Manufacturers too measure from the motor trade in the largest cities Vehicle Division's sales 2004 customer satisfaction extensively, and over the next few years. Stockmann Auto good performance is rewarded. is taking an active part in the ongoing Stockmann Auto’s total service offer- consolidation in the sector. ings include Servicing for Flyers, pick- A distributor’s brand is becoming up and return of a vehicle in for ser- an increasingly important competitive vicing, notification by a text message factor alongside the make of vehicle. when the servicing is completed, an The Stockmann name, being Finland’s invitation for preventive maintenance, most highly respected service brand in Stockmann servicing agreement, a the retail trade, will give considerable Stockmann leasing agreement, cour- competitive edge. tesy car service, a waiting-period car Stockmann Auto is starting servicing 61% New vehicles or van, tyre service and tyre storage. for Volvo-Renault in Helsinki’s Laut- 25% Trade-in vehicles The Internet service is a fast-growing tasaari district, BMW-MINI servicing in 14% Service functions area of the vehicle business. The online the Pitäjänmäki district and Ford servic- service helps customers by speeding ing in Tampere. Henceforth, the compa- up the service process. The Vehicle ny’s servicing in the Helsinki metropoli- Division’s Internet pages had about tan area will cover Ford, Volkswagen, 14 000 visitors each week in 2004. Que- Audi, Volvo, Renault, Škoda, BMW and ries about new and used vehicles to- MINI; servicing for Škoda, Mitsubishi talled 6 000 during the year. The number and Ford in Tampere; Ford servicing in of servicing time reservations made via Turku; and BMW and MINI servicing Distribution of the Vehicle Division's the Internet increased drastically. in Oulu. Options for entering into new sales by make 2004 dealerships are being explored. The Stockmann brand The most important new products in gives a competitive edge 2005 are Ford Focus, the BMW 3 series The new Block Exemption decree that and Volkswagen Passat. entered into force on October 1, 2003, as The vehicle market is expected to re- part of the EU’s competition legislation, main at a good level in 2005. The vol- has made it possible to start up author- ume of new cars sold during the year is ized service without restriction, pro- estimated at 136 000 and the volume of viding that the manufacturer’s quality new vans at 14 000 which means a total requirements are fulfilled. A distributor decrease of just over 8 000 compared will be able to establish a new vehicle with 2004. 47.8% Ford sales outlet anywhere in the EU as from Stockmann Auto’s sales and oper- 37.7% Volkswagen October 1, 2005, as the location-limiting ating profit will decline somewhat in 10.8% Audi clause will be dropped. This will bring 2005, owing to the sale of the Volkswa- a significant change in the competitive gen-Audi business in Herttoniemi on 3.7% Skoda line-up in the motor trade. July 1, 2004. c

STOCKMANN AUTO • STOCKMANN 21 Fast and convenient online shopping keeps growing in popularity. Online purchases rose to a 23 per cent share of Hobby Hall’s sales in Finland in 2004.

22 STOCKMANN • HOBBY HALL Hobby Hall

Distance retailer Hobby Hall markets products and services to its customers via catalogues, an online store and its own stores. Its assortment consists primarily of household and leisure articles. The market leader in Finland, Estonia and Latvia offers its more than 1.3 million customers an easy, reliable and pleasant alterna- tive for buying quality products at affordable prices.

Developing Hobby Hall goes on

Hobby Hall’s sales were EUR 214.4 million, down 9 per cent on the figure a year earlier. Net turnover was EUR 177.9 million. The volume of pack- ages dispatched to customers was 2.3 million, a decrease of 10 per cent Development of Hobby Hall's on the previous year. sales 2000-2004 The division’s operating result was a loss of EUR 3.1 million and fell EUR mill. markedly short of the target, though it improved on the previous year by 250 EUR 0.3 million. 200 The drop in Hobby Hall’s sales was attributable to the closing of three stores in Finland, the closing of one store in Tallinn and a weakening in 150 sales by the units in Latvia and Lithuania. The main reasons for the loss-making operating result were that sales 100 fell clearly below budget, thus causing a decrease in the gross margin. Hobby Hall was not able to offset the loss of sales by the discontinued 50 stores with its mail-order sales and through sales generated by the re- 0 maining three stores. In addition, the clearance sale of old stocks cut into 2000 2001 2002 2003 2004 the stores’ relative gross margin. International operations Costs were 9 per cent smaller than a year earlier. Finland The market leader in Finland Hobby Hall’s sales in Finland were EUR 180.4 million, down 6 per cent on the figure a year earlier. Comparable sales were up 4 per cent on 2003. Development of Hobby Hall's Hobby Hall is still the market leader in distance retailing in Finland. Ö operating profit 2000-2004 EUR mill. % 6 6

4 4

Key figures 2 2 +2%%<+$//(85PLOO   FKDQJH 6DOHV    0 0 3URSRUWLRQRI*URXS6DOHV   2SHUDWLQJSURILW   -2 -2 5HWXUQRQFDSLWDOHPSOR\HG   -4 -4 &DSLWDOHPSOR\HG    2000 2001 2002 2003 2004 ,QYHVWPHQWV   6WDII'HFHPEHU    Operating profit % of net turnover

HOBBY HALL • STOCKMANN 23 Hobby Hall offers its customers an easy and pleasant way to shop in the Hobby Hall’s Loyal Customers are offered a growing range of various peace of their own home. Purchases for the home can be made whenever benefits. In the summer, the best Loyal Customers were offered low-cost one wants to – it’s a no-stress, time-saving way. special lots of merchandise.

The best-selling product areas were EUR 1.9 million. Growth compared The result of operations in Lithuania interior decoration textiles and camer- with 2003 was 55 per cent. The share of was clearly in the red. Overall offerings as. The biggest drop in sales was reg- online sales in Hobby Hall’s aggregate in the country’s distance retail trade are istered in clothing, children’s products sales in Estonia rose from 5 per cent a still fairly modest. Putting the result into and furniture. year ago to 9 per cent. the black would mean a substantially The volume of orders placed via the In-store sales in Estonia were EUR greater input into the Lithuanian market Internet showed further strong growth 3.3 million, down 25 per cent on the than heretofore. For this reason, it was and was EUR 41.2 million, up 26 per figure a year earlier. The decrease was decided to withdraw from Lithuania by cent on the previous year. The online due to the closure of one of the stores the end of March 2005 and to concentrate store accounted for 23 per cent of in Tallinn. on raising sales in Estonia and Latvia. Hobby Hall’s sales in Finland and rep- The biggest volume increase came resented 27 per cent of Hobby Hall’s in sales of linens and interior decora- System revamp moves ahead distance retail volume in Finland. Dur- tor textiles as well as fitness and other The first phase of the information sys- ing the year the number of visitors to leisure products. The biggest losses in tem revamp was placed in use during the online store grew by 22 per cent on sales came in children’s products and 2004. The design process for the sec- the previous year. The marked increase home appliances. ond phase has now been set in motion. in ADSL connections is supporting the It will progress according to plan such growth in online shopping. Hobby Hall Decline in sales in Latvia that the upgraded system’s second Online has gained a very strong posi- Sales in Latvia dropped by 32 per cent phase will be ready to go into operation tion in the Finnish market. According compared with the previous year and in the course of spring 2006. The project to a research published in January were EUR 9.9 million. Sales were lost, will usher in necessary improvements, 2005, readers of the Valitut Palat maga- notably, owing to gaps in the product notably, in category management and zine chose Hobby Hall the most trusted assortment and merchandise availabil- billing practices, bringing cost savings online store brand in Finland. ity problems. Sales in Latvia were fur- and enhancing customer service. Sales by Hobby Hall’s stores in Fin- thermore weakened by the targeting of The new customer management sys- land totalled EUR 29.5 million, down marketing actions on existing custom- tem will enable Hobby Hall to target 29 per cent on the figure a year earlier. ers, with minor inputs into acquiring its marketing more effectively and fa- The decrease in sales was due to the new customers. cilitate the analysis and development of downsizing of the store network. In- The best sales growth was reported customers’ purchasing behaviour. store sales accounted for 16 per cent of in fitness and other leisure products as Investments in system upgrades in Hobby Hall’s sales in Finland. Sales by well as cameras. The biggest decrease 2004 amounted to EUR 0.7 million. the two stores that continued to oper- was reported in sales of household ate increased by 27 per cent. items, children’s products, furniture Test marketing in Russia and linens. Small-scale test marketing was carried Strong growth in out in Russia in the first part of 2004. online sales in Estonia Decision to withdraw The test marketing yielded information Hobby Hall’s sales in Estonia totalled from Lithuania on the special features of the Russian EUR 20.6 million, falling 11 per cent Sales in Lithuania amounted to EUR 3.6 distance retailing market. For the time short of the previous year’s sales. On- million, a decrease of 39 per cent on the being, Hobby Hall is not contemplating line sales grew strongly and totalled figure a year ago. expanding to the Russian market.

24 STOCKMANN • HOBBY HALL Different kinds of catalogues: from Latvia, a catalogue that went out to every home; Hobby Hall celebrated the 25th anniversary of its own from Finland, two mailing-list catalogues, and from Estonia, a net price catalogue. Loyal Customer programme – of course, with splendid special offers.

Streamlining operations Among the objectives for 2004 was to The streamlining programme that was achieve a lowering in inventory values launched in 2003 was continued ac- and to improve the saleability of stocks. cording to plan. The store network has The value of stocks at the end of the now been trimmed and store functions year was EUR 21.8 million, or EUR 9.8 Distribution of Hobby Hall's sales by market 2004 centralized within two stores in the million smaller than in 2003, and the in- Helsinki metropolitan area and one ventory turnover time improved. store in Tallinn. The objective of the programme of In accordance with the streamlining measures that was launched in autumn programme, the bulk of Hobby Hall’s 2003 is to lift the result by EUR 7.5–8.5 warehousing functions were consoli- million. The programme is still ongoing dated at the Viinikkala Logistics Cen- and, among other benefits, savings ob- tre during the summer and autumn. tained from combining the warehouses Development of category management will be realized for the most part during and a stepped-up inventory turnover 2005. Hobby Hall’s unsatisfactory prof- 84% Finland rate spearheaded the centralization itability in 2004 was due principally to process. The aim of the centraliza- the lower-than-planned level of sales, 10% Estonia tion project is to achieve big savings merchandise-availability problems, the 4% Latvia through reduced costs of business weighting of the product assortment, 2% Lithuania premises and improved warehouse price reductions connected with stock efficiency. In addition, the centraliza- clearance and a below-budget level of tion will afford better possibilities for relative gross margins. packaging multi-product orders in the Distribution of Hobby Hall's sales same package, thereby lowering postal Outlook for 2005 by merchandise sector 2004 costs and improving customer satisfac- Hobby Hall’s central objective in 2005 is tion. The placing in use of an automatic to lift the operating result into the black package sorting system and trunk-line and to improve the return on capital transports in deliveries in the Baltic employed. countries has also brought clear cost The profitability and cost-effective- savings and shortened delivery times. ness of operations will be improved The project for boosting the efficien- in accordance with the programme of cy of warehousing functions that was measures that was launched in Decem- carried out during 2004 contributed to ber 2004. Key initiatives are the revamp the work of combining the warehous- of the assortment and its structure, de- 31% Electronics es. As a result of these actions, goods- veloping the availability of goods, im- 22% Household textiles handling efficiency at the warehouses proving the gross margin, stepping up 13% Household appliances improved significantly, right in 2004. logistics further, sharpening the focus Thanks to this project, Hobby Hall ex- of marketing actions and cost-effective- 10% Fitness and leisure pects to realize substantial savings in ness. c 8% Garments the years ahead. 16% Other

HOBBY HALL • STOCKMANN 25 Seppälä’s growing international presence took on new dimensions with the opening in 2004 of three stores in Moscow. This photo was taken in the store in the Mega South Shopping Centre.

26 STOCKMANN • SEPPÄLÄ Seppälä

Seppälä is Finland’s most extensive chain of fashion stores. In addition to the 123 stores in Finland, Seppälä operates in Estonia, Latvia and Russia. The stores are sited in prime commercial locations. Seppälä offers clothes and accessories for women, men and children as well as footwear and cosmetics. Centralized chain-store opera- tions guarantee affordable prices together with reliable quality. Seppälä’s collection is based on own design.

Best-ever result

Seppälä reported sales in 2004 of EUR 143.7 million, an increase of 10 per cent on the figure a year earlier. Net turnover was EUR 118.4 million. Women’s apparel continued to account for a growing share of aggregate Development of Seppälä's sales. Both children’s and men’s clothes accounted for a relatively smaller sales 2000-2004 share of sales. The number of store visitors and customers making pur- EUR mill. chases increased compared with the previous year. Seppälä’s profitability 150 is now at the level of highly profitable international chains. The division 120 posted operating profit in 2004 of EUR 16.4 million, or 13.8 per cent of net turnover. 90 The principal factors driving sales and profitability are the company’s own development efforts, the competitive situation in the market and 60 changes in the store network. Seppälä’s revamped operational model, which has been developed pur- 30 posefully over the past years, is now showing up in the chain’s figures. 0 More and more people who stop by the stores make purchases, though 2000 2001 2002 2003 2004 at the same time the competitive situation in the Finnish market has be- International operations come tighter as new hypermarkets spring up and foreign chains open new stores. The number of Seppälä stores remained on average at the Finland previous year’s level.

Being nimble, being quick Development of Seppälä's For Seppälä and the garment trade in general, the most important thing is operating profit 2000-2004 always to bear in mind what kinds of fashion customers want to buy and the EUR mill. % predominating trends in the garment market. This is a challenging task Ö 18 18

15 15

12 12 Key figures 6(33b/b(85PLOO   FKDQJH 9 9 6DOHV    6 6 3URSRUWLRQRI*URXS6DOHV   2SHUDWLQJSURILW    3 3 5HWXUQRQFDSLWDOHPSOR\HG   0 0 &DSLWDOHPSOR\HG    2000 2001 2002 2003 2004 ,QYHVWPHQWV   6WDII'HFHPEHU    Operating profit % of net turnover

SEPPÄLÄ • STOCKMANN 27 The women’s assortment was expanded by adding the Bay Sport Seppälä presented awards to six young clothes designers in the S-Style collection, designed for fitness enthusiasts. competition. Veera Lassila (left) came in first with her Girlish outfit, worn by the mannequin beside her. because more and more factors have a ables Seppälä to stand out from other made it possible to offer stylish and bearing on the operating environment fashion stores. Some fifty people are high-quality fitness products at afford- and on consumers’ readiness to buy continuously engaged in designing and able prices. clothes. Ideally, customers always find buying the collection. Seppälä’s fash- something to buy in Seppälä’s extensive ions come to life at textile and fashion Close to the customer collections, whether they are interested fairs and by keeping a close eye on gar- Seppälä’s main strength is a compre- in the latest new fashions or in good ment industry trends and the society hensive network of 123 stores in Fin- utility clothing. Today’s customer buys around us. land. In Finland the focus is no longer an article of clothing for use right away. Seppälä must create fashion for its on establishing new stores; rather, Sep- This is why we need an ever-improving customers’ needs: never lose touch pälä will concentrate in seeing to it that ability to respond quickly to changes in with currents in the fashion world and its stores are in step with the times and fashion, the competitive situation and be aware of the kind of people who are sited in prime commercial locations, the weather. visit its stores. In order to promote where people are on the move. Open- Seppälä’s responsiveness has been Finnish design, in 2004 Seppälä orga- ing hours and the service concept sup- stepped up continuously and this pro- nized an open garment design compe- port shopping convenience. The task cess remains in full swing. The annual tition, which achieved wide popularity of visual marketing is to tell customers flow of goods is some 16 million individ- amongst fashion design students and in an interesting way what is happen- ual products. Seppälä’s good logistics professionals as well as consumers. ing in the world of fashion and to en- system and expertise are key in making rich the shopping ambience. The task sure that products are in the right place Trends in customer is to highlight the many dimensions of at the right time. This allows the stores behaviour point the way Seppälä’s assortments in an attractive to operate without stocks of their own. A fashion chain must be able to revi- and clearly-stated way. The use of the Instead, they receive a basic assortment talize its collection structurally too. In- store as a tool for creating a distinc- in accordance with the store size, and cluding new products in the assortment tive cachet and building a closer cus- this is topped up in line with demand whilst expanding old product groups tomer relationship is a concept that has and the central warehouse situation. broadens and refreshes Seppälä’s as- also won recognition in competitions Both new products and supplementary sortment. Seppälä began selling ladies’ that evaluate marketing performance: articles are delivered to the stores five shoes in 2002. This has proved to be a Seppälä placed first in the Effie and Ad- days a week. This operational model good new product group, and in 2004 Profit competitions. creates a basis for chain operations shoe sales were extended to a number It is important to pay unfailing at- that take into account stores of differ- of stores. By tracking customers’ atti- tention to keeping a large network of ent sizes in different-sized localities. tudes and how these affect behaviour, stores modern and attractive. In 2004, new customers and product groups seven stores moved into new premises Success hinges on continuously can be identified. Pampering oneself in Finland and additionally seven stores developing the Seppälä collection and attending to one’s personal well- were refurbished in accordance with The sources of fashion are found in life being have been an ascendant trend Seppälä’s modern light-toned and fresh about us: in the street, in media and for several years now. This trend led to look. In addition, four stores in Finland films and in youth culture. One of the the birth of a new collection, Bay Sport, were closed. Seppälä’s objective is to main underpinnings of Seppälä’s op- that was designed for fitness-minded operate with a chain of 120-130 stores erations is its own collection, which en- women. Efficient chain operations in Finland.

28 STOCKMANN • SEPPÄLÄ Shoes are an essential part of Seppälä’s fashion statement at a growing Small shower gel bottles are one of the most popular articles at the new number of stores in Finland and abroad. Cosmetics Department of the store in Tallinn’s Viru Center.

First store in Lithuania in November-December. Two of the A major element of Seppälä’s strategy stores operate in the Stockmann de- is to operate in all the Baltic countries. partment store and one in a large shop- It is Estonia’s largest chain of clothing ping centre. The aim is to open addi- stores, where it had 14 stores in opera- tional Seppälä stores as new and fairly Seppälä's sales by merchandise sector 2004 tion at the turn of the year. Because large shopping centres are completed. Seppälä has quite a good position in the Seppälä intends to open its first store Estonian market, there is no need at the in St Petersburg in autumn 2005. Mos- present time to increase the number of cow, with its population of over 10 mil- stores in Estonia. lion, and St Petersburg, with 5 million The first stores were opened in Riga people, offer good growth potential for in autumn 2003. The city’s economic ar- Seppälä in the years ahead. ea is home to nearly a million people. In 2004, one new store was opened in Riga. Growth on the radar in 2005 Seppälä’s stores are located in the four Seppälä’s operational model provides a 63% Ladies' fashion largest shopping centres in the city and good foundation for growth and earn- as part of the Stockmann department ings. Work on developing the clothes 17% Children's fashion store. In November 2004, Seppälä also collection is an ongoing process. Re- 15% Men's fashion opened its first store outside the capital furbishment of the store network in 5% Cosmetics city – in a shopping centre that was com- Finland is continuing, and at the same pleted in Liepaja. Operations in Latvia time the search is on for new commer- have been in line with expectations and cial locations in the Baltic countries Seppälä has achieved a good foothold in and Russia. Seppälä’s growth outside the country’s clothing market. Finland is linked strongly to the build- After Latvia, the next step is to move ing of new shopping centres and to the Distribution of Seppälä's sales by market 2004 into the Lithuanian market. Lithuania is rise of an affluent middle class. Both the most populous Baltic country and processes are unfolding, and resources has the largest disposable income. The dedicated to the markets in the Baltic first Seppälä store will be opened in the area and Russia are expected to bring a centre of Vilnius, the country’s capital, further significant increase in Seppälä’s in spring 2005. The aim is to build out sales and euro-denominated earnings. operations in Lithuania the same way Establishing future new stores will call as in the other Baltic countries: gain a for initial outlays and, naturally, it will firm foothold in the capital city and then take some time before each new store establish stores in other big towns. operates as profitably as an existing, well-rooted store. 89% Finland Russia: a growing The objective for 2005 is at least to 7% Estonia market area for Seppälä maintain the excellent level of operat- 3% Latvia ing profit reported in 2004. c In 2004 Seppälä opened three stores 1% Russia in Moscow, one in the spring and two

SEPPÄLÄ • STOCKMANN 29 Corporate Governance

The corporate bodies of the parent company Stockmann Stockmann’s Group Council and the other by the association plc which are responsible for the Group’s administration representing Stockmann’s senior salaried employees. and operations are the general meeting of shareholders, the The Board of Directors attends to the due organization of Board of Directors and the chief executive officer. the company’s administration and operations. In addition to the duties defined separately in law and in the Articles Annual General Meeting of Association, the Board of Directors, among other things, The highest decision-making body of Stockmann plc is the confirms the company’s long-term strategic and financial general meeting of shareholders. The Annual General Meet- objectives, approves the budget and decides on major in- ing shall be held each year before the end of June. Stockmann dividual capital expenditures, acquisitions, divestments and has two series of shares, of which each Series A share con- real-estate deals and other projects of strategic importance. fers ten votes at a general meeting and each Series B share The Board of Directors also approves the principles of the one vote. No one, however, can cast more than one fifth of company’s risk management. the votes represented at the general meeting except in situa- The Board of Directors has adopted rules of procedure tions in which the Companies Act calls for passing a resolu- defining the principles governing the Board’s composition tion with a majority of the votes cast. Information on share and method of election, its tasks, decision-making procedure ownership is given on pages 46 – 49 of the Annual Report. and meeting practice as well as the principles of the Board’s A Series A Share can be converted to a Series B Share self-assessment. The Board of Directors’ rules of procedure upon the demand of a shareholder provided that the con- are published on the company’s website at the address www. version can take place within the limits of the minimum and stockmann.fi. maximum amounts of the share series. The Board of Directors met 11 times in 2004. The average A two-tier provision concerning the obligation to exercise a attendance was 99 per cent. pre-emptive purchase of shares is written into the Articles of The Board of Directors has set up an Appointments and Association. A shareholder whose proportion of all the com- Compensation Committee which is made up of three mem- pany’s shares or the number of votes conferred by the shares bers of the Board of Directors. Its task is the preparation of reaches or exceeds 33 1/3 per cent is liable, at the demand of appointment and compensation matters concerning the chief the other shareholders, to purchase their shares and the secu- executive officer, the executive vice president and the other rities which according to the Companies Act give title to them. members of the Management Committee, the preparation of If a previous pre-emptive purchase offer has not led to the pre- the election of members of the Board of Directors for propos- emptive purchase of all the company’s shares, the shareholder al to the Annual General Meeting as well as the preparation shall make a new pre-emptive purchase offer when the share- of compensation matters concerning the Board of Directors. holder’s proportion of all the company’s shares or the votes The committee meets as necessary at least once a year. Dur- conferred by the shares reaches or exceeds 50 per cent. ing the 2004 financial year the members of the committee The business of the Annual General Meeting includes ap- were Lasse Koivu, chairman of the Board of Directors, who proval of the company’s annual financial statements and the served as its chairman, the other members being Erkki Etola, passing of resolutions on the dividend and the election of vice chairman of the Board of Directors, and Board member members of the Board of Directors. Henry Wiklund. The chief executive officer has the right to attend meetings of the committee. The committee met once Board of Directors during the financial year. The company’s Board of Directors shall have a minimum of five and a maximum of nine members. They are elected for Chief executive officer one year at a time. The Board of Directors appoints the company’s chief execu- A person who has reached the age of 65 years cannot be tive officer and decides on the terms and conditions of his elected a member of the Board of Directors. At present, the executive post, which are set forth in a written chief executive Board of Directors has seven members, none of whom are officer agreement. The chief executive officer is in charge full-time members. of the company’s line operations in accordance with the The Board of Directors shall elect from amongst its number instructions and regulations issued by the Board of Direc- a chairman and a vice chairman for one year at a time. tors. Hannu Penttilä has been the company’s chief executive The company’s officers who participate regularly in meet- officer since March 1, 2001. ings of the Board of Directors are the chief executive officer, the executive vice president, the chief financial officer and the The Group’s line organization company lawyer, all of whom are not members of the Board Apart from the chief executive officer, the Board of Direc- of Directors. The company lawyer acts as secretary to the tors appoints the executive vice president, the chief financial Board of Directors. Two employee representatives also par- officer and the directors of the divisions. Jukka Hienonen, ticipate in meetings of the Board of Directors, and they like- director of the Department Store Division, has also acted as wise are not members of the Board of Directors. One of these the company’s executive vice president since January 1, 2003 representatives is elected by the employee representatives of and as the CEO’s alternate since November 15, 2004.

30 STOCKMANN • CORPORATE GOVERNANCE Corporate Administration oversees the entire Stockmann Management’s remuneration and other benefits Group. Commercial operations are organized into four divi- The Annual General Meeting passes resolutions on the remu- sions, which are the Department Store Division, Stockmann neration paid to the members of the Board of Directors. In Auto, Hobby Hall and Seppälä. The directors of the divisions accordance with the resolution passed by the Annual General report to the chief executive officer and are members of the Meeting held on March 30, 2004, the fixed emoluments paid company’s Management Committee. for the 2004 financial year were EUR 60 000 to the chairman of the Board of Directors, EUR 40 000 to the vice chairman Management Committee and EUR 30 000 to each of the other members of the Board. The Group’s Management Committee comprises the chief About 50 per cent of the annual emoluments were paid in the executive officer, the executive vice president and the other form of the company’s shares and the remainder in cash. All directors of the divisions, the chief financial officer as well as the members of the Board of Directors were paid a meeting the company lawyer, who acts as secretary to the Manage- fee of EUR 250 per meeting. For the 2004 financial year, the ment Committee. members of the Board of Directors were paid cash emolu- Headed by the chief executive officer, the Management ments totalling EUR 154 667 and share emoluments of 6 061 Committee is responsible for directing line operations and of the company’s Series B shares. The value of the emolu- for preparing strategic and financial plans. ments paid was a total of EUR 266 250. The cash and share emoluments paid to each of the members of the Board of Oversight and risk management Directors for 2003 are itemized on the company’s website. The Board of Directors and operational management are re- The total amount of the salary, emoluments and fringe sponsible for internal oversight, the objective of which is to benefits paid to the chief executive officer in 2004 was EUR ensure the efficiency and performance of operations, the reli- 385 169, of which fringe benefits accounted for EUR 10 340. ability of information as well as the observance of rules and In the chief executive officer agreement, the CEO’s pension operating principles. On June 16, 2004, the Board confirmed age is set at 60. The pension is determined in accordance with the company’s risk management principles which are dis- the Employees’ Pensions Act and a separate insurance plan cussed in more detail on pages 33-34 of the Annual Report. which is taken out by the company. The CEO’s period of no- An essential part of internal oversight is the Internal Au- tice is specified bilaterally at 6 months. Should the company dit, which operates as a separate unit within Corporate Ad- terminate the agreement, the CEO has the right to compensa- ministration and reports to the chief executive officer. The tion corresponding to 12 months of fixed salary upon expiry Internal Audit is a function which is independent of line op- of the termination period. In addition, the CEO is entitled to erations and supports the Group management in operations extra compensation corresponding to 12 months of fixed sal- control and risk management, examining and assessing the ary one year after expiry of the termination period if the CEO effectiveness of business operations and internal oversight has not retired on an employment, voluntary or health-based as well as producing information and recommendations to pension funded by the company. Should the company termi- management on how to enhance these functions. The Inter- nate the executive post relationship on cancellation grounds nal Audit’s work is guided by a risk-oriented approach in due to personal reasons, neither of said classes of compensa- line with the priority areas of business operations and their tion shall be paid. development. The auditors elected by the Annual General Meeting exam- Incentive systems ine the company’s accounting records, financial statements The Group makes use of annual performance-based systems and administration. The audit work is carried out during the of rewards and incentives to promote the achievement of financial year through audits of the divisions and company short-term objectives. The amount of the incentive is gener- administration and by carrying out the official audit of the ally influenced by the earnings reported for the financial year financial statements at the close of the year. The company and the personal job contribution. has a minimum of one and a maximum of three auditors, who The principles of determining the incentive bonuses of the have a minimum of one and a maximum of three deputies. At CEO and the other members of the Management Committee present the company has two auditors and a deputy auditor is confirmed annually by the Board of Directors on the basis which is a firm of independent public accountants authorized of a proposal prepared by the Appointments and Compen- by the Central Chamber of Commerce. sation Committee. Bonuses are determined primarily on the The Internal Audit coordinates auditing activities between basis of the Group’s earnings and profitability trend such the external and internal audits in order to ensure the com- that the determining factors are the Group’s profit before ex- prehensiveness of the auditing work and to avoid overlap- traordinary items net of other operating income, the Group’s ping auditing tasks. return on capital employed and the key figures for the di- The fees paid to the auditors for the 2004 financial period visions, which are derived from the aforementioned. The totalled EUR 165 693 for the audit of the parent company and maximum incentive is generally no more than 25 per cent a total of EUR 368 897 for the audit of the Group. In addition, of annual salary income, but the limit can be exceeded on a KPMG was paid EUR 129 575 in consultancy fees. sliding scale in respect of Group targets. Ö

CORPORATE GOVERNANCE • STOCKMANN 31 Corporate Governance

On April 24, 2003, the Board of Directors approved for bers of the Board of Directors, the chief executive officer, the members of the company’s Management Committee, as the executive vice president and the auditors. In addition, the a supplement to the annual incentive, a long-term share bo- Insider Guidelines specify that permanent insiders include nus scheme extending, in two year periods, up to the end persons who act from time to time in tasks assigned by the of 2006. Carrying out of the share bonus scheme is tied to chief executive officer, said persons including the members the realization of the Group’s development in accordance of the Group’s Management Committee. Stockmann’s Board with its long-term strategy, and its benchmarks are both of Directors has decided that the restriction on trading in the consolidated profit before extraordinary items net of other company’s shares by insiders is 14 days before the publica- operating income and the Group’s trend in the return on tion of an interim report or the financial statements, whereas capital employed. Attainment of the share bonus targets will Stockmann has found it appropriate not to define a period be assessed in two-year periods. In 2005, a total of 5 767 preceding the publishing date of financial results during Stockmann Series B shares and EUR 208 823.07 will be paid which the company does not comment the development of to the members of the Management Committee on the basis its sales or earnings. of the attained aggregate targets in 2003-2004. The maximum A list of the persons classified as permanent insiders is incentive payable in 2006 on the basis of the attained aggre- available on Stockmann’s website. The company makes use gate targets for 2004-2005 to all the members of the Manage- of the Insider Register service kept by Finnish Central Securi- ment Committee in the form of Stockmann Series B shares ties Depository Ltd, which makes available for public scrutiny is a total not to exceed 16 712 shares as well as 1.5 times the the up-to-date share ownership data on insiders. Addition- cash value of the shares. If the lower limits defined for each ally, the data on shareholdings of the members of the Board target period are not exceeded for both target criteria, no of Directors and the Management Committee, which are up- share bonus will be paid. dated quarterly, are available on the company’s website. Achievement of the company’s long-term objectives has been supported by two share option schemes for key employ- New recommendation on the Corporate ees, which were approved through resolutions passed at the Governance of listed companies Annual General Meetings in 1997 and 2000. The subscription HEX Plc, the Central Chamber of Commerce of Finland and period for shares with the 1997 share options ended on Janu- the Confederation of Finnish Industry and Employers pub- ary 31, 2004. Information on the 2000 share options is given lished in December 2003 a new recommendation on the Cor- on page 46 of the Annual Report. porate Governance of listed companies. Helsinki Exchanges adopted it as a minimum set of regulations forming part of Insiders the stock exchange’s regulatory regime. The recommenda- Stockmann complies with the insider guidelines approved tion sets new requirements for the corporate governance of by Helsinki Exchanges, the Central Chamber of Commerce stock exchange companies and also for their duty to inform, and the Confederation of Finnish Industry and Employers. and it came into force on July 1, 2004. Stockmann complies Counted as permanent insiders of Stockmann plc under the with the recommendation. c Securities Market Act, Chapter 5, Section 2, are the mem-

32 STOCKMANN • CORPORATE GOVERNANCE Risk management

The aim of risk management is to safeguard the Group’s jeopardize or prevent the achievement of strategic goals. At earnings trend and ensure disturbance-free business opera- the same time it evaluates the adequacy of risk management tions by implementing risk management cost-effectively and measures. The management committees of the divisions are systematically in the divisions. The achievement of risk man- responsible for drawing up strategic and financial plans for agement goals at Stockmann is organized such that their own divisions. Formulating a strategy involves analys- • risk management is part of normal business operations ing business risks and assessing the risk management proce- and management dures. Business risks are also analysed outside the strategy • risk management is a process of identifying, assessing process, in particular in connection with important projects and managing business risks that can prevent or jeopard- and investments. ize the achievement of business goals. The Group has a Risk Management Steering Group whose • risk management is supported by internal control sys- task is to support the divisions in identifying and manag- tems (guidelines, routines and procedures). Risk manage- ing risks that may jeopardize or prevent the achievement of ment principles are defined separately for specific areas, Stockmann’s strategic goals. The Steering Group, comprising including the following: IT and data security, financial the head of the Group’s Internal Audit, the company lawyer operations, environmental affairs, security, insurance and the Group Controller, meets several times a year and re- policies and the Internal Audit. ports on its observations and recommendations to the com- pany’s Management Committee and Board of Directors. Risk classification All factors that may jeopardize or prevent the Group or its Risk management reporting divisions from achieving the strategic goals they have set The divisions report on business risks and their management constitute business risks. • annually in connection with Stockmann’s strategy pro- Stockmann’s business risks are classified into three risk cess and areas: • as part of decision-making on important projects and in- • business environment risks, meaning risk factors that vestments to the Group’s Management Committee, which are external to the company and may significantly affect reports on business risks to the Board of Directors. the company’s latitude of operations and profitability if they materialize. These kinds of risk factors encompass Management of financial risks fundamental and unforeseen changes in market trends, The Group’s financing and management of financial risks are disasters and catastrophes, and country risk for Russia. handled on a centralized basis within Stockmann plc Trea- • operating risks, meaning internal risks associated with sury function in accordance with the Treasury Guidelines operations which may, if they materialize, lead to in- that are approved by the Board of Directors. Group Treasury terruption of business, inefficiency and unprofitability. has more detailed operational instructions that include the These risk factors include risks related, for example, to principles for management of financial risks as well as liquid- personnel, fraud and abuse, IT and data security risks as ity and securities management. The divisions have separate well as risks associated with information used in deci- instructions for hedging foreign exchange exposure and a sion-making. security policy. • financial risks, whose influence will be reflected in the The objective of the management of financial risks is to Group’s profits, balance sheet and liquidity if they mate- minimize the effect of the financial risks related to the busi- rialize. ness operations on the Group’s financial result, balance sheet and liquidity. The Group Treasury is responsible for Allocating responsibilities within risk management the management of the hedging of foreign exchange expo- Risk management is part of the Stockmann Group’s normal sure in cooperation with the divisions, financing operations business operations. at a reasonable price in all conditions and investing liquid Under the Finnish Companies Act, the Board of Directors funds productively and safely. The Group Treasury also has must see to the due and comprehensive supervision of ac- an internal bank function and is furthermore responsible for counting and financial management. The Board also confirms managing Group accounts and securities. the company’s long-term strategies and financial goals. In accordance with the new recommendation on the Corporate Foreign exchange risk Governance of listed companies, the Board confirmed the Stockmann’s foreign exchange risk derives from purchases company’s risk management principles in June 2004. and sales in foreign currency as well as foreign currency-de- According to the Finnish Companies Act, the chief execu- nominated investments made in units abroad. tive officer must make sure that the company’s accounts are The most important purchasing currencies are the United kept according to law and that the management of funds is States dollar, British pound and Swedish krona and the most arranged in a reliable manner. important sales currencies are the Russian rouble, Estonian During the strategy process, the Group’s Management kroon and Latvian lat. In 2004, purchases made in foreign cur- Committee makes an estimate of business risks that may rencies account for 14 per cent of the Group’s purchases, Ö

RISK MANAGEMENT • STOCKMANN 33 Risk management

and sales denominated in foreign currencies make up 14 per Liquidity risk cent of the Group’s aggregate sales. The fast turnover rate The aim of managing liquidity risk is to ensure that Stock- typical of the retail trade reduces the foreign exchange risk mann is able to meet its financial obligations at any time. The deriving from the purchases. trend in liquidity is monitored by cash flow forecasts. Liquid- The management of foreign exchange risk related to the ity risk is managed by ensuring the availability of sources of business operations cash flows is based on the forecast 12- funds at a reasonable price and by allocating a sufficient part month cash flow in foreign currencies, currency by currency. of the investments in liquid financial instruments. The hedging period is usually a maximum of 12 months. The foreign exchange risk related to balance sheet items derives Credit risk from foreign currency-denominated investments made in Financial instruments involve the risk that the counterparty units abroad. Balance sheet risk is monitored and hedged to an agreement does not fulfil its obligations. Credit risk is separately. managed by means of counterparty limits. The counterparty The instruments used in hedging foreign exchange risk are limits are reviewed and approved semi-annually. c currency derivatives and currency-denominated borrowing.

Interest rate risk Stockmann’s interest rate exposure arises from the cash flows from the Group’s operations, capital expenditures and financing. A dual approach is employed in managing interest rate risk. The Group’s borrowings and investments are diver- sified across different maturities and, furthermore, floating rate and fixed-interest instruments are used. The manage- ment of interest rate risk also involves the use of forward rate agreements and futures, interest rate options and interest rate swaps. The average interest rate period of the loan and investment portfolio is a maximum of five years.

34 STOCKMANN • RISK MANAGEMENT Personnel

The Stockmann Group’s number of employees saw strong has been included in the programme. A manager coaching growth in 2004 due to the setting up of department stores programme for the other divisions and Corporate Adminis- abroad. Two full-scale department stores were established in tration was started up in September. An Industrial Relations Moscow, along with Seppälä stores next to them. The Zara Seminar and an Accounting and Finance Seminar were also chain also opened new stores in Moscow. At year’s end, the held for the Group’s managers by in-house specialists. Group had 10 919 employees, of whom 3 391 worked abroad. During the whole year, Stockmann’s and Seppälä’s own The payroll rose by 1 377 people. The number of employees groups studied for retail supervisors’ specialized vocational decreased by 74 people in Finland and rose by 1 449 people degrees over and above their work. The studies included abroad. Fifty-four per cent of the employees were full-time, classroom teaching sessions on various subareas of retail while 46 per cent were part-timers. Women accounted for theory. The supervisors got to apply the theory in practice 73 per cent of the Group’s personnel, and men for 27 per during various assignments that were related to their own cent. The proportions were roughly similar among senior jobs and in a development project lasting the entire duration salaried employees: 72 per cent women and 28 per cent men. of the degree programme. Of all those working as executives in the Group, 43 per cent In spring 2004, an IT training event was held for the first were women and 57 per cent were men. The average age of time by Stockmann’s own experts. The event was specially employees was 33 years. Staff turnover among permanent designed to meet the Group’s own needs. Help desk staffers employees in the Group’s units in Finland was on average 14 who are well-versed in the most problematic situations that per cent. Staff turnover abroad is greater, owing to the fact crop up in everyday work participated in the planning of the that the labour markets are undergoing drastic change. course content. The course aimed to upgrade the partici- Further information on the numbers of personnel is given pants’ software skills. Training is rounded out by extensive in the Board Report on Operations under the section “Per- written guides, which are also available in Estonian. sonnel strenght” on page 45 of the Annual Report and in the All the employees working at the Seppälä chain’s stores table on page 43. Information on personnel is also given in participated in its Spirit programme. In 2004, it focused on Note 4 to the Annual Accounts on page 58. upholding the calibre of customer service through the sched- uling of working hours. A good level of customer service Human Resources Development during peak business hours is ensured by scheduling tasks In order to ensure quality in customer service, the Group related to store goods handling and administration for the seeks to employ people who are willing to commit themselves quieter hours of the day. to the corporate core values and who authentically wish to do The monitoring of customer satisfaction in Stockmann Au- their best to provide excellent customer service. In addition to is ensured by systematically and rapidly contacting, either to the right attitude, the Group emphasizes induction and on- in writing or by phone, the purchaser of a new private car the-job training, multi-skills, the continuous monitoring of or service customer after his or her visit. The share of satis- customer feedback, the regular assessment of service quality fied customers has been on the rise. The training standards and rewards for good customer service. of importers and Stockmann’s operations involve continu- In the assessment of customer service at the department ous outlays on both customer service and technical product stores in Finland, the service index rose significantly for the knowledge. Sales staff were also provided with training on second year running. The index of the entire chain was 71, the services offered by financial and insurance companies whereas it was 66 per cent in the previous year and 59 the and how to take care of such transactions electronically. All year before that. A large share of the department store teams the product lines of the Vehicle Division took part in these either achieved or surpassed the long-term objective of 80. training programmes. The service index compares success against the maximum figure for performance, 100. All the Stockmann Beauty shops Large-scale hiring in Moscow participated in the assessment for the first time and imme- Two full-scale department stores, three Seppälä stores and diately achieved an index rating of 85. All in all, over 1 200 two new Zara stores were opened in Moscow in 2004. In as- survey visits were made to the department stores and Stock- sociation with the managers, local personnel administration mann Beauty shops during autumn 2004. took a long-term approach to preparing the hiring campaign Sustained efforts have been made to hone service quality. – these preparations were already kicked off in 2003, as it was Feedback on individual customer service situations contin- known in advance that it would be a particular challenge to ued and this has had a significantly positive effect, particu- acquire department store personnel. Moscow is a sprawling larly when it comes to catering to the customer. A new type of city with long distances – the company knew that it would be training entitled “Using the best resources” was started up in difficult to acquire labour in the vicinity of the department the autumn. Experienced salespeople from both the depart- stores, because many new stores have been opened in these ment stores and Seppälä participated in the coaching. It aims areas and are competing for employees. to enhance the full-scale harnessing of the professional skills In the first months of 2004, a large-scale drive to hire sales and expertise of salespeople in customer service situations. staff was started up in Moscow for the Mega South depart- A training event for inductors was held for the first time ment store, which was opened in April. Many communica- at Hobby Hall in autumn 2004. The course lasted four days tions channels were used to announce the job vacancies – the and 11 employees took part in it. They were provided with Internet site, flyers and the hiring information point at the the capabilities to guide and coach new staff as well as plan Mega Shopping Centre. About 1 500 applications were re- induction programmes. ceived. The core group of the new store’s staff comprised The training of managers continued. Eighty-one manag- applicants from the Group’s other units – they facilitated ers in sales, procurements, marketing, logistics and admin- the mobilization of Stockmann culture at the new depart- istration have completed the Department Store Division’s ment store. However, hundreds of new employees were also coaching programme. Project work to mobilize the strategy required. The mass assessment and interview technique Ö

PERSONNEL • STOCKMANN 35 Personnel

that had proved its worth during the hiring of employees for Codetermination the Riga department store was used in the selection of the The roots of Stockmann’s internal codetermination activities new employees. Using this method, over 300 employees were go back a long way – the first organized Employees’ Council screened in a short time. They all completed the Stockmann started up in 1924. In other words, codetermination at Stock- Group’s corporate induction programme before the depart- mann had its 80th anniversary in 2004. ment store was opened. In Finland, each division and larger business unit has its In December, another large department store, Mega North, own Employees’ Council that deals with issues related to the was opened in Moscow. It is located far from Mega South Act on Co-operation within Undertakings in its own busi- in an area where it is very challenging to secure labour. An ness area. Representatives of these local councils make up even larger hiring drive was initiated for this project than the Group Council in Finland, which convenes twice a year for the opening of Mega South. Personnel administration set to deal with matters concerning the entire Group. During up its own hiring office in the area to make it easier for job these sessions, Stockmann’s CEO gives a comprehensive applicants to submit their applications, and used many kinds presentation on the Group’s financial situation and plans for of communications channels to let people know that the de- the future. partment store is an attractive employer. Due to the opening This operating model was expanded to Estonia in 2004. of Mega South in the spring, the department store had few- There, the first Employees’ Council was appointed in the er applicants – supervisors and salespeople alike – from the spring. It held its first meeting in the autumn. It is intended Group’s other units. It was thus more challenging to provide that these activities will be expanded to Latvia and Russia as induction for the employees of the new department store. well in the near future. In every country, the staff representa- Nevertheless, when the department store opened, all 370 of tives are told, in their own language, about not only local its employees served customers in line with Stockmann’s cus- affairs, but also the Group’s financial situation and plans for tomer service strategy. the future in its other business countries. Codetermination negotiations on the integration of the Incentive systems Viinikkala and Tammisto warehouses continued at Hobby Most of the Group’s staff is covered by an incentive system. Hall. As a result of the negotiations, 45 employees became The incentive systems of managerial staff and experts are redundant. based on financial benchmarks and criteria for the evaluation of personal job performance. Personnel abroad Other positions are primarily covered by group incentive The number of the Group’s employees abroad was 3 391 peo- systems. However, personal sales-based incentives are being ple, of whom 2 401 had full-time jobs and 990 were part-tim- tried out at some pilot units. ers. The Group has had local employees abroad for 15 years The Group paid a total of over 5 million euros in various now, that is, ever since operations began. Badges for long- incentive bonuses in 2004. standing service for 10 years of employment have already Management incentive systems and the share option ar- been awarded to a total of 69 people abroad. The company rangements for key employees are discussed in the section has been reasonably successful at committing its foreign “Corporate Governance” of the Annual Report on pages 31- managers and supervisors to its employ, as the turnover of 32. Detailed information on the share option scheme for key key employees has been slight. Of the 3 391 people working employees is presented in the section “Share Capital and abroad, only 11 are Finnish. Two of the three department Shares” on page 46. stores in Moscow are headed by a local director – both of them are women and have been in the Group’s employ for over 10 years. The turnover of sales staff is higher, as the Group’s business locations are in vigorously evolving com- mercial centres, where competition for trained and profes- sionally skilled labour is a daily problem. c

Average number of staff Staff costs 2000-2004, Turnover of permanent personnel Years of service, permanent 2000-2004 % of net turnover in Finland 2003-2004 personnel in Finland 2004 persons % % persons 10000 15 25 2500

8000 12 20 2000

6000 9 15 1500

4000 6 10 1000

2000 3 5 500

0 0 0 0 2000 2001 2002 2003 2004 2000 2001 2002 2003 2004 Department Vehicle Hobby Seppälä Stockmann under 3 3-4 5-9 10-14 15-19 20-50 Store Div. Div. Hall total years years years years years years International operations 2004 Finland 2003

36 STOCKMANN • PERSONNEL Corporate social responsibility

Since 2002 Stockmann has worked systematically to make gives a comprehensive picture of how environmental affairs corporate social responsibility a part of the Group’s normal are handled across the Group. day-to-day operations. The Group has carried out a social responsibility project that has brought a significant increase Department Store Division in its commitment in the area of social responsibility. All Stockmann’s department stores in Finland have envi- To highlight the importance of social responsibility, a sixth ronmental systems that have been certified according to the core value was added to the Stockmann Group’s corporate ISO 14001 standard. The systems were built and certified in creed in early 2004: Social responsibility – our way of oper- 2002-2003, when the principal benchmarks for tracking envi- ating is ethical, just and shows respect for environmental ronmental impacts were also formulated. Accordingly, com- values. parable full-year information on all the department stores in Corporate social responsibility has become an increasingly Finland will be available for the first time in 2004. important theme in recent years. A certification carried out by Bureau Veritas Quality In- The development of functions connected with social re- ternational covers the functions of Stockmann’s department sponsibility has been organized across all Group units to stores and Academic Bookstores in Finland as well as the form a part of business operations. Group-wide development Department Store Division’s joint purchasing and warehous- work is directed by the Environmental and Social Responsi- ing functions in Helsinki’s Pitäjänmäki district. Just over bility Management Committee. 4 400 people work in jobs falling within the scope of the certi- The overhaul of Stockmann’s website in summer 2004 fied functions. involved adding to the site a social responsibility section The objective of environmental systems is overall manage- dealing with Stockmann’s work to promote environmental ment of environmental affairs. For Stockmann’s stakehold- well-being and social responsibility in importing. Commu- ers, the certified environmental system is a guarantee that nications on social responsibility issues will be expanded on environmental impacts are taken into account in operations the Internet during 2005. every step of the way. The main objective is to develop the In 2004 Stockmann engaged in cooperation with a number department stores’ operations so that they are increasingly of writers of theses dealing with environmental and social in line with sound environmental principles, and to prevent responsibility. environmental impacts resulting from operations. Environmental work is carried out with the aim of reduc- Financial responsibility ing environmental loading, notably by tracking and boosting Profit orientation is the first of Stockmann’s core values. the efficiency of energy consumption, recycling wastes and Good financial performance lays the foundation for responsi- directing attention to preventing wastes from arising as well ble operations, enabling the company to invest in developing as by taking environmental factors into account in purchas- the well-being of its personnel as well as social well-being. ing and assortment decisions. The personnel are in a key Good results in the area of environmental and social respon- position in making environmental systems effective, and this sibility strengthen financial performance. is why training the staff has been a major focus over the past The good trend in Stockmann’s business operations con- two years. tinued in 2004. Sales rose to EUR 1 735.0 million (1 698.6). An Environmental Affairs Steering Group was set up for Profit before extraordinary items was EUR 79.1 million the Department Store Division in 2003 and given the task of (74.0). In 2004, Stockmann paid its shareholders dividends of supervising and promoting the integration of environmental EUR 123.3 million (45.8). The company paid direct taxes systems as part of efficient chain operations. of EUR 20.9 million (22.3). During the year Stockmann em- In October, the Stockmann department stores took part ployed an average of 9 589 people (8 745), of whom 4 420 in a Europe-wide campaign to make the EU environmental were part-time staff. The company paid salaries, wages and emblem well-known for textile products. Towards the end of emoluments of EUR 166.6 million (160.1), an increase of 4 per 2004, Stockmann started pilot use of bio-degradable serving cent. Pension expenses came to EUR 24.1 million (22.4), and boxes in the Delicatessen and other departments that sell expenditure on staff training in Finland, excluding direct sal- ready-to-eat meals in the Helsinki department store. ary and wage costs, amounted to EUR 0.8 million. Stockmann Auto Environmental responsibility Stockmann Auto participates in the environmental pro- The environmental work of Stockmann’s divisions is based gramme of the Finnish Central Organization for Motor on the Group’s environmental policy as approved by Stock- Trade and Repairs (AKL), and the programme is part of the mann’s Board of Directors. The goal of environmental policy quality systems in use at the division’s outlets. Stockmann’s is to promote and support implementation of the principles Volkswagen dealership in Vantaa took part in an AKL pilot of sustainable development in the Group’s business opera- project back in 1996, and the environmental programme re- tions. sulting from this initiative today covers all Stockmann Auto’s As part of its work for a better environment, Stockmann units. AKL’s environmental programme is structured along undertook in autumn 2004 preparations for recording, the lines of the ISO 14001 environmental standard. calculating and presenting environmental expenditure in its Stockmann Auto is seeking to minimize environmental financial statement information. The environmental expendi- loading in all its functions, whilst adapting the operations of tures presented in the Annual Report have been collected and the motor trade and vehicle repairs to the demands of envi- reported in accordance with the general guidelines which ronmental protection and respect for environmental values. the Finnish Accounting Standards Board (KILA) has issued Apart from the dealership in Oulu that was acquired in No- concerning the presentation of environmental compliance in- vember 2004, all Stockmann Auto’s outlets also have quality formation in financial statements. The uniform presentation systems that have been certified according to the ISO 9001 of environmental expenditures facilitates comparison and standard. Environmental protection at the Oulu dealership Ö

CORPORATE SOCIAL RESPONSIBILITY • STOCKMANN 37 Corporate social responsibility

will be developed during 2005. Achievement of the quality one is delivered. Measures have been started to expand the targets along with more detailed environmental targets was service to cover the entire country. A similar recycling service monitored in prescribed audits that were carried out at each is also in use in the Stockmann department stores in Finland. outlet during the year. Most of the equipment to be recycled consists of large and Today, about 75 per cent of a vehicle’s weight is recycled small home appliances, televisions and consumer electronics, and used again. In line with tightened up recycling require- monitors and various telephones. ments, the bulk of the waste arising in repair shop opera- tions is also utilized. Noteworthy examples are metals, plas- Seppälä tics, batteries, filters, fluids for cooling and air conditioning Seppälä has stepped up efforts to reduce the load it exerts on equipment as well as oil. the environment at both the head office and the Goods Han- The long-term environmental work was continued by dling Centre. Recycling and sorting are performed according launching a pilot project according to the ISO 14001 envi- to plans, with an emphasis on the staff’s own responsibility. ronmental system at the Lauttasaari unit in autumn 2004. Seppälä monitors regularly the sorting and recycling pos- Stockmann Auto too makes environmental compliance an sibilities of all its stores in Finland and has drawn up operat- integral part of its operations. ing instructions for the stores. Most of Seppälä’s stores are located in shopping centres, where environmental and waste Hobby Hall management matters have been well taken into account. During 2004 Hobby Hall carried out a waste management For its suppliers, Seppälä has prepared detailed coopera- survey that has enabled the division to reduce the amount tion instructions that aim to avoid overpackaging of products, of its wastes by increasing the recycling rate. The number whilst seeking to affect suppliers’ selections of packaging ma- of sortable waste fractions has been increased both at ware- terials and ways of packaging. These measures have also led houses and in the stores. In addition, from 2003 on Hobby to an improvement in the stock turn rate. The instructions for Hall has succeeded in reducing the amount of packaging partners also set out the principles of responsible importing. material used at its warehouses by dispatching a greater volume of products in supplier-used packages and by em- Waste management ploying combined packaging in orders for multiple products. One of the primary concerns of the divisions’ different envi- Boosting the combined packaging rate is a way of achiev- ronmental management systems is the sorting of wastes and ing greater efficiency in transporting and handling products ways of making it more efficient. The Stockmann Group has across the transport chain, and it helps to reduce environ- therefore striven, for two years now, to harmonize various mental impacts. waste management practices. The differing practices which The consolidation of Hobby Hall’s warehousing functions the divisions use to manage wastes somewhat limit uniform has moved ahead according to plans. At the beginning of reporting on waste management. Furthermore, the munici- 2005, warehousing will be centralized primarily within the palities’ waste management regulations may be divergent, Viinikkala Logistics Centre, cutting down significantly the posing another set of challenges for stepping up waste man- need for warehousing space. This in turn lessens the con- agement. sumption of energy. In addition, internal transports between During 2004 a uniform reporting model has been elaborat- the warehouses and stores will decrease markedly thanks ed, partly in conjunction with partners in the waste manage- to centralized warehousing. Within deliveries in the Baltic ment process. Stockmann has devoted efforts to raising the countries, October saw the introduction of a new transport effectiveness of its waste management over the past couple model in which trunk-line transports are used to gain greater of years, notably by drawing up waste management agree- transport efficiency. ments which all the divisions utilize as far as possible. Hobby Hall’s Internet sales grew and rose to 20 per cent of The measurement methods and results have gained in aggregate sales in 2004. The Internet is an environmentally precision as the reporting of environmental indicators has friendly marketing tool. Online shopping is set for a further become standardized, and Stockmann can begin publishing spurt in growth. information on waste management costs and volumes. All distance retailing catalogues and packaging are made Annual targets have been set for waste management activi- from environmentally friendly materials that are recyclable. ties, and the results are monitored regularly. Waste manage- Since 2000, Stockmann has been a founding member of ment is based largely on source separation, and the staff’s Serty ry, an association whose task is to coordinate in Fin- participation plays a major part in it. There are rigorous land, on behalf of its member companies, the recycling and guidelines for waste management, and extensive orientation waste management of electrical and electronic equipment in has been arranged for the personnel as well as tenants and accordance with the principles of the EU’s WEEE directive partners operating in company premises. Bio and energy on producer responsibility. As part of these activities, Hobby wastes that are to be sorted, along with paper and card- Hall offers its customers in the Helsinki metropolitan area board, are delivered to recycling stations, for further utiliza- the possibility to recycle an old home appliance when a new tion and to waste processing plants.

38 STOCKMANN • CORPORATE SOCIAL RESPONSIBILITY Energy child labour or forced labour, not to practice discrimination The consumption of electricity, heat and water is monitored and to guarantee employees safe working conditions and across the Group. Comprehensive information is not yet adequate wages. available on all aspects of energy use Group-wide. For 2004, The purchasing organizations of Stockmann’s divisions energy consumption is reported in terms of the aggregate sent 24 representatives to participate in the Social Respon- consumption of electricity. sibility in Importing seminar day that was organized by the Electricity consumption stems mainly from the lighting and eponymous network in May 2004. The subjects included so- cooling of store, repair shop, warehouse and office premises, cial responsibility in the buyer’s work as well as the experi- from the electrical equipment used in these areas and from ences of Finnish and European companies in monitoring the automation and equipment in buildings. social quality of suppliers. In autumn 2004, Stockmann decided to join the Business Social responsibility Social Compliance Initiative (BSCI). BSCI is a cooperation or- Stockmann’s social responsibility extends beyond the compa- ganization that has been developed by European companies, ny’s own personnel to encompass the working conditions of trade unions and organizations. BSCI is a joint system for au- employees all along the supply chain. The main dimensions of diting suppliers and it is administered by the Brussels-based a company’s social responsibility are employee satisfaction, Foreign Trade Association (FTA). The purpose of BSCI is to mental and physical well-being, the realization of equality as improve the working conditions of suppliers and to clarify as well as training and career advancement. Personnel matters well as harmonize the monitoring of suppliers. Thanks to this are discussed in greater detail on pages 35-36 of this Annual cooperation, the number of audited factories will increase Report. manyfold, the improvement of working conditions will be Since 2001, Stockmann has been a member of the Network speeded up, and all the parties will be spared a great deal to Advance Social Responsibility in Importing, which is co- of work and costs as overlapping functions are eliminated. ordinated by the Central Chamber of Commerce. Stockmann The phase of cooperation among companies will be followed has given its commitment to promoting application of the by the audit proper, which covers working conditions and ethical principles within importing activities as defined by the terms of employment, and is carried out by an auditor au- network. In addition, Stockmann has given its commitment thorized to perform a social standards (SA 8000) inspection. to observe the principles of responsible import trade as set An audit conducted by an external professional guarantees out by the International Association of Department Stores the system’s transparency and reliability. At the turn of the (IADS). The IADS principles are largely similar to those of the year, BSCI had 31 member companies from six different Network to Advance Social Responsibility in Importing. European countries. In addition to Stockmann, there are two Stockmann’s divisions adopted the “Commitment to Social other member companies from Finland. Responsibility in Importing” in their operations in 2003, and Stockmann is a founding member in the national chap- during 2004 securing the commitment of suppliers became ter of Transparency International, an organization that pro- an established practice. The commitment is based on UN dec- motes activities aimed at combating international bribery, larations and International Labour Organization agreements. which began its operations in Finland in 2003. c Accordingly, a supplier undertakes, for example, not to use

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CORPORATE SOCIAL RESPONSIBILITY • STOCKMANN 39 Board report on operations

The Stockmann Group’s sales grew by 2.1 per cent to EUR 1 735.0 million (EUR 1 698.6 mil- lion in 2003). Profit on ordinary operations improved by EUR 17.4 million on the previous year.

Both the Department Store Division and Seppälä improved their operating profit substantially and turned in their best-ever earnings. The Vehicle Division reported a decrease in operating profit.

Hobby Hall improved its operating result, though it was still in the red. Profit before extraordinary items increased by EUR 5.1 million and was EUR 79.1 million. The corresponding figure a year earlier, EUR 74.0 million, included EUR 15.4 million of other operating income. Other operating income in 2004 amounted to EUR 3.1 million. Earnings per share increased to EUR 1.11, as against EUR 1.01 a year ago. The Board of Directors will propose the payment of a dividend of

EUR 1.00 per share.

Sales up 2.1 per cent ings amounted to EUR 25.3 million to the decrease in cash assets accord- The Stockmann Group’s sales grew by (EUR 20.4 million) and the change in ing to plan. The return on capital em- 2.1 per cent, or EUR 36.3 million, to EUR the deferred tax liability was a decrease ployed rose to 14.3 per cent, as against 1 735.0 million. International operations of EUR 4.4 million. The change in the 13.2 per cent a year ago. The return on accounted for an increased share of deferred tax liability takes into account equity rose to 11.2 per cent, as against consolidated sales, rising from 11 per the lowering of Finland’s corporate tax 9.6 per cent a year earlier. Equity per cent to 14 per cent. Net turnover was rate from 29 per cent to 26 per cent as share was EUR 9.16, compared with up 2.3 per cent to EUR 1 445.0 million. from the beginning of 2005. EUR 10.36 a year earlier. The net turnover figures by division are Net profit for the financial year was shown in the accompanying table. EUR 58.2 million, compared with EUR Sales and profitability 51.7 million a year earlier. trend of the divisions A big improvement in earnings Earnings per share increased by EUR The Department Store Division’s sales The Group’s operating gross margin 0.10 and were EUR 1.11 (2003: EUR grew by 10 per cent to EUR 938.9 mil- increased by EUR 36.1 million to EUR 1.01). Earnings per share adjusted for lion. Sales grew by 4 per cent in Fin- 493.5 million. The relative gross mar- the effect of share options were EUR land and by 43 per cent abroad. Sales gin improved and was 34.2 per cent 1.09 (EUR 1.00). growth in Finland was reduced by the (32.4 per cent). The relative gross mar- Capital employed diminished and divestment of the Academic Bookstore gin improved across all the divisions. was at the end of the year EUR 557.5 magazine business in June 2003. Inter- Operating costs increased by EUR 16.7 million (EUR 611.8 million). The trend national Operations registered sales million. Depreciation rose by EUR 1.4 in capital employed was attributable growth ahead of the market in all the million. Profit on ordinary operations improved by EUR 18.0 million. Net fi- 1(7785129(5   FKDQJH FKDQJH nancial income decreased by EUR 0.5 (85PLOO (85PLOO (85PLOO  million. These factors improved the Group’s profit on ordinary operations 'HSDUWPHQW6WRUH'LYLVLRQ)LQODQG     before extraordinary items by EUR 'HSDUWPHQW6WRUH'LYLVLRQLQWHUQDWLRQDORSHUDWLRQV     17.4 million. 'HSDUWPHQW6WRUH'LYLVLRQWRWDO     Other operating income came from the consideration received from the sale 9HKLFOH'LYLVLRQ     of the Volkswagen-Audi car dealership in Helsinki’s Herttoniemi district as well as gains on the sale of securities and to- +REE\+DOO)LQODQG     talled EUR 3.1 million, a decrease of EUR +REE\+DOOLQWHUQDWLRQDORSHUDWLRQV     12.3 million on the figure a year earlier. +REE\+DOOWRWDO     Consolidated operating profit increased by EUR 5.7 million on the comparison 6HSSlOl)LQODQG     period, to EUR 71.4 million. 6HSSlOlLQWHUQDWLRQDORSHUDWLRQV     Net financial income decreased by 6HSSlOlWRWDO     EUR 0.5 million from the previous year and was EUR 7.8 million. 5HDO(VWDWHRWKHUV     Profit before extraordinary items (OLPLQDWLRQV    grew by EUR 5.1 million and was EUR 79.1 million. 2SHUDWLRQVLQ)LQODQGWRWDO     Direct taxes were EUR 20.9 million, decreasing by EUR 1.4 million on the ,QWHUQDWLRQDORSHUDWLRQVWRWDO     figure a year earlier. Taxes on earn- 7RWDO    

40 STOCKMANN • BOARD REPORT ON OPERATIONS countries where it operates. In Rus- virons. The BMW-MINI Autotalo Jur- Net turnover 2000-2004 sia, the Mega South department store vakainen Oy dealership was purchased EUR mill. was opened in Moscow in April, a in Oulu towards the end of October. Zara store in the Marina Roscha Shop- Sales by Hobby Hall diminished by 1500 ping Centre in June and a department 9 per cent on the previous year, to EUR store and Zara store in the Mega North 214.4 million. Sales in Finland were 1200 Shopping Centre in December. These down 6 per cent on the previous year. new locations, together with the Riga The lower sales in Finland were due 900 department store that was opened in mainly to the effect of the stores closed October 2003 boosted International at the end of 2003 and the start of 2004. 600 Operations’ sales growth. International Online shopping continued to enjoy Operations accounted for 21 per cent strong growth and already accounted 300 of the division’s sales (16 per cent). The for 27 per cent of Hobby Hall’s distance Department Store Division’s operating retailing in Finland. The division’s sales 0 profit increased by EUR 13.3 million abroad were down 22 per cent on the 2000 2001 2002 2003 2004 compared with the same period a year same period of 2003. This was attrib- ago, rising to EUR 53.0 million (EUR utable to tightened-up credit policy as International operations 39.7 million). Earnings were burdened well as the closing of one store in Esto- Finland by the costs of starting up the new de- nia in autumn 2003. Hobby Hall stepped partment stores in Moscow and the de- up its inventory management, and the partment store in Riga. The return on level of stocks fell by 31 per cent dur- Operating profit 2000-2004 capital employed was 23.7 per cent, as ing 2004. Hobby Hall’s headcount de- EUR mill. against 21.1 per cent a year earlier. creased by 155 employees during 2004. 80 Vehicle sales in Finland tailed off fol- Although sales fell short of the target, lowing the spurt in sales in the wake the improvement in the relative gross of the lowered car tax. The Vehicle margin and cost savings lifted the divi- 60 Division’s sales were down 9 per cent sion’s operating result by EUR 0.3 mil- to EUR 437.1 million. All in all, the de- lion, ending in a loss of EUR 3.1 million. 40 crease in sales was attributable to the It was decided to wind up loss-making transfer of the Volkswagen-Audi deal- operations in Lithuania by the end of ership in Helsinki’s Herttoniemi district March 2005. 20 to a Kesko Corporation subsidiary as Seppälä’s sales grew by 10 per cent from July 1, 2004. The transferred car on the previous year and were EUR 0 dealership had sales in 2003 accounting 143.7 million. Sales grew both in Fin- 2000 2001 2002 2003 2004 for about 22 per cent of the Stockmann land and abroad. Sales in the Baltic Vehicle Division’s entire sales. Unit countries were increased by the four Other operating income sales of new vehicles fell by 17 per cent stores opened in Latvia towards the and those of used vehicles declined by end of 2003 and the two stores opened Profit before extraordinary items 4 per cent. The division’s operating there in 2004 as well as by the store 2000-2004 profit diminished by EUR 1.4 million, that opened after a pause of one year in EUR mill. mainly due to the sale of the Volkswa- the refurbished Viru Centre in Tallinn, gen-Audi dealership in Herttoniemi, Estonia, in May. In addition, Seppälä 80 and was EUR 4.2 million (EUR 5.6 mil- opened its first store in Russia in Mos- lion). The return on capital employed cow in April 2004, with the next two 60 was 10.2 per cent, as against 13.2 per store openings coming in November cent a year earlier. Stockmann is push- and December. Thanks to higher sales ing ahead energetically with inputs into and an improved relative gross margin, 40 developing the vehicle trade and ser- Seppälä’s operating profit increased by vicing operations in localities where it a hefty EUR 6.3 million and was EUR has a department store. Finland’s first 16.4 million (EUR 10.1 million). The 20 car dealership in line with the Audi car return on capital employed was 127.7 plant’s recommendations was opened per cent, as against 58.5 per cent a year 0 in Espoo’s Suomenoja district at the earlier. Ö 2000 2001 2002 2003 2004 beginning of July and will serve the Helsinki metropolitan area and its en- Other operating income

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BOARD REPORT ON OPERATIONS • STOCKMANN 41 Board report on operations

Financing Zara chain in Russia. A new possibility Operating profit, % of net turnover Liquid assets at the end of 2004 totalled that has been identified for augmenting 2000-2004 EUR 41.4 million, compared with EUR business operations is to expand fran- % 121.3 million a year earlier. chising activities also for international Loan repayments were not made brands that have expressed interest in * 5 during the year, nor have new long- utilizing Stockmann’s acquired knowl- term loans been drawn down. The edge of trading in Russia. As part of the 4 amount of long-term loans at the end implementation of this strategy, in Oc- of December was EUR 13.1 million. tober Stockmann signed a cooperation 3 Capital expenditures came to a total agreement with the Bestseller group of of EUR 59.0 million. Dividend payouts Denmark, on the basis of which Stock- 2 totalled EUR 123.3 million. EUR 3.0 mil- mann received exclusive rights to retail lion was added to shareholders’ equity Bestseller’s brands in Russia. The Best- 1 through share subscriptions made on seller brands include Vero Moda, Only, the basis of the 1997 and 2000 share Jack & Jones, Exit and Selected. The 0 options and EUR 6.5 million was added first store selling Bestseller brands will 2000 2001 2002 2003 2004 through the exercise of Loyal Customer be opened in the Mega North Shopping * Long-term minimum target share options. In addition, disposals of Centre in spring 2005. fixed assets generated a total of EUR Alternatives for developing Hobby 1.7 million. Hall were examined during the autumn The equity ratio was 65.5 per cent. of 2004. As a result of this exploratory The equity ratio at the end of 2003 was work, it was decided to continue im- Dividend for the financial years 68.3 per cent. proving Hobby Hall’s performance as 2000-2004 Contingent liabilities diminished by part of the Stockmann Group. EUR mill. % EUR 19.7 million from the end of 2003 The vehicle business will be de- and were EUR 41.1 million. Liabili- veloped as part of Stockmann, with 125 250 ties for lease agreements on business a special emphasis on exploiting the premises amounted to EUR 456.8 mil- synergies arising via Loyal Customer 100 200 lion, compared with EUR 471.1 million marketing in concert with department a year earlier. store operations as well as the possibili- 75 150 ties for business development offered Dividends by the amendment of the Block Exemp- 50 100 In accordance with the resolution tion regulation. In accordance with the passed by the Annual General Meet- strategic policy adopted, in October 25 50 ing, in April Stockmann paid a basic Stockmann purchased the entire shares dividend of EUR 0.90 per share and a outstanding in Autotalo Jurvakainen 0 0 bonus dividend of EUR 0.45 per share, Oy, a BMW-MINI dealership in Oulu. 2000 2001 2002 2003 2004* or a total dividend payout of EUR 70.5 The business was transferred to Stock- million for the 2003 financial year. An mann’s ownership on November 1, Bonus dividend extraordinary general meeting held on 2004. Thanks to this deal, Stockmann Dividend % of earnings December 8, 2004, resolved to pay an will be able to serve its customers, in extra dividend of EUR 1.00 per share on car sales too, in all its department store * Board proposal to the AGM top of the EUR 1.35 dividend that was localities in Finland. decided at the Annual General Meet- ing. The extra dividend totalling EUR Organizational changes 52.8 million was paid out in December. Klaus Sundström, B.Sc. (Econ.), was The Board of Directors will propose to appointed as the Vehicle Division’s new Investments and depreciation the Annual General Meeting that a divi- director and a member of the Stock- 2000-2004 dend of EUR 1.00 per share be paid for mann Group’s Management Commit- EUR mill. the 2004 financial year. The proposed tee, effective April 2, 2004. The divi- dividend is 90 per cent of earnings per sion’s previous director, Esa Mäkinen, 60 share. joined another company. 50 Raija Saari, M.Sc. (Econ.), was ap- Fine-tuning strategy pointed as Hobby Hall’s new managing 40 In its discussion of strategy in June director and a member of the Stock- 2004, the Stockmann Group’s Board mann Group’s Management Com- 30 of Directors confirmed the company’s mittee, effective November 15, 2004. strategy, according to which the Group As from the same date, Hobby Hall’s 20 will grow energetically over the next previous managing director, Henri 10 few years, particularly in the Russian Bucht, a Stockmann Group executive market. The objective is that by the end vice president and the CEO’s alternate, 0 of 2008 about a third of sales and at was assigned to special duties and will 2000 2001 2002 2003 2004 least the same proportion of earnings resign from the company’s employ on Investments in real estate will come from the markets in the Baltic June 30, 2005. Group Executive Vice countries and Russia. President Jukka Hienonen, director of Other investments Growth abroad will be spearheaded the Department Store Division, was ap- by the department stores, Seppälä and pointed the CEO’s alternate, effective Depreciation expansion of the franchising-based November 15, 2004.

42 STOCKMANN • BOARD REPORT ON OPERATIONS Developing the Group structure in 2004, bringing the total number of Capital employed and With a view to streamlining Stock- stores to eight. ROCE % 2000-2004 mann’s Group structure and increasing The Vehicle Division’s capital expen- EUR mill. % operational transparency, the Board of ditures amounted to EUR 2.3 million. Directors decided in October to spin off They went mainly for expanding opera- 600 18 Stockmann’s Vehicle Division through tions. 500 15* a transfer of operations to the parent Hobby Hall’s capital expenditures company’s wholly-owned subsidiary totalled EUR 1.2 million. They went 400 12 Stockmann Auto Oy Ab. The director mainly for the development of informa- of Stockmann’s Vehicle Division, Klaus tion systems. 300 9 Sundström, was appointed as the new Seppälä invested a total of EUR 1.2 company’s managing director. The million. Seppälä opened its first store 200 6 spin-off went into effect as from Janu- in Russia at the Stockmann department 100 3 ary 1, 2005. store in Moscow’s Mega South Shop- The Board of Directors furthermore ping Centre in April. Seppälä opened 0 0 decided to transfer the subsidiaries its second store in Russia in the Marino 2000 2001 2002 2003 2004 operating in Russia to the parent com- Shopping Centre on the southeast side Capital employed pany’s wholly-owned Finnish holding of Moscow in November 2004, and a company Oy Stockmann Russia Hold- third store at the Stockmann depart- ROCE % ing Ab. Transfer of the shares to the ment store in Moscow’s Mega North * Long-term minimum target new holding company was carried out Shopping Centre in December. In ad- in October. In addition, the Board of dition, Seppälä opened a new store in Directors decided to establish a Finnish Liepaja, Latvia, in November. Return on equity 2000-2004 finance company named Oy Stockmann Property investments totalled EUR % Russia Finance Ab, which will be whol- 13.6 million, of which EUR 1.7 million ly-owned by the parent company and was for the Audi car dealership in Es- 12 finance, among other things, purchases poo’s Suomenoja district and EUR 7.6 of fixed assets by Stockmann’s subsidi- million for the preparatory works for 9 aries in Russia. The company went into the enlargement of the Helsinki depart- operation in December 2004. ment store as well as for upgrading es- calators and lifts. 6 Capital expenditures Other capital expenditures came to Capital expenditures during 2004 to- EUR 1.1 million. talled EUR 59.0 million (EUR 40.9 mil- 3 lion). Current projects The Department Store Division’s Stockmann will open a department 0 capital expenditures came to EUR 39.6 store with about 11 000 square metres 2000 2001 2002 2003 2004 million. The division’s biggest invest- of retail space in leased premises in the ment items were the new Mega South newly built section of the Jumbo Shop- and Mega North department stores in ping Centre in Vantaa in autumn 2005. Equity ratio 2000-2004 Moscow, which operate in premises Stockmann’s share of the cost estimate leased from Ikea. The Mega South de- for the project is about EUR 10 million. EUR mill. % partment store was opened in April and A large-scale project for enlarge- 800 100 required an outlay during 2004 of EUR ment and modification works on the 12.3 million. The Mega North depart- department store in the centre of Hel- ment store was opened in December sinki is pending. Implementation of the 600 75 and had an investment price tag during project will call for modifying the town 2004 of EUR 16.2 million. Both depart- plan, which has already been initiated. 400 50 ment stores have about 10 000 square According to the plan, the department metres of retail space. Stockmann’s store’s commercial premises will be total investments in these department expanded by about 10 000 square me- 200 25 stores amounted to EUR 31.2 million. tres by converting existing premises to Two Zara stores were also opened in commercial use and by building new 0 0 Moscow: in the Marina Roscha Shop- retail space. In addition, completely 2000 2001 2002 2003 2004 ping Centre at the beginning of June new goods handling and maintenance and in the Mega North Shopping Cen- areas will be built for the department Liabilities tre in December. In Finland, two new store as well as access passages to the Shareholders' equity stores belonging to the Stockmann new customer car park. After the en- Beauty cosmetics chain were opened largement the Helsinki department Ö Equity ratio, %

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BOARD REPORT ON OPERATIONS • STOCKMANN 43 Board report on operations

store will have a total of 50 000 square adjustments. The growth in net profit increased by EUR 40 600. The shares metres of retail space. The cost estimate for the period and earnings per share were entered in the Trade Register on for the project is a total of about EUR in the IFRS annual accounts is prima- February 20, 2004, and they became 115 million. The works are estimated rily due to the reduction in deferred tax available for public trading, together to be completed phase by phase by the liabilities. The transition to IFRS in the with the existing shares, on the Helsinki end of 2009. annual accounts has no effect on the Stock Exchange on April 5, 2004. A lease agreement on opening, in Group’s cash flow. At its meetings held on February 12, spring 2005, a flagship Zara store in Upon the transition to IFRS, the seg- 2004 and November 15, 2004, Stock- a centrally located business site right mental division used in current report- mann plc’s Board of Directors ap- in the heart of Moscow was signed in ing was changed such that the prop- proved shareholders’ requests to con- October. Furthermore, agreements erty unit, whose income primarily com- vert 174 650 of the company’s shares have been signed on opening three prised intra-Group rental income, was from Series A into Series B shares in new Zara stores in Moscow in 2005. In eliminated. Under IFRS, the properties accordance with Article 3 of Stock- addition, 2-3 Bestseller stores will be owned by the Group have been divided mann’s Articles of Association. Share opened in Moscow, the first of which between business segments such that conversions of 163 000 shares were en- will be in the Mega North Shopping they are included in the assets of the tered in the Trade Register on Febru- Centre in spring 2005. segments. ary 20, 2004, and conversions of 11 650 Seppälä is aiming to open new stores In the segments’ profit and loss ac- shares on December 21, 2004. in Moscow and to expand its operations counts, the previously used internal A total of 600 269 Stockmann plc Se- to St Petersburg. Furthermore, Seppälä rent will be replaced by depreciation ries B shares with a par value of 2 euros will begin operations in Lithuania in on buildings and other expenses. Un- were subscribed for with Stockmann spring 2005. der IFRS, other operating income has Loyal Customer share options in May. been allocated to the segments, where- As a consequence of the subscriptions Transition to IFRS as they were previously reported only the share capital was increased by EUR As from the beginning of 2005, Stock- at the Group level. 1 200 538. Of the shares, 597 118 were mann changed over from Finnish Ac- The segmental division is based on entered in the Trade Register on June counting Standards (FAS) to Interna- the Group’s organization and internal 30, 2004, and 3 151 shares were entered tional Financial Reporting Standards reporting. The primary segments are on August 30, 2004, and became avail- (IFRS) in its consolidated reporting. the Department Store Division, Stock- able for public trading, together with The company has drafted an opening mann Auto, Hobby Hall and Seppälä. the existing shares, on the Helsinki balance sheet for the time of transi- The secondary segments are Finland, Stock Exchange on July 1, 2004, and tion to IFRS, January 1, 2004. The first the Baltic countries and Russia. August 31, 2004, respectively. IFRS Interim Report will be published In December, the 2000 Stockmann on April 21, 2005. The major effects of Share capital and shares share options were exercised to sub- Stockmann’s transition to IFRS are re- The company’s market capitalization scribe for a total of 170 150 Stockmann lated to the depreciation of revaluations grew by 19 per cent, or by EUR 185.2 plc Series B shares with a par value of fixed assets, the treatment of own million from the previous year and was of 2 euros. As a consequence of the shares, the treatment of certain leasing EUR 1 140.8 million at the end of De- subscriptions the share capital was and hire purchase agreements in the cember. increased by EUR 340 300. The shares motor trade, the recording of financial Stockmann’s shares outperformed were entered in the Trade Register on instruments and segmental reporting. both the HEX All-Share Index and the December 30, 2004, and they became The enclosed table presents the HEX Portfolio Index during the year. available for public trading, together changes to some of the Group’s key At the end of December the stock ex- with the existing shares, on the Helsinki figures under IFRS. change price of the Series A share was Stock Exchange on January 3, 2005. In 2004, the balance sheet total was EUR 21.10, compared with EUR 18.00 at Following share subscriptions made virtually the same under IFRS as in the the end of 2003, and the Series B share on the basis of share conversions and FAS balance sheet. The equity ratio in was selling at EUR 21.70, as against share options, the total number of the IFRS reporting was 62.3 per cent, EUR 18.30 at the end of 2003. Series A shares at December 31, 2004, or 3.2 percentage points lower than the The 1997 Stockmann share op- was 24 564 243 and the total number of equity ratio in the FAS annual accounts. tions were exercised to subscribe for Series B shares was 28 855 817. This is mainly due to the recording of a total of 20 300 Stockmann plc Series At the end of December, the 2000 accumulated depreciation of revalua- B shares with a par value of 2 euros Stockmann share options were exer- tions in shareholders’ equity and the in January 2004. As a consequence of cised to subscribe for another 4 900 deferred tax liabilities related to IFRS the subscriptions the share capital was Stockmann plc Series B shares with a

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44 STOCKMANN • BOARD REPORT ON OPERATIONS of the subscriptions the share capital Operating profit according to Operating profit according was increased by EUR 9 800. Stock- management accounting 2003-2004 to management accounting mann’s Board of Directors approved EUR mill. In calculating operating profit for management the subscriptions in its meeting held accounting purposes, the divisions are charged on February 15, 2005. 55 an internal rent for their own business premises 50 Stockmann held 406 939 of its own in accordance with the prevailing market rent 45 Series B shares (treasury shares) at the 40 and they are also charged for centrally produced end of December 2004. The par value of 35 services. The divisions’ operating profit includes these shares is a total of EUR 813 878, 30 the account servicing charges for the Stockmann and they represent 0.8 per cent of all 25 account as well as the interest share of hire the shares outstanding as well as 0.1 20 purchase and leasing income. Other operating per cent of the total votes. The shares 15 income is not allocated to the divisions. 10 were bought back at a total price of 5 EUR 6.1 million. 0 The company’s Board of Directors -5 does not have valid authorizations to Department Vehicle Hobby Seppälä Real Store Div. Div. Hall Estate increase the share capital or to float is- sues of convertible bonds or bonds with 2004 warrants or to buy back own shares. 2003 The Board of Directors has valid au- thorizations to transfer 406 939 com- pany-owned Series B treasury shares up to March 30, 2005.

Personnel strength The Stockmann Group had an average Capital employed Capital employed payroll of 9 589 employees, or 844 more 2003-2004 Capital employed has been calculated as than in the previous year. The growth a 12-month moving average. in the number of employees was attrib- EUR mill. utable mainly to the new department 250 stores in Moscow. Converted to a full- time basis, the average number of per- 200 sonnel increased by 744 employees and was 7 812. 150 At the end of December 2004, Stock- mann had 3 391 employees working 100 abroad. At the end of December of last year Stockmann had 1 946 people 50 working abroad. The proportion of the total personnel who were working 0 abroad increased from 20 per cent to Department Vehicle Hobby Seppälä Real 31 per cent. Store Div. Div. Hall Estate 2004 Outlook for 2005 Retail sales, excluding the motor trade, 2003 are estimated to increase by about 2-3 per cent in Finland in 2005. The vol- ume of new vehicle sales is expected to decrease compared with 2004. It is estimated that the markets in Russia ROCE %* and the Baltic countries will continue 2003-2004 growing faster than the Finnish mar- ket. Sales in 2005 are expected to come % in at about EUR 1.9 billion. 140 The operating profit generated by the 120 100 Department Store Division and Seppälä 80 is estimated to improve further on the 60 level reported for 2004. The operating 40 35 profit reported by Stockmann Auto is 30 expected to diminish somewhat. Hobby 25 Hall’s result is expected to improve 20 15 significantly and to return to the black. 10 Stockmann’s target is to post even bet- 5 ter earnings in 2005 than in 2004. 0 -5 Department Vehicle Hobby Seppälä Real Board proposal for Store Div. Div. Hall Estate the distribution of profits 2004 The Board of Directors’ proposal for the parent company’s dividend is on 2003 page 66 of the Annual Report. c *Operating profit according to management accounting as a ratio of capital employed

BOARD REPORT ON OPERATIONS • STOCKMANN 45 Shares and share capital

The share capital of Stockmann plc is divided into Series Key employee share options 2000 A and Series B shares. Series A shares carry ten votes In 2000, a total of 2 500 000 share options were granted to key and Series B shares one vote. The par value of both series employees belonging to the senior and middle management of shares is EUR 2.00 and the shares of both series entitle of Stockmann or its subsidiaries. Option A can be exercised their holders to an equal dividend. to subscribe for 625 000 Stockmann Series B shares at a price of EUR 20 per share, option B to subscribe for 625 000 Series The company’s shares are in the book-entry system and they B shares at a price of EUR 21 per share and option C to sub- are listed on Helsinki Exchanges. The number of registered scribe for 1 250 000 Series B shares at a price of EUR 22 per shareholders at December 31, 2004, was 33 029 (15 591 share- share. The subscription price of the share will be reduced by holders at December 31, 2003) representing 99.9 per cent of the amount of the cash dividend payout per share after April the company’s shares outstanding. 11, 2000, and before the share subscription as determined on the record date for each dividend payout. The subscription Shares periods for the shares are as follows: A, April 1, 2003 – April 1, 2007; B, April 1, 2004 - April 1, 2007, and C, April 1, 2005 General price trend - April 1, 2007. The subscription price after the dividend pay- Share prices rose on Helsinki Exchanges during the financial out proposed by the Board of Directors for the 2004 financial year by 3.25 per cent as measured by the HEX All-Share In- year on the basis of option A is EUR 13.95 per share, on the dex and by 14.64 per cent as measured by the HEX Portfolio basis of option B EUR 14.95 per share and on the basis of Index. The retail industry index rose by 17.33 per cent. option C EUR 15.95 per share. The share options have been issued in the book-entry system. The share options A and B 3ULFHWUHQGRI6WRFNPDQQ VVKDUHVDQGVKDUHRSWLRQV are listed on Helsinki Exchanges. The share options C will be listed as from April 1, 2005. &ORVLQJSULFHV  &ORVLQJSULFHV 'HF 'HF &KDQJH Loyal Customer share options (85 (85 In spring 2000, a total of 1 382 524 Loyal Customer share 6HULHV$    options were subscribed for. During the share subscription 6HULHV%    period in 2004, a total of 600 269 Series B shares at a price of RSWLRQV  RSWLRQV$  EUR 10.81 per share were subscribed for on the basis of the RSWLRQV%  subscribed options. So far, a total of 606 933 Series B shares have been subscribed for on the basis of the Loyal Customer 7XUQRYHURI6WRFNPDQQ VVKDUHVDQGVKDUHRSWLRQV share otions. The remaining subscription period for shares with the Loyal Customer share options is May 2 - May 31, RIWRWDO 2005. The dividends payable annually are deducted from the 1XPEHU VKDUHV $YHUDJHSULFH subscription price. The subscription price after the dividend RIVKDUHV RXWVWDQGLQJ (85 (85 payout proposed by the Board of Directors for the 2004 fi- 6HULHV$     nancial year is EUR 8.81. 6HULHV%     7RWDO   RSWLRQV    Own shares RSWLRQV$    At December 31, 2004, the company held 406 939 of its own RSWLRQV%    Series B shares. The Series B shares owned by the company represented 0.8 per cent of all the shares outstanding and The Stockmann shares and share options that were traded 0.1 per cent of all the voting rights. The shares in the accounted for 0.08 per cent of the share turnover on Helsinki company’s possession do not confer voting rights at the Exchanges. The company’s market capitalization at Decem- general meetings of shareholders. ber 31, 2004, was EUR 1 140.8 million. The market capitaliza- tion at December 31, 2003, was EUR 955,6 million. Taxation values of shares The trading lot for both Series A and Series B shares is 50 The taxation value of the Series A share in 2004 was shares. The trading code for the Series A share is STCAS and EUR 14.49 and the taxation value of the Series B share was for the Series B share STCBV. EUR 14.63.

Share capital Dividend policy 6KDUHFDSLWDORI6WRFNPDQQSOF'HFHPEHU Stockmann’s Board of Directors has set the dividend payout 6HULHV$  VKDUHVDW(85HDFK  (85 target at a minimum of half of the earnings derived from the 6HULHV%  VKDUHVDW(85HDFK  (85 company’s ordinary operations. The financing required to 7RWDO  VKDUHVDW(85HDFK  (85 grow operations is nevertheless taken into account in deter- mining the dividend.

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 %RQXVLVVXHLQFUHDVLQJRIWKHSDUYDOXH    :LWKWKH/R\DO&XVWRPHURSWLRQV   %    :LWKWKH/R\DO&XVWRPHURSWLRQV   %    :LWKVKDUHRSWLRQV   %    :LWKVKDUHRSWLRQV   %    :LWKWKH/R\DO&XVWRPHURSWLRQV   %    :LWKWKHNH\HPSOR\HHRSWLRQV$   %    :LWKWKHNH\HPSOR\HHRSWLRQV%   %    :LWKWKHNH\HPSOR\HHRSWLRQV$   %  

$FFRUGLQJWRWKHWHUPVRIVXEFULEWLRQHQWLWOHGWRGLYLGHQGIRUWKHILQDQFLDO\HDU

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 6XEVFUZLWK/R\DO&XVWRPHURSWLRQV 0D\0D\  %     OHVVGLYLGHQGVDIWHU$SULO  6XEVFUZLWKNH\HPSOR\HHRSWLRQV $SU$SU $ %  $SU$SU % % $SU$SU & % OHVVGLYLGHQGVDIWHU$SULO     ,IDOORSWLRQVDUHH[HUFLVHG 6XEVFULSWLRQSULFHDIWHUGLYLGHQGSD\RXWSURSRVHGE\WKH%RDUGRI'LUHFWRUV(85 6XEVFULSWLRQSULFHDIWHUGLYLGHQGSD\RXWSURSRVHGE\WKH%RDUGRI'LUHFWRUV(85 6XEVFULSWLRQSULFHDIWHUGLYLGHQGSD\RXWSURSRVHGE\WKH%RDUGRI'LUHFWRUV(85 6XEVFULSWLRQSULFHDIWHUGLYLGHQGSD\RXWSURSRVHGE\WKH%RDUGRI'LUHFWRUV(85

Shareholders at December 31, 2004

2ZQHUVKLSVWUXFWXUH

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SHARES AND SHARE CAPITAL • STOCKMANN 47 Shares and share capital

Shareholders at December 31, 2004

1XPEHURIVKDUHV

6KDUHKROGHUV 3HUFHQWDJHRIVKDUHV QR  

                    6KDUHVRZQHGE\WKHFRPSDQ\    7RWDO   

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 )|UHQLQJHQ.RQVWVDPIXQGHWJURXSLQJ    6YHQVNDOLWWHUDWXUVlOOVNDSHWL)LQODQG    1LHPLVW|JURXSLQJ    (WRODFRPSDQLHV    6WLIWHOVHQI|UcER$NDGHPL    6DPIXQGHW)RONKlOVDQLVYHQVND)LQODQG    -HQQ\MD$QWWL:LKXULQUDKDVWR    7DSLROD*URXS    ,QH]RFK-XOLXV3ROLQVIRQG    7KH/RFDO*RYHUQPHQW3HQVLRQV,QVWLWXWLRQ    :LOKHOPRFK(OVH6WRFNPDQQV6WLIWHOVH    6LJULG-XVpOLXV6WLIWHOVH    6WLIWHOVHQ%HQVRZV%DUQKHP*UDQK\GGDQ    +HOHQHRFK:DOWHU*U|QTYLVWV6WLIWHOVH    ,OPDULQHQ0XWXDO3HQVLRQ,QVXUDQFH&RPSDQ\    6WLIWHOVHQ%ULWD0DULD5HQOXQGVPLQQH    9DUPD0XWXDO,QVXUDQFH&RPSDQ\    :LOOLDP7KXULQJVVWLIWHOVH    1RUGHD/LIH$VVXUDQFH)LQODQG/WG    7KH6WDWH3HQVLRQ)XQG   7RWDO  

The holdings in the personal ownership of the members of shares, representing 12.2 per cent of the shares and 16.5 the company’s Board of Directors, CEO and the executive per cent of the voting rights) and 250 817 share options. The vice president, as well as the ownership of institutions un- share options entitle their holders to subscribe for 250 817 der their control and persons under their guardianship at Stockmann plc Series B shares, which would have been 0.5 December 31, 2004, was a total of 6 624 340 shares, representing per cent of the total shares outstanding and 0.1 per cent of a total of 12.4 per cent of the shares outstanding and 17.7 all voting rights at December 31, 2004. per cent of the voting rights (December 31, 2003: 6 430 594

48 STOCKMANN • SHARES AND SHARE CAPITAL Distribution of shares Distribution of votes

51% Foundations and others 59% Foundations and others 22% Households 20% Households 16% Private and public corporations 18% Private and public corporations 4% Banks and insurance companies 1% Banks and insurance companies 7% Foreign shareholders 2% Foreign shareholders (incl. nominee registrations) (incl. nominee registrations)

Turnover and price trend Turnover and price trend of Series A shares 2004 of Series B shares 2004 thousands EUR thousands EUR 5000 25 5000 25

4000 20 4000 20

3000 15 3000 15

2000 10 2000 10

1000 5 1000 5

0 0 0 0 1 2 3 4 5 6 7 8 9 10 11 12 1 2 3 4 5 6 7 8 9 10 11 12

Number of shares traded Number of shares traded

Monthly closing price Monthly closing price

Price trend of Series A and Series B (share-issue adjusted) compared with HEX Portfolio Index 2000-2004 EUR 25

20

15

10

5 1/00 1/01 1/02 1/03 1/04 12/04

HEX Portfolio Index *

Stockmann A

Stockmann B

* The weighting of each company in the index is limited to a maximum of 10 per cent.

SHARES AND SHARE CAPITAL • STOCKMANN 49 Shares and share capital

Earnings per share and Earnings per share and P/E ratio dividend per share 2000-2004 2000-2004 (share-issue adjusted) EUR EUR P/E 2.5 1.2 28

2.0 0.9 21

1.5 0.6 14 1.0

0.3 7 0.5

0.0 0.0 0 2000 2001 2002 2003 2004 * 2000 2001 2002 2003 2004

Earnings per share Earnings per share

Dividend per share Profit coefficient (A)

Bonus dividend Profit coefficient (B)

* Dividend according to the Board proposal

Equity per share 2000-2004 EUR 10

8

6

4

2

0 2000 2001 2002 2003 2004

Effective yield of shares 2000-2004 Market capitalization 2000-2004 % EUR mill. 15 1200

12 1000 800 9 600 6 400

3 200

0 0 2000 2001 2002 2003 2004* 2000 2001 2002 2003 2004

Stockmann A

Stockmann B

* Dividend according to the Board proposal

50 STOCKMANN • SHARES AND SHARE CAPITAL Key figures

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KEY FIGURES • STOCKMANN 51 Per-share data

3HUVKDUHGDWD      (DUQLQJVSHUVKDUH (85      (DUQLQJVSHUVKDUHGLOXWHG (85      (TXLW\SHUVKDUH (85      'LYLGHQGSHUVKDUH (85      'LYLGHQGSHUHDUQLQJV       &DVKIORZSHUVKDUH (85      (IIHFWLYHGLYLGHQG\LHOG  6HULHV$      6HULHV%      3(UDWLRRIVKDUHV 6HULHV$      6HULHV%      6KDUHTXRWDWLRQDW'HFHPEHU (85 6HULHV$      6HULHV%      +LJKHVWSULFHGXULQJWKHSHULRG (85 6HULHV$      6HULHV%      /RZHVWSULFHGXULQJWKHSHULRG (85 6HULHV$      6HULHV%      $YHUDJHSULFHGXULQJWKHSHULRG (85 6HULHV$      6HULHV%      6KDUHWXUQRYHU WKRXVDQGV 6HULHV$      6HULHV%      6KDUHWXUQRYHU  6HULHV$      6HULHV%      0DUNHWFDSLWDOL]DWLRQDW'HFHPEHU (85PLOO      1XPEHURIVKDUHVDW'HFHPEHU WKRXVDQGV      6HULHV$      6HULHV%      :HLJKWHGDYHUDJHQXPEHURIVKDUHV WKRXVDQGV      6HULHV$      6HULHV%      :HLJKWHGDYHUDJHQXPEHURIVKDUHVGLOXWHG WKRXVDQGV      7KHRZQVKDUHVRZQHGE\WKHFRPSDQ\ WKRXVDQGV      6HULHV$      6HULHV%      7RWDOQXPEHURIVKDUHKROGHUVDW'HFHPEHU       $GMXVWHGIRUVKDUHLVVXHV %RDUGSURSRVDOWRWKH$*0$FFRUGLQJWRWKHSURSRVDODGLYLGHQGRI(85SHUVKDUHZLOOEHSDLG 7KHGLOXWLRQHIIHFWRIRSWLRQVKDVEHHQWDNHQLQWRDFFRXQWLQWKHILJXUHV 'HILQLWLRQRINH\LQGLFDWRUV (DUQLQJVSHUVKDUH 3URILWEHIRUHH[WUDRUGLQDU\LWHPVOHVVLQFRPHWD[HV $YHUDJHQXPEHURIVKDUHVDGMXVWHGIRUVKDUHLVVXHV (TXLW\SHUVKDUH &DSLWDODQGUHVHUYHVIXQGIRURZQVKDUHV 1XPEHURIVKDUHVRQWKHEDODQFHVKHHWGDWHDGMXVWHGIRUVKDUHLVVXHV 'LYLGHQGSHUVKDUH 'LYLGHQGSHUVKDUHDGMXVWHGIRUVKDUHLVVXHV 'LYLGHQGSHUHDUQLQJV [ 'LYLGHQGSHUVKDUH (DUQLQJVSHUVKDUH &DVKIORZSHUVKDUH &DVKIORZIURPRSHUDWLRQV $YHUDJHQXPEHURIVKDUHVDGMXVWHGIRUVKDUHLVVXHV (IIHFWLYHGLYLGHQG\LHOG [ 'LYLGHQGSHUVKDUHDGMXVWHGIRUVKDUHLVVXHV 6KDUHTXRWDWLRQDW'HFHPEHUDGMXVWHGIRUVKDUHLVVXHV 3(UDWLRRIVKDUHV 6KDUHTXRWDWLRQDW'HFHPEHUDGMXVWHGIRUVKDUHLVVXHV (DUQLQJVSHUVKDUH 6KDUHTXRWDWLRQDW'HF 6KDUHTXRWDWLRQRQWKHEDODQFHVKHHWGDWHDGMXVWHGIRUVKDUHLVVXHV +LJKHVWSULFHRIWKHFRPSDQ\ VVKDUHVGXULQJWKH +LJKHVWVKDUHSULFHGXULQJWKHSHULRG SHULRGDGMXVWHGIRUVKDUHLVVXHV /RZHVWSULFHRIWKHFRPSDQ\ VVKDUHVGXULQJWKH /RZHVWVKDUHSULFHGXULQJWKHSHULRG SHULRGDGMXVWHGIRUVKDUHLVVXHV 6KDUHWXUQRYHULQHXURWHUPVGLYLGHGE\WKHQXPEHURI $YHUDJHVKDUHSULFHRYHUWKHSHULRG VKDUHVWUDGHGGXULQJWKHSHULRGDGMXVWHGIRUVKDUH 6KDUHWXUQRYHU 4XDQWLWDWLYHVKDUHWXUQRYHUDGMXVWHGIRUVKDUHLVVXHV 1XPEHURIVKDUHVPXOWLSOLHGE\WKHTXRWDWLRQ 0DUNHWFDSLWDOL]DWLRQDW'HFHPEHU IRUWKHUHVSHFWLYHVKDUHVHULHVRQWKHEDODQFHVKHHW  :LWKRXWWKHRZQVKDUHVRZQHGE\WKHFRPSDQ\

52 STOCKMANN • PER- SHARE DATA Profit and loss account

352),7$1'/266$&&2817 672&.0$11*5283 672&.0$11SOF

 -DQ  -DQ  -DQ  -DQ  5HI 'HF RIQHW 'HF RIQHW 'HF RIQHW 'HF RIQHW (85PLOO WXUQRYHU (85PLOO WXUQRYHU (85PLOO WXUQRYHU (85PLOO WXUQRYHU 1(7785129(5          2WKHURSHUDWLQJLQFRPH              5DZPDWHULDOVDQGVHUYLFHV     5DZPDWHULDOVDQGFRQVXPDEOHV      3XUFKDVHVGXULQJWKHILQDQFLDO\HDU        9DULDWLRQLQVWRFNVLQFUHDVH  GHFUHDVH       5DZPDWHULDOVDQGVHUYLFHVWRWDO          6WDIIH[SHQVHV          'HSUHFLDWLRQDQGUHGXFWLRQLQYDOXH          2WKHURSHUDWLQJH[SHQVHV                      23(5$7,1*352),7             )LQDQFLDOLQFRPHDQGH[SHQVHV     ,QFRPHIURP*URXSXQGHUWDNLQJV   ,QFRPHIURPRWKHULQYHVWPHQWVKHOGDVQRQ FXUUHQWDVVHWV      ,QWHUHVWDQGILQDQFLDOLQFRPHIURP*URXSXQGHUWDNLQJV    ,QWHUHVWDQGILQDQFLDOLQFRPHIURPRXWVLGH WKH*URXS       5HGXFWLRQLQYDOXHRIVHFXULWLHVKHOGLQ FXUUHQWDVVHWV     5HGXFWLRQLQYDOXHRIQRQFXUUHQW LQYHVWPHQWV   ,QWHUHVWDQGRWKHUILQDQFLDOH[SHQVHVIRU *URXSXQGHUWDNLQJV   ,QWHUHVWDQGRWKHUILQDQFLDOH[SHQVHV RXWVLGHWKH*URXS        )LQDQFLDOLQFRPHDQGH[SHQVHVWRWDO             352),7%()25((;75$25',1$5<,7(06             ([WUDRUGLQDU\LWHPV  ([WUDRUGLQDU\LQFRPH   ([WUDRUGLQDU\H[SHQVHV   ([WUDRUGLQDU\LWHPVWRWDO         352),7%()25(7$;(6     352),7%()25($335235,$7,216$1'7$;(6        $SSURSULDWLRQV     

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PROFIT AND LOSS ACCOUNT • STOCKMANN 53 Balance sheet

%$/$1&(6+((7 672&.0$11*5283 672&.0$11SOF

$66(76 5HI 'HF 'HF 'HF 'HF (85PLOO (85PLOO (85PLOO (85PLOO  121&855(17$66(76 

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

&855(17$66(76

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54 STOCKMANN • BALANCE SHEET %$/$1&(6+((7 672&.0$11*5283 672&.0$11SOF

/,$%,/,7,(6 5HI 'HF 'HF 'HF 'HF (85PLOO (85PLOO (85PLOO (85PLOO  &$3,7$/$1'5(6(59(6 20-21 6KDUHFDSLWDO     3UHPLXPIXQG     )XQGIRURZQVKDUHV     5HVHUYHIXQG   2WKHUIXQGV     5HWDLQHGHDUQLQJV     1HWSURILWIRUWKHILQDQFLDO\HDU     &$3,7$/$1'5(6(59(6727$/    

0,125,7<,17(5(67    $&&808/$7('$335235,$7,216   

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Assets 2004 Financing 2004

42% Non-current assets 65% Capital and reserves 26% Stocks 2% Non-current creditors 32% Financial assets 33% Current creditors

BALANCE SHEET • STOCKMANN 55 Funds statement

)81'667$7(0(17 672&.0$11*5283 672&.0$11SOF

    (85PLOOLRQV (85PLOOLRQV (85PLOOLRQV (85PLOOLRQV

&$6+)/2:)52023(5$7,216 3D\PHQWVIURPVDOHV     3D\PHQWVIURPRWKHURSHUDWLQJLQFRPH     3D\PHQWVIRURSHUDWLQJH[SHQVHV     &DVKIORZIURPRSHUDWLRQVEHIRUHILQDQFLDOLWHPVDQGWD[HV    

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&DVKIORZIURPRSHUDWLRQDOH[WUDRUGLQDU\LWHPV QHW   &$6+)/2:)52023(5$7,216 $    

&$6+)/2:,172$1')520,19(670(176 &DSLWDOH[SHQGLWXUHVRQWDQJLEOHDQGLQWDQJLEOHDVVHWV     &DVKIURPWDQJLEOHDQGLQWDQJLEOHDVVHWV     &DSLWDOH[SHQGLWXUHVRQRWKHULQYHVWPHQWV     &DVKIURPRWKHULQYHVWPHQWV     ,QYHVWPHQWVLQ*URXSFRPSDQLHV   *URXSFRPSDQLHVGLYHVWHG  'LYLGHQGVIURPLQYHVWPHQWV     &$6+)/2:,172$1')520,19(670(176 %    

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56 STOCKMANN • FUNDS STATEMENT Notes to the accounts

ACCOUNTING POLICY

General principles recorded at the rates prevailing on the thermore include revaluations of land areas Stockmann’s annual accounts have been pre- transaction date. and buildings. Investments in finishing works pared in accordance with the regulations of At the end of accounting period foreign of rented premises in Russia have been clas- the Finnish Accounting Act which came into currency debtors and creditors in the balance sified as tangible assets instead of intangible force on December 31, 1997. sheet are translated at the rates prevailing on assets since the year 2003. Reclassification the balance sheet date. Gains and losses on of EUR 9.9 million has been made in the fig- Scope of the consolidated accounts foreign exchange in financial operations are ures of the comparison year. The consolidated accounts cover the parent entered as net amounts under other financial Revaluations have been made during the company Stockmann plc and those compa- income or other financial expenses. period from 1950 to 1984 and are based on nies in which the parent company controls, then estimates of real-estate valuers. Revalu- directly or indirectly, more than 50 per cent of Net turnover ations are not depreciated. the voting rights conferred by the shares as Net turnover comprises sales income exclud- Planned depreciation is based on the well as those property management compa- ing indirect taxes, discounts granted and for- original cost and the estimated economically nies in which the parent company controls, eign exchange differences. useful life of intangible and tangible assets either directly or indirectly, at least 80 per cent as follows: of the voting rights conferred by the shares. Other operating income • Intangible assets: 5 years The consolidated accounts cover also 63 The items stated as other operating income • Goodwill and goodwill arising on consolida- percent of the accounts of the partly owned are capital gains on the sale of non-current tion: 5 years real estate company SIA Stockmann Centrs assets connected with business operations, • Other capitalized long-term expenses: 5-20 in Latvia in proportion to the Group’s interest compensation obtained from the sale of busi- years in the company. nesses as well as charges for services ren- • Buildings: 20-50 years Mutual real-estate companies in which the dered to foreign subsidiaries. • Machinery and equipment: 4-12 years Group has an interest of more than 20 per • Lightweight store furnishings, motor vehi- cent have not been treated as associated Extraordinary income and expenses cles and data processing equipment: 4-5 undertakings, nor do other associated un- The items stated as extraordinary income years dertakings belong to the Group. The compa- and expenses are non-recurring income and nies acquired during the year have been expenses that are not a part of ordinary op- Securities included in non-current assets included in the consolidation from the time of erations. are valued at acquisition cost or, if their mar- acquisition. ket value has decreased permanently, at this Taxes lower value. Internal transactions The direct taxes entered in the profit and loss Transactions as well as debtors and creditors account are the taxes corresponding to Group Current assets between Group companies have been elimi- companies’ net profits for the financial year Securities included in financial assets are nated. as well as rectifications of taxes for previous valued at acquisition cost or, if their value is financial years. lower, at this lower value. Shares in subsidiaries In the consolidated accounts the deferred In the valuation of stocks the principle of low- Shareholdings between Group companies tax liability is calculated for all the periodiza- est value has been used, i.e. the stocks have have been eliminated by the purchase cost tion differences between the annual accounts been entered in the balance sheet at the lowest method. In carrying out eliminations, the ac- and taxation, applying the tax base for the of acquisition cost or a lower repurchase price or quired company’s provisions at the time of next year, which has been confirmed at the the probable market price. The acquisition cost acquisition excluding deferred tax liability are balance sheet date. The deferred tax liability of stocks has been defined applying the variable also considered to constitute the company’s has not, however, been calculated for revalua- expenses incurred in making the purchase in capital and reserves. tions nor in the Russian subsidiaries for the accordance with the FiFo principle. The difference between the purchase price differences in non-current assets between the of subsidiary shares and equity has been al- consolidated annual accounts and local taxa- Obligatory provisions located in part to fixed assets. The proportion tion. Further, the deferred tax liability has not Expenditure to which the company has com- exceeding going values is shown as a sepa- been calculated for the profit of the Estonian mitted but which has not yet been realized, rate goodwill item which is amortized on a subsidiary since the year 2004. Accordingly, for example restructuring cost, is shown as straight-line basis over a period of five years. also the accumulated deferred tax liability for obligatory provisions in the balance sheet. Ex- the profits of the Estonian subsidiary has been penses corresponding to the obligatory provi- Subsidiaries abroad presented as a change in deferred tax liability sions are included in the income statement in In the consolidated accounts all items in profit in 2004. The deferred tax liability for the profit a relevant group of expenses. and loss account of foreign subsidiaries have of the Estonian subsidiary will be calculated been translated into euros at the average ex- when the decision concerning the distribution Appropriations change rates for the year. The balance sheets of dividend has been made. Deferred tax li- The parent company’s appropriations com- have been translated into euros at the rate abilities and tax assets are included entirely prise the depreciation difference and volun- prevailing on the balance sheet date. The in the consolidated balance sheet. tary provisions. The change in deferred tax translation differences arising on the elimina- liability resulting from the change in appropria- tion of the capital and reserves of subsidiaries Tangible and intangible tions has been stated in taxes in the consoli- have been entered in capital and reserves. assets and depreciation on them dated accounts. Accumulated appropriations The annual account figures for Russian Tangible and intangible assets are valued ac- in the consolidated accounts are divided into subsidiaries have been translated into euros cording to the original cost excluding planned a portion in deferred tax liability and a portion using the monetary-non-monetary method depreciation. The balance sheet values fur- in capital and reserves. according to which fixed assets, stocks and equity are translated into euros at the rates prevailing at the time of acquisition and ([FKDQJHUDWHV &ORVLQJUDWHV $YHUDJH\HDUO\UDWH the other balance sheet items at the rates &RXQWU\ &XUUHQF\ 'HF 'HF   prevailing on the balance sheet date and, furthermore, the profit and loss account is translated at the average monthly rate on a 5XVVLD 58%     month-by-month basis. (VWRQLD ((.     /DWYLD /9/     Transactions in foreign currencies 6ZHGHQ 6(.     Transactions in foreign currencies are /LWKXDQLD /7/    

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NOTES TO THE ACCOUNTS • STOCKMANN 65 Notes to the accounts

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Proposal for the distribution of parent company profit

According to the Consolidated Balance Sheet, the distributable funds at December 31, 2004, were EUR 159.7 million. The parent company’s distributable funds according to the balance sheet at December 31, 2004, were EUR 152.1 million. According to the Parent Company Balance Sheet at December 31, 2004, the following amounts are at the disposal of the Annual General Meeting:

• retained earnings, including the Contingency fund 98 114 438.23 • net profit for the financial year 54 001 522.83 152 115 961.06

The Board of Directors proposes that this amount be distributed as follows: on the 53 023 788 shares owned by external parties be paid • a dividend of EUR 1.00 per share for the 2004 financial year 53 023 788.00 • to be carried forward to the Contingency fund and Retained earnings 99 092 173.06 152 115 961.06

Helsinki, February 15, 2005

Board of Directors Lasse Koivu

Erkki Etola Eva Liljeblom Kari Niemistö

Christoffer Taxell Carola Teir-Lehtinen Henry Wiklund

CEO Hannu Penttilä

66 STOCKMANN • PROPOSAL FOR THE DISTRIBUTION OF PARENT COMPANY PROFIT Auditors’ report

To the shareholders of Stockmann plc

We have audited the accounting and the financial statements, In our opinion, the financial statements, showing a profit as well as the administration by the Board of Directors and of EUR 58,242,800.04 in the consolidated income statement the CEO of Stockmann plc for the year ended 31 December and a profit of EUR 54,001,522.83 in the parent company 2004. The financial statements, which include the report of income statement, have been prepared in accordance with the Board of Directors, consolidated and parent company the Accounting Act and other rules and regulations govern- income statements, balance sheets, cash flow statements and ing the preparation of financial statements in Finland. The notes to the financial statements, have been prepared by the financial statements give a true and fair view, as defined in Board of Directors and the CEO. Based on our audit we ex- the Finnish Accounting Act, of both the consolidated and press an opinion on these financial statements and on the parent company’s result of operations, as well as of the finan- company’s administration. cial position. The financial statements with the consolidated We have conducted the audit in accordance with Finnish financial statements can be adopted and the members of the Generally Accepted Auditing Standards. Those standards re- Board of Directors and the CEO of the parent company can quire that we perform the audit in order to obtain reasonable be discharged from liability for the period audited by us. The assurance about whether the financial statements are free of proposal by the Board of Directors on how to deal with the material misstatement. An audit includes examining, on a test distributable funds is in compliance with the Finnish Com- basis, evidence supporting the amounts and disclosures in panies Act. the financial statements, assessing the accounting principles used and significant estimates made by the management, as Helsinki, 17 February 2005 well as evaluating the overall financial statement presenta- tion. The purpose of our audit of the administration has been Henrik Holmbom Wilhelm Holmberg to examine that the members of the Board of Directors and Authorized Public Accountant Authorized Public Accountant the CEO have complied with the rules of the Finnish Com- panies Act.

AUDITORS’ REPORT • STOCKMANN 67 Contact information

www.stockmann.fi Department Store Division [email protected] Kutomotie 1 C P.O. BOX 147, FI-00381 HELSINKI Corporate Management Tel. +358 9 121 51 Aleksanterinkatu 52 B Fax +358 9 121 5812 (Operations in Finland) P.O. BOX 220, FI-00101 HELSINKI Fax +358 9 121 5250 (International Operations) Tel. +358 9 1211 Fax +358 9 121 3101 Stores

Corporate Administration Finland Kutomotie 1 C Helsinki Department Store P.O. BOX 147, FI-00381 HELSINKI Aleksanterinkatu 52 Tel. +358 9 121 51 P.O. BOX 220, FI-00101 HELSINKI Fax +358 9 121 3342 Tel. +358 9 1211 Fax +358 9 121 3632

Itäkeskus Department Store Itäkatu 1-5 C 124, FI-00930 HELSINKI Tel. +358 9 121 461 Fax +358 9 121 4655

Jumbo Department Store (Opening late 2005) Vantaanportinkatu 3, FI-01510 VANTAA Tel. +358 9 121 251 Fax +358 9 121 2555 Office till August 14, 2005: Kutomotie 1 C, FI-00380 HELSINKI Tel. +358 9 121 251 Fax +358 9 121 5504

Oulu Department Store Kirkkokatu 14 P.O. BOX 230, FI-90101 OULU Tel. +358 8 317 9411 Fax +358 8 317 9433

Tampere Department Store Hämeenkatu 4 P.O. BOX 291, FI-33101 TAMPERE Tel. +358 3 248 0111 Fax +358 3 213 3573

Tapiola Department Store Länsituulentie 5, FI-02100 ESPOO Tel. +358 9 121 21 Fax +358 9 121 2269

Turku Department Store Yliopistonkatu 22 P.O. BOX 626, FI-20101 TURKU Tel. +358 2 265 6611 Fax +358 2 265 6714

68 STOCKMANN • CONTACT INFORMATION Academic Bookstore Mega South Department Store Keskuskatu 1 Mega Teplyj Stan Shopping Centre P.O. BOX 128, FI-00101 HELSINKI Leninsky District Tel. +358 9 121 41 142704 MOSCOW REGION, Russia Fax +358 9 121 4245 Tel. + 7 095 980 8282 www.akateeminen.com Fax + 7 095 980 8283

Bookstores Mega North Department Store Helsinki centre, Itäkeskus, Tapiola, Tampere, Turku, Vantaa Mega Khimki Shopping Centre (Opening late 2005) Microdistrict No 8, Khimki 141400 MOSCOW REGION, Russia Stockmann Outlet Tel. +7 095 974 0122 Kuriiritie 17 Fax +7 095 784 7383 FI-01370 VANTAA Tel. +358 9 121 6551 Speciality stores Fax +358 9 121 6549 Leninsky boutique, Moscow Fashion store, St. Petersburg Stockmann Beauty Supermarket, St. Petersburg Office Kutomotie 1 C Zara P.O. BOX 147, FI-00381 HELSINKI Office Tel. +358 9 121 51 Stockmann-Krasnoselskaya Fax +358 9 121 5812 Proezd Olminskogo 3 a 129085 MOSCOW, Russia Stores Tel. +7 095 974 0122 Helsinki, Kuopio, Lahti, Pori, Seinäjoki, Tampere, Vaasa, Vantaa, Fax +7 095 282 0189 Espoo (Opening in autumn 2005), Jyväskylä (Opening in autumn 2005) Stores Moscow (3) Zara Office Bestseller Z-Fashion Finland Oy Office Kutomotie 1 C ZAO Stockmann P.O. BOX 147, FI-00381 HELSINKI Microdistrict No 8, Khimki Tel. +358 9 121 4414 141400 MOSCOW REGION, Russia Fax +358 9 121 3342 Tel. +7 095 790 3261 Fax +7 095 739 8642 Stores Helsinki centre, Itäkeskus, Turku Store Moscow Russia Moscow Office Estonia ZAO Stockmann Tallinn Department Store Microdistrict No 8, Khimki Liivalaia 53 141400 MOSCOW REGION, Russia 10145 TALLINN, Estonia Tel. +7 095 739 8636 Tel. +372 6 339 500 Fax +7 095 739 8642 Fax +372 6 339 556

Smolenskaya Department Store Latvia Smolenskaya Square, 3 Riga Department Store 121099 MOSCOW, Russia 13. Janvara- iela- 8 Tel. +7 095 785 2500 RIGA LV-1050, Latvia Fax +7 095 785 2505 Tel. +371 707 1200 Fax +371 707 3227

CONTACT INFORMATION • STOCKMANN 69 Contact information

Stockmann Auto Stockmann Auto, Takkatie servicing centre Kutomotie 1 A Audi and Volkswagen: servicing centre, body repair shop, P.O. BOX 157, FI-00381 HELSINKI spare parts Tel. +358 9 121 861 Ford: body repair shop Fax +358 9 121 5401 Takkatie 7a www.stockmannauto.fi FI-00370 HELSINKI [email protected] Tel. +358 9 121 645 Fax +358 9 121 6400 Sales Units and Servicing Centres Stockmann Auto, Takkatie Espoo Institutional sales of spare parts Stockmann Auto, Audi Center Espoo Takkatie 7a Audi: vehicle sales, servicing centre, spare parts FI-00370 HELSINKI Martinkuja 6 Tel. +358 9 121 645 FI-02270 ESPOO Fax +358 9 121 6400 Tel. +358 9 121 781 Fax +358 9 455 1354 Oulu Stockmann Auto, Oulu Stockmann Auto, Niittykumpu BMW and MINI: vehicle sales, servicing centre, body repair shop, Ford: vehicle sales, servicing centre, body repair shop, spare parts spare parts Kotitontuntie 2 Tyrnäväntie 6 FI-02200 ESPOO FI-90400 OULU Tel. +358 9 121 771 Tel. +358 8 562 9000 Fax +358 9 121 7740 Fax +358 8 562 9010

Stockmann Auto, Suomenoja Tampere Volkswagen: vehicle sales, servicing centre, body repair shop, Stockmann Auto, Tampere spare parts Škoda: vehicle sales, servicing centre, body repair shop, Audi: body repair shop spare parts Isonniitynkuja 2 Ford and Mitsubishi: servicing centre, body repair shop, FI-02270 ESPOO spare parts Tel. +358 9 121 751 Lahdenperänkatu 3 Fax +358 9 121 7561 FI-33900 TAMPERE Tel. +358 3 3123 4111 Helsinki Fax +358 3 3123 4129 Stockmann Auto, Herttoniemi Ford: vehicle sales, servicing centre, body repair shop, spare parts Turku Valurinkatu 1 Stockmann Auto, Turku FI-00880 HELSINKI Ford: vehicle sales, servicing centre, body repair shop, spare parts Tel. +358 9 121 481 Satakunnantie 164 Fax +358 9 121 4848 FI-20320 TURKU Tel. +358 2 273 6900 Stockmann Auto, Pitäjänmäki Fax +358 2 273 6940 Ford and Volkswagen: vehicle sales, servicing centre, spare parts Audi, BMW and MINI: servicing centre, spare parts Vantaa Kutomotie 1 A Stockmann Auto, Tikkurila FI-00380 HELSINKI Ford: vehicle sales, servicing centre, body repair shop, spare parts Tel. +358 9 121 51 Servicing centre for Flyers Fax +358 9 121 5401 Kuriiritie 19 FI-01510 VANTAA Stockmann Auto, Lauttasaari servicing centre Tel. +358 9 121 6500 Audi, Ford, Renault, Škoda, Volkswagen and Volvo: servicing Fax +358 9 121 6505 centre, spare parts Vattuniemenkatu 27 Stockmann Auto, Veromies FI-00210 HELSINKI Volkswagen: vehicle sales, servicing centre, body repair shop, Tel. +358 9 121 6151 spare parts Fax +358 9 121 6153 Audi: servicing centre, body repair shop, spare parts Servicing centre for Flyers Kiitoradantie 2 FI-01530 VANTAA Tel. +358 9 121 761 Fax +358 9 121 7626

70 STOCKMANN • CONTACT INFORMATION Hobby Hall Seppälä Hämeentie 157 Tikkurilantie 146 FI-00560 HELSINKI P.O. BOX 234, FI-01531 VANTAA Tel. +358 9 777 611 Tel. +358 9 825 981 Fax +358 9 7776 1381 Fax +358 9 825 1100 www.hobbyhall.fi www.seppala.fi [email protected] [email protected]

Finland Stores

Online Store Finland www.hobbyhall.fi Alajärvi, Espoo (4), Forssa, Hamina, Haukipudas, Heinola, Hel- sinki (6), Hollola, Huittinen, Hyvinkää, Hämeenlinna (2), Iisalmi, Customer Service Imatra (2), Joensuu (2), Jyväskylä (3), Jämsä, Järvenpää, Kaarina, Tel. 0106 7722 Kajaani, Kangasala, Kankaanpää, Karhula, Kauhajoki, Kauha- [email protected] va, Kemi, Kemijärvi, Kempele, Kerava, Keuruu, Kirkkonummi, Klaukkala, Kokkola (2), Kotka, Kouvola (2), Kuopio (3), Kurikka, Stores Kuusamo, Kuusankoski, Lahti (3), Lappeenranta (2), Lapua, Lau- Hämeentie 157 kaa, Lempäälä, Lieksa, Lohja, Loimaa, Loviisa, Mikkeli, Muurame, FI-00560 HELSINKI Mäntsälä, Naantali, Nastola, Nivala, Nokia, Orimattila, Oulu (3), Tel. +358 9 7776 1286 Palokka, Parainen, Pello, Pieksämäki, Pietarsaari, Pirkkala, Pori Fax +358 9 7776 1290 (3), Porvoo, Raahe, Raisio, Rauma, Riihimäki, Rovaniemi, Salo, Savonlinna, Seinäjoki (2), Siilinjärvi, Sodankylä, Sotkamo, Valimotie 11 Tammisaari, Tampere (5), Tornio, Turku (5), Uusikaupunki, Vaasa, FI-01510 VANTAA Valkeakoski, Vammala, Vantaa (3), Varkaus, Ylivieska, Ylöjärvi, Tel. +358 9 7776 1425 Äänekoski. Fax +358 9 7776 1614 Estonia Logistics Centres Haapsalu, Kohtla-Järve, Narva, Pärnu, Tallinn (7), Tartu (2), Tahkotie 2 Viljandi FI-01740 VANTAA Tel. +358 9 777 611 Latvia Fax +358 9 7776 1481 Riga (5), Liepaja

Valimotie 11 Russia FI-01510 VANTAA Moscow (3) Tel. +358 9 777 611 Fax +358 9 7776 1597

Estonia Stockmann AS/Hobby Hall Maakri 25 10145 TALLINN, Estonia Tel. +372 6 339 600 Fax +372 6 339 603

Online Store www.hobbyhall.com

Store Paldiski maantee 102 Rocca al Mare kaubanduskeskus 10149 TALLINN, Estonia Tel. +372 6 659 065

Latvia SIA Stockmann/Hobby Hall Katlakalna 11 c RIGA LV-1073, Latvia Tel. +371 707 3200 Fax +371 707 3215 [email protected]

CONTACT INFORMATION • STOCKMANN 71

Aleksanterinkatu 52 B P.O.Box 220 FI-00101 Helsinki Tel. +358 9 1211 www.stockmann.fi