On Helsinki's main shopping esplanade, Marimekko Corp.'s trademark poppy design blooms in the window of the company's flagship store -- a harbinger of the long-awaited Finnish spring. Inside, the fabric company's president and chief executive, 75-year-old Kirsti Paakkanen, is checking the final details of a fashion show and watching with a smile as customers line up to buy poppy-printed jackets, backpacks, tablecloths, napkins, and fabric by the meter.
Marimekko alive and well? There was a time in the '70s when Marimekko's primary colors, fine fabric, and simple Nordic elegance held sway among many highbrow shoppers in Europe and the U.S. But there wasn't much cachet left when Paakkanen bought 54-year-old Marimekko from Finnish conglomerate Amer Group PLC in 1991. Amer had let the brand languish to the point that Marimekko was fighting for survival. Chains such as Pottery Barn in the U.S. and Habitat in Europe had nudged Marimekko aside.
Paakkanen, a former ad agency owner, has staged a classic turnaround. Net profits have more than tripled over the past five years, to $7.3 million in 2003, while sales have more than doubled, to $68.4 million. "The business was badly run," Paakkanen says, "but the brand was good."
To revive Marimekko, Paakkanen has reintroduced classic designs such as Unikko, the famous poppy, along with bright geometric prints, stripes, and black-and-white abstracts. She has also expanded into linens, towels, and interior design items such as plates, glasses, and pillows. "My mother had a Unikko dress," says Marja Koskonen, a 50-year-old shopper looking for fabric in the flagship store. "It's really nostalgic for me."
To win younger customers, the company is introducing products and patterns by younger designers. Last year children's clothing was offered for the first time. Paakkanen has also fattened Marimekko's portfolio of licensing deals. It now licenses designs for removable cell-phone covers to Nokia Corp. (NOK ). The formula is paying off. Return on equity was 30.6% in 2003. The company's Helsinki-traded shares have almost doubled in the last year, to $11. "It's a well-run company, with a strong balance sheet," says Jari Koskela, an analyst at Nordea Securities in Helsinki. "I think the growth can continue."
Paakkanen isn't done, though. New equipment, says Helinä Uotila, director of production and purchasing, should enable Marimekko to raise production from 700,000 meters of fabric a year to 1 million. The company is also getting stricter about inventory control. Uotila estimates that in the 26 stores the company owns, unsold stock was cut by half last year.
Increasing exports, which account for less than a quarter of sales, is Paakkanen's biggest challenge, Koskela says. Given that Marimekko operates its own stores only in Finland and Sweden, expanding overseas means working through licensed Marimekko retailers and such outlets as Crate & Barrel in the U.S. and Selfridges in Britain. Paakkanen is targeting France, Italy, Spain, and Russia, which are new markets, while aiming to boost sales in the U.S. and Japan. North America accounts for just 3.4% of revenue.
While Paakkanen has no immediate plans to retire, she is prudent when talking about the future. "We don't have the resources to do everything everywhere," she says, "so we have to make sure we can handle the business we have." Paakkanen's dream, she says, is to open her own store in New York City. For Manhattan, the more poppies in bloom, the better.
By Ariane Sains in Helsinki