Financial Press Conference 2011/12

20.06.2012 | Hamburg

Otto Group invests in core business, e-commerce and high-growth world markets

  • Consolidated revenue rose by 1.7 per cent to 11.6 billion euros
  • E-commerce revenue grew by 9.2 per cent to 5.3 billion euros
  • Otto Group reinforces its position as the world's leading online retailer for fashion and lifestyle products
  • High growth rates in the Services and Financial Services segments
  • Market leadership in Russia consolidated - up 35 per cent
  • Successful launch in the growth market of Brazil
  • Promising start to the new financial year
  • Investment in core business 
  • Investment in e-commerce 
  • Investment in strategic growth market of Turkey
  • Investment in 100 per cent sustainable cotton

"The Otto Group has made a hopeful start to the new financial year," emphasized Hans-Otto Schrader, CEO and Chairman of the Executive Board of the Otto Group, at the presentation of the Group's balance sheet. "Revenues in Germany, in Russia and in the Services and Financial Services segments have partly seen double-digit growth in the last three months." Despite the uncertainties surrounding the development of the euro and their impact on consumer sentiment, Schrader remains cautiously optimistic in his forecasts for the whole financial year. "Our aim is still to secure moderate growth while continuing to increase profit."

Investment in core business
In the medium term, Schrader is anticipating positive impetus for growth and revenue from the campaign of investment instigated this year. "From a position of strength we are looking to lead our core business - with its brands OTTO, Baur and Schwab - into a promising future. In the course of the project FOKUS, the three brands, all of which delivered positive contributions to earnings, are to be more clearly positioned. Under the aegis of a dedicated management board, OTTO is to be more distinctively and energetically positioned on the market as the leading universal online retailer with its focus on fashion and living which will bring it back to a course of growth. Appropriate investments are being made. Baur and Schwab will rigorously continue their chosen path towards becoming specialist online retailers."

Investment in e-commerce
The second field of investment covers a broad range of e-commerce activities. Dr Rainer Hillebrand, Vice Chairman of the Executive Board of the Otto Group, is heading advances in e-commerce across the Group. His key responsibility will be to steer the e-commerce activities of the world's second largest online retailer (presently valued at 5.3 billion euros) and to lead it into the future. Activities include more than 60 online shops from the various multichannel retailers in the Otto Group, such as MyToys, the pure online providers such as Limango, Mirapodo, and the Shopping24 Group and corporate venture activities such as E-Venture Capital Partners and Project A in which a three-digit million amount have already been invested.

Investments in high-growth world markets
A third strategic field of investment concerns high-growth world markets. The Otto Group is already operating in over 20 countries. Following the example set by the powerful and prosperous market launch in Russia in 2006 and the successful start in the boom market of Brazil in 2011, the Otto Group is now setting its sights on Turkey as a further strategic growth market for e-commerce. To date, the retailing group of companies is present on the Bosporus with private shopping providers Limango. Bonprix is currently testing the market.

Investment in 100 per cent sustainable cotton
The Otto Group is pursuing a completely different investment in the field of sustainability. Following on from its long tradition in this field, the Otto Group is now aiming to convert the whole of its own cotton ranges to cotton cultivated under sustainable conditions* by 2020. "This ambitious goal once again exemplifies the Otto Group's pioneering role when it comes to sustainability," emphasises Hans-Otto Schrader.

Key balance sheet figures for 2011/12
The Otto Group grew its revenue in 2011/12 (29 February) by 1.7 per cent from 11.4 billion euros to 11.6 billion euros. Adjusted for currency effects, business expanded by 2.3 per cent. "In the wake of the enormous growth of 12.6 per cent recorded in 2010/11, the Group was able to retain newly acquired customers and win over new ones, despite the tough economic environment," explains Schrader. Revenues in the segments Financial Services and Services, and in e-commerce posted above-average growth.

As reported on a number of occasions, earnings were down on the year. Rising raw materials and factor costs, weak earnings posted by some Group companies such as in France and high investments, in particular in the Group IT division managed to keep earnings performance below the level of 2010/2011. Operating profit (EBITDA) fell from 667 million euros to 539 million euros. Earnings before interest and tax (EBIT) dropped from 378 million euros to 259 million euros.

Revenue up in all three segments
Following substantial growth recorded in the prior year, Multichannel Retail ended this current year slightly up, growing revenues by 0.3 per cent to 10 billion euros. The Services segment, driven largely by the international Hermes group of companies, grew external revenue by 9.0 per cent to 1.030 billion euros, and thus crossed the one-billion-euro threshold for the first time. Developments were even more dramatic in Financial Services, a segment marked by the EOS Group. Following double-digit growth to 455 million euros in the prior year, revenues for the segment were up 16.9 per cent to 532 million euros in 2011/2012.

E-commerce grows by nearly 10 per cent
Internet retail continued to build on its position as the most significant sales channel within the Otto Group, growing online sales by 9.2 per cent, or roughly 500 million euros, to 5.3 billion euros. Consequently the Otto Group’s more than 60 online platforms accounted for 53 per cent of all earnings in the Multichannel Retail segment. In Germany, e-commerce revenues increased by 300 million euros (9 per cent) to 3.4 billion euros, accounting for 58 per cent of the Group's retail sales. Thanks to this growth, the Otto Group maintained its position as the world’s largest online retailer for fashion and lifestyle products and the world's second largest web retailer.

Multichannel Retail
The picture painted by the results for the individual Group companies within the Multichannel Retail segment in Germany is, almost without exception, positive. Earnings at the Group's core business OTTO were virtually stable following a year of tremendous sales growth in 2010/2011. Revenues achieved at the company fell slightly - by 1.3 per cent to 2.087 billion euros. Internet business continued to develop and now accounts for 75 per cent of company revenues. The trend at the Bonprix Group continued to be upbeat, with revenue growing by 2.2 per cent from 1.136 billion euros to 1.162 billion euros. The Witt Group posted growth of 2.4 per cent from 629 million euros to 644 million euros. Following outstanding growth of more than 22 per cent in the prior year, Baur Group revenues grew once again by 1.2 per cent to 616 million euros in the year under review. In contrast, the Heine Group reported a drop in revenues of 3.7 per cent to 526 million euros. The Schwab Group, which includes the Schwab, Sheego and MyToys brands, posted a strong 8.4 per cent growth from 464 million euros to 503 million euros. Sportscheck grew its revenue by 5.9 per cent to 347 million euros.

Difficult situation in France
On an international level, business activities went through a difficult period, particularly in France. Companies belonging to 3 Suisses International witnessed a decline in sales of 5.6 per cent to 1.980 billion euros. This was due in part to the somewhat depressed consumer market for fashion and the restructuring of the distance selling business model in France. Meanwhile, in the UK, Freemans Grattan Holdings underwent another deliberate cut in turnover as part of corporate restructuring. As scheduled, revenues fell further from 199 million euros to 164 million euros - with the company moving into the profit zone. Overall in Europe (excluding Germany, but including France and Russia), the Otto Group achieved revenue growth of 3 per cent to 3.511 billion euros.

Business developments in the USA and Canada were encouraging. Despite the trying economic environment, sales revenues rose by 4.4 per cent adjusted for currency effects. This was largely generated by houseware and furniture specialist Crate and Barrel. However, remove these effects and the region posted a slight drop of 0.4 per cent to 1.148 billion euros. Business in Asia was characterised by some extraordinary circumstances. Despite the tsunami and nuclear disasters in their country, the Otto Japan Group was able to maintain revenue levels at 226 million euros. 

Remaining on course for success in the high-growth markets
Taking account of all developments, it is once again the performance of the Otto Group in Russia which stands out in 2011/12. As market leader, Otto Group Russia achieved the largest sales growth across all major companies. Revenue in Russia surged by 34.9 per cent to 487 million euros. Similar high levels of growth are now being targeted in Brazil where the Otto Group is looking to achieve sales volumes of US$500 million within five years. This is to be achieved not only by securing market share in the booming fashion e-commerce sector, but also through financial services and the support given to local and international fashion brands in building up their online shops in the country. Besides Brazil, the Group is looking to intensify its e-commerce business in Turkey.

The number of employees in the Otto Group rose by 3,500 in the past year to more than 53,100.

* Sustainable cotton is initially defined as ecologically cultivated cotton and cotton from the 'Cotton made in Africa' project instigated by Dr Michael Otto.


Photo selection Financial Press Conference 2011/12

picture Credits: Otto Group

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