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Hornbach Group increases sales by 4.5% in first nine months – Earnings held back by weak quarterly performance in Germany

Hornbach Group increases sales by 4.5% to Euro 3.0 billion in first nine months of 2015/2016 / DIY stores in other European countries as key growth driver / Weak earnings in Germany in fall hold back Group’s earnings performance / Nine-month operating earnings (EBIT) down 9.8% to Euro 172.5 million / Earnings per share nevertheless almost at previous year’s level

Neustadt a. d. Weinstrasse, December 21, 2015.

The business performance of the Hornbach Holding AG & Co. KGaA Group (Hornbach Group) witnessed a setback in the fall: despite group-wide sales growth, operating earnings for the third quarter of 2015/2016 (September 1 to November 30, 2015) showed a marked downturn. This was primarily due to an unsatisfactory earnings performance in the DIY store business in Germany, a factor that also left its mark on the Hornbach Group’s earnings performance for the first nine months of 2015/2016. While cumulative consolidated sales grew by 4.5% to Euro 3.0 billion, EBIT declined by almost 10% to Euro 172.5 million. Thanks to improved net financial expenses and a lower group tax rate, the Hornbach Group’s net income of Euro 116.7 million fell only slightly short of the previous year’s figure. The Board of Management has updated the earnings target for the financial year ending on February 29, 2016. Given the company’s innovative and financial strength, however, it still sees Hornbach’s long-term growth potential as being intact.

“We did not reach our earnings targets in the third quarter. In Germany, both sales and the gross margin fell short of our expectations. In the fall months, we felt the effects of a certain reluctance on the part of German consumers to make purchases, a development which competitors reacted to with increased discount campaigns. That adversely affected our margin in November in particular”, explained Albrecht Hornbach, Chairman of the Board of Management of Hornbach Management AG. The year-on-year development in the gross margin was negatively influenced by, among other factors, changes in the product mix due to the growing share of online sales and one-off items resulting from the takeover of former Praktiker/Max Bahr locations.

Furthermore, earnings were held back throughout the entire period under report by cost increases mainly relating to the expansion in the Hornbach Group’s internet activities. “Digitizing retail is the greatest challenge in the DIY sector as well. Anyone unwilling or unable to invest considerable sums in technology and infrastructure in this area will be left behind in future”, stressed Albrecht Hornbach. The Hornbach Group was pursuing a sustainable growth strategy. “Now is the time to invest, even if the odd quarter does not go so well. We are convinced that this approach will pay off in the long term, but that will take staying power”, added Albrecht Hornbach.

DIY store sales up 5.9% in third quarter

Sales at Hornbach Baumarkt AG, the largest operating subgroup (DIY retail), grew by 5.9% to Euro 863.0 million in the period from September 1 to November 30, 2015. In the first nine months of 2015/2016, the 153 Hornbach DIY stores with garden centers in nine European countries increased their net sales by 4.7% to Euro 2.8 billion. On a like-for-like basis and net of currency items, DIY sales grew by 2.9% in the third quarter and by 1.8% in the first nine months of the 2015/2016 financial year. This growth was driven above all by strong demand from DIY customers at Hornbach’s stores outside Germany. Adjusted sales here increased by 7.0% in the third quarter and by 3.7% in the first nine months. This more than offset the development in sales in the domestic business, which remained virtually unchanged on the previous year. The Hornbach Baustoff Union GmbH subgroup increased its net sales by 2.8% to Euro 62.2 million in the third quarter and by 1.2% to Euro 182.4 million in the first nine months.

Hornbach launched operations at four new DIY megastores in other European countries in the third quarter of 2015/2016 and thus completed its expansion program for the current financial year. As of November 30, 2015, Hornbach operated 153 DIY stores with garden centers in nine European countries, of which 99 stores in Germany.

Earnings expectations reduced for 2015/2016

Due to the weak third-quarter earnings performance of our DIY store business, especially in Germany, the full-year earnings targets for the business performance of the Hornbach Group in the 2015/2016 financial year have been updated. Accordingly, the Board of Management no longer expects consolidated operating earnings (EBIT) for the 2015/2016 financial year as whole to roughly match the level reported for the 2014/2015 financial year. “We rather see EBIT as being likely to fall a maximum of 15% short of the previous year’s figure of Euro 165.1 million” is the forecast issued in the interim report published today by the Hornbach Holding AG & Co. KGaA Group.

Key Figures of the Hornbach Group for the 3rd Quarter and First Nine Months at a Glance

Key figures
Hornbach Holding AG & Co. KGaA Group1)
(in Euro million, unless otherwise stated)
3rd Quarter
2015/2016
3rd Quarter
2014/2015
±
in %
9 Months
2015/2016
9 Months
2014/2015
±
in %
Net sales925.6875.85.72,980.22,851.44.5
of which Hornbach Baumarkt AG subgroup863.0814.95.92,796.42,669.84.7
- Germany480.4477.40.61,596.51,560.92.3
- Other European countries382.5337.513.31,199.81,108.98.2
Like-for-like sales growth (DIY)2.9%1.0% 1.8%4.9% 
of which Hornbach Baustoff Union GmbH subgroup62.260.52.8182.4180.21.2
Gross margin (as % of net sales)35.8%36.7% 36.9%37.2% 
EBIT21.337.2-42.7172.5191.2-9.8
Consolidated net income2)11.622.6-48.6116.7120.6-3.2
Earnings per share (Euro)0.711.22-41.85.946.15-3.4

Misc. key figures
Hornbach Holding AG & Co. KGaA Group1)
(in Euro million, unless otherwise stated)
November 30, 2015February 28, 2015±
in %
Shareholders’ equity as % of total assets53.2%51.7% 
Number of DIY stores with garden centers1531464.8
Sales area of DIY stores with garden centers in 000 m²1,7721,7044.0
Number of employees17,32016,4555.3

Rounding up or down may lead to discrepancies between percentages and totals. Calculation of percentage figures based on Euro 000s.

1) Previous year's figures adjusted due to IFRIC 21; please see Note 1 in the notes to the 2015/2016 First Nine Months Report

2) Including minoritiy interests pursuant to IFRS

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Axel Müller
Head of Group Communications

T +49 (0) 6348-60-2444

F +49 (0) 6348-60-4299

axel.mueller@hornbach.com

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