April 15, 2010

Germany's retail winners & losers

An Edeka Zurheide centre (photo: Reinhard Rosendahl)
Winner: Edeka outpaced all German food retailers in 2009
It is not often these days that a journalist receives a call from two retail analysts at a major London bank who claim they want to visit. Bankers have grown rather low-profile of late. In fact, they have almost become like the wolves which the local authorities, in their infinite wisdom, have recently re-introduced to the German Federal State of Saxony: potentially dangerous, but few ever see them. In the past, contacts with retail analysts in the City of London always seemed to go through three distinct periods...
April 8, 2010

Lidl's foreign profit falls

Lidl in Switzerland (photo: Tom Kawara)
Lidl in Switzerland: The company sees potential for 150 more stores
It takes a fair amount of mental discipline to read Bundesanzeiger on a regular basis. Without wishing to be unkind, the Federal German Gazette, containing all obligatory announcements for German companies, is not perhaps the most stimulating read. Those who do make the effort, however, are sometimes rewarded for their pains for German retailers are generally a most secretive bunch. Many of them seem to believe that they should be allowed to eat their cake and still keep it. On the one hand, they want to sell to all and sundry, which gives them vast power within society. On the other, they wish to enjoy their wealth in very private obscurity. This turns the Bundesanzeiger into something of a cat & mouse game between retailers and journalists. In fact, if it wasn't so frustrating, one could almost admire the skill with which some grocers tuck away illuminating pieces of information and the imaginative names they give to their holdings, sub-holdings and foundations. But sometimes, if only through some occult process of serendipity, one manages to strike gold in the Klondike of Bundesanzeiger's august pages.
April 1, 2010

Grey market makes Douglas Holding see red

Dr. Henning Kreke, CEO Douglas Holding (photo: Douglas)
Henning Kreke: "Suppliers must choose exclusive distribution with top customer service or price-driven mass distribution"
Dr. Henning Kreke, CEO of Douglas Holding, has thrown down the gauntlet to those suppliers who sell on the grey market. The top man at Germany's leading lifestyle specialist retailer used the company's AGM last week for some straight talking. With a 35 per cent share of the national perfume market, what Douglas does or doesn't want carries a lot of punch in the segment. Kreke demands that perfume brand manufacturers adhere more strictly to the exclusive distribution contracts they have concluded with retailers. He also criticises suppliers who thrust volume into the system only to sell the excess stock in grey market channels. "It would seem that quality customer service and advice is no longer important to them."
March 25, 2010

Metro CEO Eckhard Cordes praises own group

Zygmunt Mierdorf (photo: Anna-Maria Romanelli)
Didn't shape up: Metro Group personnel boss Zygmunt Mierdorf failed to survive the restructure he had helped to proclaim
Tolstoy once asked in his famous novel Anna Karenina why the bourgeoisie had dinner parties. He then answered his own rhetorical question: "because they want to marry their daughters". Similarly, naughty journalists are often tempted to interpret major restructures at retail groups as the prelude to the sale of a division or two. When a CEO goes on to praise the performance of lacklustre subsidiaries in fulsome terms, temptation ripens into a very mania of anticipation. Of course, any hint of a sale is strenuously denied by the company concerned, but that is all part of the great game. If, however, Metro Group boss Eckhard Cordes really does wish to find a suitor for various subsidiaries, then he is more like a step-father than the real father to the brides to be.
March 19, 2010

Rewe Group gets an investment rating

Norbert Fiebig, CFO Rewe Group (photo: Rewe Group)
Living by numbers: CFO Norbert Fiebig has gained an investment grade credit rating for Rewe
Some say that the man who woos a girl has made significant progress when she tells him her dress size. At all events, we now know Cologne-based Rewe Group's vital statistics. Standard & Poor's Ratings Services (S&P) have assigned Germany's second-largest food retailer its first long-term (BBB-) and short-term (A-3) corporate credit rating. Although this represents the first rating achieved by a German retailer co-operative, some of the agency's explanations are puzzling: "We consider the ratings constrained by Rewe's high leverage ratio, which we view as currently below the levels usually commensurate with an investment-grade rating. The group generates low free cash flows due to its significant capital expenditure programme. We consider, therefore, that Rewe will rely on divestments in the future to achieve further deleveraging." Despite financial debt levels of around €2.4bn to the end of 2009, it is the last sentence that surprises here. For years, Rewe has denied media speculation that it might be tempted to sell its "Toom" DIY stores and hypermarkets or its tourism division.
March 12, 2010

German discounters turn cannibal

Aldi Süd logo (photo: Hans-Jürgen Schulz)
Still king: More than one in four German discount stores bear the name
In the US and the UK most major grocers are publicly quoted companies. For decades investors, retail analysts, small shareholders and even consumers have been able to debate such arcane acronyms as WACC, ROCE, ROIC etc. However in the secretive, clannish world of German retail every spring we can look forward to, wait for it, wait for it, and, oh wonder of wonders – the latest store counts! But the figures just published by market researcher TradeDimensions on the state of the local discount segment as per February 25 do enable some interesting conclusions to be drawn. In the Federal Republic eight players run a total 15,331 discount: Aldi North & South; Edeka subsidiary "Netto Marken-Discount" and former Tengelmann subsidiary "Plus", most of which will be subsumed into the Netto empire by mid-year; Schwarz Group subsidiary "Lidl"; Rewe Group subsidiary "Penny"; Norma; and the Dansk Supermarked/Edeka joint-venture "Netto Supermarkt". The pack is still led by alpha wolf Aldi, whose northern and southern branches operate more than one in four of Germany's discount outlets.
March 5, 2010

Schlecker prunes foreign drugstore operations

Schlecker XL store interior (photo: Jans Rudolf-Schulz)
Great blue hope: The new and larger Schlecker XL store format opens in Spain today
The European discount drugstore empire of owner-manager Anton Schlecker continues to retreat on a number of fronts. The group has confirmed to Lebensmittel Zeitung that it plans to end its 20-year presence in the Netherlands by the end of this year. Currently, Schlecker's c. 100 Dutch stores post estimated annual revenues of around €35m to €40m. Also, local trade union Setca claims that 32 of Schlecker's 36 Belgian stores are due for closure. Following the withdrawal from Denmark last year, Europe's largest drugstore multiple has reduced its activities to ten national markets. Can it be, we ask as breathless reporters, that the flaming Schlecker bull is finally running out of steam?
February 23, 2010

Sweet makers condemn cocoa price speculation

Chocolate (photo: Infozentrum Schokolade)
Bitter-sweet: A third of the world's cocoa harvest last year was bought for speculation purposes
Now that the chocolate powder has settled on last month's Internationale Süßwarenmesse (ISM), the world's largest confectionery trade fair in Cologne, it would seem that Germany's sweets and biscuit makers have discovered a new bête noire. Apparently, a considerable number of them went in for a round of banker-bashing at this year's venue accusing Deutsche Bank, Goldman Sachs, Merrill Lynch & Co. of irresponsible speculation regarding raw materials prices. In particular, cocoa prices at all-time highs of £2,300 ($3,550; €2,620) per tonne have got everyone hot under the collar. Jürgen B. Steinemann, CEO at cocoa and chocolate products maker Barry Callebaut, cites weekly reports filed by the U.S. Commodity Futures Trading Commission that a third of the world's 3.5 million tonne cocoa harvest last year was bought by hedge funds, institutional investors and pension funds rather than by food processors.
February 22, 2010

German shoppers drive, French click & drive

Chronodrive (photo: Les Linéaires)
Chronodrive: Auchan customers can drive to a packing station to collect their online orders
"Chronodrive est magnifique!" This fulsome praise in a recent e-mail from a great-aunt in Belgium was intriguing. Tante Françine, despite being in her mid-80s, is impressively tech-savvy and orders more on the internet than most young people. She then drives in her automatic car over the border into France to collect her shopping at the Chronodrive packing station. The click & drive activities of the Auchan subsidiary as well as those of its major local rivals are impressive. French retailers have clearly stolen a march on their German rivals. We therefore asked Germany's major retailers whether they plan to develop online drive-in systems. Their response, or lack of it, was significant.
February 19, 2010

Talk with Rinascente CEO Vittorio Radice

Vittorio Radice, CEO La Rinascente (photo: La Rinascente)
Vittorio Radice: "Retailers need footfall"
An interview with La Rinascente CEO Vittorio Radice is a bit like a trip down the memory lane of UK retailing. Radice was the creative Italian who turned Habitat (later acquired by Ikea) and Selfridges around in the 1990s. He then had a brief stint on the board of Marks & Spencer in 2003. During his seven years at London-based Selfridges, Radice transformed what had become a rather dowdy department store operator into a cool, swinging operation. In order to do so, he didn't flinch from introducing loud pop music, body-piercing salons, or extravagant annual promotions, including mass photo shoots with naked customers.