May 6, 2010

Leading German retailer Edeka in top form

Edeka top management (photo: Carsten Milbret)
Triumphant triumvirate: Edeka's Gert Schambach (buying director), Markus Mosa (CEO) and Reinhard Schütte (CFO/IT director) in buoyant mood after reporting an excellent set of results for 2009
For many years, Germany's national dailies acted as though the country's largest food retailer didn't really exist – at least they never seemed to write about Hamburg-based Edeka Group. Only relatively recently, have they begun to tell German consumers about a company found on many a street corner in cities, towns and villages throughout the nation. These days, thankfully, are gone, and there is healthy competition within the media to report on a company as socially influential as Edeka. At the annual press conference for European crisis year 2009 last week, Edeka CEO Markus Mosa was clearly upbeat. This is not surprising as the figures for crisis year 2009 were pretty darn respectable. Group revenues grew by nearly 15 per cent to over €42bn and ebit jumped 17 per cent to €1.4bn. Net margin remained stable at 3.6 per cent – a fine achievement on Germany's low value-added food retail market.
April 29, 2010

Tesco vs. Metro Group

Metro Group head office (photo: Ludwig Heimrath)
Outclassed: Metro Group is roughly the same size as Tesco, but its UK rival earns more than double
With group revenues rising 7 per cent to nearly €64bn, Tesco's robust results for 2009/10 certainly didn't go unnoticed here on the European continent. The leading UK grocer's results cast an unfavourable light on anaemic-looking Metro Group, Germany's only major food retail plc. Even a cursory glance at the annual figures of Ahold, Carrefour, Tesco and Walmart must make depressing reading for the German giant. Admittedly, any comparison between international retailers is fraught with methodological difficulties. Often, one finds oneself comparing apples and pears. Obviously, there are diverse balance sheet rules (GAAP in the US and usually IFRS in Europe). Then, there is the question of exchange rates and divergent business years, not to mention differences in business models. Still, investors have a choice. No one obliges shareholders to keep faith with companies who employ their capital less efficiently than their international peers.
April 23, 2010

German milk product prices rise again

Aldi own label milk (photo: Lukas)
Benchmark for price and volume: Aldi Nord's own label brand Milsani
Recently, English-speaking readers have besieged Lebensmittel Zeitung with requests for the translation of an article published in our newspaper on the 23rd of April. The tenor of these demands seems to be: "We can see that the text refers to higher milk prices, but we don’t understand German!" Quite right! Since the article appeared, consumer milk prices increased by two cents a litre on May 1, and butter prices are set to rise on May 17. Annual contract negotiations are soon to be concluded here in Germany. Against a background of strongly increasing milk prices on the world market, local farmers have been demanding higher ones from Germany's retailer oligopoly. You can therefore bet your bottom dollar or euro that the inevitable consequence of this state of affairs will be a further hike in the price of all milk products.
April 22, 2010

Talk with Value Retail Chairman Scott Malkin

Scott Malkin, Group Chairman Value Retail (photo: Value Retail)
Outlet centre virtuoso Scott Malkin: "Value is never cheap & nasty"
Mild-mannered Scott D. Malkin, founder and Group Chairman of London-based Value Retail Plc, is not the most probable exponent of something so controversial as the village outlet centre. However, Harvard-educated Malkin (51) has made his vision come true in old Europe. After selling his creation, 2 Rodeo Drive in Beverly Hills, California, in 1990 to the Japanese department store operator Sogo, the American from the East Coast packed his bags for London. Unlike other US tourists, however, Malkin had something unusual in his pockets: the blueprint of a new operating model for the traditional European shopping centre – and one which has proved to be very lucrative.
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.