Lidl hits the debt brake
Hard discounter Lidl wants to reduce its indebtedness to banks. This is partly a cautious reaction by parent company Schwarz Group to the current crisis in the eurozone.
However, Lidl clearly also believes that future capex requirements will be lower than in former boom years.
Since 2007/08 (February 29), balance sheet debt has jumped by around €2.5bn to €10.1bn (not including France) on net annual revenues of €45bn.
This follows an explosion of overall indebtedness from 2002 to 2009 in the wake of aggressive foreign expansion. The vast European empire of the Neckarsulm-based group currently spans 28 countries.
The entry of sometimes three new foreign markets a year required an annual capex of up to €3.5bn. Who can wonder that plans to enter new markets have now been scaled back?
A move into Serbia will follow soon, but such a small country is not likely to demand substantial investment.
In fairness, any review of corporate indebtedness must also take into account that real-estate valuations and cash-flow have increased substantially. Furthermore, our newspaper estimates that Lidl's like-for-like revenues have increased by 3 per cent this year.
Apparently, Schwarz Group boss Klaus Gehrig also believes that interest rates are set to rise on capital markets.
Overall, there seems to be a clear shift in strategic priorities. The days of low-interest, credit-fuelled expansion are now deemed over. Instead, the emphasis is on raising productivity at Lidl's 10,000-odd outlets by modernising stores and continuing the roll-out of bakery units.
This is not without an element of humour. Swabians are not only known in Germany for their thriftiness and diligence, but also for their penchant for housebuilding (Schaffe, schaffe, Häusli baue).
Perhaps soon we shall be treated to the spectacle of Klaus Gehrig mixing cement on site or sweeping the leaves off the premises?
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