Ceconomy Ag Ord

Good morning, everyone, and welcome to our Q3 results call. With me today are our CEO, Bernhard Duttmann, our CFO, Karen Sonnmoser, and Ferran Rivera, CEO of the MediaMarkt Saturn Retake Room. They will guide you through today's presentation. Before we start, let me briefly address the usual formalities. Firstly, please be aware that this call is being recorded. A replay will be available on our website later today. Please keep in mind that today's presentation and potentially also some answers to your questions during the Q&A session may contain forward-looking statements. For additional information in this context, please refer to the disclaimer. Well, but now let me hand over to our CEO. Please go ahead.

Good morning, everyone, and thank you for joining the call. As you know from our trading statement, we are looking back on a third quarter which has been exceptional in many ways. I will kick off today's presentation by highlighting how we navigated through this challenging time. I would say we did this successfully. And we eventually came out better in the third quarter than we had originally expected. Farhan will later shed some light on the progress in our strategic areas. We will also share insights on yesterday's announcement regarding our new operating model, which we will implement across the entire business. Karin will, as usual, guide you through the quarterly financials and our outlook for the full year. In the end, we will, of course, wrap up with the usual Q&A session. Ladies and gentlemen, last time we talked in mid-May, we had just started to reopen our stores after weeks of lockdown. At that point in time, it was uncertain how fast consumers would come back to our stores and what their shopping pattern would be. I'm very pleased to report that our business recovered very fast. You could also say that we managed to hit the ground running when the lockdown was lifted. Actually, we resumed the good development we had in the first five months before corona. With stores reopening from mid-May onwards, our business quickly picked up pace. Based on diligent preparation during the lockdown phase, we had all necessary measures in place to provide customers with a safe shopping experience. The traffic in our stores remained lower compared to previous year, yet this was compensated by higher conversion and a higher checkout value. In short, less people came to our stores, but the ones who came had a clear shopping mission. At the same time, the strong shift to our online sales channel continued in all countries. The good news is the strong sales momentum from June even continued into July. Actually, it remained strong until today. We are definitely in consumers' minds. But we assume that demand shift effects will gradually phase out. We also remain cautious regarding the macro perspectives in key markets across Europe. Nevertheless, with all due caution, the positive trend registered since the end of the lockdown is encouraging and makes us feel optimistic for the business going forward. Chart six summarizes our perspective on the quarter. From our point of view, the positives clearly are more and outweigh the negatives. Due to the strength of our omnichannel business and diligent preparation, we were able to quickly capitalize on the easing of the COVID-19 restrictions. Our proactive crisis management also paid off. Our measures for mitigating the crisis were a key factor in delivering a better-than-expected Q3 result. On the other hand, we faced some headwinds on our growth margin. mostly due to the shift to online and lower revenues in service and solutions, fortunately easing month by month. Moreover, we have seen that the age structure of our inventories has deteriorated due to the lockdown of our stores. To wrap up the third quarter, let's take a quick look at our headline figures. In slide seven, you see, despite more than six weeks of widespread store closures, on that is half of the Quarter, sales adjusted for currency and portfolio effects were only down by 8.4%. Adjusted EBIT, excluding associates, came in at minus 45 million euro, which is on prior year's level. Ladies and gentlemen, COVID-19 has imposed a huge level of disruption on the retail industry and all of us. I am proud of how our teams at economy and mediamarkt.org have responded with determination and promptness. They spent massive time and energy to successfully steer the company through this unprecedented crisis. At the same time, we did not lose sight of our strategic initiatives. We continue to make tangible progress. In a minute, Farhan will highlight a few of our recent achievements. As you can imagine, with all COVID restrictions, Digital growth was the main focus in the last quarter. Here we focused on quick wins to really respond immediately to the market, but also on more strategic initiatives, which will improve our online business in the future. For example, we aim to push service and solutions more also in our online business. Centralization of processes remain key for our initiatives and our strategic direction. We are now in the middle of the transformation. Therefore, we cannot wait longer to implement a streamlined and identical organization across all countries. The standardized processes that are uniform throughout the entire business. This is the reason we now come with a new operating model. It will enable us to become faster and more custom-oriented. During COVID, with only a small agile team working under a strict protocol, we had a good experience in gaining speed with standardized processes. We will now implement these across the entire countries and our whole business. So much from my side. Now, Ferran, please go continue and talk about our details and the new model.

Thank you, Bernhard, and good morning also from my side. No doubt, in the past months, we continued to make noticeable progress in all the strategic initiatives. That shows we stay on track and we deliver what we promise, even in exceptional times. Let me explain to you a bit more in detail what we achieved in the third quarter, beginning with Omnichannel. First and foremost, we have performed strongly in online, with almost 3 million new registered online customers since March. This strong growth in online was also driven by our increased focus on online marketing, While online marketing accounted for 30% to 40% of our total media investment before COVID-19, it is now at 60% to 70%. And the majority of this online marketing spend is performance-based, with very attractive returns. As a step into new business models, we have launched our own marketplace in July and are quite pleased with the initial momentum and the strong interest we see from the seller community. So traffic has obviously suffered from corona during the third quarter. But we see traffic now recovering step by step, and pickup rates are already up above 40% again. Within our stores, we have realized a significant efficiency improvement through our new employee app. This new app enables our employees to provide better and faster service to our customers by accessing all relevant information directly on their smartphone. It reduces the time required for a sale or for the preparation of a pickup by one third. This frees up a lot of capacity. We have completed the rollout of this new app in Germany and we will finally roll it out across all our markets. And not to forget, we have started to prepare for the rebranding in Austria and Luxembourg, where we will rebrand our Saturn stores and Saturn online channel into MediaMarkt by end of this calendar year. Given the specific situation in these two countries, focusing on one strong brand is the right way forward there. In Germany, where we run more than 150 Saturn stores, we plan to continue our two-brand approach. In services and solutions, sales, have recovered to previous year level in June. Again, this has been supported by our new employee app. Sales with the app have a 25 higher touch frame, which is quite significant. But sales have also improved because of usability measures when we have taken in our online channels. We have implemented the technical ability to build services in monthly subscriptions. also in our online channel and have launched our warranty extension, Guaranty Plus, as a monthly subscription service in Germany. This capability to build monthly subscriptions will be rolled out across all our channels and markets and will be a key enabler for future growth. We have also completed the rollout of our after sales and repair IT platform in Germany. This platform enables us to offer these services in a much more efficient and customer-friendly way. And our net promoter score in after sales has immediately improved after the platform went live. In category and supply chain management, we have now introduced a standardized assortment and supplier framework for each country. This will create significant benefits over time. In procurement, we have made further progress with our centralization approach, We are now at 90% centralized procurement in Germany and over 95% centralized procurement on country level across the group. We are much more efficient now, have more transparency and control. Furthermore, we have launched a number of new category pilots, for example, solar in Spain and health and wellness in Germany, and we see significant potential in these categories going forward. In logistics, we are continuing to implement our so-called omnichannel spine to create one stock across all channels and borders. And we are making steady progress in enhancing our customer experience. For example, in Germany and Benelux, we are now already delivering more than 80% of our parcels within the next day. In terms of organization and cost structures, we are continuing our efforts to make our costs more flexible. One main driver here is rent contracts, where we are succeeding in implementing turnover rents, especially when agreeing new rent contracts. Given that, our average lease period is roughly three years. We will capture these benefits step by step over time. Last but not least, we are introducing a new operating model as a major step in the further development of our company. It will be the organizational basis for our way forward. I will come to that in more detail in a moment. So, we achieved a lot in the past month, and we have learned a lot. During corona, we demonstrated that we can react fast to fundamentally changing conditions. Our agile, group-wide contingency approach proved to be highly effective and successful. We are now ready to take the next big step on our way to becoming a very efficient and consistently customer-oriented company. We will now introduce a new operating model and thus further accelerate our transformation process. We are happy that both shareholders, economy, and the family Kellerhaus owner of Convergenta support the concept and the program of the new operating model. Our new operating model is about standardization, and harmonization of structures and processes across the entire company. This applies to the administrative functions in our countries as well as the organization of our stores. And it includes a new form of cooperation between our holding in Ingolstadt and the headquarters in the individual countries. We will harmonize management structures in our 1,000 stores across Europe and align store formats company-wide. And very importantly, we will transfer administrative tasks from the stores to the headquarters of our countries. In this way, we also support the further standardization of key processes, for example, in category management, procurement, or logistics. Above all, however, we ensure that our colleagues on site can concentrate on what really matters, our customers. We will establish, group-wide, unified structures with clear responsibilities for strategic guidelines, standard design, and execution of activities. All our countries will have the same leadership structure with the same departments to facilitate a seamless collaboration across our company. In addition, we will form regional clusters and bringing together Belgium, the Netherlands, and Luxembourg to form the Benelux region. We have already merged the Iberia region, Spain, and Portugal beforehand. In our stores, we will focus everything on best possible customer orientation. Besides the introduction of an efficient uniform management organization, we are strengthening our consistent customer focus with further measures. Under the title Passion for Customer, we are investing in our people. We empower them with a dedicated training program to offer outstanding customer service. In particular, we want to further improve the service quality and advising skills of our teams. The smartphones and digital tools we keep our colleagues in the stores with also contribute to this approach. A good example is the employee app. I already touched upon this topic at the beginning. The guiding principle we follow in our operating model is clear. Ensure maximum customer orientation and a consistent customer experience based on lean, unified structures and fast processes. Our way forward also includes the continued review and optimization of our store network across Europe. In response to COVID-19 impacts, we plan to permanently close 14 of our more than 1,000 stores. The number of European stores may decline further slightly over the coming month. To avoid any misunderstandings, we are talking about individual cases. We are talking about those stores where in light of COVID-19, it is not foreseeable that we will be profitable within a reasonable period of time. The stores are and will remain our biggest asset. They are the heart of our company and the core of our omni-channel model, even in a post-corona world. That's why it is less about closures and more about optimizations. This includes right sizing as well as continued flexibilization of rental costs. By the way, right sizing is more than less space. It's about the right alignment of the safe floor to the respective store format. Above all, we will invest in the effectiveness of our stores. We have formulated a clear goal for this. We will leverage our store network as the ultimate showroom with immediate availability and for click and collect fulfillment. To achieve this goal, we will expand the services and experience areas for our customers. We will increase the visibility of particularly strong brands, and we will further strengthen our pickup points. Furthermore, we will also continue to introduce new store formats. Just in the last few weeks, we have opened two concept stores in Italy, and the next opening is scheduled for Cologne, the so-called Experion area. will be inaugurated in early September. The store focuses on e-gaming. Ladies and gentlemen, to put it in a nutshell, by implementing our new operating model and optimizing our store network, we will gain speed and quality. We will sustainably improve the competitiveness of our entire company, our subsidiaries, and our stores. We will make sure that our customers across Europe have an attractive and consistent omnichannel experience when shopping at media malls at all. Our lean and efficient organizational structure will also lead to significant cost savings. We expect that the implementation of the new operating model and the selected closures of stores will lead to sustainable savings of slightly more than 100 million euros per year. We only expect limited earnings contribution next financial year. but then savings should be significantly accelerated in financial year 21-22. By financial year 22-23, we expect to realize the majority of anticipated savings. One-time expenses for the execution of the program amount approximately €180 million. A significant part of these expenses is expected to still become earnest effective in the current fiscal year. The implementation of the new operational model and the review of our store network are also associated with job adjustments. That's unavoidable, unfortunately. Within the next two to three years, company-wide, a total of up to 3,500 full-time jobs could be reduced, primarily in our foreign European countries. Such decisions are never easy to take. As a responsible company, we will handle This matters with decency, professionalism, and in accordance with social standards in the best possible sense, as we have done in the past. Let me make it very clear. All decisions to be taken are based on comprehensive analysis and serve a very clear purpose. We want and we will become an even better company in each and every respect. Therefore, we are not talking about a simple cost-cutting program. We are talking about our way forward. The new operating model is the organizational basis for the next phase of our transformation. We have a clear plan, which I would like to outline only briefly at this point. In simple terms, the strategic development of our company follows three main directions. First, we go for growth. Therefore, we will further strengthen our core business. We will grow online, expand into new categories like healthcare and solar, and combining it with the new income pools. That also means, for example, that we will step into new business models such as our own marketplace. Second, quality matters. Therefore, we will further strengthen our key differentiators. We are the category authority. We rely on our omnichannel model, and we believe in our people. They make the difference. Third, we want to speed up. Our new operating model will enable efficient operations and we will make even better use of technology and big data. That means we want to get more out of our own data, data of our segmented customer groups, and we'll combine them with improved data analytics capability. We will become a data-driven smart retailer. Ladies and gentlemen, there are many individual projects behind these three strategic dimensions. We will implement them very consistently in order to fulfill our ambition to become customers' first choice. This is our way forward. We have not yet reached our destination, but we are well underway. So much from my side. Thank you. And now over to you, Karin.