Ceconomy Ag Ord

Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining this Economy AG investor and analyst conference call. Throughout today's recorded presentation, all participants will be in a listen-only mode. The presentation will be followed by a question and answer session. If you would like to ask a question, you may press 0 followed by 1 on your telephone. Please press the star key followed by 0 for operator assistance. I would now like to turn the conference over to Stephanie Ritschel. Vice President Investor Relations. Please go ahead.

Good morning everyone and thank you for joining our Q2H1 results call today. With me are CEO Bernard Duttmann and our new group CFO Florian Wieser. 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. Secondly 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. But now let me hand over to our CEO, starting with an overview of the second quarter. Please go ahead.

Good morning, everyone, and thank you for joining us today. Today's call will be conducted in a new setting. With me here is Florian Wieser, who in addition to his role as CFO of Megazatoren has now been appointed to the CFO of Seconomy as of May 1st. Florian is not a new kid on the block. He has been with us for a long time. He was part of the demerger team when we separated from Metro. He was part, before he had gained experience, operational experience as a controller in a country. After the demerger, he worked as a finance manager for the southern European region with Ferran Reverta and the turnaround of Italy. End of 2018, he became CFO of our German business before becoming the CFO of Major Zatorre Retail Group. To make it short, Florian has been already an important part of the current transformation process, He knows all the details very well, our strengths and our weaknesses we have to overcome. I am glad that he joins the Board of the Economy because he will make sure that we will continue the transformation we have started when we pressed the reset button early 2019. The roll-up of Florian as Group CFO is also a first important step in establishing a uniform management structure of this economy group. So we have one board member for the economy now in a new structure that I can present you today. The second one, Carsten Wildberger, was appointed by the Economy Supervisory Board last night. Mr. Wildberger will take over my position in August. At the same time, he will become also CEO of Media Saturn Holding. Carsten Wildberger has more than 20 years of experience in marketing, and sales roles and led omnichannel, retail, and digital transformation processes of large distribution companies. At the Australian telecommunications company Telstra, he had P&L responsibility for around 400 branded jobs and led the entire retail and service organization. Ladies and gentlemen, with the nomination of Carsten Wildberger and Florian Wieser, we finally eliminate the dual structure We will unite the roles of CEO and CFO at the economy and media market. With that, let's move on to the second quarter. Ladies and gentlemen, I am proud of what we have achieved and how robust our business is. I will give you my reasoning for that. Our stationary business was again heavily impacted by ongoing temporary store closures and severe restrictions. Yet, we managed to largely mitigate the COVID-19 impact on our business. Sales as well as adjusted EBIT came in only slightly below the last year's level, which was significantly less impacted by COVID-19. Encouragingly, we continue to see high demand, both brick and mortar and online, in countries that were less affected by restrictions. Our online business overall remained highly dynamic. We generated more than 2 billion euros of online sales in one single quarter. The excellent online growth, as well as the sales momentum experienced when stores reopened in individual countries, demonstrate our strong market position. We also made sound operational progress. Structures are well in place to continue the progress of our transformation. All in all, the fact that we managed the second quarter well despite all the challenges and uncertainties proves the resilience of our business model. To underpin this and give you some background, let's take a closer look at the restrictions that we faced in the second quarter. Look at last year's number. We only had a lockdown for about two weeks in the second half of March in 2020. In comparison, This year, the lockdowns were significantly longer and more severe. This year, we were basically affected during the entire quarter. The countries that were most severely impacted by temporary closures were our home market Germany and the Netherlands, but also other countries faced temporary lockdowns and restrictions. In Austria, stores were temporarily closed in January, while Switzerland was affected in January and February. And in March, Hungary had to close its doors. At the same time, countries like Italy, Poland, and Turkey faced severe restrictions, including temporary closures on weekends or closure of stores in shopping malls. On average, only 37 percent of our entire store portfolio was open in January, followed by 46 percent in February. In March, we were really eagerly awaiting the easing of restrictions and were looking forward to Germany slowly executing the lockdown. But the German government decided otherwise. They went for a gradual reopening strategy whereby store openings were based on the number of infections per 100,000 inhabitants of a city. In areas with a seven-day incidence below 50, we were allowed to reopen our stores when in areas with an incidence between 50 and 100, the option click and meet with scheduled appointment for store visits was offered to customers on top of compliance with the prevailing distance hygiene and square meter rules. Subject to strict restrictions, the click and meet concept was also applied in the Netherlands and Belgium in March. With the rising number of infections during March, the number of fully open stores sharply declined day by day. Moreover, considering the hassle to make an appointment prior to shopping in our stores, the click and meet option was and is not overly popular for our customers. Frequencies of customers compared to 2019 decreased by roughly 60%. You can see over the entire second quarter, our brick and mortar business was severely affected by these restrictions. and that on top after already the first quarter was affected. In fact, ladies and gentlemen, before we dive further into Q2, let me take you back to when the pandemic started in order to show you how much COVID-19 disrupted our sales. The pandemic has been with us for more than a year now. You see here our sales development during this time. In 1920, we had started off very solidly. The 2019 Black Friday season was another success. In January and February, we seamlessly continued the positive trend of the first quarter and were fully in line with expectations. Even until mid-March 2020, we saw a pleasing sales momentum. But then this picture changed completely as COVID-19 started to spread across Europe. COVID-19 caused a temporary standstill of most of our stationary business in March and April 2020. Yet with the easing of the restrictions in May, we saw strong catch-up effects. This was followed by continued strong customer demand and high spending on consumer electronic products. The strongly positive sales trend continued until the return of severe restrictions on closures in several countries mid-December. Up to that point, we had a record sales development in that quarter. It is important to note that the sales disruptions you see over the course of the year are only due to the impact of COVID-19 pandemic on our brick and mortar business. Whenever our business was and is not interrupted by store closures and strict social distancing guidelines, we show a very positive sales performance supported by strong demand for offerings. This demonstrates our potential. The past year has also shown that we are well-prepared to benefit from catch-up effects once our stores reopen. I am therefore confident that we are well-positioned in both channels once we are behind the pandemic. To wrap up the developments for the first six months of this financial year, let's take a quick look at the headline figures. In the second quarter, due to all these restrictions, we were unable to match the previous year's level of sales and earnings. However, thanks to increased cost efficiency and our strong COVID-19 contingency measures, we were able to limit the profit decline. Sales adjusted for currency and portfolio effects only declined by 5.7% and adjusted EBIT decreased by merely 15 million year on year. Looking at first half results, I'm pleased to say that the development of sales and earnings is proof of the resilience of our business model. Despite the drastic COVID-19 restrictions, we achieved an overall positive development in this period compared to the previous year. Thanks to the excellent start into the first quarter of this financial year and the mitigation measures in the second quarter, coupled with the positive developments in less affected countries, first-half sales adjusted for currency and portfolio grew by 4.5%, and our EBIT rose by 41 million to 199 million euros. Ladies and gentlemen, we also remain track in our transformation, despite the massive restrictions on our stationary business and the short-time work that still affects many of our employees. It has been five months since we presented our strategy update to you at the Capital Markets Day in December. As we already announced then, we will most certainly inform you about the continuous progress we are making. Let me begin with the creation of an efficient organization and structure. We made very clear from the beginning that this pillar is fundamental to accelerate the transformation. I'm pleased to say that the ongoing implementation of the new operating model is progressing well. It's even ahead of the schedule. And also with slightly higher savings in the financial year. We have implemented homogeneous management structures in all countries. Moreover, in more than one third of all stores, we have already introduced a standardized organization. which is a prerequisite for consistently convincing customer experience. In addition, our hub for global business services has started operations in El Prat, near Barcelona, with around 150 FTEs. This new administrative center will unify the administrative functions of operational accounting, centralized control of invoices, and other services of the MediaMarkt.org group. it will serve all our non-German-speaking countries. By doing so, our stores and headquarters will be relieved of administrative tasks to focus their capacities even more strongly on value-adding services and most of all on our customers. All in all, our new operating model is an important step for future growth and fast implementation. In the strategic layer, build a unique value proposition I would like to emphasize the steps we have taken so far with the passion for customers training. Despite short labor during the last month, we have trained more than 400 managers and 3,000 employees in passion for customer. Let me remind you that the essence of the strategy is that we want to be the first choice for our customers. We have promised that we will invest even more intensively than before in the comprehensive training of our employees. With this, we have also set ourselves the goal to make a significant contribution to further expanding our advisory and service competence in the stores. The achieved training rate shows that we take our passion to be the first choice seriously. Speaking about service, we have integrated a monthly extended warranty subscription service in our webshops. Although the overall penetration of online services is still quite low, I'm pleased to say that it's starting to grow nicely. To expand our core business, we have successfully engaged in local consolidation and acquired 17 Wharton stores in Spain, where we lacked local presence. The acquisition will strengthen MediaMarkt Spain presence in regions such as Catalonia and Andalusia and enable market entries in cities such as Marbella. In addition, the expanded local presence is expected to increase online sales, including the possibility for click and collect. Finally, a few words on the acceleration of our growth path. We have continued to expand the media market marketplace in Germany. By tapping this new income pool, we will significantly increase our relevance to customers and suppliers and boost organic traffic in our webshops. It will also push our own retail and service sales and allow us to test new categories and products at speed and scale. At our media marketplace in Germany by now, around 230 sellers are onboarded with more than 130,000 SKUs. Besides, we have recently launched the marketplace for Sat1 in Germany, following the pace In 2022, it's our aim to launch the marketplace platform in the Netherlands and Spain. With this, I'm handing over to Florian, who will guide you through the financial performance of this quarter.