Ceconomy Ag Ord

Welcome to the Seconomy MediaMarkt full year results webcast. We are live from our headquarters in Dusseldorf in an hybrid setup with participants both on-site and online. I'm joined by our CEO, Dr. Kai-Ulrich Deissner, and our CFO, Remco Reinders. They will present the highlight of the year followed by a Q&A session. Today, we meet in a new setup, one joint call for both press and analysts. We are pleased to welcome journalists online from our 11 countries. The presentation will be held in English with live translation. You can switch the language in the live stream. Before we begin, please note that today's discussions will include forward-looking statements. For more information, please refer to our disclaimer. The full presentation is available on our website. With that, I'm delighted to hand over to Dr. Deissner, who will guide you through the highlights of the year.

Thank you, Fabienne. Good morning, everyone. Thank you for joining us here today. I'm really happy to have you here with us today. Now, whether you're joining us here at our economy headquarter in Düsseldorf, all participating virtually, as Fabienne said, from 11 countries of our footprint. Today, Remco Reinders, my trusted CFO, and I will take you through the details of our financial year 24 and 25. Now, we'd already shared some preliminary numbers with you back in October, but I'm sure you will see some very strong performance across the board today. Because we've been on a strategic transformation for some three years now, from a classical retailer into what we call an omnichannel service platform. And last year's results show very well how that strategic transformation is gaining momentum. It's only the tip of the iceberg, but let me remind you from the very beginning 11 quarters of EBIT growth. That's a very strong track record. Now, there's two levels to this. First, for our business model, we are enhancing our retail core business model with what we call growth businesses. These are by now substantial in size and they continue to grow. But secondly, and actually much more fundamentally, This transformation is about the customers, about customers that think and feel and go shopping differently now than they did in the past. And all of our teams in the stores, in our logistics centers, in the offices throughout our 11 countries, they do want to put those customers first front and center to give them what we call Experience electronics. Our goal is to create a unique shopping experience that is tailored to their needs. Do we get that right every day? Of course not. Not yet. But we're moving in that direction and into the right directions. As you will see, today's results underline that. We've set over the past three years a solid foundation for future growth and we're proud of that. Ladies and gentlemen, we're on the right path and we will see this consistency pay off in the new financial year again. That's why we will publish a positive outlook for the current financial year 25 and 26. I will get to that later. Now let's first have a look into the details of those results of last year. Let me start with an overview and you will see that we delivered strong results across all our key metrics. First, sales reached 23.1 billion euros. That's a growth of 5.7% and that's more than the moderate growth that we initially guided. And we grew EBIT by 24% to 378 million euros. That means profitability is growing steadily, just as a reminder, for 11 quarters in a row now. And finally, a very hard measure. We increased free cash flow by 180%, now reaching 337 million euros. And as I said initially, fundamentally, our customer satisfaction reached a new record. Our net promoter score improved to 61. That's up three points from the previous year. So our focus on customer experience is indeed paying off. Now, we want to accelerate even more based on this momentum. We know that we still have a way to go in terms of our transformation. But we're ready for that next step. And we believe we have a really good partner to take this on with, JD.com. This partnership will help us accelerate even faster. JD.com brings significant experience, especially in logistics and technology. And teaming up with them, we want to create not just experience electronics, but the future of European retail. Just so that you know where we stand with this partnership. As you all know, we've signed our investor agreement back in July this year. At the end of November, JD.com had secured a total shareholding of 85.2% in Sycomine. And now we're working on and waiting for the outstanding regulatory approvals to finally close this transaction. We expect that closing still for the first half of the next calendar year. And I'm more convinced than ever that this partnership will make us stronger, even stronger, and will take us to that next level. But independent of that partnership in the future, let's look at the progress we made in our business, and that's on slide four. The performance of our growth area shows we are on the right track with diversifying our business model. Each of our strategic business segments contributes to our success. This diversified growth gives us the ability to adapt to changing market conditions even in the future. And we're adapting to our customer needs. Our all-time high of the Net Promoter Score isn't just a number of 61. It reflects fundamental improvements in how we serve everyone that shops with us across all touch points and every day. In this context, we've made significant progress with what we call personalized service, a specific program to let you design your visit to the store. We've completed that rollout in four countries already, and we're currently expanding to five additional countries. This, by the way, demonstrates that we scale successful concepts internationally, but of course we do adapt locally to reflect the different expectations that may exist in different countries. And we also invest in our backbone, our logistics and infrastructure, especially for those omni-channel capabilities. Here's an example. We've rolled out 16 regional fulfillment centers, that's across Europe, Germany, Spain, and Turkey. These centers then help us reduce delivery times and improve reliability of delivery for our customers. On the technology or IT front, we're leveraging data and AI to improve our customer experience. For example, with personalization to help our customers discover products that truly meet their specific needs. and to help us with conversion rates and customer satisfaction. Additionally, we're driving our sustainability measures, one of the key pillars of our strategy. Our refurbished sales nearly tripled this year. This also reflects changing consumer behavior. More and more often, customers choose high-quality refurbished products. Does it make sense for them economically And at the same time, it is an active contribution to putting less pressure on the environment. You probably recognize the next slide, number five. We do present it each quarter to give you transparency about the development of the nine KPIs which we introduced at our Capital Markets Day back in 2023. Because these nine KPIs represent the essence of our strategic focus. And once a year, we provide you with an update that includes precise figures. That's today. And I'm very proud to show to you that we've reached three of those nice strategic KPIs ahead of time. We achieved 53 million loyalty members. We increased our income share of services and solutions. And we grew our retail media income significantly. all before the official deadline, September 26. This shows we have made huge strides in becoming more than a retailer. Our growth businesses are now a significant contributor to our business, and they still continue to grow steadily. This will become clear on slide 62. Our growth businesses now represent a total of 36% of our gross profit. That's up from 33% last year, and it's a substantial increase from the 31% in financial year 2022-23. So we believe we're well on track to reach our target mix for financial year 2025-26, when we expect our growth businesses to contribute even more significantly to our overall profitability. Now, for the next few pages, let me walk you through some of the key operational developments last year, first for Retail Core, but then also for those growth businesses that I keep talking about. Let's start with Retail Core. It continues to be our strong foundation. And we're making some progress across all key areas in retail core. Let's look at loyalty first. As I said, we already surpassed our mid-term target of 50 million loyalty customers, and it's now 53. Why is that? We successfully integrated our Media Markt and MySaturn programs in Germany for a more customer-centric approach. And our loyalty program is now available in nearly all countries. Why is that important? These 53 million customers come to our stores and to our app and to our website far more frequently than unregistered customers. And we're approaching them with more targeted offers that convince them and they do drive our revenues. As you can see, we also improved another key metric and that's inventory management further. It's now down to 8.8 weeks of stock reach. And, of course, online. Our online sales were driven by strong growth both in visits and in conversion rate. And also our omni-channel approach is paying off. We're successfully linking for customers store visits and online journeys. It's finally reflected in our pickup rate, the rate of customers that chooses to go into a store although they ordered online. And that's now 37%. That's a great example of what omnichannel means. Not to forget the app. The percentage of online sales generated through the app has grown to almost 30%. That's very strong growth, and it's mainly driven by Turkey, Spain, the Netherlands, and Austria. Final element, store modernization. It remains fully on track. We've promised a target of 90% and we're on track to achieve that. Last year, we opened in particular smaller store formats. 29 new express stores and 8 new really small smart stores. That brings our innovative formats closer to our customers. Looking ahead into next year, we are preparing for the future through even more small format stores and at the same time a few more large lighthouses. As in the past, this differentiation, which is untypical for us historically, comes together with a cost focus and better logistics. So it serves our customers better and it is more efficient. All of this together shows our retail core is the strong foundation, and it is making steady progress to get even better. Now, based on that foundation, next to our growth fields, and let's start with service and solutions. Now, we did grow all product categories in service and solutions, but what stood out last year were insurances and products. installations and configuration services when customers buy new devices. It's what we internally call power services. Turkey and Spain were the two highlight countries for that part of the service business. For this year, we have two major objectives. We want to make it easier for customers to buy services online or in the app, Because, frankly speaking, this is still not as convenient as in our stores, and our attach rate still here has some potential. And we want to focus secondly on growth in the telco segment. We believe that there is still a lot of growth for us, potentially even with MVNOs, like our own mobile brand, Let's Go Mobile, which we launched in the Netherlands only this year. Second element of retail core is what we call space as a service, and it also expanded successfully. We're now offering what we call experience zones and entrance statements in over 700 of our 1,000 stores, and we're working with around 25 very special partners. We call them internally non-endemic partners. Well, that means it's partners that are not our classical industry partners, but where actually we establish a new relationship and thus also new business potential. Let's move on to private label, our own brands. Now, to be fair, the progress in private label has been slower than progress in other areas. But last year, our private label business benefited significantly from our audio line with Peak, and there especially by the Robbie Williams Company. Strongest product category is still accessories. And why is that? Because we tailor our accessory offers to highlight products. Take the Nintendo Switch 2 launch as an example. When we launched it, cases and many other accessories, cables, were also in high demand. And so we used that momentum and posted strong numbers around private label, around the Switch launch. Finally, we are improving the usability of our products. We've just recently introduced an AI chatbot that's been really well deceived by customers, especially with the use of smart manuals. Then, after private label, let us look at retail media business. This grew especially strong in Benelux, Spain, and Turkey. And we extended our offer again. We've introduced our first off-site programs. In case you're not familiar, with that solution, advertisers can reach MediaMarkt certain shoppers not just on our website or app, but elsewhere. With this, we open new potential for our partners in addition to our own platforms. And that is also very much in focus for this financial year. Secondly, we want to onboard here as well non-endemic partners and thus build new relationships, very similar to what I've just said about space as a service. Then, marketplace on slide 10. With Turkey now active, we're operating our marketplace in eight countries now. The GMV, the gross merchandise value, reached 527 million euros. That's another 90% year-on-year growth. Importantly, our EBIT generation more than doubled in that period. So we've also made strong improvements in our profitability as we scale this business. And we're not done yet. We're preparing to roll out Marketplace Next in Hungary and Switzerland for 2026. At the same time as we roll this out, we will enhance our assortment and add what we call verticals. I would call them topic areas. This is important because these verticals or topics have been very successful in the past. And you will see that they are different than our core assortment. For example, energy, fitness. E-mobility or even gardening. These verticals expand our assortment and they make us even more attractive for our customers. And as you know, and as I said, sustainability is a core part of our strategy. And again, we doubled down on this last year, as you can see on slide 11. There's three aspects. Let me start with better way. We reached our Better Way targets ahead of plan. Let me remind you what Better Way is. Better Way products are products in our assortment that are more sustainable, for example, by being more energy efficient. These Better Way sales now account for 25%, so a quarter of our total sales. That's already now a lot more than the 20% target which we have given ourselves for the financial year 2025-2026. Second, the number of trade-in products. So when a customer returns a used device, this increased by 11%. At the same time, the average trade-in value also increased, and that helped us make this a very profitable business for us. Finally, refurbished products. So used products refurbished to be as good as new. This showed exceptional growth. and increased by 191%. That's a very clear sign that we really are offering what customers nowadays are looking for. So, although we do feel encouraged to stay on this path, we will expand our trade-in offers, we will sell even more refurbished devices, and we will continue to focus on reducing the emissions footprint of our products. Now all of this that I've just so proudly presented to you, all of this would not be possible without our great team. I strongly believe that for us as an omnichannel platform, people and the human touch make all the difference. So we consistently invest in our people because we want, as MediaMarkt Saturn, to be the best place for them to work. And so we asked them, we asked them twice a year, would you recommend us as an employer? The results, we call that the net promoter people. And in our last survey, it was at an all-time high of 42. That's up four points year on year, or 10%. And of course, we also invest in their development. We now use AI actually as a core tool to empower and to train our employees. And at the same time, strengthening those AI skills across all levels in our organization is a key priority for us in this next phase. We also made progress looking at diversity. Our female share in the top leadership increased by 250 basis points year on year, and now stands at 16.3%. Come to think of it, perhaps even more importantly, we have so many different cultures on board in our team. And that's a very important aspect also to me personally of diversity that shapes our company culture. Across Europe, people from over 130 nations work with us. Yeah, that's right. More than 130 nationalities at MediaMarkt, etc. I want to take this opportunity not to speak to press and analysts, but to thank all those amazing people, to thank you guys that you work with us. All of this wouldn't have been possible without you. So thank you. From the bottom of my heart, thank you. Before I now hand over to Remco for the financial results, I want to highlight the three points that I want you to remember after our presentation today. Number one. The customer is always in the center of everything we do. Not always perfect, but better every day. We are convinced that our omni-channel model is the right way to go and it delivers on their expectations. So we will build on that in the future. Second, we have proven once again that our strategic direction, which has been stable for three years, is the right path. We continue to diversify our business and we do become more than a pure retailer. Our growth businesses are no longer small, they are a key pillar of our success and they continue to deliver consistent growth. And thirdly, as I started, we performed strongly despite an arguably challenging economic climate. Our sales grew more than moderate and our profitability improved for the 11th quarter in a row. Let me now hand over to Remco for a closer look at those amazing financials. So Remco, please join me.

Thank you. And also a big thanks from my side as well and a warm welcome once again. As Kai already highlighted, we achieved a strong result this year and delivered slightly ahead of our updated guidance, with both a strong sales growth of 5.7% and adjusted EBIT of 378 million, slightly above our updated guidance of around 375 million. This represents a 24% increase year on year, or 72 million compared to the previous year. In my opinion, these results are our visible and measurable success. They are proof that we are making good progress in our transformation, which began just under three years ago, as you can see on slide 16. Our efforts have translated directly into financial strength. We have significantly improved our profitability, with our adjusted EBIT growing by an average of 22% year-on-year. That's a performance that speaks for itself, and we are certainly very proud of it. These results come from robust sales growth in our core retail business, the increased contribution from our successful growth business, and our strict cost discipline. I will go into more detail on all three areas shortly. Let me now take a closer look at the full year result. We reported solid sales performance in all our four quarters and released very strong 6.9% like for like in Q4. Our profitability increase was driven again by our growth business. While we remain focused on cost, For Q4, our gross margin increase of 40 basis points was the main driver behind our profitability improvement. And now per region. The region DAG performed strongly over the year, and Germany reported the highest improvement in the region. This is a strong achievement, continued in a muted market, and we are pleased to report that we held our market share. In Western and Southern Europe, their Spain was the strongest contributor both in sales and in EBIT growth. Note that the Netherlands had a strong EBIT growth too. Finally, for Eastern Europe, Turkey continued to perform strongly. While we are still restructuring mode in Poland, as we said before, it will take a bit more time. Let's now take a look at our sales from Service and Solution. As a reminder, this includes insurance and warranties, telco and digital products, installation and repair, consumer financing and sustainability services. Overall, sales from service and solution increased by 12.5% for the full year. Regarding the individual service categories, extended warranty and consumer financing achieved strong research for the full year. These figures show once again that our efforts to improve our service offerings are paying off. We have successfully convinced our customers that we are not just product providers, but above all, solution providers. Let's move on to our online business. Over a 12-month period, online sales increased by 13.3% to €5.7 billion. This corresponds to an online share of 26%, including our marketplace, and this is 240 basis points more than the previous year. Please keep in mind here that our marketplace is currently active in eight countries, with the recent opening in Turkey. We expect the final two countries, Switzerland and Hungary, to go live in 2026. We still see great deal of potential here as the marketplaces to continue to ramp up. Let me now return to EBIT development. Our cross margin increased by a strong 30 basis points for the full year. This is essentially due to the positive impact of our growth areas. If we look at our operating expenses, you can see that our adjusted OPEX ratio has decreased again, although only slightly by 10 basis points to 17.3% of group sales for the full year. We have improved our location cost, as well as the efficiency of our marketing spend. We also place strong emphasis on managing our indirect spend. In simple terms, We are working hard to control all our internal costs that don't directly relate to customer facing side of our business. Let me walk through from adjusted EBIT to net profit. As explained before, we increased our adjusted EBIT by 72 million euros this year, which is a strong operating performance. Below the line, our net profit came in at minus 34 million, mainly impacted by non-recurring items like impairment we made in Poland for 34 million. Remember that we are in restructuring mode over there, as I mentioned before. Second, we recorded a 32 million transaction cost for our coming partnership with JD and clearly see this as an investment for our future. So it's fair to say that excluding those we would have reported a positive net profit. Let me finish with cash. Indeed, cash is king, particularly now in retail. While profit is an important measure, cash is the true livelihood of the company. A strong free cash flow demonstrates that our business model is working efficiently. In this case, that gives us the strategic freedom to fund growth, reduce debt and ensure we are resilient and agile in any economical climate. In essence, it's the engine that powers our long-term success. We generated 280 million more cash than last year, which is a fantastic performance in my view. On this positive note, let me now hand back to Kai.