Ceconomy Ag Ord

Ladies and gentlemen, thank you for standing by. Welcome to the CEConomy AG Q3 9-month 2025-26 results conference call. At this time, all participants are in a listen-only mode. The presentation will be followed by a question-and-answer session. To ask a question, you will need to press star 1-1 on your telephone keypad. You will then hear an automated message advising your hand is raised. To withdraw your question, Please press star 11 again. You can also write your questions via the text box below the webcast. Please be advised that today's conference is being recorded. I will now hand the conference over to Kirsten Ocnefo, Senior Investor Relations Manager. Please go ahead.

Thank you, Crystal, and good morning, everyone. Welcome to our Q3 results call. I'm joined today by our CEO, Remco Reimers. Before we begin, please take note that today's presentation and discussion may include forward-looking statements. Further information can be found in the disclaimer included in today's presentation. This call is being recorded, and a replay will be available on our website later today. With that, I would now like to hand over to Remco.

Yeah, thank you, Kerstin, and good morning, everyone. Thank you for joining us today. I'm happy to welcome you to our Q3 webinar, and to my first earnings call as CEO. I look forward to taking you through today's presentation. As a news, CFO will join us later in the course of the year. I will guide you through both our operational and financial highlights. But before I discuss our business development and financial performance, let me put today's results into a broader perspective. On July 9th, we held our strategy day. and we shared an overview on where we stand and where we are going. I'm extremely proud of what we have achieved over the last years. We have taken consumer electronics to the next level. We have strengthened our strong customer relationships. We are seamlessly linking our core business with our growth businesses. This makes us an omnichannel service platform. We combine multiple business areas under one roof. This is a strong foundation that we can build on. Our experience electronic strategy is working and paying off. This is why our new strategy is deliberately not a reinvention, it's an evolution of our direction. We create experience electronics that matter. These experience and moments of trust. Let me explain. We live in a world where rapid technology development and an almost limitless variety of products are making purchase decisions increasingly complex. There's only one thing that cuts through this noise, trust. Trust is a decisive factor for our customers. This is why our new strategic chapter will focus on creating moments of trust for our customers. We want to build trust in every interaction. online, in-store, and through our services. And we set a new ambitious financial target, 800 million in adjusted EBIT by fiscal year 28-29. That is a 60% increase from where we stand today. You can see we are moving fast and we are not slowing down. You will see this in our today's Q3 results as well. They are proof that we are on the right track. Let me start this slide free and our operational highlights from last quarter. All of them show customer centricity is not a buzzword for us. It shows up in how we run our operations every single day. The customer is at the heart of everything we do. Let me walk you through some of the concrete examples from the last month as well as things we are currently working on. First, We will enhance our marketing capabilities even further and increase our efficiency in content production. An important lever will be our AI-enhanced content engine Momentum. It will make us faster, more data-driven, and more scalable. All of this contributes toward one goal, to reach our customers with the right message at the right moment at the right channel. Our offers will feel even more personal. and this is a key for customer relevance and trust. The second area is sustainable services. We have achieved three milestones here. First, we introduced extended warranties for refurbished products. All refurbished devices that we sell will now have the same warranty as new devices. Second, we launched a new at-home care subscription model in Turkey. The offering enables customers to maintain their household appliances for the professional maintenance. With this offering, we help to extend product lifetime, improve product performance, and strengthen long-term customer loyalty. Third, we launched our trade in at-home offer in Turkey. Customers can now trade in their products at their own doorstep. After the online pre-valuation, the team comes by, checks the device, And if customer agrees, they take it. This makes it possible to use our trade-in services with even less effort. And last but not least, our logistics network is gaining momentum. We are moving even closer to our customers. Six of eight urban distribution centers in Germany are now live. They cover more than 50% of our two-man handling deliveries, like fridges, washing machines, and other bulky items. and the rollout to further countries is ongoing. This means faster delivery, better availability, higher customer satisfaction. These are not standalone initiatives. They are all expressions of our customer centricity. Let me now give you an overview of our results on slide four. The headline is simple. We are on course. In the first nine months of the financial year, we generated 18.4 billion in sales. It is a 5% increase adjusted for currency and portfolio effects. In Q3, we delivered very strong like-for-like growth of 8.2%. Our adjusted EBIT reached 342 million in the nine-month period. This is a plus of 62 million compared to last year. This makes our Q3 the 14th constructive quarter of profitable growth. This shows clearly our strategy is working. consistently. Our focus on customer satisfaction is also paying off. Our NPS stands at 63, up two points year on year. All of this leaves us with a positive outlook for the rest of the year. We are on the finishing stretch of reaching our targets. Let me give you a bit more color on what drove this performance in the first nine months on slide five. Starting with omnichannel sales, our online sales grew by 10% in the first nine months of the year. In Q3 alone, they accelerated by 18.3%. Our online share now stands at 28.2%, which translates to an increase of 190 basis points. And at the same time, our brick-and-mortar sales grew 3.3% in the first nine months. In Q3, it even increased by a strong 4.8%. These developments show our omni-channel approach continues to pay off. Our growth businesses are also continuing to grow with strong momentum. Our service and solution incomes increased strongly. The retail media income nearly doubled, and our marketplace GMV is growing at a high double-digit rate. These businesses carry structurally higher margins. As they continue to scale, they make our overall business more diversified, enhanced, stronger and more profitable. Let us now have a closer look on our countries. Turkey and Hungary delivered strong sales. Spain and Italy developed positively as well. Germany strongly gained momentum in Q3. Profitability improved in Hungary, Germany, Austria, Turkey and Italy. Overall, our profitability increased. Our EBIT grew by 62 million in nine months period. We are gaining loyalty customers too. We now count 57 million members, a plus of 30 million year on year. At the same time, we maintain strong liquidity. Our free cash flow is stable. You probably recognize the next slide, number six. We present this table each quarter to give you a detailed transparency about the development of the nine KPIs that we introduced at our Capital Markets Day in 2023. And we are getting to the finish line now. Across the various business fields, retail core, service and solutions, marketplace, retail media, we took a big step towards the targets for September 2026. The picture is clear. We are on track, and we will even exceed five of our targets. These are loyalty members, stock reach, service and solution, marketplace, and retail media. And we will use our momentum to grow even more. This is what you will see on the next slide. On slide seven, you see the updated sets of our key pledges. We presented this at our strategy day. As I already mentioned, creating moments of trust will be our leading ambition. And we are anchoring this ambition in two critical KPIs, NPS and returning customers. Why these two? On the one hand, NPS measures satisfaction. We have added 10 NPS points over the past three years and now target an NPS of at least 66 by fiscal year 29. On the other hand, returning customers measure stickiness Ag Ord Ag Ord Ag Ord Ag Ord will drive our profitability. Over the last three years, we have more than doubled our adjusted EBIT. Now, we have set ourselves an ambitious target of 800 million adjusted EBIT for fiscal year 28-29, driven by further profitability gains in our growth businesses, as well as expected synergies from the partnership with JD.com. At that level, we are moving firmly in best class in territory on margins. And slide eight tells the structural story of how we will do this. Today, in fiscal year 25-26, 40% originate from our growth businesses. By 28-29, we want to see a different picture. More than half of our gross profit, 51%, will come from our growth businesses. Retail core will remain at 49%. It isn't just a shift in numbers. It's a proof that we are an omnichannel service platform. We are building a more resilient, more diversified business model. All business areas will significantly contribute to our cross-profit, which is precisely the resilience the model is designed to deliver. Now let me share more details of Q3 results. We will start with slide 10. Now let me share more detail of our 9 month results. We will start with slide 10. We had again another quarter of growth. This is the 14th consecutive quarter, resulting in a positive event momentum for 9 months. And this is a market which remains volatile and competitive. So we are extremely proud of our results. Let's look at the headline numbers. Our sales growth accelerated in Q3 by a very strong 8%, resulting in a 5% growth for the first nine months. This number is adjusted for currency and portfolio changes and pre-IS 29. Our life-for-life sales grew by 8.2% in Q3 and 4.9% for the nine months. That is if you count only comparable selling space and stores already open one year ago. Our profitability increased strong for the nine months with 22% increase in adjusted EBIT leading to a 30 basis points increase in margin. And with a plus of 19 million euro in Q3 and 62 million euro in the first nine months, we are definitely on track to reach our full year guidance. Overall, this is a strong set of results that demonstrate the resilience of our business. Now let's look at the segments, starting with DAG and sales on slide 11. We recorded a slight light for light decline of 0.9. However, I would like to highlight the positive trend improvement in Q3, where we have reported great light for light growth of 5.1%. This was primarily driven by Germany, where we performed strong. during the heat wave, particularly in air conditioning products, despite the overall customer electronic market remaining in decline. Our profitability improved strongly with a 25 million euro increase in adjusted EBIT. In Western and Southern Europe, our sales were strong with a 3.6 increase in like-for-like for the first nine months. On profitability, we increased our adjusted EBIT by 9 million and our margin by 10 basis points. Their Italy and Spain were the main drivers. Moving to Eastern Europe, sales were driven by Turkey, but both countries contributed to increased impossibility. Finally, let me highlight our other segments, which primarily represent holding costs in our private label business. The decline in EBITDA is primarily due to a higher risk provision on mobile phone contracts, reflecting the current macroeconomic headwind. So let me come back to our EBIT development on slide 12. Our cross margin increased by 30 basis points for the first nine months to 18.2%, a strong performance. This improvement was driven by our growth areas. Now, circa 40% of our cross profit comes from our growth businesses. Our OPEX ratio was stable to 16.9% as we have mitigated the OPEX increase with strict cost management, particularly our location and energy cost. Turning to the full overview on slide 13 from adjusted EBIT to net profit. Walking down from the adjusted EBIT of 342 million, we recorded 105 million non-recurring items. The 11 million euro increase year over year is mainly due to a lower profit share of FNAC 30 of 33 million euros. Regarding tax, the improved operational result in combination with a higher tax rate led to higher taxes. All in all, this resulted in a reported EPS of 6 euro cents in the first 9 months, an improvement of 4 euro cents compared to last year. Turning to slide 14, free cash flow was, as expected, seasonally negative in the first nine months. Even so, our free cash flow was stable year on year in the third quarter, confirming the six month trends. Now let us have a look at how this financial development translates in our outlook. You can see on slide 16, Let me come straight to the point. We confirm our guidance for 2025-26. We expect a moderate increase in currency and portfolio adjusted total sales, with Western, Southern and Eastern Europe contributing to that sales growth. Secondly, we continue to expect an adjusted EBIT of around 500 million. And here is an important update. Our improvement is now expected to be driven by all segments, Not only Western and Southern Europe, as we previously indicated. It means we are on track to achieve our headline ambition of 500 million in adjusted EBIT that we first communicated at our Capital Markets Day in 2023. We keep our promises and we communicated on our strategy LA for FISCREA 2029 our ambition in adjusted EBIT of 800 million euros. Let me give you an update on our proposed partnership with JD.com on slide 17. We are still on route to closing. On the regulatory front, we have together and under the lead of JD.com made significant process. Merger control clearance has been granted everywhere as set out in the offer document. In Germany, Austria, the Netherlands, Poland, Spain and Turkey. Foreign direct investment or FDI clearances have also been received in Italy, France, and Germany. And we are very proud that we have received the FDI clearance from Spain yesterday. This is a very strong sign for the progress and underscores the viability of our transaction. Regarding the FDI clearance in Austria, we continue to engage actively with the Federal Ministry of Economy, Energy, and Tourism to meet the clearance conditions. JD.com has also submitted the FSR filling in Brussels. They are in a constructive engagement with the AU authorities. These processes take time, but they are moving into the right direction. Overall, we expect the closing in the second half of the year. We remain fully committed to this partnership and we are working diligently together with JD.com to bring it to completion. Allow me to repeat. the partnership between C-Economy and JD.com is a strategic investment in us but also in the future of retail we choose this partnership as a strategic next step not because we had to but because we could this partnership will be an acceleration of everything we have already built and it will enable us to lead European retail in the future let me wrap it up with slide 18. A summary of what this quarter tells you about Sea Economy today and about the foundation for the future. There are six points I want you to take home today. One, the customer is at the center of everything we do. Our experience electronic strategy is grounded in this ambition and we also see it in our numbers. Our MPS is up two points to 63. Two, He has successfully established a foundation to create moments of trust. Our new strategy is a consistent evolution of our existing way forward, and it will help us to accelerate even more. 3. We possessed a strong performance in the first nine months of the year, driven by our balanced country portfolio and our scaling growth businesses. Our sales were at 18.4 billion. Our adjusted EBIT amounted 342 million. This makes this Q3 our 14th consecutive quarter of possible growth. Four, our focus remains on cost, liquidity, and profitability. Five, we are ready to accelerate with JD.com. The regulatory process is on track and we are in constructive talks for the to receive all approvals. We expect the closing in the second half of 2026. Six, we confirm our outlook for 2025-26 fiscal year. This means moderate sales growth and adjusted EBIT of around 500 million. To sum it all up, we are on track to deliver on our targets and with moments of trust, we will enter the next stage of our company growth journey. Thank you for your attention and we are now ready for your questions.

Thank you. To ask a question, you will need to press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again. Alternatively, please write your question via the text box below the screen. Please stand by. We compile the Q&A roster. Thank you and I am showing no questions from our phone lines but again ladies and gentlemen to ask a question via the phone please dial in by pressing star 1 1 on your telephone or via the text box below the stream. In one moment we do have a question. and our first question will come from Alexander Zinkowitz from MWB Research AG. Your line is open.

Thank you. Can you hear me?

Yes, we can hear you, Alexander. Good morning.

Good morning. One question on how much of the Q3 improvement comes from World Cup and weather versus how much is underlying? visible there. And my second question would be on working capital. Beyond your gross profit and cost levers outlined at the strategy day, how should we think about working capital development on your path to 28, 29? How does the growth mix you intend to follow affect your working capital? Could you decompose that? Thanks.

Yeah, thank you, Alexander. Good morning. And again, so how much of the Q3 improvements come from the World Cup and the weather impact? We had some tailwind. That's true. So if you look at World Cup, our TV sales rose by 15%. So that had a positive impact. We also very much and very well prepared for that. And on the seasonal products, so the airco's, the fans and the mobile airco's, we saw an increase of almost 65%. Then you had a second question when it comes to networking capital, working capital. So we will keep it, our estimation is to keep it stable in percentage of sales until 2029. That's the plan that we are working on.

Okay, so no more granular movements there. So it's basically net zero.

Yeah, in percentage of sales, yeah. That will grow with the sales, of course, but it will stay stable. Correct.

Okay, helpful. Thanks.

Thank you. And as a reminder, to ask a question via the phone lines, please press star 11 on your telephone or use the text box below the stream. Thank you. I'm showing no additional questions from our phone lines. I'd now like to pass it back to the speakers to answer any web questions.

Thank you. We've got a question, a set of questions from Charles Allen from Bloomberg Intelligence. So the questions would be, what are your expectations on the impact of higher chip prices on computers and similar prices? Have you purchased inventory in advance to avoid some price increases? And last one would be, do you think consumers have noticed the rise in chip prices and have you seen any difference in purchasing behavior?

Yes, Sheldon, thanks for your question. Yes, the increase of chip prices is a, I wouldn't say daily conversation that we have with our suppliers. it's very volatile and we have all seen I guess the increase the advantage that we have as a market leader in Europe that we have very very strong relationship with all our suppliers so indeed we are an open discussion but we also take strategic purchases very serious at the moment so yes we made for all our countries a overall plan on the notebooks category where we buy 8 to 9 months in advance also preempting that increase in chips and making sure that we don't have to let's say transfer that price increase to the customers so that's one when it comes to especially mobile phones you see especially the lower price entry segments in mobile phone brands suffering the most due to the fact there is a chip price increase but also a shortage there and that's We see as a retailer selling also average and exit prices as an advantage for us as the market leader also to get a bit more price stability in the market because the availability will go down overall and therefore the competitive element is also less, at the moment, less vocal for our business. Let's say it like this. But yes, the chip prices, they will stay stable and increase even more. That's our expectation for now, at least for the next year. Also the information that we receive from the suppliers. So there are a couple of topics that we are looking into, but we are trying to avoid with the price to stack down the products, making sure that we don't need to transfer the prices. But we see a price increase in the market when it comes to notebooks, especially. but due to the AI integration, the notebook category is actually growing quite nicely and quite well in value, but also slightly in SQ still today. But we are well prepared.

Okay, then we've got one more question from Frank Messing from the DRZ. I think it was partly answered, but maybe you can repeat it, Remco. Can you please tell us more about demand of climate facilities?

Yeah, so we are, of course, having a very diversified country portfolio with Spain, Italy, but also Germany, Netherlands. So first of all, it was exceptional, especially in the last couple of weeks, especially when it comes to the Western European countries. So there are two things happening. First of all, we are increasing heavily our sales. So that's 65% plus. an big part of that is also coming from our own brands Koenig that we're also selling very very well in this period it helps our margin but it helps also our brand awareness and customer loyalty but second of course as a company due to the fact that we see also Western Europe getting more and more in demand for split airco's we're also working on new concepts and installation concepts also for next year to make sure that we can tap into that potential even more, and we can learn from countries like Turkey, Spain, and Italy how to do that, and to make sure that we have from an assortment perspective, especially from a service and installation perspective, even more possibilities to gain market share. But overall, very, very successful. Of course, highly demand by our customers and our own brand share increased significantly.

Thank you, and I am showing no further questions at this time. I would now like to hand the conference back to Remco Reiners, CEO, for his closing comments.

Yes, thank you very much. So, yeah, not too many additional questions, but again, I would like to thank all of you for your time and questions today. It was a, as we mentioned, a very strong quarter for us, and we are confirming the outlook for the rest of the year. If you'd like to engage with us again through our official channels, we are happy to do so and continue the conversation, of course. And looking into the future, we have two milestones coming up for this financial year. We will publish our trading statement for Q4 and the financial year 2026 on the 27th of October. We will then present one full year results to our 14th of December. Be sure that the start of Christmas holidays is not too early for now. Kerstin and I wish you really all the best and hopefully a very relaxing period during the summer with family and friends and talk to you soon. Thank you again for your time. Bye-bye.

Thank you. This does conclude today's presentation. This does conclude the program. You may now disconnect. Everyone, have a wonderful day.