REWE Group grows in Germany and internationally
Cologne, 03.04.06
New turnover record of 41.7 billion euros – Stronger growth than competitors in German food trading as – Internationalisation moves forward – Preliminary group results of 525 million above target – On a firm course for growth in 2006 as well
integration of the Extra and Globus stores, the Group’s earnings (EBITA under IFRS) of 525 million euros were slightly above target and just under the record set in the previous year (2004: 544 million euros). The earnings are based exclusively on the Group turnover (excluding the independent retailers), which grew by 2.9 per cent to 34.5 billion euros. Investments were increased by 2.4 per cent to 840 million euros.
“We are particularly pleased that we managed to gain ground in our turnover proceeds even on the difficult domestic German market. With a rise in turnover of 1.5 per cent to 29.9 billion euros, our growth rate was nearly twice as high as it was for the overall industry”, said Dr. Achim Egner, REWE Group CEO at the annual press conference on
Monday (April 3) in Cologne. “The dynamic international business has made a substantial contribution to the positive development of REWE Group as well. We increased our turnover in the thirteen countries outside our home market by 4.9 per cent to 11.1 billion euros. Especially in Eastern Europe we even experienced double-digit growth rates, so that the share of our foreign business now accounts for over 32 per cent of Group turnover. We have made great strides with our clear course of internationalisation”, said Egner, who was pleased with the business progress achieved.
On course for more growth in 2006 with 480 new openings and one billion euros in investments
REWE Group will continue on its course for growth over the current year. “Our growth engine is the expanding international business. But we are also confident that our domestic market will exceed the good returns of the previous year. The introduction of a uniform ‘REWE’ marketing brand will give our supermarkets a big boost that will be reflected in the turnover for the second half of the year”, the REWE CEO said assuredly. With an investment volume now topping one billion euros and 480 new store openings in Germany and other European countries, the stage was set for all the firm’s divisions to grow and profit.
The Management Board foresees two major challenges facing the company: the continuing weakness in consumption in Germany and the modernisation programme introduced for the Group. “Consumers’ shopping lists seem to be getting shorter. One of the main reasons for this hesitant behaviour among German consumers is still as always the high rate of unemployment and the growing recognition that it is necessary to make independent, private provisions for retirement. The explosive rise in energy costs has also stretched household budgets”. The REWE CEO reckoned that the oftmentioned hope on the horizon – the Football World Cup in Germany – is unlikely to change overall economic growth significantly. The same was true of possible early purchases made to avoid the rise in the value-added tax slated for 2007. “This tax rise is the biggest error of the current grand coalition government. We are complaining about the ongoing weakness in consumption and simultaneously taking up to 30 billion euros of purchasing power away from consumers – without any noticeable improvement in the government budget to show for it”, Egner said.
Turnover in Germany increases to 30 billion euros
The independent REWE retailers of the cooperative Group contributed to the encouraging growth in turnover to almost 30 billion euros for 2005 in Germany by increasing their own turnover to a total of 7.1 billion euros (+0.9 per cent). Overall, the number of stores rose by 157 to 8,901 in Germany alone. In the past fiscal year, 178,144 employees worked for the number two on the domestic food trade market. That was 2,384 or 1.3 per cent fewer than during the previous year. Around half of the jobs
lost can be traced to the sale of the “idea” drugstores. The number of trainees was increased once again. With 6,900 trainees and apprentices – 100 more than in the prior year – REWE Group is demonstrating that it takes seriously its social responsibility of providing young people future-oriented training. As before, just around 8,300 trainees are completing their training with REWE Group in Europe. In the current year, 260 new stores will be opened throughout Germany.
New Russian acquisition drives international business forward
The international activities in 13 countries throughout Europe were the growth engine for
REWE Group in 2005. A workforce of 82,450 succeeded in increasing turnover at 2,903 stores by half a billion euros, or 4.9 per cent, to 11.1 billion euros. The divestments from Swiss retailing and from the French discount store segment accounted for the increase in turnover of just 1.1 per cent to 8.1 billion euros for the region of Western Europe. As
the strongest international subsidiary in terms of turnover, REWE Group Austria clearly demonstrated its strength as the market leader in Austrian food trading with a turnover of 4.4 billion euros (+1.8 per cent) on the Austrian market alone. In Eastern Europe, where REWE Group is now focusing its energies, the turnover mark of three billion
euros was crossed for the first time. This corresponds to growth in turnover of 15 per cent. The strongest growth in Eastern Europe came from the expansion of the Penny discount chain in Romania and of the Billa supermarkets in Croatia. The cash-and-carry store segment produced the greatest gains in turnover and growth in Romania and Poland. Thanks to the acquisition of 15 supermarkets in Russia – completed this weekend – this growth market is moving to the head of the pack with a two-fold increase in the store base over 2006.
Discounters as the main pillar of core business
The 2,771 Penny stores in Germany, Italy, Austria, the Czech Republic, Hungary, and Romania recorded overall positive developments in turnover with a growth of 0.4 per cent to 8.03 billion euros. The 772 discount stores outside the German domestic market increased turnover by 2.3 per cent to reach 2.8 billion euros. In Eastern Europe, the
increase was 15.1 per cent, with Western Europe reaching a growth of 1.1 per cent.
With turnover of 5.7 billion euros, the 2,000 Penny outlets in Germany were slightly below their performance of the preceding year (-0.7 per cent). This could primarily be attributed to weak performance in the non-foods business, but also to competitors’ adopting some innovations. “The discount business in Germany and abroad is once again a key pillar of our core business. We will continue to grow profitably in the future thanks to Penny”, Dr. Achim Egner explained. In 2006, 120 new Penny stores will be opened in Germany alone.
Supermarkets and hypermarkets: businesses with the strongest sales
The strongest business for REWE Group in terms of turnover was full-range store segment in Germany. The 2,680 REWE and miniMAL supermarkets as well as the toom hypermarkets achieved 11.5 billion euros in turnover. This was 200 million, or 1.8 per cent, more than in the previous year. The number of supermarkets rose to 2,498 (+77). Of the 125 acquired Extra stores, 87 went to independent REWE retailers and 31 were integrated into the miniMAL store chain. The converted locations have developed quite positively. The north-eastern region was also strengthened by the acquisition of 23 Marktfrisch stores from Dohle group.
The toom hypermarkets did not manage to escape the negative trend in this large-scale sales format. While turnover at these hypermarkets did rise at a double-digit rate from 1.5 to 1.9 billion euros, this rise can only be attributed to the integration of 29 former Globus stores. When adjusted for sales area, turnover declined by 5.1 per cent.
In the second half of 2006, over 2,600 REWE and miniMAL supermarkets, along with toom and Petz hypermarkets, are to be converted to the new uniform “REWE” marketing brand.
REWE Group supermarkets successful internationally
The international full-range supermarket business was one of the most dynamic growth factors at REWE Group in 2005. Turnover at supermarkets operated abroad under the Billa, Merkur, Standa and miniMAL sales brands rose by 11.5 per cent to 6.1 billion euros. The number of supermarkets in Austria, Poland, the Czech Republic, Slovakia, Croatia, Romania, the Ukraine, Bulgaria and Russia increased by 87 to 2,089 locations.
“Full-range stores abroad are a source of great joy for us, not only in terms of how turnover developed, but also in terms of how much they contributed to the Group’s earnings. With a turnover yield of over four per cent, our Billa stores in Eastern Europe are surpassing Austria and leading the pack”, the CEO said.
Specialist stores in difficult circumstances
After the sale of the “idea” drugstore chain, the business segment “national specialist stores” at REWE Group now encompasses the toom DIY stores and the ProMarkt stores for home electronics. Both companies face hard-fought competition in their markets. The effects are reflected in the sales figures: the 221 toom DIY stores and the 50 ProMarkt outlets achieved a turnover of 1.7 billion euros (-2 per cent).
Despite this decline in turnover, the net income percentage of sales at toom DIY stores rose. This was due to two factors: on the one hand, the DIY stores are profiting from the restructuring and optimizations introduced earlier; on the other hand, the stores profit from their clear positioning. The 22 locations already converted to the Casa Lea concept show that toom DIY can attract women as a new consumer group to join the traditional male do-it-yourselfers. In 2005 as well, toom DIY stores held on to the strategy of prioritising optimisation of existing stores over new store openings.
The number of ProMarkt stores remained constant at 50 locations. Turnover of 445 million euros was within expectations. The interplay between Marketing and Category Management was improved again over the past year with the aim of orienting the product range more closely and quickly to customer demand. The successful concept “ProMarkt Discount+Service” continues to be implemented.
Food service with double-digit growth
With a leap in turnover of 16.3 per cent to 3.4 billion euros, the “commercial wholesale customers’ service” business developed quite dynamically in comparison to the previous year’s performance.
The commercial wholesale customers’ service business in Germany grew by 3.5 per cent to 679 million euros. This development could be traced primarily to the consistent work on the product range of REWE- wholesale customers’ service business with existing food-service customers. The REWE commercial wholesale customers’ service business continues to establish itself as a full-range provider. In a parallel development, the own-label brand “Honneurs” was also expanded to help improve profile and customer loyalty. The label now covers a range of 290 individual products.
The 64 Fegro/Selgros stores operated jointly with the Hamburg-based Otto-Versand in Germany, Poland and Romania increased turnover to 2.4 billion euros (+5.7 per cent). In Germany, the cash-and-carry stores could not escape the negative market trend and recorded a drop in sales to 1.5 billion euros. This was more than balanced out by other developments, especially in Romania. Fegro/Selgros there gained by over 50 per cent.
The joint venture “transGourmet”, which REWE Group entered into with Coop of Switzerland at the beginning of 2005 in the field of restaurant supply for Switzerland and France, is also on course for growth. In the process, the pick-up wholesale company
Prodega/Growa Cash+Carry and the delivery wholesale firms Howeg and Bell Gastro Service in Switzerland, along with Aldis Service Plus and Prodirest in France, were bundled up into a joint company. The turnover of the joint venture has reached 1.6 billion euros.
Travel and tourism as the second core business with continuing growth
The Travel and Tourism business continued its positive developments throughout the 2005 calendar year. Consolidated turnover of tour operators and travel agencies grew to 4.23 billion euros, thus exceeding the earnings from the previous year by half a per cent. “On the one hand, the enthusiasm for travelling among Germans is not entirely separated from the general stagnant state of the economy, and it should thus be considered in light of the hesitancy among consumers. On the other hand, the fiscal year was also marked by a tsunami, hurricanes and global terrorist attacks”, said the REWE CEO in explaining the moderate rate of growth in comparison to past years. Nonetheless, REWE Travel and Tourism was much more lightly impacted by such crises than were many competitors thanks to REWE’s balanced portfolio of tour operator brands in the area of package tours, building-block tours and long-distance travel.
The six tour operator brands managed to increase their turnover by nearly two per cent to 2.8 billion euros. The solid developments at the building-block and long-distance operators Dertour, Meier’s Weltreisen and ADAC Reisen (+6 per cent) played a substantial role. While the package-tour operators Jahn Reisen and Tjaereborg experienced good growth rates, ITS fell short of its performance in the prior year. Whereas the strategy of attracting customers to book early worked well in the winter of 2004/05 for this operator specialising in family trips to the Mediterranean Sea, the booking rates during the summer of last year collapsed in large part due to terrorist threats and bombings at the main destinations for this operator.
The tour operators’ turnover is reflected in the earnings from travel agencies. Overall, turnover for the travel agencies division of REWE Travel and Tourism was slightly below that of the previous year with 1.8 billion euros (-1.2 per cent). Especially the continued structural adjustments at DER and Atlas travel agencies played a role here. With 695 company-owned travel agencies and around 2,000 additional franchise and cooperative partners, REWE Travel and Tourism continues to be a leader in directed travel-agency marketing in Germany. DER Business Travel, which experienced strong growth (4.3 per cent) with turnover of 610 million euros, is rising fast.
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