DOUGLAS Group’s main growth is in Germany – 9-Month Interim Report

Hagen, August 10, 2011 – The DOUGLAS Group remains on track. “All in all, we are satisfied with the trends during the first nine months of the current fiscal year,” said Dr. Henning Kreke, President and CEO, “and so we are confirming our forecast for an increase in sales between 2 to 4 percent for fiscal 2010/11 along with our goal of pre-tax earnings (EBT) around 140 million EUR.”

The DOUGLAS Group also wants to expand its online business and for this reason it is creating a new board position. “We still see real growth potential in our online business. And so we want to expand our board by adding a position for e-commerce,” Dr. Kreke said with regard to the new online strategy. It involves plans for stronger online links between DOUGLAS Group brands. Overall, the sales trend for the DOUGLAS Group over the first nine months of the fiscal year 2010/11 was in line with expectations. Group revenue rose 2.3 percent to 2.62 billion EUR between October 1, 2010 and June 30, 2011. Like-for-like sales were 1.7 percent higher than they
were the previous year.

Online sales continued their dynamic growth with a 28 percent increase compared to the previous year. The share of online sales as a percentage of the Group sales figure was about 6 percent in the reporting period. Growth within Germany was especially significant. DOUGLAS Group sales increased 4.4 percent compared to the previous year, reaching 1.74 billion EUR (+3.3 percent like-for-like). By contrast, international sales at 877.9 million EUR were 1.6 percent below the previous year’s figure due to
continuing weak consumer demand in some markets (-1.4 percent like-for-like). “Today this demonstrates how appropriate it was – and is – never to lose sight of Germany’s importance as our home market,” Dr. Kreke added.

Douglas perfumeries sales

Douglas perfumeries sales rose 0.5 percent to 1.47 billion EUR and as much as 1.9 percent on a like-for-like basis. The trend in Germany was especially gratifying with a rise of 4.7 percent (+4.6 percent like-for-like) to 771.0 million EUR. Douglas perfumeries sales abroad were 702.1 million EUR. This represented a decline of 3.7 percent, but only 1.0 percent on a like-for-like basis. Positive trends in Austria, the Netherlands, Turkey, and Hungary were nearly able to offset disappointing developments in markets such as France, Italy, and Spain. Sales abroad rose 1.4 percent based on current country portfolios – that is, adjusted for the withdrawals from the markets in Russia, U.S., and Denmark. “We take this as a positive sign that we are once again on the right track internationally,” Dr. Kreke said.

In the reporting period, pre-tax earnings (EBT) for the DOUGLAS Group reached 126.7 million EUR, near the previous year’s level of 128.6 million EUR. The profit margin for the DOUGLAS Group – the ratio of pre-tax earnings to sales – was 4.8 percent compared to 5.0 percent the previous year.
While the Douglas perfumeries and the Christ jewelry stores were able to boost their earnings due to steady sales growth in Germany, the book division clearly fell short of its results a year earlier. Income from Thalia was mainly handicapped by disappointing, industry-wide revenue trends for store-based businesses. Another aspect must be taken into account as well: the results the previous year for Thalia were bolstered by non-recurring income from the revaluation of shares. Hussel confectioneries’ contribution to earnings was also lower than it had been the previous year. On the other hand, the AppelrathCüpper fashion stores were able to slightly improve their earnings contribution.

Earnings before interest, taxes, depreciation and amortization (EBITDA) for the DOUGLAS Group were up from 228.3 million EUR the previous year to 241.1 million EUR in the reporting period due to non-recurring income from the divestiture of its store network in Russia. The EBITDA margin – the ratio of EBITDA to sales – increased to 9.2 percent from 8.9 percent the previous year.
Over the first nine months of fiscal 2010/11, the DOUGLAS Group’s consolidated net income was 82.0 million EUR, compared to 89.0 million EUR the previous year. Adjusted for the revaluation of shares, the Group’s consolidated net income was 82.9 million EUR the previous year. Income per share was 2.08 EUR, after 2.26 EUR for the previous year (2.10 EUR when adjusted for the effect).

During the reporting period, DOUGLAS Group capital expenditure totaled 78.9 million EUR, surpassing the previous year by 6.2 million EUR. The funds were spent on 53 store openings (there were 62 the previous year) as well as expanding and modernizing the store network. The focus was on Douglas perfumeries, which opened 35 stores (41 the previous year), with 26 of them abroad (36 the previous year).

As of June 30, 2011, the end of the period, the DOUGLAS Group’s store network included 1,932 specialty stores, 45 fewer than as of June 30, 2010 (the figure for that year was 1,977). A total of 63 openings over the past 12 months (78 took place the previous year) along with 71 closings (102 the previous year) and 37 divestitures (compared to 2 acquisition the previous year). As of June 30, 2011, 23,809 people were employed at the DOUGLAS Group, compared to 24,008 a year earlier. The slight decline can primarily be attributed to the divestiture of the Russian store network. By contrast, the number of employees in Germany rose gratifyingly to 14,859 (14,559 the previous year), including 1,255 trainees.

An investment pool of around 125 million EUR is available for fiscal year 2010/11. In the current and coming fiscal years, investments will continue to focus on Douglas perfumeries. Up to 65 million EUR is scheduled to be invested in the opening of 50 to 60 stores, mainly abroad, in the modernizing the existing store network and in expanding international online sales to strengthen their leading market position in select cosmetics on the Internet. With regard to growth in the number of stores, the focus is on countries where Douglas already has a leading market position or can attain one in the foreseeable future. Within the product range, the share of sales from exclusive and private brands will continue to expand.

[Text: Douglas AG]