Gerry Weber projects 5.1 percent rise in Q3 revenues

The Gerry Weber Group increased its consolidated sales revenues by 5.1 percent to 630.5 million euros (711.6 million dollars) in the first nine months of the financial year 2014/15.

This growth is attributable, among other things, to the consolidation of the revenues of Hallhuber, which has been included in the Group’s consolidated financial statements since February 2015. Hallhuber generated sales revenues of 70.6 million euros (79.6 million dollars) during this period.

Hallhuber reflects positive revenue growth

Hallhuber’s like-for-like sales revenues clearly outperformed the German market as a whole. While sales revenues in the German fashion retail sector declined by about 5 percent between November 2014 and July 2015, Hallhuber’s like-for-like sales revenues remained stable with 0.1 percent improvement.

Retail revenues of the Gerry Weber core brands (Gerry Weber, Taifun, Samoon) climbed 7.7 percent to 316.2 million euros (356.8 million dollars), but there was 4.2 percent decline in like-for-like sales. Revenue growth of 7.7 percent is primarily attributable to the new sales spaces opened in the past 24 months. As of July 31, 2015, 972 sales spaces of the Gerry Weber, Taifun and Samoon brands as well as 242 stores of the Hallhuber brand were managed by the Group.

The decline in Gerry Weber Core Wholesale revenues from 306.4 million euros (345.8 million dollars) in the first nine months of fiscal 2013/14 to 243.7 million euros (275 million dollars) in the first nine months of the current financial year reflects the effects of the difficult market environment. Adverse weather conditions, low customer footfall in the city centres and the resulting higher inventories, also at wholesale customers led to a drop in order volumes. Moreover, the strong depreciation of the rouble and the increase in consumer prices in Russia had a negative effect on sales to our retail partners in Russia and its neighbouring countries.

Sales decline impacts earnings

The decline in like-for-like sales revenues of the Gerry Weber Core Retail segment and the sharp drop in wholesale revenues had an adverse impact on the Gerry Weber Group’s earnings, especially in the third quarter of 2014/15. As both segments generate high margins and make an important contribution to the company’s earnings, a decline has disproportionate effects on the company’s bottom line. Higher discounts on seasonal items and the expansion-related increase in fixed costs of the Gerry Weber Core Retail segment additionally weighed on the result.

The Group’s personnel expenses for the nine-month period rose from 113.7 million euros (128.3 million dollars) to 136.2 million euros (153.7 million dollars); the latter figure includes 13.9 million euros (15.6 million dollars) for Hallhuber, which has been consolidated since February 2015. Other operating expenses climbed from 150.4 million euros (169.7 million dollars) to 188.3 million euros (212.5 million dollars), with Hallhuber accounting for 29.7 million euros (33.5 million dollars). As a result, EBITDA declined from 84.5 million euros (95.3 million dollars) in the first nine months of the previous year to 63 million euros (71.1 million dollars) in the nine-month period of the current financial year.

Hallhuber contributed 4.6 million euros (5.1 million dollars) to the Gerry Weber Group’s EBITDA in the first nine months of 2014/15, which is in line with the earnings contribution projected for the full financial year. In addition, increased depreciation/amortisation resulting from the retail expansion and the Hallhuber acquisition weighed on the bottom line of the Gerry Weber Group.

Taking into account the above factors, EBIT of the Gerry Weber Group amounted to 38 million euros (42.8 million dollars) in the first nine months of 2014/15. Accordingly, the EBIT margin declined from 10.9 percent in the first nine months of 2013/14 to 6 percent.

Managing board believes the forecast will be achieved

High-margin merchandise of the Autumn/Winter collection is sold on the sales floors at full price without any discounts in the months of September and October every year. As a consequence, these two months are of particular importance for the sales and earnings development of the company. Against this background and in the context of the first positive effects of the measures initiated to improve profitability, the Managing Board of Gerry Weber International continues to believe that the targets set in June 2015 will be reached in spite of the disappointing sales and earnings figures of the third quarter of 2014/15.

According to these projections, sales revenues will grow by a high single-digit percentage and earnings before interest and taxes will be 20 percent to 25 percent lower than in the previous year 2013/14.

“For the next 18 to 24 months, the operational tasks will continue to be focused on the transformation and consolidation of the Gerry Weber core segments (excluding Hallhuber). We do not expect the sales revenues of the core brands to increase significantly in this period, during which the Group’s growth will be based on the expansion of the Hallhuber subsidiary”, says Ralf Weber, CEO of Gerry Weber International.