- Prachi Singh |
In the first nine months of the financial year 2016/17, consolidated sales revenues of Gerry Weber International were down by 2.9 percent to 620.1 million euros (736 million dollars), which the company said was primarily because the store portfolio of the core retail segment was streamlined as planned. However, the Hallhuber subsidiary recorded a 5.3 percent increase in revenues and contributed 140.8 million euros (167 million dollars) to the group’s revenues in the first nine-month period.
Commenting on the nine-month trading period, Ralf Weber, CEO of Gerry Weber International said in a statement: “All measures of the Fit4Growth realignment programme were implemented successfully within the planned time-frame. The first positive effects can be felt on the cost side and with regard to sales revenues. Especially the core segment’s like-for-like revenues in a weak market environment reflect the success of the modernisation measures. We were nevertheless unable to improve our earnings position notably.”
Gerry Weber posts decline in core revenues
The Gerry Weber core brands (Gerry Weber, Taifun and Samoon) contributed 479.4 million euros (569 million dollars) to the group’s revenues in the first nine months compared to 504.8 million euros (599 million dollars) in the same period of the previous year. The core retail segment accounted for 291.8 million euros (346 million dollars) compared to 313.5 million euros (372 million dollars), in the nine-month period last year.
The company said, sales revenues of the core retail segment were adversely affected primarily by the closure of 88 points of sale compared to the end of the third quarter of the previous year. Moreover, the negative market environment led to a 2.5 percent reduction in like-for-like revenues.
However, the company added that this 2.5 percent decrease was compared to about 3.3 percent decline recorded by the German fashion retail sector during the same period, which shows that the core brands performed better than the market. This positive trend, Gerry Weber added, is confirmed by the core wholesale segment, with wholesale revenues down by 2 percent to 187.5 million euros (222 million dollars) in spite of the continued difficult market environment.
Gerry Webber added that core segment’s gross margin declined from 62 percent in the first nine months of the previous year to 58.8 percent in the same period of the current financial year due to the elimination of inventories, changes to the order and merchandise management system aimed at building up lower inventories at the beginning of a season for optimised deliveries during the season as well as an increase in the perceived value of our collections. As a result of these effects, the group’s gross margin also declined from 61.8 percent to 60 percent.
Hallhuber witnesses growth during the period under review
After 0.9 percent decline in Q1 and 4.1 percent growth in Q2, Hallhuber’s revenues increased by 13.9 percent in the third quarter of 2016/17 and stood at 140.8 million euros (167 million dollars) at the nine-month stage. The company said, to prevent excess inventories at the end of a season and improve the gross margin, an average of approximately 25 percent less merchandise was delivered to the Hallhuber POS during the first six months of 2016/17. The number of items per square metre was increased again gradually only as of the end of April 2017 and the first positive effects of this adjustment became apparent in the third quarter of 2016/17. Given that inventories were back at the prior year level only as of July 2017, the company expects Hallhuber’s like-for-like revenues to return to normal in the fourth quarter at an improved gross margin.
Due to the adjustment of the segment’s merchandise management strategy, its gross margin improved from 61.3 percent to 64.1 percent on a nine-month basis. As increased costs resulting from the opening of 34 new points of sale resulted in higher operating expenses, Hallhuber’s operating loss (EBIT) was 4.2 million euros (4.9 million dollars). Adjusted for this group-related depreciation, Hallhuber’s adjusted EBIT stood at 0.7 million euros (0.8 million dollars).
Gerry Weber confirms sales outlook for the full year
In view of the successfully implemented measures, the ongoing reorganisation of the order and merchandise management and the importance of the fourth quarter for the earnings position of the Gerry Weber Group, the managing board continues to assume that the financial targets set for the financial year 2016/17 can be reached.
For the current financial year, it expects sales revenues to be down by between 2 percent and 4 percent on the previous year’s 900.8 million euros (1,070 million dollars), not least because of the store closures already implemented. Accordingly, consolidated EBIT (reported) are expected to amount to between 10 million and 20 million euros (11-23 million dollars).