Macintosh loss widens, plans strategy to bounce back

The Macintosh Retail Group said that the customers responded positively to the cross-channel approach in fashion as well as to the innovations in stores. In the first three quarters, this resulted in a 7.6 percent increase in sales and a significant growth in market share in the shoe markets, especially in the Netherlands with 1.6 percent growth. However, from September, warm weather condition, resulted in very disappointing sales of autumn and winter fashions and slower growth of 2 percent in fashion sales in Q4.

Sales generated by Kwantum (Living) grew by 10.1 million euros (10.7 million dollars) or 5.6 percent to 191.9 million euros (204.1 million dollars) in a home decoration market that contracted by 0.1 percent. The company says that this was largely attributable to a positive development in the second half of the year.

“2014 was a year in which the strategy was redefined and refinancing was achieved with the support of majority shareholders. We made progress in our efforts and are back on track in several important areas but still have a way to go in others. In order to speed up the recovery of earnings, we have further sharpened our strategy, focusing fully on Fashion Benelux. Shopping experience, great assortments and the cross-channel customer approach remain key words,” stated Kurt Staelens, CEO of Macintosh.

Underlying EBIT from fashion fell by 5.9 million euros (6.3 million dollars) to 12.1 million euros (12.9 million dollars) negative due to pressure on margins in the second half of the year, higher costs associated with the implementation of the ‘Rebalancing for Profitable Growth’.

At Kwantum, underlying EBIT rose by 3.6 million euros (3.8 million dollars) to 3.5 million euros (3.7 million dollars) on the back of higher sales and a higher gross margin percentage. 75 stores were closed or sold, of which 12 were non-core Fashion NL stores and 27 non-core Scapino stores in Belgium. Other stores closures mostly affected Fashion UK. The total number of fashion stores fell from 904 at year-end 2013 to 880 at yearend 2014. Kwantum closed 3 stores and opened one 2015.

The ‘Rebalancing for Profitable Growth’ strategy which was adopted early in 2014 focuses mainly on strengthening the fashion store formats. The strategy was further sharpened early in 2015 and it was decided to focus on fashion Benelux. The sale of Fashion UK and Nea International (production and wholesale of braces) will be started in 2015, as will the sale of Kwantum. In the Benelux, Macintosh leads the market in fashion and has national store coverage, so that the cross-channel strategy can be implemented as efficiently as possible with the available financial resources. Fashion Benelux will mainly concentrate on enforcement of the customer approach in the stores and on improving profitability of the market share gained in 2014.

The proceeds from the sale of Kwantum, Fashion UK and Nea International will be used to free up resources for the execution of the transformation programmes and capital expenditures at Fashion Benelux and to repay debts. However, the sale will also result in a lower group turnover and affect EBIT and EBITDA. The sales growth target set in early 2014 (CAGR of 3.5 percent to 4.5 percent) in the period from 2013 to 2017, combined with an underlying EBIT margin in 2017 of at least 6 percent in fashion, will be updated in 2016.

In 2015, Macintosh's efforts will be focused fully on improving the operational and financial performance in fashion, on executing the transformation programmes in the Benelux and on implementing the strategic agenda. Operating EBIT in H1 2015 is expected to be negative as usual, due to seasonal influences in fashion.