Dear Shareholders and Friends
of the DOUGLAS Group,
The 2008/09 financial year was dominated by the global economic and financial crisis which also left its mark on the DOUGLAS Group. Nevertheless, consolidated sales rose by 2.3 percent to 3.2 billion EUR, slightly surpassing our projected increase of 2 percent. Unfortunately our like-for-like sales declined slightly, falling just 1.0 percent behind the previous year’s figure. In positive contrast, our home market Germany outperformed the foreign operations during the year under review. At the same time, we again surpassed the competition in the majority of foreign countries, gaining additional market share.
Pre-tax earnings (EBT) – prior to one-off adjustments for the streamlining of the store network – totaled just under 128 million EUR. All in all, we reached the defined target of 120 to 130 million EUR (before non-recurring items) that we had set ourselves in May 2009. Furthermore, despite the difficult economic conditions, the DOUGLAS Group once again posted a positive DOUGLAS Value Added (DVA) of 21 million EUR in fiscal 2008/09.
At first glance our performance in the 2008/09 financial year may seem modest, especially when compared to some of the previous years, in which we were able to report double-digit growth. However, we are still proud of the fact that we have managed to achieve our goals despite the unfavorable economic climate and that we were able to defend our position against many of our competitors.
Our workforce of 24,000 ladies and gentlemen played a pivotal part in this accomplishment. With their warmth, customer orientation and professionalism, they managed to spark customers’ enthusiasm for the DOUGLAS Group’s specialty stores even in these difficult times. Therefore I would like to express my heartfelt thanks – also on behalf of my colleagues on the board – to each and every one of our employees for their contribution and dedication to our goals!
Despite their outstanding effort, the crisis has hit us hard in several of our foreign markets. As a result, the entire DOUGLAS Group store network was analyzed and we decided to close approximately 50 Douglas perfumeries abroad. Not only were these locations generating negative cash flows, but – even in the medium-term forecast – there was no indication of these cash flows improving on a sustained basis. Altogether, the costs of streamlining the store network in our various divisions will reach approximately 24 million EUR.
In the last fiscal year, we have also decided to cut back and reduce our investments. Whereas we invested 155 million EUR in the previous year, just 112 million EUR was devoted to opening 104 new stores and modernizing existing stores during the year under review. Of this amount, approximately 61 million EUR was invested in the Perfumeries division. There were 78 openings throughout Europe, with the new Douglas store on Berlin’s ”Unter den Linden” among the highlights. In the Books division, a dozen new Thalia stores were added. With the opening of our very first true multi-channel bookstore at the ”Loop5” shopping mall in Weiterstadt near Frankfurt, Thalia set innovative standards for booksellers in German-speaking countries. In the Jewelry division, Christ boasted six new openings and numerous modernized locations, the highlights being the completely remodeled stores in Cologne and Nuremberg. On the Fashion front, the
AppelrathCüpper flagship stores in Frankfurt, Hamburg and Cologne were modernized and repositioned. And last but not least, Hussel opened eight new stores and upgraded numerous existing locations to expand its network of high-quality confectionery shops.
Although the impact of the economic crisis could still be felt during the 2009 Christmas season, the DOUGLAS Group was able to increase its sales by 1 percent from October through December 2009, thereby producing a satisfactory first-quarter performance. We therefore remain cautiously optimistic as to the developments in the rest of the financial year. However, exact predictions concerning consumer behavior in 2010 are currently just as difficult as accurate forecasts on when the global financial crisis will finally end. Yet the last year demonstrated that people still like to indulge in a touch of luxury even in times of financial hardship.
Nonetheless, it is important for the DOUGLAS Group and retailers in general that the government act swiftly to create a framework, which is conducive to a gradually improving economy and rising consumer confidence. If appropriate funding is available, the promised tax breaks should be instituted as soon as possible. Beyond that, the continuing stabilization of the labor market remains another urgent priority, which would in turn positively impact the retail sector.
Regardless of the crisis and even though another tough year may lie ahead for the retail industry: we will keep our strategic focus by offering our customers outstanding service, an inviting shopping ambiance and first-rate product ranges at fair prices.
Our aim is to continue growing – albeit at a somewhat slower rate – as we further cement and extend our position as a leading European lifestyle group. We will be concentrating on generating organic growth powered by new store openings and the modernization of existing locations. For this purpose we have budgeted an investment volume of 120 million EUR for the ongoing fiscal year. Our Douglas perfumeries are planning to open 40 new stores and update numerous existing ones. Thalia will solidify its market leadership in the German-speaking countries by opening between five and 10 new bookstores while consistently pursuing its multi-channel strategy. Christ and Hussel will also further extend their leading market positions by opening and modernizing stores. AppelrathCüpper already set its new course in 2009; it is now younger, more up-to-date and more fashionable. Now much will depend on whether the apparel industry can regain its momentum after a long slowdown. If and when this happens, we are confident that AppelrathCüpper will be among the winners.
All of the activities in the DOUGLAS Group revolve around the customer. We have stylish stores, sophisticated and contemporary product ranges, as well as competent, committed and friendly ladies and gentlemen who consistently impress our customers with our products and services. As we feel that there is always room for further improvement, our corporate motto for 2010 is: ”Turning visitors into customers.” We want our customers to truly enjoy each visit to our shops and always feel that they have been treated to the very best advice, the very best service and the very best products.
Hopefully you have noticed that – despite the economic turbulence – we are striving with ”heart and mind” to achieve further sustainable and value-oriented growth for the DOUGLAS Group. All things considered, our performance in the last business year and our cautiously optimistic outlook enable us to propose a dividend payment at the previous year’s level. For this reason, the Supervisory and Executive Boards will be recommending that the Shareholders’ Meeting on March 24, 2010, approve a dividend of 1.10 EUR per dividend-bearing share for the 2008/09 financial year.
The DOUGLAS Group is well prepared to face the challenges of the future. Financially, we are equipped with both a healthy capital structure and solid long-term financing. Additionally, we have extremely service-oriented and competent ladies and gentlemen in our team who rank among the very best the retail trade has to offer. Propelled by a modest economic upturn and a slightly more optimistic mood among consumers, the DOUGLAS Group will strive to deliver a strong performance in 2010.
Sincerely,
Henning Kreke
Hagen, January 2010
