The DOUGLAS Group – an overview
Profile and philosophy
The DOUGLAS Group is a European retail enterprise with more than 1,500 specialty stores in prime metropolitan locations and shopping centers offering a comparable array of merchandise. Upwards of 21,000 employees are now committed to the DOUGLAS lifestyle philosophy, offering their customers outstanding service, first-class product ranges at fair prices and an stimulating shopping ambiance. This lifestyle philosophy is the golden thread binding all five business divisions, each one having a strong market presence with its own brand name. The Douglas perfumeries are currently represented in 18 countries. As the market leader in Europe, Douglas stands for competence in the areas of perfume, cosmetics, and body care. With their wide range of sophisticated products, the Thalia bookstores also occupy market-leading positions in Germany, Austria, and Switzerland. Christ jewelry stores head the market in Germany in the mid- to upper price range of the jewelry sector. The luxury jewelry provider René Kern is the top address on its terrain. In the Fashion division, Appelrath-Cüpper numbers among the leaders in high quality women’s fashion wherever it is found, as does Pohland in the area of menswear. The confectionery specialist Hussel is market leader in the confectionery sector in Germany. Since 2005, it is also operating in Austria. DOUGLAS HOLDING AG with its head office in Hagen, Germany, is the holding organization responsible for investments and management. It also performs leadership and service functions for the DOUGLAS Group’s subsidiaries. The service divisions, which are operated as profit centers, and nearly all of the service centers of the sales companies, are also located in Hagen. A diagram of the corporate structure of the DOUGLAS Group is shown on page 5 of this annual report.
Mission and goals
The DOUGLAS Group stands for “Retail with Heart and Mind.” This defines the values underlying all of the company’s dealings and also describes the corporate culture that characterizes the DOUGLAS Group. It entails a firm belief in decentralization. In line with the principle “as much decentralization as possible, as much centralization as necessary,” decisions are being made close to the customer’s needs. It also emphasizes just how important customer service is in the DOUGLAS Group. This key concept simultaneously forms the platform for attaining the following goals: strengthening the market positions through value-oriented growth, continuing to expand internationally, and further developing the leadership role in quality and service.
Strengthening the market positions through value-oriented growth
The DOUGLAS Group has set itself the goal not only of solidifying the market positions of the five business divisions, but of seeing them grow. Earnings-oriented growth is the key to this. This applies as much to new openings as to acquisitions and shareholdings. Each and every investment planned by the DOUGLAS Group is examined to see whether it contributes to a sustained increase to the corporation’s value. Corporate value, and its development, is measured with the help of the DOUGLAS Value Added (DVA) system. This is based on the so-called EVA® concept. The DVA concept is rooted in the premise that the DOUGLAS Group and its individual subsidiaries only generate value if they cover their cost of capital.
Continued international expansion
The DOUGLAS Group has a solid base on its home terrain in Germany – nearly 68 percent of its sales are generated here. The Group nevertheless wants to expand its international presence. This is particularly true for the Douglas perfumeries already located in 17 European countries and in the U.S. The focal point for future expansion remains the southern and eastern European countries. Market entries in new countries is made dependent on the average buying power of their citizens. This must be sufficiently strong that potential customers are able to afford a “touch of luxury” at Douglas.
Further developing leadership role in qualityand service
The specialty stores of the DOUGLAS Group wish to be the top standard for quality and service in their locations, thus setting themselves apart from their competitors – with friendly and firstclass service, competent advice, well-designed merchandise presentation, and high-quality product ranges at attractive prices. Sensing trends in customer behavior and recognizing new needs, and translating these quickly into attractive business formats, exclusively obtainable products, or into new services, is a challenge that must be met in order to become such a top standard. It is also the “motor” driving innovation, through which all DOUGLAS subsidiaries are strengthening their leadership in quality and service still further.
The working relationship between the Supervisory and Executive Boards of DOUGLAS HOLDING AG is characterized by efficiency and trust. A person cannot be a member of both boards at the same time.
DOUGLAS HOLDING AG’s Executive Board conducts the company’s business and represents it vis-à-vis outside parties. It is comprised of four members. Although each member of the Executive Board is responsible for a particular division, the members of the Executive Board are jointly responsible for the management of the Group.
The Executive Board reports regularly to the Supervisory Board. The reports focus on the business policies and strategies of the various divisions, the ongoing operations, potential acquisitions and divestiture projects, and financing activities. The Supervisory Board is also kept informed of all events that could have a significant impact on the organization’s future and on the sustainable increase in the value of the DOUGLAS Group.
The Supervisory Board appoints the members of the Executive Board and monitors and advises the Executive Board on the management of the company. Although the Supervisory Board is not authorized to perform any management tasks, certain transactions may not be executed by the Executive Board without its prior approval. The Supervisory Board’s 16 members represent the shareholders and employees on an equal basis. The shareholders’ representatives are elected by the Shareholders’ Meeting. Employee representatives are elected in compliance with the provisions of the German law on co-determination.
The Supervisory Board must meet at least twice in every half of the calendar year. Information on the remuneration system for the Executive and Supervisory Board can be found in the notes on pages 140 to 142.
Fiscal year 2005/06 – an overview
The DOUGLAS Group continued its value-oriented growth in the 2005/06 fiscal year. Net sales were up 10.9 percent to around 2.7 billion EUR. The DOUGLAS Group thereby marginally exceeded the target it set in May 2006, which was to in - crease revenues by eight to ten percent. We are also pleased to report that, like for like, revenues were up 2.3 percent over last year.
Capital expenditure totaled 141.2 million EUR in fiscal year 2005/06 compared to 121.6 million EUR in the previous year. A total of 106 new specialty stores were opened by the DOUGLAS Group in Germany and abroad during the period under review. As of September 30, 2006, the DOUGLAS Group’s network of stores totaled 1,549. The Group’s pre-tax earnings amounted to 129.4 million EUR as opposed to 119.4 million EUR the year before. The pre-tax earnings’ target of 125 to 127 million EUR was therefore slightly surpassed.
The corporate value of the DOUGLAS Group, in terms of DOUGLAS Value Added (DVA), increased by 4.9 million EUR in fiscal year 2005/06 to 31.3 million EUR.
The Executive and Supervisory Boards of DOUGLAS HOLDING AG will request the Shareholders’ Meeting on March 14, 2007, to approve a dividend of 1.10 EUR per dividend-bearing share for fiscal year 2005/06. This equals a ten percent increase compared to last year’s dividend of 1.00 EUR per share. Based on the closing share price of 36.90 EUR on September 30, 2006, this is equivalent to a dividend yield of around 3.0 percent.