Hornbach Group recorded mixed results in the third quarter of the fiscal year 2018-2019 (September 1 to November 30). The net turnover increased by 7.7 percent, to EUR 1.08 billion, the highest growth in the last four and a half years, but the operating profit (EBIT) decreased from EUR 28.8 million in the same period of 2017 to EUR 19.7 million.
The reason was the increase in quarterly costs, especially in the area of digitization, that could not be offset by increasing gross profit. In the first nine months of 2018-2019, the company’s turnover rose by 4.8 percent, reaching EUR 3.47 billion, while the EBIT adjusted operating result of EUR 180.6 million was by 11.1 percent lower than last year.
During the financial year 2018/19, turnover increased significantly from one quarter to the next. The turnover of Hornbach Baumarkt AG, which currently operates 158 DIY stores (DIY retail), increased by 7.5 percent to EUR 1.006 billion euro in the third quarter of 2018/19, and 4.8 percent in the first nine months to EUR 3.25 billion. Dynamics during the year is noted in the development of adjusted turnover according to the commercial surface and the exchange rate. After an increase of 2.3 percent in the first quarter and an increase of 3.4 percent in the second quarter, the third quarter of 2018/19 saw an increase of 6.2 percent.
“In autumn we really moved. In Germany, our building and garden materials stores have grown better in all months than the industry and have grown by 4.4 percent adjusted according to the commercial surface,” said Albrecht Hornbach, Chairman of the Board of Directors of Hornbach Management AG.
Albrecht Hornbach: “Our business model works”
The biggest contribution to financial growth brought HORNBACH stores from the eight European countries apart from Germany. Here, DIY turnover, adjusted for trade and foreign exchange rates, increased by 8.2 percent in the third quarter of 2018/2019. The foreign share of the sub-group’s turnover was 48.2 percent in the first three quarters (46.7 percent in the previous year).
“Demand is rising. Our retail store works – despite all the gloomy forecasts. Digitizing is a huge opportunity for us. By combining our classic e-commerce business, we can offer our customers more value than pure online competition, especially when it comes to renovation projects that require intensive counseling,” said Albrecht Hornbach.
Albrecht Hornbach was unhappy with profits in the third quarter. The Group’s operating result (EBIT) adjusted for the non-operating results of the Hornbach Group declined by 31.5 percent, to EUR 19.7 million in the third quarter, and 11.1 percent to EUR 180.6 million in the first nine months of the financial year 2018/19.
“Unfortunately, we have failed to translate the acceleration of the turnover growth into profit growth. The rise in costs, which is also linked to the increase in digitization, was too high compared to gross profit growth,” says Albrecht Hornbach. “But these are aspects of our decision-making area that we can change.”
This is also true for the further development of the commercial surplus, which declined in the third quarter of 2018/19 due to purchase prices, depreciation and higher logistics costs. According to the Hornbach Group, the objective is to sustainably strengthen the Group’s profitability following the recent decline.
In the Hornbach Baumarkt AG subgroup, in the first nine months of the 2018/19 financial year, the adjusted EBIT decreased by 12.6 percent to EUR 134.3 million. The Hornbach Baustoff Union GmbH subgroup, which is mainly targeted to professional construction industry clients, recorded a 5.5 percent increase in turnover in the first nine months of the year, reaching EUR 217.7 million, and an adjusted EBIT of EUR 6.6 million (the previous year EUR 8.8 million). In the Hornbach Immobilien AG subgroup, after 9 months of adjusted EBIT, it came close to EUR 42.3 million from previous year’s value (minus 1.8 percent).
Following the analysis of the results for the first three quarters of the financial year 2018/19, the profit forecast for the full year was adjusted as a result of the unsatisfactory earnings growth in the third quarter. EBIT is expected to fall by more than 10 percent over the prior year level both within the Hornbach Group and the sub-group of building materials stores. Instead, the Board of Directors maintained the turnover forecast for the unchanged financial year 2018/19, with a projected increase in the one-digit average percentage range.