GERRY WEBER International AG — Earnings Release 2014

Feb 26, 2016

News Details

Ad-hoc | 26 February 2016 07:25

GERRY WEBER starts realignment programme

Gerry Weber International AG / Key word(s): Final Results/Forecast

26.02.2016 07:25

Dissemination of an Ad hoc announcement according to § 15 WpHG, transmitted
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The issuer is solely responsible for the content of this announcement.

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Ad-hoc announcement pursuant to § 15 WpHG

GERRY WEBER starts realignment programme

• Group sales revenues climbed to EUR 920.8 million in 2014/15; earnings
  before interest and taxes (EBIT) down to EUR 79.3 million

• Proposal to pay a dividend of EUR 0.40 per share

• Realignment programme consists of four elements: (1) Optimise the
  Retail operations; (2) Adjust structures and processes; (3) Strengthen
  the Wholesale operations; (4) Modernise the brands

• Programme aims to improve revenues, efficiency and costs as well as
  gross profit; return to profitable growth in 18 to 24 months

• Extraordinary one-time expenses will have a strong adverse impact on
  earnings before interest and taxes (EBIT) in 2015/16

(Halle/Westphalia, 26 February 2016) At today's annual press conference,
GERRY WEBER International AG will confirm the preliminary figures for the
financial year 2014/15 published at the end of January 2016. In the past
financial year 2014/15 (1 November 2014 - 31 October 2015), consolidated
sales revenues of GERRY WEBER International AG amounted to EUR 920.8
million, while earnings before interest and taxes (EBIT) totalled EUR 79.3
million. The Managing Board and the Supervisory Board will propose a
dividend of EUR 0.40 per share to the upcoming Annual General Meeting.
Against the background of the unsatisfactory business performance in the
past months and the persistently challenging market environment for the
fashion industry, the Managing Board will today present a programme aimed
at realigning the GERRY WEBER Group.

Sales revenues in 2014/15

Although sales revenues increased by 8.1% from EUR 852.1 million to EUR
920.8 million, the financial year 2014/15 was not a satisfactory year for
the GERRY WEBER Group. While the HALLHUBER subsidiary, which was acquired
in February 2015, delivered a very positive performance (EUR 115.2
million), the sales revenues generated by the GERRY WEBER Core brands
(GERRY WEBER, TAIFUN and SAMOON) declined by 5.4% to EUR 805.6 million.

The breakdown by segments shows that the GERRY WEBER Core Retail segment
contributed EUR 440.3 million to total Group revenues; the 8.7% increase on
the previous year is attributable to the segment's ongoing expansion. The
increase primarily reflects the opening of new company-managed stores and
the reclassification of former shop-in-shops operated by the Wholesale
segment to the Retail segment (concession stores). However, like-for-like
revenues of the GERRY WEBER Core Retail segment declined by 4.4%, thereby
following the general negative trend in the German market, which contracted
by roughly -2%. Sales revenues of the GERRY WEBER Wholesale segment were
down by as much as 18.3% on the previous year to EUR 365.4 million. This
reduction results both from lower order volumes placed by our Wholesale
customers and from a shift in Wholesale revenues to the Retail segment.

HALLHUBER contributed EUR 115.2 million to the GERRY WEBER Group's total
sales revenues. In this context, it should be noted that HALLHUBER was
initially consolidated as of February 2015, meaning that the consolidated
financial statements cover only nine months of HALLHUBER's financial year.
Compared to the prior year period, HALLHUBER's revenues increased by 18.0%.
This increase was supported both by the newly opened points of sale and by
like-for-like revenues growth of 3.2%.

Earnings in 2014/15

After deduction of all operating expenses, earnings before interest, taxes,
depreciation and amortisation (EBITDA) amounted to EUR 115.8 million,
compared to EUR 134.2 million in the previous year. Accordingly, the EBITDA
margin declined from 15.7% to 12.6% in the reporting period. This reduction
is primarily due to the fact that sales revenues of the GERRY WEBER Core
segment were lower than planned while fixed costs remained unchanged as
well as to discounts granted because of increased inventories.

Earnings before interest and taxes (EBIT) declined from EUR 108.9 million
in the previous year to EUR 79.3 million. Accordingly, the EBIT margin
dropped from 12.8% to 8.6%.

The GERRY WEBER Group generated consolidated net income after taxes of EUR
52.2 million, down from EUR 71.4 million in the previous year.
Consequently, earnings per share declined to EUR 1.14 (previous year: EUR
1.56), with the number of shares remaining unchanged.

Realignment programme "FIT4GROWTH"

The main objective of the "FIT4GROWTH" realignment programme is to lay the
foundation for profitable long-term growth in the next 18 to 24 months. The
programme comprises four elements: (1) Optimise the Retail operations; (2)
Adjust structures and processes; (3) Strengthen the Wholesale operations;
(4) Modernise the brands. The measures presented will work on three levers,
namely sales revenues, efficiency and costs as well as gross profit.

(1) Optimise the Retail operations

The consolidation of the store network is an integral element of the Retail
optimisation. According to current plans, 103 stores which fail to reach
the margin targets and/or have a negative growth outlook will be closed
this financial year and next. Another 5% of the store portfolio is on the
watchlist.

Improving the customer approach and the brand experience is another
important lever. We want the brands to have greater appeal for our
consumers again. This includes, among other things, increasing the value of
the products and collections, an up-to-date brand presentation, an active
customer approach but also improved service in the stores. In addition, the
GERRY WEBER Group will rely much more strongly than before on
digitalisation and exploit the omni-channel potential.

Improving the merchandise and inventory management is an additional measure
to optimise the Retail business. More effective inventory management will
help to avoid excess inventories and reduce the write-off rate.

(2) Adjust structures and processes

Because of the strong growth in the past years, the central divisions of
the organisation have become too complex and inefficient. All internal
processes were therefore thoroughly analysed at the headquarters and partly
redefined. The Managing Board assumes that the optimisation of the
structures and processes will cut operating and personnel expenses by EUR
20 to 25 million per year as of the financial year 2017/18. To achieve this
reduction in costs, about 200 jobs at the headquarter in Halle/Westphalia
as well as approx. 50 jobs in the foreign subsidiaries will have to be cut.
In addition, 460 employees in the domestic and international stores will be
affected by the consolidation of the store network. The GERRY WEBER Group
and the works council are jointly developing a fair and socially compatible
solution for the respective employees.

Besides the reduction in operating and personnel expenses, there is further
potential for efficiency increases in the logistics segment. The new
logistic centre, which was taken into operation in December 2015, will also
help to accelerate and optimise the processes.

(3) Strengthen the Wholesale operations

The aim is to turn the Wholesale operations into a growth driver of the
company again within the next 18 months. To achieve this, a number of
measures have been developed and partly initiated. These measures aim at
offering our Wholesale customers better support and service, to present the
brand more effectively at the point of sale and to win new Wholesale
customers. The measures include, among other things, the launch of
partnership programmes to optimise the merchandise management and improve
the service quality.

(4) Modernise the brands

The brand identity does not entirely live up to the standards of GERRY
WEBER as a leading fashion and lifestyle company at all levels. In the
context of the realignment programme, a stronger focus will be placed on
the Group's brands and core products.

Going forward, each brand family will be operated as a strategic business
unit (SBU). These will be given maximum decision-making freedom in the
market. The Managing Board will thus lay the basis for each brand to
optimally adjust itself to the respective market and customer requirements.

For the GERRY WEBER core brand, this essentially means making the brand
more modern and presenting it in a more up-to-date manner. This also
includes making investments in the value of the products and aligning the
collections more strongly with current customer requirements. The company
will also improve the brand presentation at the point of sale and develop
new campaigns for a more emotional brand experience.

Besides the main brand, the company will sharpen the brand identity of
TAIFUN in order to position the brand more independently of the main brand.
In addition, a test phase for a new GERRY WEBER brand has been launched.

Outlook

The Managing Board expects the GERRY WEBER Group to complete the
realignment programme in the next 18 to 24 months and to enter a phase of
sustainable profitable growth as of the third year. In view of the
implementation of the "FIT4GROWTH" realignment programme, the Managing
Board projects severe cuts on the revenue and earnings side of the GERRY
WEBER Core segment and, hence, for the Group as a whole.

The Managing Board therefore projects consolidated sales revenues of
between EUR 890 and 920 million for the financial year 2015/16 (financial
year 2014/15: EUR 920.8 million), of which HALLHUBER will contribute EUR
180 to 190 million. The consolidation of the store network and the
efficiency measures will lead to extraordinary one-time expenses and
write-downs of approx. EUR 36 million. After allowing for scheduled and
potential write-downs in conjunction with the efficiency measures, Group
earnings before interest and taxes will amount to between EUR 10 and 20
million, of which HALLHUBER will contribute the biggest portion.

Key figures of the GERRY WEBER Group (*2013/14 excluding Hallhuber):

                                         2014/15    2013/14\*    Change

                                                                in %

Sales revenues (in EUR millions) 920.8 852.1 8.1

EBITDA (in EUR millions) 115.8 134.2 -13.7

EBITDA margin (in %) 12.6% 15.7%

EBIT (in EUR millions) 79.3 108.9 -27.2

EBIT margin (in %) 8.6% 12.8%

Net income for the year (in EUR millions) 52.2 71.4 -26.9

Earnings per share (in Euro) 1.14 1.56 -26.9

Forecast of the GERRY WEBER Group incl. Hallhuber:

                             GERRY WEBER HALLHUBER GERRY WEBER Group
                             Core

Sales revenues (in EUR millions) 710 - 730 180 - 190 890 - 920

EBITDA (in EUR millions) 45 - 50 15 - 20 60 - 70

EBIT (in EUR millions) 10 - 20

Admitted to the Regulated Market of the Frankfurt Stock Exchange (Prime
Standard)
ISIN: DE0003304101
WKN: 330410

GERRY WEBER International AG

Investor Relations Press Contact
Contact

Claudia Kellert Catharina Berndt

Head of Investor Head of Corporate Communications
Relations Unternehmenskommunikation

Tel: +49 (0)5201 185 8422 Tel: +49 (0)5201 185 320

Email: Email: c.berndt@gerryweber.com
c.kellert@gerryweber.de

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Language: English
Company: Gerry Weber International AG
Neulehenstraße 8
33790 Halle/Westfalen
Germany
Phone: +49 (0)5201 185-0
Fax: +49 (0)5201 5857
E-mail: c.kellert@gerryweber.de
Internet: www.gerryweber-ag.de
ISIN: DE0003304101
WKN: 330410
Indices: SDAX
Listed: Regulated Market in Dusseldorf, Frankfurt (Prime Standard);
Regulated Unofficial Market in Berlin, Stuttgart; Terminbörse
EUREX

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