Those who are declared dead live longer, at least where they can adapt. For its retail chains Mediamarkt and Saturn, the electronics retailer Ceconomy sees customers returning to brick-and-mortar stores, especially in Germany, the most important market. Compared to the same period of the previous year, customer frequency rose by 16.5 percent in the second quarter, while sales in brick-and-mortar retail increased by 11 percent to almost 4.2 billion euros in the same period. Although this includes a corona effect, because in the previous year, especially in Germany, some shops were visited less due to the restrictions, Ceconomy CEO Karsten Wildberger said in a conference call on Monday: "In principle, we also see this recovery from quarter to quarter."
Business correspondent in Dusseldorf.
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Online sales, on the other hand, fell by 10 percent year-on-year, but a kind of new shopping reality has slowly leveled off: With a share of 21.5 percent of total sales, online retail is significantly higher than before the Corona pandemic, it has increased by almost two-thirds since then, amounting to 1.1 billion euros in the second quarter at the end of March. On the other hand, in some countries where the approximately 1000 Mediamarkt and Saturn stores in Europe are located, the frequencies in the stationary business are still up to a fifth below the 2019 value. But it turns out that "those who come to the store have a higher willingness to buy," said Wildberger.
One of the most important key figures for the retailer is the so-called area productivity, i.e. the turnover that is achieved per square meter and how it relates to the costs. In recent months, Ceconomy has restructured almost 40 percent of its stores and in most cases reduced them significantly. "We're seeing higher footfall and better earnings in all the markets we've touched," Wildberger said. In these stores, the productivity per unit area is 10 to 12 percent higher than in those that have not yet been converted.
Conversion pays off
According to Wildberger, the so-called Lighthouse formats are even more clearly above expectations, in major cities such as Berlin at Alexanderplatz, the company operates branches that, at 8000 square meters, are almost four times as large as the stores on average, but also with space for industrial partners such as Samsung, Apple or Miele, who also invest locally for their boutique space. Such special shopping places are apparently well visited, analogously this still works in stationary retail with luxury department stores. In such Mediamarkt stores, for example, there are special areas especially for gamers, where there are chairs and consoles as well as all kinds of accessories to try out.
In addition, the company is testing different formats for the size of its stores depending on the location. Starting from other countries where Ceconomy already offers this, there are now also the first very small branches in Germany that offer a reduced assortment and also concentrate on picking up goods ordered online and service offers such as repairs. The connection to online business, known as "omnichannel" in retail jargon, is the holy grail for every retailer: At Ceconomy, 39 percent of orders on the Internet are now picked up in a branch.
The share is growing steadily, which is important for Mediamarkt and Saturn because it not only saves costs, but customers tend to make additional purchases. The deadweight effect is sometimes greater in brick-and-mortar stores than with recommendations for the digital shopping cart, according to the motto "customers also bought". Part of the strategy to keep the brick-and-mortar business attractive is also a stronger focus on service offerings such as repairs or the return of old equipment. With such additional offers as well as warranty extensions or mobile phone contracts, Ceconomy now generates just over 6 percent of total sales.
Joint logistics and advertising
In Germany, both sales and earnings have grown, which is also due to the fact that efficiency in logistics and marketing has increased. With the two brands Mediamarkt and Saturn, however, the company has also had a lot of catching up to do for a long time, advertising has only recently started running together, and logistics are only now slowly being linked. Ceconomy has just converted its order processing system, while at the same time an efficiency program is underway in the company to increase liquidity and profitability.
Inflation and high costs are ultimately eating away at margins, and even in consumer electronics, companies cannot turn the price screw at will in order to increase sales. Especially in Southern Europe, Ceconomy is struggling with a difficult market environment. Adjusted earnings before interest and taxes (EBIT) increased by 61 percent, but are still in negative territory at minus 23 million euros. The net loss almost doubled to 15 million euros, which was due to Ceconomy withdrawing from Sweden. This burdens the result with 68 million euros and is likely to be the main reason why the stock market was very dissatisfied with the electronics retailer's figures on Monday: With a minus of almost 13 percent over the course of the day, the share was by far the weakest value in the S-Dax micro-cap index.
Recently, however, the shares had also been in greater demand, since the beginning of the year, the plus is still 15 percent. However, investors had apparently expected more, although Ceconomy continues to assume the more optimistic scenario in its two forecasts. On a currency- and portfolio-adjusted basis, it envisages a slight increase in sales and a significant improvement in adjusted operating profit. "Despite challenging conditions, we are confident about the second half of the year," said Wildberger.