HEMA Q2 2014 results
Unaudited
October 2, 2014
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Introductory remarks
 Q2 2014 relates to the 13 weeks starting May 5, 2014 and ending
August 3, 2014
 The Q2 2014 report has been reviewed by PwC
 On June 17, 2014, HEMA refinanced its existing borrowings
 As part of its commercial strategy, HEMA began preparation for
the remodelling of its Dutch store base during Q2 2014:
 The remodelling process was initiated in week 25;
 Resultant disruption to store operations had a negative influence on
like-for-like sales and store operating expenditure during the period.
 In September 2014 (Q3) two franchisees initiated arbitration
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Contents
1.
Economic indicators the Netherlands
2.
Macro economic outlook 2014-2015
3.
Market developments
4.
Q2 2014 results
5.
Current trading
6.
Commercial update
4
1. Economic indicators
In the Netherlands
Steady, but fragile recovery of economic
indicators
Source: CBS, Central Bureau of Statistics, http://www.cbs.nl
6
Steady, but fragile recovery of economic
indicators (continued)
Source: CBS, Central Bureau of Statistics, http://www.cbs.nl
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2. Macro economic outlook
2014-2015 the Netherlands
GDP and Household consumption
2011
2012
2013
2014
2015
Gross Domestic Product (economic growth
in %)
1.7
-1.7
-0.7
0.75
1.25
Household Consumption (%)
0.2
-1.4
-1.6
0.0
1.0
2011
2012
2013
2014
2015
Consumer Price Index (CPI) (% inflation)
2.3
2.5
2.5
1.0
1.25
Contract wages market sector (%)
1.4
1.6
1.2
1.25
1.5
Purchasing power, static, median all
households (%)
-1.1
-2.1
-1.4
1.5
0.5
2011
2012
2013
2014
2015
389
469
600
620
605
4.4%
5.3%
6.7%
7.0%
6.75%
Prices, wages and purchasing power
Labour market
Unemployment x 1.000 persons
% of workforce
9
Source: Macro economic outlook. CPB, Centraal Plan Bureau.
http://www.cpb.nl/en/publication/macro-economic-outlook-mev-2015
3. Market developments
The Netherlands
Dutch Retail: Non Food
January - July 2014 vs 2013:
Sales
Volume
Price
Source: CBS, Central Bureau of Statistics, http://www.cbs.nl
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- 0.3%
+ 0.5%
- 0.8%
Dutch Retail: Food
January - July 2014 vs 2013:
Sales
Volume
Price
Source: CBS, Central Bureau of Statistics, http://www.cbs.nl
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+1.4%
+1.2%
+0.2%
HEMA versus the market
 HEMA household goods remain under pressure
 HEMA apparel slightly under pressure, but trend is improving,
especially in babywear and bodywear
 HEMA food in line with market
 Online outperforming the market
 HEMA remains best in class on reliability, value for money and
good quality
Source: third party information
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4. Q2 2014 results
Like-for-like sales Q2 2014
Q2
YTD Period 6
vs 2013
vs 2013
Own Stores Netherlands
-4.1%
-4.3%
Belgium / Luxembourg
-1.4%
-0.9%
Germany
-5.3%
-4.2%
France
8.0%
9.0%
Deliveries Franchisees
-6.9%
-3.8%
HEMA
-4.6%
-3.4%
Like for like sales % versus 2013
 Negative impact on sales from the remodelling of our directly
owned stores in the Netherlands is estimated to be approx. 1 –
2% for Q2
 Despite the remodelling in the Netherlands, July 2014 (period 6)
witnessed a positive consumer sales development versus last
year
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Headline numbers Q2 2014
Q2
x € Million
2014
YTD period 6
B/W
2013
2014
B/W
2013
Net sales
247.6
-3.4
503.8
-4.8
Gross profit
115.2
1.6
233.0
0.6
-110.9
-7.2
-231.4
-18.6
EBITDA
18.4
-5.4
30.0
-17.1
Adjusted EBITDA
19.4
-5.0
43.1
-5.7
46.5%
+120bps
46.2%
+50bps
Operating expenses
Gross profit as % of sales
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Headline numbers Q2 2014
 Q2 2014 EBITDA was € 5.4 million lower versus Q2 2013
(from € 23.8 million to € 18.4 million), due to:
 Lower sales in the Netherlands, partly due to the remodelling;
 Q2 2014 gross profit as a percentage of net sales was 120
bps higher versus Q2 2013, mainly as a result of lower
markdowns and higher supplier contributions;
 Q2 2014 operating expenses were € 7.2 million higher versus
Q2 2013, mainly due to additional costs as a result of the
remodelling process, which are estimated to be approximately
€ 3.5 million.
 The remainder is the result of expansion and CPI increases.
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Cash flow Q2 2014
Q2
x € Million
Operating cash before changes in working capital
2014
YTD period 6
B/W
2013
2014
B/W
2013
18.4
-5.4
41.1
-6.0
-10.0
-12.4
1.1
-10.0
-7.9
-7.4
-11.7
-25.3
-34.0
-18.2
-69.6
-17.5
Changes in provisions and other
0.1
2.4
-5.6
-0.2
Income taxes
1.0
-1.4
1.0
0.7
-32.4
-42.4
-43.7
-58.3
Net cash used in investing activities
-9.8
3.9
-18.7
13.9
Interest and financial leases
-9.0
-0.2
-20.9
-3.6
Borrowings
-48.3
-30.0
-48.3
-30.0
Finance fees
-14.3
-14.3
-14.3
-14.3
Net cash used in financing activities
-71.6
-44.5
-83.5
-47.9
-113.8
-83.0
-145.9
-92.3
Changes in trade & other receivables
Changes in inventories
Changes in trade & other payables
Net cash generated by operating activities
Net cash flow
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Cash flow Q2 2014
 Q2 2014 cash flow was lower than Q2 2013, due to:
 Lower EBITDA;
 Higher inventories (€ 7.4 million) as a result of the addition of
new assortment and leftovers from the mild winter season;
 Lower trade and other payables (€ 18.2 million), due to
lower capital expenditures and changes in payment terms for
a specific supplier;
 Trade and other receivables lower due to timing of payments;
 Reduction of the borrowings (€ 30.0 million);
 Finance fees paid (€ 14.3 million)
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5. Current trading
Current trading period 7 (August)
 In the Netherlands like-for-like sales were almost flat
 The disruption from the store remodelling had an estimated
impact of minus 3%
 Particular improvement in apparel and catering sales vs last year
 Lower deliveries to franchisees partly due to remodelling in the
franchise stores
 France continued to deliver double digit like-for-like growth
 Positive sales development in Belgium
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Current trading period 8 (September)
 In period 8 the remodelling process is at its peak: the larger
stores are under construction and the smaller stores are in the
final stages
 The impact of remodelling on sales is estimated to be higher than
in previous periods (more than -3%)
 Apparel sales were also under pressure because of a shift in the
commercial program and the unusually warm weather in
September
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Current trading period 8 continued
 Costs are anticipated to be higher due to:
 More labour hours in the stores (remodelling);
 Higher sales promotion and other costs to support the
relaunch of the remodelled stores
 The main benefit of the remodelling is expected for P9 to P12
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Arbitration
 In September 2014, two franchisees initiated arbitration with the support
of the VAB, which is the association of franchisees which represents the
collective interest of almost all of HEMA’s franchisees. These two
franchisees claim they are entitled to a portion of HEMA’s Marketing
Strategy Fund (MSF), which is used for sales promotion and funded by
contributions from HEMA suppliers.
 Based on their own estimates, these two franchisees claim an amount of
€ 29 million, excluding interest, on behalf of all franchisees over the
years 2009 until 2014, and a corresponding share of future MSF
contributions.
 HEMA disputes the validity of the claim and intends to vigorously defend
against it.
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6. Commercial update
Webshop award: HEMA best department
store and Best in Baby / Kids
Ranking best department store:
1.
HEMA
2.
IKEA
3.
BOL.COM
4.
Wehkamp
5.
V&D
Source: ABN AMRO
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Ranking Baby / Kids:
1.
HEMA
2.
H&M
3.
C&A
Remodelling process
 Substantial operation completed in a very short period of time
 520 stores in the Netherlands remodelled over a two months period
 330.000 m2 of store space has been reorganised, together with the
addition of new assortment to replace lower sales density categories
and refresh the “surprise factor” for consumers
First impressions remodelling
 The remodelling process will be completed in week 41
 Supported by a large internal promotion program for the
relaunch, including new marketing brochures and TV advertising
campaigns
 The relaunch has received a lot of publicity in the Netherlands
together with many enthusiastic reactions and compliments from
customers
 Sales increases are anticipated in the coming periods (period 9
to 12)
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Change of company logo
 HEMA: “making the ordinary extraordinary”
Store presentation
 New tables
 New presentation materials
 Special HEMA favourites logo
 More attention and
maintenance of the tables
Favourites - Toys
Small toys
Creative toys
Must haves
Puzzles & Games
Cooking
Living
Beauty
Improved brochure
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TV commercial to support new assortment
http://www.youtube.com/watch?v=0kI5S4w-rBw&feature=youtu.be
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Blauwe slide hier invoegen met HEMA maakt
bijzonder
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Questions?