DGAP-News: Adler Modemärkte AG: New 'ADLER Strategy 2023' Promises Significant Revenue and Earnings Potential

Press Release from Adler Modemärkte AG

Outlook for 2020: Sights Set on Improving Like-for-like Revenue

New "ADLER Strategy 2023" Promises Significant Revenue and Earnings Potential
High Free Cash Flow and Liquidity Also Forecast for Current Financial Year

Haibach (near Aschaffenburg), 12 March 2020: After exceeding its annual targets for 2019, in some cases considerably, Adler Modemärkte AG is looking forward with confidence to this and future financial years despite the continuing difficult conditions in the German textile retail industry. With this in mind, the Company is expanding on its successful "ADLER 2020" initiative. Considerable revenue and earnings potential to be realised in the next three years was identified as part of the "ADLER Strategy 2023". Where products are concerned, the strategic focus is on efficiently leveraging CRM data, launching new own brands, consolidating suppliers and rolling out new collections more quickly. With regard to the sales strategy, the Company is systematically pressing ahead with its successful store optimisation programme, and online revenue will treble to more than €30 million. The primary focus of the communications and marketing strategy is on increasing revenue per customer (share of wallet) and new customer acquisition. ADLER will also bolster its position as an attractive employer.

Targets for 2019 exceeded, some significantly - free cash flow up 69% to €57.4 million
As predicted, ADLER held its own in 2019 despite the negative trend in the textile retail industry. At €70.3 million, earnings before interest, taxes, depreciation and amortisation (EBITDA) exceeded the forecast range of €64-69 million. Earnings after taxes amounted to €5.1 million, a very significant increase on the prior-year figure of €0.4 million. Consolidated revenue remained in line with expectations at approximately €495.4 million, down on the €507.1 million reported in the previous year due to store closures and the persistently weak industry environment At -0.7% on a like-for-like basis, ADLER significantly outperformed the industry as a whole (-2.0%; source: Textilwirtschaft). Free cash flow recorded encouraging growth, rising by 69% from €33.9 million to €57.4 million. The Company also saw a further improvement in its balance sheet structure in financial year 2019. Equity increased from €61.6 million to €66.1 million, lifting the equity ratio from 14.8% to 16.1%. Cash and cash equivalents recorded an all-time high of €70.1 million as at the 31 December reporting date, also up significantly on the prior-year figure of €54.9 million.

"Our new ADLER Strategy 2023 aims to draw on the success of the 2020 programme. By increasing the share of wallet with respect to our more than three million active customers, acquiring a substantial number of new customers and trebling online revenues as budgeted, we see the potential to generate tens of millions of euros in revenue by the end of 2023. We will press ahead with our efficiency improvements in an effort to further boost profitability. We see good prospects for holding our own despite the persistently difficult environment", said Thomas Freude, CEO of Adler Modemärkte AG, describing the development.

Strategic measures impact the cost side
A further improvement in the gross margin, which rose by 100 basis points from 54.7% to 55.7%, is testament to the fact that strategic measures are taking hold on the cost side. The figure had been 53.6% in 2017. The improvements were due primarily to optimisation along the entire value chain, including in cooperation with new sourcing and logistics partners Otto International and Meyer & Meyer. The store optimisation programme launched in 2018 is also exceeding expectations. Following the closure of five loss-making stores in 2018, a further eight were closed in the year under review. Rental price renegotiations generated cost savings of just under 10%, enabling one store to once again become profitable and avoid closure. Rents continue to hold potential in 2020.

Growth in like-for-like revenue forecast for 2020 - focus on cash flow and liquidity
ADLER's Executive Board does not expect the difficult situation facing the textile retail industry to improve during the 2020 financial year. As in previous years, the management is using a variety of measures to generate revenue and enhance efficiency. The store closures completed in 2019 and planned for 2020 will have an adverse effect on revenue expectations. The grand opening of two stores in 2019 and the planned launch of sales at additional stores in financial year 2020 will not be sufficient to compensate for this. The aim is to improve consolidated revenue slightly on a like-for-like basis and in absolute terms to be at the same level as in the previous year: at approximately €495 million. The expected positive effects from the efficiency enhancement measures which have been introduced or implemented in full will be offset in 2020 by adjustments in personnel expenses due to collective bargaining agreements and expected increases in marketing and sales expenses to sustainably secure revenue, such as through online trading. Including potential negative one-off expenses, particularly for store closures, totalling €5-6 million, the Executive Board thus forecasts EBITDA to be between €66 and 69 million. In 2020, the management will continue to focus squarely on maintaining the large liquidity reserve and generating a substantial positive free cash flow.

It cannot yet be predicted what financial implications the coronavirus will have on the current financial year 2020. ADLER sources the majority of its products from the east and south-east Asia region, meaning that in principle, procurement might be hit by an escalation of the situation as the year progresses. However, ADLER currently has sufficient stocks of new merchandise for the spring and summer collections. It also has opportunities to counter the situation where necessary by procuring merchandise from suppliers in other parts of the world.

The 2019 Annual Report can be downloaded at https://www.adlermode-unternehmen.com/en/investor-relations/reports-and-publications/annual-reports/2019/
 

ADLER Group's key performance indicators

* IFRS16 adjusted
** based on 18,510,000 no-par value shares.

* IFRS16 adjusted

Adler Modemärkte AG press enquiries and investor relations
Peter Dietz
Media and Investor Relations
Tel.: +49 6021 633 1828
E-mail: [email protected]

About Adler Modemärkte AG:
Adler Modemärkte AG, headquartered in Haibach near Aschaffenburg, Germany, is one of Germany's largest and most important textile retailers. In 2019, the Group generated revenue of €495.4 million and EBITDA of €70.3 million. As at 31 December 2019, ADLER employed a workforce of around 3,600 and currently operates 172 stores, 143 of which are located in Germany, 24 in Austria, three in Luxembourg, two in Switzerland, plus an online shop. The Company focuses on large-space concepts offering in excess of 1,400 m² of retail space. With its many own brands and select external brands, ADLER offers a highly diverse product range. Thanks to more than 70 years of tradition and strong customer loyalty, ADLER considers itself to be the market leader within its target group of affluent customers aged 55 and over.
For more information: www.adlermode-unternehmen.com; www.adlermode.com