report

DEAR ShAREhOLDERS
In 2011 Charles Vögele pushed ahead with the implementation
of its 3­pillar strategy. The necessary
processes for the centralization were stabilized
and the brand Charles Vögele stands for fashion
expertise again. However, the positive effects of
this were overshadowed by negative external and
internal factors. Tougher operating conditions
presented a particular challenge in the company’s
restructuring. Coupled with difficulties in implementing
the modernization strategy, a weakness
in our ladies collection and uncertainty amongst
customers about just where Charles Vögele is positioned,
led to results that fell well short of expectations.
Strong Swiss franc, euro crisis, unusual
warm autumn
2011 was marked particularly by a challenging
economic environment with a strong Swiss franc.
In Charles Vögele’s home market Switzerland
this led to a reduction in spending and uncertainty
amongst customers. This was compounded by an
outflow of spending in the neighbouring countries
and a drop in visitor numbers to Switzerland.
Both factors had a further negative effect on the
market and Charles Vögele. In the euro region
the economic prospects deteriorated further during
the course of the heightening debt crisis.
Last but not least, an unseasonably warm autumn
led to a fall in sales of essentials in the key winter
business.
Logistical problems, customer uncertainty,
weakness in collections
The external problems should not distract us from
the internal difficulties. The optimization of logistics,
involving a reduction from nine to three regional
distribution centres and simultaneous outsourcing
to two external providers in the south and north
of Europe, presented a challenge. The timetable was
too ambitious, leading to massive teething trou­
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bles in the third quarter and a shortage of merchandise
supplies. The stabilization of the processes
therefore represented a key priority in the fourth
quarter. The umbrella brand campaign, Charles
Vögele’s updated image and its new store design,
caused a sensation in the fashion world. However, it
also made customers uncertain about just where
Charles Vögele is positioned. Particularly in its ladies
collection Charles Vögele was unable to fulfil the
fashion claims to the extent implied by the new image.
Significant fall in sales and consolidated loss
Net sales fell during the 2011 financial year by 15 %
to CHF 1 016 million (previous year: CHF 1 198
million). Approximately CHF 86 million of this fall
was due to the sharp depreciation of foreign currencies
(mainly the euro) against the Swiss franc.
In local currency terms, the decline in sales was 9 %,
or CHF 96 million, and after adjusting for changes
in exchange rates and floorspace (like­for­like) 8 %,
or CHF 82 million. The fall in sales was mainly due
to the performance in the second half­year. Increasing
procurement prices as well as increasing labour
costs reduced gross margin to 62 % (previous year
67 %). Helped by the weaker euro operating
expenses were reduced by CHF 45 million to CHF
646 million (previous year: CHF 691 million). The
fall in the value of the euro against the Swiss franc
prompted a revaluation of the goodwill position
in Germany and Austria. A goodwill impairment of
CHF 36 million had to be made in the first half
of 2011, resulting in operating earnings of CHF
− 114 million (previous year CHF 38 million) and
a consolidated loss of CHF 119 million (previous
year: CHF + 18 million).
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