Hornbach-Baumarkt-AG Group

82 GROUP MANAGEMENT REPORT Outlook for the Group
Outlook for the Group
Since the financial crisis in 2009, the basis for forecasting
future developments has been subject to greater macroeconomic
uncertainties than previously. At core, these relate to
how industrialized economies plan to regain control of the
problems resulting from excessive government debt. Financial
markets reacted very sensitively to the outcome of the elections
in Italy and the risk of state bankruptcy in Cyprus in
spring 2013, thus rekindling worries about an intensification
in the euro crisis, as well as triggering fundamental doubts as
to international political willingness to implement reforms.
Future developments remain subject to numerous risks. Market
volatility has increased across the board. Short to medium-term
developments in sales, procurement, and refinancing
markets are difficult to predict.
One crucially important factor for the business prospects of
the HORNBACH-Baumarkt-AG group is the future development
in consumer demand in those countries in which we operate.
Private consumer spending is decisively affected by the development
in levels of employment and disposable income,
factors affected not least by the development in inflation,
savings measures to consolidate government finances, and
social security, and healthcare reforms. Forward-looking
parameters, such as expectations as to developments in the
overall economy and in personal incomes, or consumers’
propensity to spend, act as confidence indicators pointing to
future developments in real economic data. Alongside these
issues, unusual weather conditions may also significantly
affect consumer behavior and our seasonal business, although
this factor cannot be accounted for in our forecast.
The statements made concerning the two-year forecast period
are based on the company’s medium-term planning, which
has a budgeting horizon of five years and is extrapolated
annually. The corporate budget for the financial years
2013/2014 to 2017/2018, into which the annual budget for
2013/2014 is integrated, was approved by the Supervisory
Board at the end of February 2013.
Expansion
We have still not planned any market entry in a new country
for the two-year forecast period, but will rather focus on
expanding and modernizing our store network in our existing
country markets, i.e. in Germany and eight other European
countries. Depending on the progress made in the building
permit and construction planning stages, store openings may
be rescheduled between individual years. Some of the planned
new store openings serve to replace existing locations no
longer meeting the latest standards. The majority of new
stores is to be opened outside Germany.
We plan to open up to four new HORNBACH DIY megastores
with garden centers across the Group in the 2013/2014 financial
year. Outside Germany, three locations are planned. Upon
completion of this report, the locations in Slovakia, Sweden
and the Netherlands were under construction. In Germany, we
plan to open a new store in Heidelberg. This will replace the
existing store, with sales areas of just 4,000 m², in operation
since 1985.
Up to six new store openings are planned across Europe for
the 2014/2015 financial year. Of these, up to four stores will
be in other European countries. One new store opening is on
the agenda in Germany. Furthermore, the DIY store and standalone
garden center at the Kassel location are due to be
replaced by a newly built combined HORNBACH DIY megastore
and garden center. Including replacement locations and
closures, the group-wide total number of HORNBACH DIY
megastores with garden centers based on the expansion
planned for the current and next financial year should rise to
up to 145 by February 28, 2015 (February 28, 2013: 138).
Investments
The gross investment volume at the HORNBACH-Baumarkt-AG
Group is budgeted to range between € 120 million and
€ 150 million in each of the 2013/2014 and 2014/2015 financial
years. The overwhelming share of these funds will be
channeled into building new stores, equipping new and existing
stores, converting and extending existing stores, and IT
infrastructure.