Annual Report 2009/10 Excellence in Retailing - Douglas Holding

58 Management Report
Key results
Business activities and operating environment
Net assets, financial position and result of operations
DOUGLAS HOLDING AG
Subsequent events
Control system and success factors
Opportunities and risks situation
Statutory disclosures
Forecast and overall assessment
162–165
indicate a sustainable improvement in earnings on the medium term. The store network
streamlining was completed to a large extent in the reporting period.
Sales and purchasing opportunities and risks
In order to always assure an attractive and modern product-mix, the DOUGLAS
Group maintains business relations with a number of selected suppliers and manufacturers.
Through supplier agreements based on longer terms and ongoing market observations,
potential procurement risks are minimized. The solid national and international
negotiation position of the DOUGLAS Group with landlords, suppliers and manufacturers
helps to realize key procurement advantages.
Rising rental and energy prices as well as growing competition necessitate intensive
cost management. The opportunities and risk management system supports the search
for reasonable solutions.
For an international retail group, changes in consumer habits present significant
risks, especially in the changing demands of the customers. The continuous development
of the Customer Relationship Management not only contributes to the further development
of the exclusive and private brands concept, but also promotes customer loyalty.
Furthermore, the DOUGLAS Group aims to profit from the trend towards online retailing
and has accordingly developed a multi-channel strategy.
All these activities are subject to regular reviews in order to spot trends early and
respond appropriately.
Financial opportunities and risks
The DOUGLAS Group displays a moderate financial risk profile. Due to its concentration
in the euro zone, currency risks are insignificant. The same holds true for liquidity
and interest risks due to the Group’s solid capital and financial structure. Default risks
are countered by the DOUGLAS Group by distributing the business volume into both
money deposits and financial instruments among various contractual partners. Because
of the global economic uncertainties, large money investments will be avoided where
possible or invested with only first-rated banks in Germany.
A detailed description of the financial risks and their managing tactics can be found
in the Notes accompanying the consolidated financial statements on pages 162 to 165.
Receivables default risk
The receivables default risk is only of minimum relevance for the DOUGLAS Group.
The continuous evaluation and monitoring of receivables by means of an active receivables
management through internal and external service providers minimized the risks
from receivables default throughout the Group. In addition, the timely offsetting of receivables
against payables with suppliers helps to reduce the default risk. Risks from
cash and non-cash payments are limited by group-wide guidelines in effect and systematic
examination procedures. Losses from forgery of banknotes are immaterial due
to the controls in place.