Annual Report 2009/10 Excellence in Retailing - Douglas Holding

66 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
Opportunities for the DOUGLAS Group are expected to come from the growing demands
from customers for diverse selling channels. The exclusive option of making purchases
only at the specialty retail stores is no longer sufficient for many consumers. The
customer wants to shop at both stationary stores and online, too. The interlinking of both
alternatives into a multi-channel strategy offered by the DOUGLAS Group not only provides
its customers with both selling channels, but also generates additional advantages
for the customer, such as online orders with the option of product pick-up at the store. The
process optimization steps undertaken in the areas of logistics and IT have already paved
the way for a successful implementation of the multi-channel strategy. Even the development
in the field of Web 2.0 is seen as an opportunity by the DOUGLAS Group in actively
communicating with the customer.
Moreover, the business group sees key opportunities from vertical integration. The Jewelry
division will be testing new sales channels by opening stores in the areas of monolabel
and multi-label. In addition, all corporate divisions except for the Books division attach
great importance to exclusive and private labels. Through the use of exclusive and
private labels, customer loyalty is intended to be raised, with a stronger differentiation
among competitors. Decisive for the further success of the DOUGLAS Group will be the
steps taken towards the correct direction of the product-mix strategy.
Following the lower capital expenditure budgets of the last two fiscal years, the investment
volume is estimated at approximately 125 million EUR for the 2010/11 fiscal year,
with the aim of again reaching a level of roughly 150 million EUR on a medium-term. In
addition to new store openings, the DOUGLAS Group intends to grow further by means
of acquisitions. That is why acquisition opportunities are continuously monitored and
evaluated.
The DOUGLAS Group’s financing of investments is secured from the access to various
financial sources. This includes cash and cash equivalents, operating cash flow and
bank credits. In addition to the syndicated revolving credit facility that was contractually
agreed with eleven banks up through September 2012, bilateral credit lines are also
available in the amount of 37.2 million EUR as of the balance sheet date on September 30,
2010. As of the balance sheet date, the Group had at its disposal borrowing headroom in
the amount of 409 million EUR from the revolving credit facility. Procurement of larger
financing commitments before the maturity date of the revolving credit facility is not considered
necessary at the present time. In the case that financing needs should dramatically
change, the financing strategy would then be accordingly adjusted in a timely manner.
No material changes are anticipated in the cost structure in the current and fiscal
years ahead. The personnel cost ratio is expected to remain at about 22 percent of net
sales. Even the rental expense ratio is expected to remain relatively stable due to the longterm
nature of these agreements. Energy costs of nearly one percent of net sales are also
expected in the future.
Economic outlook of the business divisions in the fiscal years 2010/11 and 2011/12
The multi-channel strategy is gaining in importance for the DOUGLAS Group. The integration
of the Internet platform with stationary retailing is becoming of more relevance
in all corporate divisions. In this respect, the DOUGLAS Group deems this to be a key advantage
over its competitors. The store network with almost 2,000 highly-qualified spe-