With its new strategy, Media-Saturn is paving the way for earnings improvement

26 July 2011

  • EBIT before special items at Media-Saturn fell short of market expectations in the 2nd quarter of 2011 / 2nd half of the year expected to be above the prior-year's level
  • Management presents programme for strengthening the earnings power: multichannel strategy, expansion of the online business and focus on value for money are at the core of the strategic realignment
  • Media-Saturn targets online market leadership in Europe
  • Saturn.de to start operations in Germany in October 2011, MediaMarkt.de in January 2012
  • Online offensive to be accelerated with further acquisitions
  • METRO GROUP confirms earnings guidance for 2011

The Management of Media-Saturn-Holding presented a comprehensive package of measures aimed at strengthening the earnings power of this METRO GROUP sales division in the long term and at accelerating its online offensive. The strategic realignment comprises the integration of the store-based business of the Media Markt and Saturn brands with the respective online shops (multichannel strategy) as well as the fast expansion of the pure play online business of Redcoon. 

Growth is also to be accelerated by further acquisitions. Moreover, a stronger focus will again be placed on the overall price and cost leadership. With these measures, Media-Saturn is responding to increasingly weak earnings reported in the past quarters. According to preliminary and unaudited figures, the Q2 EBIT before special items at Media Markt and Saturn reported at € -44 million (Q2 2010: € 41 million) came in below capital market expectations. The strong drop in like-for-like sales, especially in Germany, as well as investments to sharpen the price profile materially contributed to this decline in earnings. Moreover, higher operating losses in France, start-up losses in China as well as higher expenses due to the further implementation of the multichannel strategy are weighing on earnings. 

"With the new corporate strategy we have now paved the way for returning to our former earnings power", said Horst Norberg, CEO of Media-Saturn-Holding GmbH. "In this context, we will strongly focus on price and cost leadership. They were the roots of our success and shall play the same role again in future". 

As the leading company in bricks and mortar consumer electronics retailing in Europe, Media-Saturn targets market leadership in online retail. "With an accelerated online strategy we want to enter a new growth phase", said Dr Rolf Hagemann, CFO and Vice Chairman of the Management Board of Media-Saturn-Holding GmbH. "Thanks to the close ties between our bricks and mortar business and our online activities we can offer our customers a value added right from the beginning which none of our pure online competitors can offer". In future, in addition to shopping and customer advice at the store, the customers of Media Markt and Saturn will in future have the opportunity to order goods online and then either have them sent to their homes or pick them up directly at the store. Complaints and returns can be handled via the stores or the online shops irrespective of where the goods were purchased. 

Besides the multichannel strategy of the established Media Markt and Saturn brands also the pure online business of Redcoon is to be expanded quickly and complemented by further acquisitions. 

Price and cost leadership

The customers are to perceive all brands of the Media-Saturn group as offering the best value for money whereby the traditional brands Media Markt and Saturn will offer a different services and value proposition than Redcoon. "With the new brand Redcoon, we now for the first time have the opportunity to address customers who have a completely different shopping pattern than our traditional Media Markt and Saturn customers. In analogy to the banking sector, Redcoon takes the role of the group's direct bank. In the multichannel business of Media Markt and Saturn, by contrast, we offer an extensive services portfolio; this notwithstanding, here, too, we will be able to offer all customers the best price for the respective product or service - irrespective of whether they shop online or at the store", explained Norberg. Media Markt, for example, defined a core assortment of around 2,500 articles that are offered at identical rock-bottom prices both, in the Media Markt online shop and also in the local Media Markt store. It is planned to launch the Media Markt online shop in Germany in January 2012. Saturn.de will already go live in October 2011. As a precondition for its service offering, the international group also plans to reduce its costs by way of even more efficient processes and by leveraging cost savings potentials. With these measures, the Media-Saturn group expects to increase its operating profit in the second half of the year as compared to the prior-year period. 

Earnings guidance of METRO GROUP reiterated

Olaf Koch, CFO of METRO GROUP, said on the occasion of the presentation of Media-Saturn's package of measures in Aschaffenburg: "Except for Media-Saturn, all sales divisions of METRO GROUP are within market expectations. Therefore, despite the drop in earnings at Media Markt and Saturn, METRO GROUP is confirming its earnings guidance for financial year 2011". The company expects to be able to achieve earnings before special items of around 10% (based on the 2010 EBIT before special items of € 2,415 million).