Douglas Group, Europe's leading lifestyle brands retailer, has reported a 5.6% increase in sales for Q1 of its 2007/08 financial year. From October 1, 2007 to December 31, 2007, sales amounted to E1,078.1 million, a like-for-like increase of 1.6%. While Douglas Group's strongest growth came from its international perfumery divisions, future growth lies in further developing its foreign operations.
The group's sales in Germany rose 1.4% during the period, but on a like-for-like basis there was a marginal decline of 0.8%. However, this should not be a major concern for the group, as sales in 2006 were boosted by the imminent VAT tax increase, which rose from 16.0% to 19.0% in January 2007. This means that the base for like-for-like comparisons was artificially inflated in 2006. As a result, Douglas's slight decline in like-for-like sales in Germany merely highlights the fact that the adverse effects of the VAT increase have not been as significant for the group as they have been for some other retailers in different sectors such as clothing.
The group's strongest performers are its international divisions, which Datamonitor expects to offer Douglas Group the most potential in the future, with particularly strong growth opportunities in Eastern Europe, Greece and the Arabian Peninsula. During Q1, sales at the group's international divisions increased by 15.0%, amounting to E367.3 million, a significant increase when compared with the group's domestic operations.
The 650 Douglas perfumeries located outside of Germany performed particularly well, with turnover increasing by 15.2% to E307.1 million. This can primarily be attributed to sales gains from 31 new stores that opened in Poland, Spain, Italy, Russia and the Netherlands. The group's foreign perfumeries now make up almost 50% of the group's total perfumery sales.
Looking ahead, the group is set to accelerate its international expansion program, focusing largely on Eastern and Southern Europe. The group's perfume and book divisions will see new store openings in Eastern Europe, including Romania and Bulgaria. There are also plans to further consolidate the group's market-leading jewelry division in Germany, with seven new store openings planned during the 2007 to 2008 financial year, as well as redesigning and modernizing its current store portfolio.
Datamonitor believes that Douglas Group's satisfactory results for Q1 put it in a good position to achieve a solid performance in its 2007/08 financial year; despite the increasingly temperamental retail trading environment in the EU against a backdrop of rising energy prices and utility bills; concern about the credit crunch, and fears of a looming recession in the US.
The group's focus on developing its operations in key growth markets is proving to be a profitable venture, as is evident from the sales gains at its foreign perfumeries. Moreover, there is a significant opportunity for the group to develop its other brands internationally. By further extending its foreign expansion program, future growth prospects will materialize as the group unveils its diverse portfolio into the international market.
Source: Verdict Research