Europe's seventh largest DIY retailer has released FY results, with strong growth both abroad and at home. Despite a challenging domestic market, the German DIY group Hornbach has performed well in recent years, due to the retailer proactively targeting the right growth areas. Going forward, the retailer is well placed to reach its target of doubling turnover over the next decade.
In 2006/07, Hornbach's net sales grew by 7.1% to E2.4 billion, with strong like-for-like sales growth of 4.0% (2.3% in Germany and 7.2% abroad) against a backdrop of declining like-for-like sales in German DIY as a whole. Positive sales growth translated into improved profit margins at Hornbach with EBIT growth of 36.9% to E96 million.
Hornbach enjoys a unique position among European DIY retailers, as it has the highest average store size in the EU, with 80% of its stores over 10,000 square meters. It also gains significant advantages from the homogeneity of its store estate. Furthermore, the retailer has a presence in Austria, the Netherlands, Sweden, the Czech Republic, Luxembourg, Slovakia and Switzerland.
Domestically, Hornbach continues to outperform the tough German market. Undoubtedly, its stalwart performance is helped by its high sales densities and its large format size, which have been key in establishing strong range authority. Communicating its price credentials effectively has enabled the retailer to develop destination status across a range of DIY product categories in Germany.
Though the German market is still characterized by declining sales densities, with macroeconomic indicators improving and consumer confidence stronger than any time since the turn of the century, Hornbach is well positioned to capitalize on past initiatives targeting the right growth areas. These included an early focus on women DIYers, with training sessions in its centers dubbed 'women at work' and the marketing of green, energy efficient products. Hornbach also specialized early in insulation materials, the exchange of old boilers and the recycling of rainwater for gardening purposes and now reaps the rewards with strong sales uplifts in these categories.
We see domestic growth opportunities for Hornbach, despite the recent consolidation in the German DIY market. As the economy in Germany recovers, construction work is set to speed up, prompting an improvement in sales figures for DIY retailers. Moreover, much of Germany's housing stock will need renovation in the foreseeable future. In the East, many homes built prior to reunification need work and even those built since 1989 now need maintenance. Internationally, the retailer is on target as well, with plans to open 13 new stores in 2007, 11 of which will be based abroad.
Source: Verdict Research