metro group capital markets day 2016 december 20 2016€¦ · 20.12.2016 · 2 deborah weinswig,...
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1 DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.
December20,2016
Metro Group Demerger: Capital Markets Day 2016
1) MetroGroupwilldemergeintotwocompaniesinmid-2017:Metro,afoodretailerandwholesaler,andCeconomy,aconsumerelectronicsretailerthatoperatesmainlyundertheMediaMarktandSaturnbanners.
2) PresentationsfromthewholesaleandfoodretaildivisionemphasizedthatMetroispredominantlyawholesaler;thatMetroCash&Carrystoresarebeingtailoredtodifferentdemands;andthatitsretailstoresarebeingmademoreinspirationalplacestoshop.
3) PresentationsfromtheelectronicsdivisionnotedCeconomy’sscale;thedynamismoftheEuropeanconsumerelectronicsmarket;howCeconomyhasbeentransformedinrecentyears;andopportunitiesforgrowth.
METROGROUPSETTODEMERGEOnDecember15,Germany’sMetroGroupunveileditspost-demergerplans,atitsCapitalMarketsDayinDüsseldorf.Inmid-2017,thecompanywillsplitintothefollowing:
• Metro:CurrentlytheWholesaleandFoodSpecialistCompany(WFS),whichconsistsofMetroCash&CarryandRealhypermarkets.
• Ceconomy:Theconsumerelectronicscompany,whichconsistslargelyofMediaSaturn.
Separationwillbeona1:1basis,witheachMetroGroupshareholderreceivingoneshareineachofMetroandCeconomy.
Inthefollowingsections,weoutlinekeytakeawaysfromtheCapitalMarketsDay.
METRO:FOODRETAILANDWHOLESALEHereareourtopthreethemesfromMetroGroup’spresentationonitsWFSdivision:
1) WFSisPredominantlyaWholesaleCompanySome80%ofWFSrevenuesandagreatershareofprofitscomefromwholesaling.CEOOlafKochwasatpainstoemphasizetheextentofitswholesaling,andonereasonforthiswasthediscountheperceivesisbeingappliedtothecompany’s
2 DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.
December20,2016
shares.MetroGrouphastraditionallysufferedfroma“conglomeratediscount”tothesumofitsparts,anditsWFSgetslinkedtoafood-retailvaluationmultiplebyanalysts,Kochsaid.Thereisa“significantdifference”inmultiplesforwholesalers,soMetroGroup’svaluationstandstogainfrombeingviewedasawholesalefirm.
2) WholesaleOpportunitiesareDifferentbyMarketMetroCash&Carryisrecognizingthatitswholesalecustomertypesdifferbymarket,andismovingfromuniformstoresfollowingcentralizedtemplatesandguidancetomoretailored,focusedstores.Theaimofthisistodrivecomparable-salesgrowththroughrelevancy.
Inimplementingthis,thecompanyisfocusingontwotargetgroups:hotel,restaurantsandcafés(HoReCa),andneighborhoodretailstores(“momandpop”stores).
Source:MetroGroup
HoReCaoffersveryattractivemargins,thecompanysaid,whilelower-marginretailcustomerswillremainanimportantelementofthewiderretailsectorand,inEasternEuropeinparticular,areasignificanttargetmarket.Smallcompaniesingeneral,suchasofficesandinstitutions,compriseathirdtargetsegment,buttheyarenotakeytarget,andMetrowillnotadjustitsofferingtocaterparticularlytothesecustomers.
Metroisformattingitsstorestocatertothedominantcustomergroupineachmarket:inItaly,forinstance,HoReCacustomersareatthecenterofMetro’soffering,whileinRomania,smallretailcustomersareitsprincipalcustomers.Differentiatingbyregionisdesignedtounderpincomparablesalesgrowth,whichisthecentralplankofMetro’sgrowthstrategy.
AttheWFSgrouplevel,thecompanyistargetingtotalsalesgrowthof3%ormoreinthemediumterm.Marginresilienceandimprovedcashgenerationarefurtherfinancialprioritiesforthegroup.
3 DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.
December20,2016
3) WideChoiceisNotSufficienttoSatisfyRetailCustomers“Everythingunderoneroofisnotenough,”declaredKoch;forgroceryshoppersatthecompany’sretailhypermarkets,theshoppingexperienceneedstobe“inspirational.”Tothisend,ReallaunchedanewconceptformatatKrefeldinNovember2016,whichHochdescribedasa“sensation,”andthecompanyupdatedonearlytrading.Thefirstthreeweeksshowed“promisingsignsofsuccess,”withfeedback“soextreme,sopositive”thatWFShasconvictionthatthismodelisthewayforward.
WFSwillconvertselected“superior”Reallocationstothisconcept,aswellasapplying“relevantmodules”fromthemodeltothebulkofitsestate,andimplementonlyselectedelementstothetail-endofitsestate.
CECONOMY:CONSUMERELECTRONICSCeconomyisa“€22billionstartupcompany”witha“long-lastinghistory,”notedCFOMarkFrese.ThecompanyoperatesMediaMarktandSaturnstoresaswellaspure-playRedcoon.Aswediscussbelow,managementnotedthatthecompanyisthebiggestconsumerelectronicsretailerinEurope,operatesinadynamicmarket,hastransformeditsbusinessinrecentyearsandhasopportunitiestogrowfurther.
1) CeconomyisNumber1inConsumerElectronicsinEuropeWith€22billioninsales,CeconomyisthebiggestconsumerelectronicsretailerinEurope,atarounddoublethesizeofnearestrival,DixonsCarphone.Itisthemarketleaderinninecountries.
Source:MetroGroup
4 DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.
December20,2016
Source:MetroGroup
Thisscalemeansitbecomes“almostnecessary”forsupplierstopartnerwithCeconomy,notedCEOPieterHaas.Indeed,majorsuppliersaremoredependentonCeconomythanCeconomyisonmajorsuppliers,Haasargued.
Thebreadthofproductrange,meansCeconomyiswell-preparedfortheintegrationoftechnologyandtheInternetofThings,Haassaid.Single-categoryretailerswouldfinditdifficulttocaterforthe“connectedworld.”
Source:MetroGroup
Meanwhile,animprovedserviceofferingisbolsteringMedia-Saturn’sproposition.Servicesspanningcredit,set-up,delivery,digitalcontent,repairsandwarrantiesbroughtin€1.3billionofrevenueforthegroupinfiscal2016.
5 DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.
December20,2016
2) TheEuropeanConsumerElectronicsMarketisDynamicTheEuropeanconsumerelectronicsmarketisworth€300billion,andCeconomy’sgeographicalpresencemeansitcovers70%ofthistotal.
DynamicsintheEuropeanelectronicsmarketthatwerenotedbythecompanyinclude:
• Growthinsalesofappliancesandtelecomshavedrivenexpansioninthemarketoverthefouryearsthrough2016.Thetotalmarketisgrowingatamodest1%–2%peryear.
• InthecountrieswhereCeconomyoperates,some17.3%ofconsumerelectronicssaleswereonlinein2015,andthecompanyexpectsthistogrowtoa22.3%sharein2020.
• InthemarketswhereCeconomyispresent,multichannelretailersaredrivingonlinegrowth,ratherthanpureplays.
• Thereremainsmuchscopeforconsolidation,withmanycountriesseeingthefivebiggestconsumerelectronicsretailerscapturinglessthan50%ofthemarket.
• Itisexpensivetoconsolidatetheconsumerelectronicsmarket:retailersmustinvestinomnichannelcapabilities,ITandpricinganddataabilities.
3) CeconomyhasbeenTransformedCEOPieterHaasarguedthatCeconomyisfoundedonastrongbase,becausetheconsumerelectronicsbusinesshasspentthepastfewyearsshapingup,slimmingdownandpushingonline.
• Shapingup:Thecompanyhasfocusedoncorebanners,cuttingtheRedcoonandSaturnnameinsomemarketstofocusonthecoreMediaMarktbanner.Ithasalsoconstantlyinvestedinupgradingandremodelingitsstores.
• Slimmingdown:Ithas“cleanedup”itsstoreportfolio,exitinganumberofmarketssuchasFranceandChina,makingsomestoreclosuresand“rightsizing”someotherstorestoreducesalesarea.
Source:MetroGroup
• HaasnotedthatMediaSaturn“inventedsupermarketsforelectronicsbutdigitalizationtookusbysurprise.”Whilethecompanywas“latetodigitalization,”itwasnotaslateassomecompanies,andithasmaderapidprogresssincefirstlaunchinge-commercein2010.Some8.9%ofgroupsaleswereonlineinfiscal2016.Aswediscussinthenextsection,pushingupthisproportionisoneofthecompany’sobjectivestogrowsalesinthecomingperiod.
6 DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.
December20,2016
Source:MetroGroup
4) OpportunitiesforGrowthCeconomymayalreadybeEurope’sbiggestconsumerelectronicsretailer,butHaasnotedthatpocketsofgrowthopportunitiesremain.Amongtheleversthatthecompanycanpulltogrowthetopandbottomlinesare:
• Growingonlinesalesinitskeymarkets:online’sshareofsalesatCeconomylagsitsshareofthetotalconsumerelectronicsmarketinthecompany’smajormarkets.
• Openingnewstores,acrossavarietyofformatsincludingsmallerstores.
• Expandingitsservicesandsolutionsofferingtoboostsalesandmargins.Thecompanyisaimingfor10%oftotalrevenuestocomefromservicesinthemid-term.
• Utilizingdatatooffergreaterpersonalizationofcommunicationsandofferstocustomers.
Thecompanyhasamid-termambitiontogrowsalesataCAGRof3%ormore,inthecontextof“moderate”annualgrowthof1%–2%intheoverallconsumerelectronicsmarket.Itistargetinga5%EBITDAmargin,upfromthe3.6%marginachievedinfiscal2016.
7 DeborahWeinswig,ManagingDirector,FungGlobalRetail&[email protected]:917.655.6790HK:852.6119.1779CN:86.186.1420.3016Copyright©2016TheFungGroup.Allrightsreserved.
December20,2016
DeborahWeinswig,CPAManagingDirectorFungGlobalRetail&TechnologyNewYork:917.655.6790HongKong:852.6119.1779China:86.186.1420.3016deborahweinswig@fung1937.comJohnMercerSeniorAnalyst
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