GuruFocus -
- Sales: EUR3.46 billion, stable compared to last year's H1.
- Gross Margin: 34.9%, an increase of 1.6 percentage points from the prior year.
- Adjusted EBIT: EUR265 million, significantly stronger than last year's H1.
- Earnings Per Share (EPS): EUR10.78, approximately 38% above the prior year period.
- CapEx: Expected total of EUR160 million to EUR180 million for the fiscal year.
- Free Cash Flow: EUR112 million in the first six months of 2024/25.
- Net Sales Growth (HORNBACH Baumarkt): 0.7% compared to the prior year period.
- Customer Frequency: 1.6% increase in footfall.
- Net Sales (HORNBACH Baustoff Union): Decreased by 7.3%.
- Like-for-Like Sales Growth: 0.7% for the first half year.
- Ecommerce Sales (HORNBACH Baumarkt): 12.5% of total sales in the first six months of 2024/25.
- Adjusted EBIT Margin: 7.7%, up from 6.4% in the prior year period.
- Equity Ratio: 46.5%.
- Debt Ratio: Improved to 2.2 from 2.5 as of February '29.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- HORNBACH Holding AG and Co KGaA (XTER:HBH) delivered a solid performance in the first six months of the fiscal year, with stable sales at EUR3.46 billion and increased market shares in several countries.
- Gross margin increased to 34.9%, a rise of 1.6 percentage points, reflecting normalized core commodity prices and a healthier product mix.
- Adjusted EBIT came in at EUR265 million, significantly stronger than the previous year's first half.
- Earnings per share stood at EUR10.78, approximately 38% above the prior year period.
- Customer satisfaction remains high, with top rankings in customer service surveys in Germany and the Netherlands.
- Macroeconomic uncertainty and inflation have pressured consumer demand, resulting in weaker spending across home improvement projects.
- Net sales at the subgroup HORNBACH Baustoff Union decreased by 7.3%, reflecting ongoing weakness in the German construction sector.
- Average ticket sizes were slightly down year-on-year, indicating continued softness in large projects and discretionary spending.
- The company faces a subdued consumer sentiment, leading to an overall softness in spending, particularly for larger projects.
- Despite the positive performance, the forecast for the full year remains cautious, with expectations of sales and adjusted EBIT only slightly above the previous year.
A: The gross margin is driven by both product mix and normalized core commodity prices. The product mix this year was as expected, with a strong gardening season in Q1. Last years spring was not favorable, which affected the product mix. Additionally, we managed to normalize supply prices after significant increases in '21 and '22. For current trading, we see a continuation of the trends from Q2, with good footfall but smaller shopping carts as consumers hold back on larger projects.
Q: You plan to open four new stores in the next business year. How high is the sales contribution of an individual store, and when does a new store reach breakeven?
A: Generally, new stores take about 3 to 4 years to fully mature and reach their expected performance levels. While we do not disclose specific sales contributions per store, these new stores are large-format, 10,000 square meters-plus, and add significant potential to our overall sales.
Q: Can you provide an update on BODENHAUS and its development?
A: BODENHAUS, which opened in 2021, has a mixed performance. The online business is extremely successful, but footfall in physical stores is not yet at the desired level. We are considering integrating it more closely with the HORNBACH brand to leverage brand recognition.
Q: Given that revenue was flat in the first half, how do you plan to achieve your full-year outlook of 2% to 5% growth?
A: We are confident in our guidance due to the weak base effect from last years Q3, which was not strong. We expect better performance in the upcoming months, driven by improved consumer sentiment and strategic initiatives.
Q: In the past half, you realized a tax rate of 25%. Can we assume this 25% as a run rate for the full year, or will it go up to 30%?
A: The 25% tax rate is expected to remain stable for the full year, considering the current pattern of non-deductible items and other movements.
Q: What are the main factors contributing to the increase in adjusted EBIT by 19.9% compared to the same period last year?
A: The increase in adjusted EBIT is primarily due to successful management of inventories, costs, and margins. Our gross margin improved by 1.6 percentage points, and we achieved cost efficiencies and reduced depreciation, which offset higher personnel costs.
Q: Can you elaborate on the sustainability initiatives mentioned, such as reusable plant trays?
A: We are introducing reusable plant trays in partnership with other DIY and gardening retailers in Europe. These trays have the potential to save approximately 40,000 tons of plastic per year and will be rolled out in all HORNBACH stores over the next few months.
Q: How is the performance of HORNBACH Baumarkt and HORNBACH Baustoff Union in the first six months?
A: HORNBACH Baumarkt saw a sales growth of 0.7% with a 1.6% increase in footfall. However, HORNBACH Baustoff Union experienced a 7.3% decrease in sales, reflecting ongoing weakness in the German construction sector, especially in new construction.
Q: What are the long-term opportunities HORNBACH is pursuing despite ongoing macroeconomic challenges?
A: We are focusing on multifunctional living spaces, energy efficiencies through renovation, adapting homes for an aging society, and supporting DIY and DIFM activities. These areas present significant medium- and long-term growth opportunities.
Q: How is HORNBACHs balance sheet positioned to support future growth?
A: Our balance sheet remains robust with an equity ratio of 46.5% and low net financial debt. This strong financial position allows us to pursue growth opportunities and maintain resilience in challenging environments.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.