GuruFocus -
- Revenue: EUR4.95 billion, up 0.5% for the first nine months.
- Gross Margin: Increased by 1.3 percentage points.
- Adjusted EBIT: EUR300 million, up 11.4% from the previous year.
- Like-for-Like Sales Growth: Up 1.1% for the first nine months.
- E-commerce Sales Share: Stable at 12.4% of HORNBACH Baumarkt sales.
- Cash Flow from Operating Activities: Increased by 20.1%.
- Equity Ratio: 46.8%.
- Net Financial Debt Ratio: Improved to 2.3% from 2.5%.
- CapEx Guidance: Expected full-year CapEx between EUR160 million and EUR180 million.
- Store Expansion: Four new stores planned for next fiscal year.
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) achieved a sales growth of 0.5% to EUR4.95 billion in the first nine months of the fiscal year, despite a challenging macroeconomic environment.
- The company's market share increased in most countries, with a notable rise in customer frequency by 1.6%.
- Gross margin improved by 1.3 percentage points, contributing to a significant increase in adjusted EBIT to EUR300 million.
- E-commerce sales remained stable at 12.4% of total sales, with growth driven by Click & Collect and direct delivery.
- The company maintained a strong balance sheet with an equity ratio of 46.8% and reduced net financial debt, resulting in an improved debt ratio of 2.3%.
- Sales growth was slightly below expectations, with a like-for-like sales increase of only 1.1% in Q3, which was considered softer than anticipated.
- Switzerland was the only region that did not achieve positive sales growth on a like-for-like basis.
- The company faced increased costs due to salary raises, which impacted the Q3 cost base and contributed to a decline in EBIT for the quarter.
- The guidance for full-year revenue was adjusted to stable, reflecting a more cautious outlook despite positive sales developments in Q3.
- The company is navigating a market characterized by soft consumer sentiment and reluctant spending behavior, particularly for larger projects.
A: Current trading is strong with increased customer frequency and basket size. We see momentum in midsized projects, indicating a positive trend. We expect the gross margin to remain stable and positive, although the year-over-year difference may shrink as last year's improvements are factored in.
Q: EBIT declined in Q3 due to salary increases. Can you provide more details? Will EBIT decline in Q4 as well? Also, how significant is Black Week for HORNBACH?
A: The EBIT decline in Q3 was due to a 10% salary increase in Germany, impacting our cost base. We are gearing up for new store openings, which also affects costs. We expect Q4 to be strong and maintain our full-year guidance. Black Week is not significant for us due to our everyday low-price strategy.
Q: Can you comment on pricing and the like-for-like growth pattern in Baumarkt? Also, what is the EUR6.6 million in the investing cash flow?
A: We are in a deflationary environment with prices gradually decreasing. Despite this, we have increased sales and volume, which is positive. The EUR6.6 million in investing cash flow relates to solar panel investments and is booked through the balance sheet.
Q: Can you provide more details on the new store openings in Romania, Germany, and Austria?
A: Nuremberg will reopen in February, followed by a new store in Germany in March, one in Austria around June or July, and two in Romania in September or October. Nuremberg is a reopening with a larger space and more employees.
Q: How do you expect the lower interest rate environment in 2025 to affect your business? Also, what is the outlook for the secondary market and large DIY projects in the DACH region?
A: Lower interest rates should encourage larger projects, as people are more willing to spend. We expect increased activity in the secondary market, particularly in Germany, but this will likely pick up in the second half of 2025. Romania shows strong growth potential with good EBIT margins.
Q: Why was the revenue guidance adjusted to stable despite positive sales development in Q3?
A: The adjustment reflects a later-than-expected recovery in consumer sentiment. Q4 is typically a quieter quarter, so while we see positive momentum, the overall impact on revenue is limited compared to more active quarters.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.