Praktiker AG readjusts dual-brand strategy in Germany
Expansion offensive of the Max Bahr brand - “upgrade” for around 125 Praktiker stores
Kirkel/Hamburg – 29 May 2012. In the framework of Praktiker AG’s realignment of its dual-brand strategy, Max Bahr is to be expanded until the end of 2013 to a nation-wide main sales division with around 200 stores in the company’s home market and tap new customer segments in the DIY sector. Up to 100 locations will continue to operate under the Praktiker brand. Their well-known profile as a price and cost leader in the DIY sector is to be developed further. This concept, which is supported by the future investor Anchorage Capital Europe and also by existing key investors, forms the basis for the deliberations of the Annual General Meeting 2012 which is now finally scheduled to take place in Hamburg on 4 July.
“Max Bahr is a pillar of support for the whole Group that has consistently generated solid profits during the past few years and gained market share until now”, stressed Dr. Kay Hafner, the CEO of Praktiker AG since 13 May 2012. “This is why it stands to reason to further expand and strengthen this profitable brand in the framework of our business activities in Germany. This concept represents the best possible investment into the future for Praktiker Group, which thereby gains a new growth perspective with two strong brands”.
So far, Max Bahr has been operating 78 stores, mainly in northern Germany. Under the revised restructuring concept, the presence of the Hamburg-based company with its long tradition will be massively extended, especially in the economically strong regions in south western and southern Germany. “A tour de force that will turn Max Bahr from a regional supplier to one of the leading DIY chains in Germany”, says Hafner. To this effect, around 125 of the 234 Praktiker stores are to be converted to the more upmarket sister brand by the end of 2013. Mainly the larger locations qualify for such a conversion. The upgrade will involve investments in the low three-digit million euro range for material and personnel expenses.
Within the Group, Max Bahr will remain the quality brand that caters to discerning private customers and offers them advice and full service on the level of a specialist retailer. In addition, a stronger focus is to be placed on ambitioned do-it-yourselfers and professional craftsmen. To this end, the assortments will be extended especially in terms of quality.
In parallel, the Praktiker brand will be strategically realigned as a price and cost leader. This means that Praktiker will focus on its true brand core and position itself among the competition as a self-service DIY store offering best prices, lean assortments, well-structured product presentations and a service scope that has been reduced to the bare essentials. “With this dual strategy we will better leverage the potential of our portfolio and have the matching concept for each location. Praktiker remains the destination of choice for the price-sensitive customer. With the extension of the Max Bahr brand, by contrast, we are increasing our reach into the higher end – and in our view higher margin – customer group”, explained Praktiker’s CEO Hafner.
Consolidation of the Praktiker brand in Germany continues to involve the disposal of permanent loss makers in the store portfolio. Contrary to former plans, however, no store closures ahead of schedule are planned. Instead, unprofitable locations without development perspectives will now be abandoned at the end of their respective lease term, just like in the past. This means that distinctly fewer stores than originally planned will be closed in the next few years. Accordingly, also the downsizing at the stores will be lower.
This approach – especially the waiver of store closures before expiry of the lease term – reduces the immediate need for cash and thus the entire financing volume of the restructuring programme to around 235 million euros.
The plan to realign the German business operations of Praktiker AG through a Group headquarters in Hamburg will basically remain unchanged. Unlike former plans, however, a service center with about 180 employees will be retained at the company’s present headquarters in Kirkel, Saarland. This will mainly relate to internal services such as IT, accounting and payroll accounting which will not be outsourced as planned, but remain part of the Group.
The Annual General Meeting 2012 scheduled to take place in Hamburg on 4 July is to also resolve about two key financing elements for this concept: a capital increase with subscription rights that is to generate fresh capital in the amount of 60 million euros and the authorisation to issue a bond with warrant.