Annual General Meeting of Praktiker Bau- und Heimwerkermärkte Holding AG
Modified marketing strategy showing success in domestic business

Converted Easy-to-Shop stores to be optimized as from Q3 2008

Saarbrücken – May 30, 2008. After a slow start into the year 2008, business of the Praktiker Group in Germany has picked up appreciably in the last two months. “In terms of sales but even more so in terms of the gross profit on sales we are fully on target“, said Wolfgang Werner, Chairman and CEO of Praktiker Bau- und Heimwerkermärkte Holding AG, at this year’s Annual General Meeting held in Saarbrücken on Friday. “We started to catch up, which should bring us additional market share in the second quarter“. This notwithstanding Praktiker still anticipates that domestic like-for-like sales will be down from the year-earlier level. However, this trend would be more than compensated for by the dynamic growth of the company’s international segment so that the consolidated sales for 2008 are expected to “increase by a medium single-digit rate“.

Praktiker domestic sales had already been up from the prior year in April in spite of the poor weather conditions and the elevated basis of comparison. Werner sees this as a sign that “the new marketing mix of the Praktiker brand is catching on“. What is new about this mix is that the number and intervals of the 20 percent discount campaigns will be distinctly reduced. Instead, the company is set to invest more strongly into permanent price reductions that will be introduced in several “waves” throughout the year 2008. Werner: “With this measure we hope that our customers will perceive us even more than before as the price leader“. This is of particular significance, especially with a view to the massively rising cost of living. “Our core message is: we, too, are working on the price spiral – but in the opposite direction“. This is an important psychological message against inflation fears among the population“. 

The first measure in the framework of the recalibration of the marketing strategy of Praktiker – the reduction in the number of discount campaigns – resulted in an improved gross margin on sales but affected the sales volume. The second measure, explained Werner, is now showing its first effects in the current quarter: those articles whose prices have been permanently reduced and which are all in the particular focus of customers are purchased more frequently and also trigger additional incentives to buy. At the same time, the less frequent 20 percent discount campaigns have distinctly regained attraction. And sales also improved in the periods between such campaigns. “It shows that it pays off to frequently revise your own position, to fine-tune tried and tested instruments and to introduce new ones” said Werner. 

The same also applies for the Easy-to-Shop concept on which Praktiker continues to place high expectations. After around one and a half years during which a total of 77 stores were converted the time had come to draw an interim balance. To this effect the rollout plan was temporarily suspended, as reported. At the Annual General Meeting CEO Werner now announced that the company will optimize those stores that have already been converted starting from the third quarter. To this end all experiences made so far will be taken into consideration. In future, the concept is to be used more flexibly and a stronger focus is to be placed on regional market demand. ”We will retain those elements of the concept that have proven their excellence and further strengthen those elements that have so far shown some weaknesses“, explained Werner. He went on saying that he continued to believe that Easy-to-Shop was successful and that the conversion of the German Praktiker stores would be completed in the medium term.

Werner stressed that there is no reason to call into question the Easy-to-Shop concept as a whole. After adaptation of the concept “we will have no further reason to lower our expectations regarding its profitability”. Certainly the adjustments would have to stand the test in the hard reality of daily business. He remained convinced that “we will succeed“.

At the 3rd Annual General Meeting of the Praktiker Group, CEO Werner drew a positive balance of the fiscal year under review where earnings and sales were in creased, massive investments into the future were made and at the same time “a high level of financial flexibility” was maintained. Praktiker is thus optimally positioned for a dynamic expansion abroad and for benefiting from a further consolidation in the DIY sector in Germany. “We are closely watching these developments,” stressed Werner. “If the opportunity arises we can take action because we command both, the financial resources and the know-how for further takeovers”. 

At the close, the CEO confirmed the forecast for the current business year presented on the occasion of the Annual Press Conference 2008. Werner: “Sales of the Praktiker Group should increase by a medium single-digit rate. To further drive our expansion abroad, we plan cash-capex of more than 150 million euros. And we plan to further increase operating earnings: We anticipate EBITA to come in at around 135 to140 million euros“.