HORNBACH Holding AG & Co KgaA Q1 2025 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Thomas Maul - DZ Bank AG - Analyst : Yes, thank you. Good morning. Thanks for taking my questions. I've got two. The first one. Can you please shed some more light on your online business? I understand that sales are declining. That's okay. My question is are your sales actually declining faster or slower than online sales of your peers. So what about market share in the online business? And my second question, can you please elaborate a bit more on sequential development of footfall and shopping cut-size in June compared to Q1 of the current fiscal year. Thank you. Karin Dohm - HORNBACH Holding AG & Co KgaA - Chief Financial Officer, Member of the Management Board of Hornbach Management AG Thomas, thanks for your questions. I'm happy to talk a bit more on the e-commerce. Unfortunately, for any acoustic reason? I didn't get your second question. Could you just repeat it, please?

Question: Thomas Maul - DZ Bank AG - Analyst : Okay. Thank you. Karin Dohm - HORNBACH Holding AG & Co KgaA - Chief Financial Officer, Member of the Management Board of Hornbach Management AG Second, to your second question on the footfall, and I understood it a bit in the sense of what is also current trading looking like. I mean, obviously, as I alluded to earlier, we had in a lot of our countries. We had relatively often rainy weather towards the end of May and now in the first weeks of June. Many people on the call maybe experience that literally themselves. But so that is, of course, something when we always see a little bit reduce of our activities. On that means not so much footfall, a little bit less footfall there than in March and April and a little bit smaller baskets here and there. Nothing dramatic, but just as a usual weather impact that you have seen. As we currently have more sun across Europe in many areas, we also have, of course, the development into the other direction. The other thing that we mentioned, where we always need to see how things play out is. Of course, we have a number of exciting sports events this summer in Europe. We have obviously the football or European Championship just going on. We have the Olympics coming up in July. So it might also be something where people do a little bit less to a little bit more in the garden, depends obviously, in combination once again with the weather. So there are a little bit of smaller question marks out there, and that's the reason why we said we had a very good start into the year. We need to see how Q2 comes along, but nothing to worry. But I think it's just that's why we said we would like to keep the guidance currently where it is.

Question: Thilo Kleibauer - Warburg Research HmbH - Analyst : Yes, hi, good morning. Some I have two questions, if I may. The first one is on the gross margin development and the level of studies at 35% or 35.4% and Q1 level. We could expect for the coming quarters? Or is there kind of special positive effect from seasonal product mix and then Q1, because then in Q2 and also in Q3, but the basis for the gross margin is also pretty low. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 25, 2024 / 6:30AM, HBH.DE - Q1 2025 HORNBACH Holding AG & Co KgaA Earnings Call And my second question is regarding the development of the number of employees, it was it was up by more than 4% since the start of the fiscal year. So the increase was even stronger than the top line increase. So maybe you can you comment on this if there's any specific reason behind this development. Thank you. Karin Dohm - HORNBACH Holding AG & Co KgaA - Chief Financial Officer, Member of the Management Board of Hornbach Management AG Yes, thanks for your questions. Number one, on the gross margin, two thoughts there. A, as I talked about in some of the previous calls, we were really keen to make sure we get some of those parts that we lost in the gross margin in earlier quarters. Specifically, I would claim towards the end of 2022, 2023 and the first half of 2023, 2024. So if you want to say 12 months ago and a little bit more due to high energy prices before some force majeure events with some suppliers, things like that commodity prices. So we worked hard on making sure we get that back, which we successfully managed to do, and that was something which came through already in winter, starting towards the end of our Q3 and definitely in Q4. Now if you look back into those figures, you can see that already there. So it is a continuation on that is something which is really I think a good sign of stabilization. Nevertheless, of course, as you know, we also have not only our supply prices, our logistic expenses and other components where we can work hard on but we also have, of cost sales prices and we want to make sure that we are a reliable partner for our customers. So that means we are also there are everyday. Low price strategy, as I mentioned, is still one of our core principles. So we need to make sure we really there a reliable partner. So that means there might be the one or the other sales price decrease, which then could make the gross margin ultimately a bit lower. We're not expecting any fundamental changes there currently, but I'm just -- we are trying to shed a light there. It might be that goes a little bit more down. But actually, I said currently, we look for stabilization on that side. Employees, yes, typical Q1 phenomenon I would say, that is the time of hiring in our industry. Independent, whether you talk on the store side, whether you talk about some of our back offices. So underneath here in those figures, there are, for example, a couple of IT challenges, which we managed to get onboard in Q1. So we were lucky and some of that will so to say, the offset over the course of the other quarters. And therefore, nothing that is a fundamental change of direction of travel. It's just the, I would claim, coincidence that, that fell into Q1.

Question: Benjamin Thielmann - Berenberg Bank - Analyst : Hey, good morning, everyone. This is Benjamin from Berenberg. Two questions from my side, if I may. First one on free cash flow run rate on for Q2 out of Q4. Is there anything you could roughly guide us on. I remember in the full-year call, you mentioned free cash flow roughly in line with last year levels. Is that's still up to date? This is question number one. Question number two is then on basically market shares. I see you guys keep winning market shares, particularly in Czech Republic, Netherlands is looking quite fine. Do you consider this market share gain as sustainable? I mean, they keep growing since three years. And the question is like, how much of that is spillover from post COVID? And do you think that those customers they remain a customer over the next couple of years? Like do you track maybe, okay, how many times do you maybe just send professional customers more on the customer purchasing patterns in, for example, in Netherlands, have they changed significantly in terms of the frequency of customers visiting the stores because so far market share gains are against actually quite nicely. And the question and say, okay, how much of these market share gains, it is sustainable over the next two to three years? That's it from my side. Thank you. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. JUNE 25, 2024 / 6:30AM, HBH.DE - Q1 2025 HORNBACH Holding AG & Co KgaA Earnings Call Karin Dohm - HORNBACH Holding AG & Co KgaA - Chief Financial Officer, Member of the Management Board of Hornbach Management AG Once again, thanks for the questions. On the cash flow side, yes, absolutely. Obviously, it's good to come in with a good development on the cash flow. And we see that literally as a kind of mirror on all of our activities in the operational side, you know, in our business, the relation between sales and cash is relatively one to one on. We have, of course, also services on offer where we have the one or the other later payment for our customers. If they want to we support them with credit facilities or other services. Nevertheless, the vast majority is still as they -- as we have to say, there's also the cash coming at the same time. So good business figures mean a good income in cash. And we are really keen to make sure we use our net working capital in a way it's meant to and we have our eyes fixed on that. So that was not only a one-off exercise in the past. This is an ongoing monitoring, which is high on management agenda to make sure we use so to say the inherent cash in our organization to support our cash flow. Therefore, I definitely think that we will have here a good stability not only now in this quarter, but over the course of the year and over the course of the following years also, we have put an emphasis on making sure we use our cash in times of high interest rate environments, even though those are coming down currently, as we know slightly. But we will have elevated levels, of course in this decade. So we are really keen to make sure that we have classical debt only utilized in those instances where we want to use it for investments or other things. But the ongoing activities, capture our CapEx and other spending nicely and generously to then use cash beyond that for extra activities for shareholder return in form of dividend and other things. So that is absolutely meant to go on like this, if I want to say so. And then to your other question with the market shares, it is really -- it's not a spill over or something of a pandemic times in Czechia or in the Netherlands. It is the fact that we're really they're extremely strong. We have there a different competitive footprint. We are ultimately market leaders, and we have very successfully expanded that position in those countries. I mean, we're having a number of countries where we can grow only by taking away market share from others. That's known to everybody, for example, Germany, we have a very dense competition. Of course, we also aim and work on to make sure we gain their additional percentage points. Nevertheless, we are really confident and feel very happy in a number of the other countries where we are well established, no sign whatsoever that might diminish. So absolutely very happy with where we stand. And I said no, no clouds on the horizon.