HORNBACH Holding AG & Co KgaA Q2 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, good morning, Thomas from DZ. Thanks for taking my questions. I've got two. The first one would be, you highlighted in the call that you expect gross margin to remain on an elevated level. Maybe you can elaborate a bit on what makes you so confident here. And yeah, what are actually the main drivers for gross margin? Is it mainly lower raw material prices or is it product mix? And second question, maybe you can also comment a bit on current trading with regard to footfall and shopping cart size. Thank you. Karin Dohm - HORNBACH Holding AG & Co KgaA - Chief Financial Officer, Member of the Management Board of Hornbach Management AG Yeah, thanks for your questions, Thomas. On the gross margin. So you asked about what drove it? It's actually really both. It is the product mix because we had -- I would claim this year a very normal product mix exactly as we want to and aspire to in the spring and summertime with a strong gardening season in our first quarter and the usual mixture of products that you expect and in summertime. So the change is that, that wasn't happening last year. So that is part of the base effect I would claim. As you might recall, Spring 2023 was really not as we all wished for with months literally of cold and rainy weather. So that's the change in composition of product and product mixes. And the other thing is, of course, we had always said after commodity price increases both in '21 and '22 and a lot of force measure events also on our supplier side. When you remember, the broken logistic chains back in '21. The energy price rises end of '21, but of course, especially in '22 That led to what quite strong supply price increases. And we managed to make sure that we get back into normal areas last year in '23 in combined actions with our suppliers. And that is of course, now coming through and that is what you see also in the gross margin. So adding that all up, it's really literally both. With regard to the next month, obviously, it is our aim to keep that level. We need to see how things evolve. As, you know, we're very committed to our everyday low-price strategy. So in case that we have some competitor who is maybe under pressure that we don't are or that we are not, and then we see a couple of moments there that could have an effect, specifically, obviously on sales price and thus on gross margin. But as said, obviously, it's our aim to, to stay stable. And then we need to see how things evolve over the next month. You also asked for current trading and footfall. I think currently we see more or less, I would say, what we saw also in the last weeks of Q2. Of course, Europe is back from, from holiday. We all have the -- everybody's back to work school, whatever. So there is a bit more momentum in general. But this overarching softness as we call it, the fact that people are a bit holding back on going into larger projects and the attached spending that is going on currently. And that is I would say very much a prolongation of what we saw in August. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 25, 2024 / 6:30AM, HBH.DE - Q2 2025 HORNBACH Holding AG & Co KgaA Earnings Call

Question: Ralf Marinoni - Quirin Privatbank AG - Analyst : Yes, Ralf Marinoni from Quirin Privatbank. Good morning, everybody. Two questions from my side. First of all, you plan to open for new stores in the next business year. So general question, how high is the sales contribution of individual store? Is it about EUR30 million per year on an annual basis on average? And second question, when does the new store reach breakeven? Karin Dohm - HORNBACH Holding AG & Co KgaA - Chief Financial Officer, Member of the Management Board of Hornbach Management AG Yeah, thanks for your question, Ralf. It's exactly as you, as you said. Though we think that there should be for coming through next year. Allow me a general remark on opening of new stores sometimes we have with certain -- these things are always huge building site. So there could always be that the one or the other is just coming through a month later for no specific reason as you know from any big building activity. So, I's say, for us the current expectation, that would be two in Romania, one in Austria, and one additional one beyond the reopening in Nuremberg that we alluded to several times. One additional one next year in Germany. Usually those stores whenever we open one really in a new location where we were not before, they take a couple, a small couple, but nevertheless, a couple of years to really be full up and running on a very rough, so to say big fund approach I would say, 3 to 4 years until they are fully flourished. And then they deliver what we would expect them to deliver as said in a proper right status. So that's the rough figure. And then what, what you mentioned with regard to sales and added figures, we don't go into those details. I need to admit with regard to individual stores participation. But in general, these stores are all totally adding to our big box pictures. So they are 10,000 square meters-plus and adding therefore quite some potential also on the sheer sale side.

Question: Johan van Den Hooven - Value8 NV - Analyst : Good morning. It's Johan from Value8. A few questions. The first one, if we look at the sales development, I think in the first quarter, it was mainly volume -- well, it's a bit volume driven. The increase in revenues, of course, it also was some lower pricing. Of course, it's also in positively influencing the gross margin. How was that in Q2 if -- well, revenues are down. Was it still a bit of volume growth and the rest was price decline? That's the first question. Second question is, can you please give an update about BODENHAUS? How it is developing? REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 25, 2024 / 6:30AM, HBH.DE - Q2 2025 HORNBACH Holding AG & Co KgaA Earnings Call And the last question, it's about the outlook for revenue. Revenue for flat in the first year and you stick to your outlook of 2% to 5%-plus. So the increase has to come from normally -- what is normally your week or half of the year? I have no more questions. Thank you. Karin Dohm - HORNBACH Holding AG & Co KgaA - Chief Financial Officer, Member of the Management Board of Hornbach Management AG Thank you. Let me start with the first one you asked about the sales and the development. If we look in a split manner, so to say, onto Q1 and Q1. Q1 definitely profiting from, I would say, all angles or all components of the top line. We had in general good weather across all our regions and countries. We had storm footfall. We had a good gardening season which is a season that comprises goods which in general anyhow, have a better margin on average. We also had a good gross margin, as I explained earlier, driven by the fact that we have different commodity prices baked into the goods that we're currently selling. So it was all. It was volume; it was margin; and it was therefore both affecting positively the sales at the -- ultimately the gross revenue in Q1. And on top of it, we had a base effect in general due to the, allow me to call it, relatively lousy Q1 in 2023. And then we had obviously a second quarter which was a little bit a mixed picture across the countries where we are. In general as that consumer sentiments go into larger project, the confidence to go into something that lasts longer and has higher costs attached is not yet there. It wasn't there in Q1, but there I said we spoke more about garden and plants, which is a different business. In general, the underlying note that consumer across Europe -- and we know also in other regions, but for us it is Europe, that they hold back currently as they had in the last quarter, if you can say, is going on -- is a feature that hasn't been really diluted. Of course, we are positive about the interest rate decreases of ECB. We think that there are a couple of factors that will positively influence the environment in midterm. But currently consumers hold a little bit back. That means for the sales of Q2, we talk in general about good footfall, nevertheless, smaller packages and combinations of goods. Once again, we see that large projects are not yet happening. We have -- in general, we are in this year. We are in contrast to last year. Obviously, we are in a period where prices tend to go more down than up. Sales prices I'm talking here because that's just now we have no inflation anymore and therefore sales prices go down a little bit. So Q2, I would say, little bit uh decrease on the sales price side, nothing dramatic, just except the usual swings that you have. And then we had a little bit of holding back on larger projects. You asked about BODENHAUS, BODENHAUS as you know, opened in '21 with a little bit -- we have two of those. We have one in Berlin and one in Cologne. We also have the -- in the Netherlands, we have [Flogan], which is the same concept, but it comes under the full HORNBACH brand. And we see that those in the Netherlands are the evolving very well. Very happy with the performance. The one in Germany, it's a little bit of a mixed picture. Specifically, the online business of them is extremely successful. People from all over Germany are using BODENHAUS. The footfall in the store is not where we would like to see it ideally. But for us, it's still too early to understand, is this now something that we want to maybe um drive further in the brand attachment? Clearly speaking, just relabeling it to make sure it's part of -- it's visible that this is part of the HORNBACH family or whatever we do, but they have an extremely successful online shop. So all in, we're fine there as well. And then you ask for the outlook, yeah, what we have now in Q3 coming up is once again, Q3 2023. So last year's Q3 wasn't really good. Was actually, really not good. So if you look back into our figures, wasn't that brilliant. And we think there is potential that we see here some more going on. We need to see how that customer evolve, how they evolve in the buying behavior, how they address certain topics. We are with home improvement in the business that is always very close to people's life, whether they do it themselves or whether they hire somebody. So we thought -- we are absolutely feeling confident currently with our guidance, and therefore, no room to change that or no better knowledge at this very moment. That was the main reason there. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. SEPTEMBER 25, 2024 / 6:30AM, HBH.DE - Q2 2025 HORNBACH Holding AG & Co KgaA Earnings Call

Question: Ralf Marinoni - Quirin Privatbank AG - Analyst : Yes, thank you. In the past half, you realize the tax rate of 25%. Can we assume this 25% of run rate for the full year or do we go up to the 30% order in the course of the year? Karin Dohm - HORNBACH Holding AG & Co KgaA - Chief Financial Officer, Member of the Management Board of Hornbach Management AG I think the -- what we need to take into account that we have a different picture pattern with regard to non-deductible items, no, mainly some impairments and other movements. So I think there is some effect also in the last year which is not coming through this year. But happy to dive deeper into the -- for this year, it's definitely the expectation that that stays as such.