Hornbach Holding AG & Co KGaA Q3 2019 Earnings Call Transcript

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

Question: Juergen Elfers - Commerzbank AG, Research Division - Analyst : As usual, I would like to ask you whether you could please be so kind as to shed some light on the like-for-like developments on the country by country basis, both for Q3 as well as for the accumulated 9 months period?

Question: Juergen Elfers - Commerzbank AG, Research Division - Analyst : Mr. Pelka, thank you very much for this detailed shedding of light into the outstanding success of your international operations. In many of those countries in the third quarter, sales momentum remained in double-digit or end at double-digit territory. Would it be fair to assume that there were some special effects there? Or could it be the case that such momentum would be brought forward into the fourth quarter as well? And that implies that it may well be that you are -- your mid-single-digit full-year sales guidance may be slightly in excess of 5% if you are able to sort of stick to this dynamics of the international markets. Is that correct?

Question: Juergen Elfers - Commerzbank AG, Research Division - Analyst : In fact, I was going to ask you also if I may, on the underlying EBIT, you refer to poor performances in Germany and Austria. And maybe you could shed some light on the specific competitive situations in these 2 markets? And what your reading is for the shorter to medium-term going forward in these markets? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. DECEMBER 20, 2018 / 10:00AM, HBH.DE - Q3 2019 Hornbach Holding AG & Co KGaA Earnings Call

Question: Juergen Elfers - Commerzbank AG, Research Division - Analyst : Okay. Then let's maybe have a look at the online sales momentum. Can you provide us with some figures on how online sales progress in the third quarter as well as for the first 9 months?

Question: Juergen Elfers - Commerzbank AG, Research Division - Analyst : Okay. Just to clarify, you said for H1, the momentum was just over 20% and in Q3, you are talking about more than 30%. Is that correct?

Question: Juergen Elfers - Commerzbank AG, Research Division - Analyst : Okay. Yes. So then just one final, if I may? Mr. Pelka, you spoke about your plans for establishing 4 new stores in Sweden, in the Netherlands, Slovakia and Romania. And I was just wondering can you share with us your impressions after the first few months of the Boras store? Is the smaller store size becoming a blueprint for your expansion plans? Or is it only applicable to probably the new store in Sweden? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. DECEMBER 20, 2018 / 10:00AM, HBH.DE - Q3 2019 Hornbach Holding AG & Co KGaA Earnings Call

Question: Juergen Elfers - Commerzbank AG, Research Division - Analyst : But for now, the new stores in the Netherlands Slovakia and Romania are not planned to be trimmed to such store size levels.

Question: Juergen Elfers - Commerzbank AG, Research Division - Analyst : The other questions that have occurred, it's regard new questions as is always the case. Mr. Pelka, I would just come back to Thilo Kleibauer's question of the funding of the EUR 95 million that were initially planned to buyback the 4 stores, 2 in Berlin and 2 in the Netherlands. Also EUR 95 million, I believe you now have as the Netherlands' deal is not going to materialize, you now have like EUR 50 million of funding that is not dedicated to a special deal or transaction from now on. So what are you going to do with the excess cash? That's the first question.

Question: Juergen Elfers - Commerzbank AG, Research Division - Analyst : Okay, okay. So effectively, the second leg of the promissory note is for the Netherlands. Is that the 7-year promissory note?

Question: Juergen Elfers - Commerzbank AG, Research Division - Analyst : Okay. And did you pay EUR 45 million for the first 2 stores in Berlin and Potsdam, hence you have like ...

Question: Juergen Elfers - Commerzbank AG, Research Division - Analyst : EUR 45 million. So that is a residual of EUR 50 million net and therefore, that was planned to be invested into the 2 Dutch stores. Is that correct?

Question: Juergen Elfers - Commerzbank AG, Research Division - Analyst : Yes, so then the 5-year promissory note that has a volume of EUR 52 million, perfectly fits into this transaction. Is that also correct?

Question: Juergen Elfers - Commerzbank AG, Research Division - Analyst : Okay, okay, right. Good. Then, 2 more questions if I may on Austria yet again. Is Austria actually loss-making?

Question: Juergen Elfers - Commerzbank AG, Research Division - Analyst : I was of the opinion that profitability in Austria was pretty robust until actually and including 2014/'15. And the weakness, the margin weakness started to pour in from 2015/'16. Do you support this view? And then if so, has that got to do with having pushed Baumarkt over the cliff? And that the Baumarkt's portfolio has been acquired by other players, namely OBI and Boras. Is that the reason for the poor profitability? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. DECEMBER 20, 2018 / 10:00AM, HBH.DE - Q3 2019 Hornbach Holding AG & Co KGaA Earnings Call

Question: Juergen Elfers - Commerzbank AG, Research Division - Analyst : Okay. I would've thought you've embarked into a rental contract, which didn't perform according to expectations. Is that the prime problem that you have?

Question: Juergen Elfers - Commerzbank AG, Research Division - Analyst : Yes, that's correct.

Question: Juergen Elfers - Commerzbank AG, Research Division - Analyst : Okay, okay. Super. Then...

Question: Juergen Elfers - Commerzbank AG, Research Division - Analyst : Okay. Then one final if I may. You said you are unhappy with the cost situation in Germany. You have to bring down costs. Can you give us some examples of how you plan to trim operational expenses? without the prior written consent of Thomson Reuters. 'Thomson Reuters' and the Thomson Reuters logo are registered trademarks of Thomson Reuters and its affiliated companies. DECEMBER 20, 2018 / 10:00AM, HBH.DE - Q3 2019 Hornbach Holding AG & Co KGaA Earnings Call

Question: Juergen Elfers - Commerzbank AG, Research Division - Analyst : And we are not looking into really closing down stores, I hear. Is that correct?

Question: Juergen Elfers - Commerzbank AG, Research Division - Analyst : And these one or two stores are smaller stores or could they be also some of those that you have cost from ...