Germany’s Otto Group has reported its 2023/24 annual results with the owner of the Freemans, About You, Bonprix and Evri businesses (among many others), saying it “succeeded in holding its own comparatively well in an enormously challenging market environment and made noticeable progress in its operating result”.
It highlighted a rise in EBITDA of €155 million to €744 million after its “temporary focus on profitability and liquidity paid off”.
But it was clearly a tough year overall with high interest and inflation rates and a sustained deterioration in consumer sentiment in the group’s core markets.
As a result, total revenue fell by 6% to €15 billion on a comparable basis. Revenue in Germany was just under €8.5 billion, down 5.6%, and in its international markets, sales fell a worse 6.5% to €6.5 billion. It said consumer sentiment “is still somewhat depressed”.
As well as that tricky consumer backdrop, the aforementioned focus on profitability and liquidity in the management of the group also dented its revenue performance, with the group making savings in the marketing budget, for instance. Discontinuing underperforming businesses also affected revenue.
So how did individual parts of the group perform? In its largest segment, Platforms, which includes Otto and About You, we’re told “the trend is encouraging”.
The marketplace business with external partners launched in 2020 “continues to grow dynamically, and investments in Otto’s transformation into a platform are paying off”.
Otto’s Gross Merchandise Value (GMV) grew by almost 2% and the GMV of external partners rose by around 50%. It was able to increase the number of marketplace partners by 33% to 6,500+ and one-third of platform revenue now derives from marketplace business.
Meanwhile, About You met its annual forecasts both for revenue growth – up 1.6% – and profitability. The company said “despite the uncertain market environment, the e-commerce group of companies broke even with adjusted EBITDA”.
But IFRS external revenues in the Platforms segment fell by 4.7% to €6.2 billion. These revenues don’t reflect the significantly increased total value of partner revenue on the platform.
The Brand Concepts segment, which includes Crate and Barrel, Bonprix, Witt, and Sheego, saw a like-for-like revenue drop of 8.5% to €5.3 billion. The performance of the Witt Group, which grew revenue by 1.5% and improved profitability, was called out as a highlight. But at Crate and Barrel high interest rates in the US reduced demand for new furnishings and negatively impacted revenue. Yet it was still able to significantly boost earnings.
In the Retailers segment, which includes Manufactum and Limango, revenue fell by 8.7% to €2 billion on a comparable basis, dented by the closure of Mytoys and Unigro during the year.
The Services segment, which includes the group’s logistics service providers and Otto International, saw 3.6% lower revenues like-for-like, generating €374 million. This was due to weakening demand in e-commerce, meaning lower parcel volumes and a reduced order volume at Otto International – both in its own and third-party business.
But the Financial Services segment, “recorded very encouraging growth in revenue of 4.4% on a comparable basis”. It was “highly profitable and made an important contribution to earnings in the past financial year”.
As mentioned, group EBITDA rose to €744 million and without the costs incurred from the discontinuation of Mytoys and Unigro, the increase would have been even greater.
At €11 million, reported earnings before interest and tax (EBIT) were almost flat. However, it included major one-off costs and would otherwise have been €186 million.
Alexander Birken, Chairman and CEO, said: “We used the crisis to make the group fit for the future. And we succeeded. We can now work with a different, more efficient cost structure. This puts us in an excellent position to achieve sustainable competitive success with our business models and to take advantage of any tailwind from the market.”
As for the future, the group is taking a deep dive into artificial intelligence (AI) and in the current financial year is also investing significantly in performance, innovation and sustainability, primarily in digital transformation and logistics.
The clear focus here is on those services that improve the customer experience.
That means more AI-controlled robots in logistics at more hubs. It will also expand the use of generative artificial intelligence (GenAI) for shopping experience, customer service, product development and process optimisation.
Interestingly, it’s “piloting the use of GenAI in product development”. The Fashion Creation App developed in-house “supports product managers, facilitating the creation of new styles and collections. Based on product attributes as either text or photos, the tool generates different variations of the style to be developed. These can then be modified until they are suitable for further 2D/3D product development. Bonprix relies on the smart combination of several GenAI models”.
