Otto Group likely to emerge stronger from corona crisis
The corona pandemic continues to dominate global economic, political and social life and is having repercussions for the Otto Group, Alexander Birken, CEO, told reporters at the online press conference Wednesday (May 27, 2020). However, Birken expressed optimism as the Otto Group had solidified its position in the 2019/20 fiscal year and continues to hold its own despite the tough economic environment. Revenue grew by 4.8 per cent to EUR 14.3 billion in the 2019/20 fiscal year while online sales increased by 6.2 per cent to around EUR 8.1 billion and by 7.5 per cent to EUR 5.7 billion in Germany alone.
Otto Group's growth course in 2019/20
"Thanks to our high investment in digital transformation and thorough implementation of our focused growth strategy, we have made very good progress along our planned growth track. With this financial tailwind, our strategic digital focus, a very well-developed technical infrastructure and our resilient company culture, we are cautiously optimistic about overcoming the business challenges posed by the corona pandemic – and in the mid-term, even emerging from this crisis stronger,” said Birken. Investments in so-called focus companies are central to the growth strategy as they account for over 80 per cent of the Otto Group's total turnover, he added.
The focus companies include Otto, Bonprix and the About You fashion start-up. Otto GmbH & Co KG grew its turnover by 8.8 per cent to EUR 3.48 billion while About You GmbH experienced "stormy growth" and increased its sales by around 61 per cent to EUR 739 million. Given its shareholder structure, About You is no longer included in the group’s consolidated financial statements.
Digital business models, new work and climate targets
The group "maintained the efficiency of the entire value-added chain" in almost all the 30 countries in which the Otto Group is active and which have been impacted by the global lockdown. The "good competitive chances" especially in the era of corona are based mainly on the following criteria:
1. Digital business models
"We are where stationary trade and online trade come together," Birken pointed out. Otto's platform strategy, for instance, is currently generating increased demand from mostly stationary brands and retailers who want to profit from this strong ecosystem. The plans foresee bringing 1,000 partners (in addition to 500 at present) onto the platform by the end of 2020. During the last fiscal year, the company again invested "a triple-digit million sum" in transforming the platform.
2. Exploiting the upswing of new working world
Nearly all of the group's 20,000 (commercial) employees work on the move and mainly from home. Although on-site work at the various administration buildings and on the Otto Group Campus in Hamburg will be ramped up gradually from early June, the Group Executive Board expects the "very positive experience" of remote working to remain valid in future. "We definitely do not want to return to long meetings and inefficient business trips; we fully intend to harness this valuable experience to embrace mobile, agile and efficient New Work,” Birken remarked.
3. Vision of "responsible commerce that inspires"
Birken stressed: "We will not abandon our values at the cloakroom of digitization." The group will pursue its goal of CO2 neutrality until 2030. The aim is to roll out the sustainability strategy throughout the group this autumn and along the lines of "avoid, reduce, compensate".
Outlook for 2020/21 fiscal year
The unprecedented levels of negative consumer sentiment prevalent in all markets relevant to the Otto Group will lead to an "already palpable decline" in demand especially in textiles, and an overall intensification in price-based competition. Coupled with increased expenditure on protecting the health of its employees, this will impact earnings in the current fiscal year.
Founded in Hamburg in 1949, the Otto Group is a globally active trading and services group with around 52,000 employees. The group is represented in 30 major corporate groups in over 30 countries in Europe, North and South America as well as Asia. The group does business in three segments: Multichannel Retail, Financial Services and Services, and includes the Hamburg-based About You fashion start-up, a first unicorn, and its own company builder Otto Group Digital Solutions.