Ceconomy, first shareholder of Fnac Darty, in turmoil

Nothing goes in the German Ceconomy, the holding company owner of MediaMarktSaturn, the first european distributor of consumer electronic products, and 24 % of Fnac Darty. After two warnings about the results, that had to collapse the Stock price, the director-general, Pieter Haas, has been let, with immediate effect, on October 12 in the night. The group’s chief financial officer is also on the start. This crisis, which occurs only a few weeks before the Christmas period, says a lot about the difficulties of the major brands of electronic equipment, upset by the competition of e-commerce.

Investors had welcomed it, a year ago, the great restructuring of the Metro group. The distributor history has disposed of its activities in the electronics sector to focus on the food wholesale. Ceconomy is today the holding company, which reigns over the two brands Saturn and Media Markt, which have long dominated the sector of electronic equipment, up to the emergence of online commerce. The split of the group was to be a release for each of the specialties, provided the strategy of the boss of the Metro, Olaf Koch, who has promised to the shareholders of better results and an increase in the price.

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But nothing happened as expected. Several times, the objectives of sales and profitability of Saturn and Media Markt have not been held. And, at the end of September, at the close of the fiscal year 2017-2018, the debacle proved to be worse than expected : the operating income has collapsed from $ 714 million to 630 million euros. Since January, the action Ceconomy has already lost half of its value. The alert on the results, published on 8 October, has finished putting out the patience of investors : the stock has dropped 20 %. Pieter Haas has relied on the temperature too hot and the weakness of the German market to justify the weak sales. Too short, considered the shareholders, who eventually demanded his head. The competition is always stronger in the giant Amazon and reconciliations of several “pure-players” (specialists in the sale of a single product) on the Internet has probably played a decisive role.

“Simplification of complex structures ”

The sales of the Saturn and Media Markt, which is conducted online is certainly making strong progress, but still insufficient to compensate for the collapse of sales in the stores. The competition has introduced a price war which erodes profits. To attract customers in the stores, the brands have no choice but to increase the promotions. On two occasions, in the month of September, Saturn and Media Markt offered to their customers the VAT on every purchase made in-store. “It is not necessary to expect that the signs emerge again in the future, the margins to which they were accustomed,” says the analyst of Equinet Christian Brown.

How to straighten the bar ? It is a Spanish, Ferran Reverter Planet, currently the director of operations, who has been tasked by the supervisory board to lead the group temporarily. His appointment has been well received by shareholders. But the task is considerable. The analyst of bank HSBC Andrew Porteous considers, in a note published on October 22, that the highest priority task is the “simplification of complex structures” of the group, marked by a decentralized organization of purchasing and logistics. The new management, “he continues,” could also ” call into question the logic of participation of the group “, as in the French groups, Fnac and Darty or within the Russian M. Video.

Setbacks ” passengers ”

Is this an option that needs to worry the French ? In Fnac Darty, it makes no comment on the setbacks in economic called “passengers” of a shareholder. At the most, a reminder that Pieter Haas was not on the board of directors of groupe Fnac Darty or, indeed, none of the leaders of the German group. When the transfer by the family Pinault of 24.3% of Fnac Darty to Ceconomy, in July 2017, the latter had placed two independent directors to follow in its place the good of the company.

But Ceconomy is much more than just a shareholder, he is the partner of Fnac Darty in its purchases of goods. MediaMarktSaturn and Fnac Darty have in effect put in place, in August, a european alliance, called the “European Retail Alliance” which focuses on four areas : partnership agreements with major suppliers at international level, purchases, and licensing agreements for brands, distributors, collaboration and innovation and, finally, co-development of tools to improve the knowledge of customers. The French group ensures that the discussions operational in the framework of this alliance have not been affected by the difficulties traversed by Ceconomy.

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