Electronics Retailer Ceconomy Latest Victim of Retail Crisis
(Bloomberg) -- Ceconomy AG, Europe’s biggest consumer-electronics retailer, eliminated its dividend and warned that earnings will decline another year in the retail industry’s latest disaster.
The stock fell as much as 16 percent to a record low Wednesday as the departure of Chief Financial Officer Mark Frese leaves the company facing a leadership void. The 54-year-old executive, who has been helping to fill the company’s empty chief executive officer position, will leave at the end of this month, Ceconomy said late Tuesday.
Whoever becomes the full-time CEO of Ceconomy will take charge of a company that expects operating profit to decline again after a 19 percent slump in its past fiscal year. Ceconomy has been wrestling with competition from Amazon.com Inc. and other online sellers, and the company was hit hard because it failed to secure hoped-for volume discounts from suppliers, according to analysts.
Former CEO Pieter Haas resigned in October, and the company’s shares have lost almost three-quarters of their value this year as the company cut its outlook three times. A strategy to consolidate the industry is on the back burner after Ceconomy focused too little on its own operations.
The CFO position will be temporarily filled by Ceconomy board member Bernhard Duettmann, 59, who was interim CFO at drugmaker Stada and has experience at German companies Lanxess, Beiersdorf and Tesa.
World of Pain
Pain afflicts retailers across Europe. XXL ASA, a Norwegian sporting-goods retailer, dropped as much as 44 percent Wednesday after reporting disappointing Black Friday sales and saying it had been too aggressive in discounting. The company’s CEO resigned 11 months after joining the company. He’s leaving that position less than three weeks after being appointed.
Last week, Sports Direct International Plc CEO Mike Ashley said business in November was “unbelievably bad.” Asos Plc CEO Nick Beighton said Monday that Germany and France have been especially weak in a profit warning that drove the online U.K. retailer’s shares down 38 percent. A trade group has said the Yellow Vest protests in France have cost retailers about 2 billion euros ($2.3 billion) in lost sales.
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Ceconomy’s profit outlook excludes contributions from the company’s stake in French retailer Fnac Darty SA. That investment should add a double-digit million-euro amount to earnings, Ceconomy forecast. The search for a new CEO is on track, the company said Tuesday.
“We have a leadership challenge and a skill problem,” Ferran Reverter, recently appointed CEO of the Media Markt and Saturn chains, said on a call with analysts. Earnings dropped in October, the first month of the new fiscal year, though Black Friday and November were better. Fixing the basics will take six months and first-quarter earnings will be at best on par with last year’s, he said. “We were hiding behind the success of the past.”
Reverter said he’s trying to cut costs in Germany and centralize operations there, and the company is trying to add more people with IT skills who can help it move faster.
“Rapid change is my daily business,” Reverter said. “Change or be changed.’’
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