windeln.de Initiates Set of Measures to Focus its Business Activities, Improve Processes, and Increase Profitability

 In 2016

  • windeln.de to focus business in ready-to-ship online shops and close Nakiki’s shopping club Business
  • Europe-wide integration with shared purchasing and centralized IT platform to be expedited
  • Costs to be reduced through relocation of central warehouse and automating more functions
  • Expanded management team systematically implementing measures

Munich, Germany, July 28, 2016 - With the approval of the Supervisory Board, the Management Board of windeln.de AG has passed a comprehensive set of measures to focus its business activities more closely on the customer, improve its operating processes, and cut costs, including already initiated measures. Hereby Europe’s leading online retailer for baby and toddler products intends to advance its transition from a pure growth value to a sustainably profitable e-commerce champion. windeln.de aims to generate balanced earnings over the next few years with the existing capital base and, in the long term, to achieve an EBIT margin of more than 5%.

More focused business model

The proven online shop model, which, via the online shops windeln.de, pannolini.it, windeln.ch, kindertraum.ch, toys.ch, bebitus.es, and feedo.cz, offers a wide assortment of immediately availiable products at attractive prices with short delivery times, will be expanded. windeln.de systematically invests in optimizing customer-friendly processes in order to guarantee the most positive shopping experience. Nakiki’s flash sale business, offering a limited product range at discounted prices with long delivery times, represents a different business model and will be discontinued. This will overall considerably reduce the complexity of the company – in particular in terms of supplier and product management, the IT infrastructure, and logistics.

windeln.de is also tapping into new customer groups in China with its Tmall Global shop launched in July. This platform offers an expanded range of German quality products, fast delivery, and accepted payment methods.

Concentration of the product range

In order to be able to offer its customers the most popular products at attractive prices and to ensure fast delivery at all times, windeln.de is reducing its product range from 750 suppliers to the 290 top-selling suppliers, who account for more than 95% of total sales. This will significantly reduce the company’s complexity while maintaining its product range with more than 60,000 products. Private labels will also broaden the range. A first step taken here was the successful launch of the company’s first own infant milk formula brand, Formila Plus, earlier this year.

Creation of a European platform

The potential offered by the company’s presence in European markets, which windeln.de expanded last year by means of acquisitions in Spain and the Czech Republic and through organic growth in Italy, will be exploited more. By integrating the Southern and Eastern European shops bebitus and feedo, windeln.de expects efficiency and cost benefits particularly through a shared IT platform.

Process optimization for greater customer loyalty

The warehouse in Grossbeeren (Berlin) used for the shops in Germany, Switzerland, and the Eastern European countries, will be replaced by a central warehouse based in Eastern Europe, which will start operating in the second half of 2017 and is likely to cover additional online shops in the future.

windeln.de is leveraging the efficiency potential offered at all levels and functional areas of the company by increasing the automation of predominantly manual functions - from contract and invoice management to returns processes.

The increased automization is not at the expense of personal customer approach - on the contrary: the digitilization of process steps will relieve the windeln.de team of administrative tasks. Additionally speed will increase enormously, resulting in shorter delivery times for the customer.

Change in the management team supports set of measures

Implementation of this set of measures will be supported by management changes. Jürgen Vedie has been taken on as the new COO, a position that he previously held at Zooplus. He will assume central responsibility for the entire supply chain all the way up to logistics and will implement the measures designed to boost efficiency.

On the Management Board, Konstantin Urban remains responsible for the German Shop business unit (windeln.de shop) that handles business with customers in Germany and China. He will be supported by a newly aligned second-level management team: the expansion of Chinese business will be led by Julia-Caroline Schmidt, who has previously worked in China for the company Storck, while business with German customers will be led by Laura Schulte, the former head of Nakiki.

By closing Nakiki’s Shopping Club business the windeln.de team will be reduced by about 100 employees (approx. 22% of employees in Germany). As additonal functions will be automated and centralized and more cautious approach towards new hirings will be taken, only a slower increase in personell numbers is expected in the future.

Sales forecast adjusted

Without Nakiki’s shopping club business, management anticipates that sales from ongoing operations will increase by 25% from EUR 161 million in 2015 to EUR 200 million in 2016. The forecast for adjusted EBIT from ongoing operations in fiscal year 2016 is in the range of –10% to –12%.

According to preliminary figures, windeln.de (not including Nakiki) achieved year-on-year growth of 35% and an adjusted EBIT margin of -14% in the first half of the year, which meets expecations in light of the introduction of a new ERP program in the second quarter, and also regulatory changes in China and related customer uncertainty.

By closing Nakiki’s shopping club business the windeln.de team will be reduced by 100 employees (approx. 20% of employees in Germany). One-off restructuring costs will amount to ca. EUR 2 million, which will be recognized as expenses in 2016 and 2017. The cumulative positive EBIT effects that the set of measures will produce (including measures already communicated initiated already), are estimated to total more than EUR 65 million gross up to the end of 2019 or approx. EUR 20 million per annum in full run rate.

Preliminary figures for H1 2016 compared with H1 2015

First half-year 2016 Total Shopping Clubs Continued
Revenues (in EUR million) 101 1092
year-on-year growth in % 35% 33% 35%
Gross profit from revenues (in EUR million) 30326
in % of revenues 29% 33% 29%
Adjusted EBIT (in EUR million) -15 -3 -13
in % of revenues -15% -29% -14%

Second quarter 2016 Total Shopping Clubs Continued
Revenues (in EUR million) 49 5 45
year-on-year growth in % 25% 22% 26%
Gross profit from revenues (in EUR million) 15 2 13
in % of revenues 30% 33% 29%
Adjusted EBIT (in EUR million) -8 -2 -6
in % of revenues -15% -36% -13%
1Note: "Adjusted EBIT" is not a parameter in accordance with IFRS. Information on the calculation of adjusted EBIT are shown in the Annual Report 2015 windeln.de AG.

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