DGAP-News: Adler Modemärkte AG: Q1 Heavily Influenced by COVID-19 Pandemic

Press Release from Adler Modemärkte AG

Revenue Trend Tops Industry Average

Q1 Heavily Influenced by COVID-19 Pandemic
Focus on Comprehensive Measures to Adjust Costs and Secure Liquidity

Haibach (near Aschaffenburg), 5 May 2020: After a solid start for Adler Modemärkte AG in January and February, the first quarter of financial year 2020 was severely affected by the COVID-19 pandemic from mid-March onwards, with all of the Company's 171 stores closing under official lockdown orders between 16 and 18 March. This is reflected in revenue, which fell year on year by 26.3% to €73.2 million (3M 2019: €99.3 million). Nevertheless, with a 23.7% like-for-like decrease in revenue, ADLER fared better than other companies in the industry, which saw declines of 26.0%.

Comprehensive Measures to Adjust Costs
How flexible ADLER's business model can be in times of crisis was demonstrated by the Company's cost of materials, which fell by 25.0% in the first three months of 2020, from €50.3 million to €37.7 million. This means that despite the additional costs resulting from the COVID-19 crisis, the gross profit on goods sold contracted only by 0.9 percentage points to 48.5% (3M 2019: 49.4%). Moreover, a 6.4% reduction in personnel expenses to €23.6 million - which decreased further after mid-March with the introduction of short-time work - indicates that the large-scale measures initiated in the previous year to adjust costs are having the desired effect. Marketing expenses fell by €0.8 million to €9.9 million, and have been more significantly curtailed since the end of March in the wake of the COVID-19 crisis. As expected, earnings before interest, taxes, depreciation and amortisation (EBITDA) amounted to €-12.8 million, thus falling below the previous year's €-2.4 million. However, it should be noted that the Company traditionally records negative earnings in first quarter of the year on account of purchasing orders for the new spring and summer collections. Earnings before interest and taxes (EBIT) decreased in the first three months of 2020 to €-24.1 million (3M 2019: €-13.8 million). The consolidated net loss plunged to €22.6 million (previous year: €13.5 million loss).

Robust Financial Position and Cash Flows -Liquidity Above Prior Year Due to Restrictive Cash Management
As before, ADLER has a sound balance sheet structure. Total assets amounted to €384.3 million as at 31 March 2020 (31 December 2019: €409.4 million). Equity declined from €66.1 million as at the end of 2019 to €43.3 million as at 31 March 2020 and the equity ratio dipped from 16.1% to 11.3%. Cash and cash equivalents amounted to €28.3 million (31 March 2019: €25.9 million; 31 December 2019: €70.1 million). After three months, free cash flow amounted to €-31.1 million, thus significantly lower than the previous year's figure of €-17.4 million.

ADLER has been focusing on securing its liquidity ever since the crisis began. In that vein, the Company again significantly stepped up its working capital management along the value chain. Together with its established partners, a far-reaching adjustment was made to payment terms, with postponements arranged for procurement orders. Furthermore, the Company is taking advantage of its options for deferring tax and social security payments in order to secure liquidity. ADLER has also negotiated an adjustment to costs and cash flows with a large number of store landlords. Moreover, the Company is in advanced talks with its principal banks and state authorities to leverage additional financial leeway to stabilise operations and to finance the Company over the longer term. ADLER had no bank liabilities as at the end of March 2020. This will probably change in the current quarter.

ADLER Store Re-openings Underway - Store Optimisation Measures Continued
After a majority of the stores were re-opened, many of them subject to compliance with official orders to reduce sales floor space to 800 square metres, ADLER expects to re-open the remainder of the stores and sales floor space by the middle of May. ADLER is taking all the necessary precautions and hygiene measures to offer its customers and staff the best level of protection possible. The store optimisation programme launched in 2018, which is aimed at closing unprofitable stores and opening lucrative new ones, is being systematically continued. During the quarter under review, two stores (Marl and Neunkirchen) were closed and one ADLER store was opened in Schwäbisch Hall.

Realignment of Strategy to Enable ADLER to Emerge from the Crisis Stronger
It is still too early to predict how the COVID-19 situation will develop or how long its consequences will last. The resulting recession - which experts expect will be the most severe since the Second World War - will leave a lasting impact on the economy and society. ADLER's reaction will be measured, and the Company will take the necessary steps to ensure that it will emerge from the crisis stronger thanks to its unique position in the textile retail sector. ADLER's management team has already begun to draw up initial conceptual approaches to realign all structures and processes above and beyond the "Strategy 2023" initiative and across every link in the value chain so that it is prepared for the post-crisis era. As the market leader in the target group of affluent customers aged 55 and over, ADLER believes that there is significant additional potential, e.g., through the continued optimisation of working capital management, a reduction of risks within the business model, continuing efforts to optimise stores and expanding online activities even further than previously.

In light of the existing uncertainties, ADLER is at this time not issuing a new forecast for the 2020 financial year.

The Report on the first three months of 2020 can be downloaded at https://www.adlermode-unternehmen.com/investor-relations/reports-and-publications/financial-reports/2020/.

ADLER Group's key performance indicators

* based on 18,510,000 no-par value shares.

*31 March 2019: 175

Adler Modemärkte AG press enquiries and investor relations:
Peter Dietz
Media and Investor Relations
Tel.: +49 6021 633 1828
E-mail: [email protected]

About Adler Modemärkte AG:
Adler Modemärkte AG, headquartered in Haibach near Aschaffenburg, Germany, is one of Germany's largest and most important textile retailers. In 2019, the Group generated revenue of €495.4 million and EBITDA of €70.3 million. As at 31 December 2019, ADLER employed a workforce of around 3,600 and currently operates 171 stores, 142 of which are located in Germany, 24 in Austria, three in Luxembourg, two in Switzerland, plus an online shop. The Company focuses on large-space concepts offering in excess of 1,400 m² of retail space. With its many own brands and select external brands, ADLER offers a highly diverse product range. Thanks to more than 70 years of tradition and strong customer loyalty, ADLER considers itself to be the market leader within its target group of affluent customers aged 55 and over.
For more information: www.adlermode-unternehmen.com; www.adlermode.com