The online party of the Corona years is over for the time being. War and inflation also depress people’s desire to buy. This leads to scratches in the balance sheet of Hamburg Otto, who has been spoiled by success.
High inflation and sluggish consumption following the Russian attack on Ukraine pushed the Otto Group into the red. It may be some time before the situation improves. “It will take two years to return to the old level of profitability,” said CEO Alexander Birken on Wednesday in Hamburg when presenting the business figures for the 2022/23 financial year. In order to be at the forefront of the rapid change in online trading, Otto continues to invest undauntedly. In 2023/24 alone, investments in the three-digit million range are planned, for example in the delivery service and the expansion of the group’s own logistics.
In 2022/23 (until the end of February) the Hamburg service and retail group posted a loss of 413 million euros. In the previous year, which benefited from the online boom during the corona pandemic, there was still a profit of more than 1.8 billion euros on the books, after around 842 million euros in the first corona year.
At EUR 16.2 billion, sales in 2022/23 were at the level of the previous year (EUR 16.1 billion). The internationalization of the group, which had already been initiated under Birken’s pre-predecessor Michael Otto, proved to be a support. While domestic sales collapsed by 9.2 percent to 9.0 billion euros, business volume abroad climbed by 9.6 percent to 7.2 billion euros.
Cautious about prospects
“The figures show that we were not able to escape the market trend either. The very turbulent and moving times against the background of the horrible war in Ukraine, the energy crisis, inflation and the associated slump in consumption are also reflected in our business,” said CEO Alexander Birken, who was “not satisfied” with the results. He explained the domestic slump, at least in part, with a return to pre-pandemic consumer behavior. More money will be spent on travel and culture again, and with the end of the corona measures, more will be bought in stationary retail again.
The Otto Group Board of Management is only reluctant to comment on the prospects for 2023/24. “There will be normalization again, but I can’t say when,” said Birken. A stable level of sales and earnings before interest and taxes (EBIT) in the low three-digit million range are expected. In 2022/23, the EBIT was only 22 million euros. This means that it cannot be ruled out that the current year will once again end in the red.
Birken indicated a year ago that price increases, for example, could not be passed on in full, which would put pressure on profits. In the end, the customers also bought for less money than expected. “The high volume of pre-orders made for 2022/23 based on completely different economic forecasts and the resulting need to sell through discounts also had a negative impact.” For the current year they have “purchased much more defensively”.