Ahlers Q1 revenues decline, expects tough market conditions ahead

Total sales revenues of the Ahlers Group decreased by 1.5 million euros (1.7 million dollars) from 67.7 million euros (77.2 million dollars) to 66.2 million euros (75.4 million dollars) in the first three months of fiscal 2015/16. This 2.2 percent reduction in sales, the company said, is exclusively attributable to the reducing Gin Tonic business and the ongoing decline in sales to the last remaining private label customer.

However, the Group’s own retail revenues increased by 6.5 percent in the reporting period, which represented 11 percent of total sales revenues, 0.8 percentage points more than in the previous year. Like-for-like revenues rose by 2.4 percent in spite of difficult market conditions. The e-commerce business continued to grow positively, with sales up by 16.6 percent.

Premium segments revenues down in Russia

Premium segment sales revenues were down 1.5 percent due to delayed deliveries in Russia. In the rest of Eastern Europe and in Scandinavia, sales revenues showed a positive trend and picked up by 4 percent and 16.5 percent, respectively. In Germany, Baldessarini recorded particularly strong revenue growth of 4.8 percent between December 2015 and February 2016.

The premium segment’s share in total sales revenues climbed from 67.7 percent in the prior year period to 68.2 percent in Q1 2015/16. Core business of the Jeans, Casual & Workwear segment grews strongly. The remaining four brands of this segment, Pioneer Authentic Jeans, Pionier Jeans & Casuals, Pionier Workwear and Jupiter, increased sales by a strong 5.4 percent. Pioneer Authentic Jeans grew by 14 percent and also gained a strong 11 percent in the German market. Discontinued activities and decline in Gin Tonic sales revenues brought down the segment’s share in total sales revenues from 32.3 percent to 31.8 percent as of the end of the quarter.

Other financial highlights of the first quarter

The reduced sales revenues and the slightly lower gross profit margin: 51.7 percent against 52.3 percent in the previous year, resulted in a lower gross profit of 34.2 million euros (38.9 million dollars) in the first quarter, down from 35.4 million euros (40.3 million dollars) in Q1 2014/15. The reduced gross profit margin, the company said, is attributable to the fact that goods sourced in the Far East are billed in US dollars and have become more expensive due to the weakness of the euro.

Cuts production, staff, outlook cautious

As of February 29, 2016, Ahlers employed 2,048 people, 139 less than one year ago. Major changes resulted from the capacity reduction at production facilities in Sri Lanka and Poland, due to which staff numbers declined by 91 in Sri Lanka and seven in Poland, respectively. Another 33 jobs were cut because of the discontinuation of Gin Tonic. The headcount of the Group’s own retail segment increased by a total of 19 people in Germany and Poland and declined by 10 in Austria and other foreign markets. In Germany, Ahlers employed 621 people as of the reporting date, 31 less than in the previous year due to the discontinuation of Gin Tonic sales activities.

In view of the challenging market conditions, the Management Board decided a set of measures to enhance the Group’s short and medium-term profitability last year. Apart from various cost-cutting measures, this also includes the discontinuation of the distribution activity of the Gin Tonic brand as of the end of 2015. As a result of the discontinuation of the business activities of Gin Tonic, Jupiter would be the only remaining active brand in the Men’s & Sportswear segment, so both - ‘Jeans & Workwear’ segment and the ‘Men’s & Sportswear’ segment are now merged into a new ‘Jeans, Casual & Workwear’ segment.

As of the fiscal year 2015/16, Ahlers thus has two segments: Premium Brands comprising the Baldessarini, Pierre Cardin and Otto Kern brands and Jeans, Casual & Workwear comprising the Pioneer Authentic Jeans, Pionier Jeans & Casuals, Pionier Workwear and Jupiter brands as well as the private label business and the expiring Gin Tonic activities.

With a view of Europe and Russia, the company feels that conditions in the markets that are relevant for Ahlers have not changed materially compared to the second half of 2015. So it expects sales of apparel to stagnate in most of the large European markets, and grow only in the more prospering countries such as Spain and some Eastern European countries. Conditions in Russia remain challenging and difficult to predict, although it expects the business here to improve slightly.