At 13.4 billion euros, the Otto Group’s total turnover was nominally below that of the previous year. The e-commerce company was unable to achieve the growth targets it had set itself for the past financial year (28 February 2019). In addition, Alexander Birken, CEO of the Otto Group, was critical of the competitor Amazon.

The Otto Group was negative about competitor Amazon because of its low tax payments in the EU: “We pay 100 million euros in taxes that we could invest in digitisation or service or in lower prices for consumers,” said CEO Alexander Birken on Wednesday in Hamburg. “This is a serious disadvantage for the entire retail sector, not only for Otto, who costs jobs. According to the Otto Group, the company continues to grow and has sufficient funds available for investments.

Amazon takes a stand

Amazon commented on the facts and stated that the company paid all applicable taxes. A company speaker added: “In Germany alone, Amazon currently employs more than 18,000 people, and since 2010 Amazon has invested more than 10 billion euros in local infrastructure and facilities. The company is also investing to reduce the complexity of international sales for local companies. The company stated that last year alone, small and medium-sized companies from Germany generated export sales of 2.1 billion euros at Amazon.

The Otto Group has set itself a growth target

The Otto Group has set itself a growth target until 2022. The Group aims to achieve annual growth of four to five percent to 17 billion euros. In addition, the company is to be converted into a fully digital company. Birken explains that the digital transformation also involves the defence of European values such as the rule of law and sustainability on an international market. “Customers want to see us behave decently,” Birken said. The CEO sees the project as a competitive advantage over globally dominant players such as those from the USA and China.

Online sales increase

A further objective was to develop otto.de into an e-commerce platform through which several suppliers could offer their goods. The Otto Group’s online revenues increased by 4.5 percent to 7.7 billion euros. This makes Otto the second largest online retailer in Germany after Amazon. The “About You” online shop, in which Otto holds a stake, is to be further developed into a platform within a short period of time.

Otto was unable to achieve growth targets

At the same time, the Group was unable to achieve the growth targets set by Otto. Revenue in the past financial year, which ended on 28 February, was 13.4 billion euros, nominally lower than in the previous year. On a comparable basis, however, the Otto Group achieved an increase of 3.5 percent.

With a profit of 177 million euros, the company was clearly below last year’s figure. In 2017/2018, the group had achieved a surplus of 516 million euros. The start-up subsidiary “About You” made a significant contribution to the margin generated. At the same time, earnings before interest and taxes (EBIT) fell from 388 million euros in the previous year to 222 million euros.

According to Birken, the company had higher expectations. The CEO explained that the growth targets were not met with the hot and long summer of 2018, which had hit the customers’ buying mood, as well as a withdrawal of individual brands from the Russian market. In addition, the Group had invested heavily in e-commerce and the Group’s logistics infrastructure.

Birken assures that the Otto Group remains on course. He also expects stronger revenue growth and a slightly higher operating result this year.

 

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Link: The Otto Group is experiencing a decline in profits.

Image: Otto Group

//JP