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Sales hurt by negative currency effects, Charles Vögele
Aug '10
Charles Vögele Group, one of Europe's leading vertical fashion companies, posted a 4% fall in sales after currency adjustments for the first half of 2010. Thanks to a higher gross margin, foreign exchange rate hedging and a strict cost management, the EBITDA margin was maintained at 6.0%. After deducting depreciation, EBIT operating earnings came in at CHF 4 million. The net result was CHF - 7 million.

Sales hurt by clear-out of old stock and negative currency effects
Gross sales fell from CHF 743 million to CHF 690 million. As expected, selling off the remaining old stock proved difficult, but by making further price concessions it was possible to clear most of it. This process took up valuable sales space and resources; but happily, sales of new stock went up 4% after adjusting for currency movements.

The store portfolio was also streamlined during the half-year under review: 12 new stores were opened, while 25 were closed. At the end of June the company had a portfolio of 844 stores. Around two-thirds of Charles Vögele Group's sales markets are in the euro zone. The continued weakness of the euro in particular reduced the sales figure by CHF 22 million, or 3%. After currency adjustment, gross sales fell by 4%.

Operating costs reduced again
Ongoing restructuring measures had a particularly noticeable effect on distribution logistics. Around CHF 10 million was saved by reducing inventories of old stock. Advertising spend was reduced temporarily in 2009 owing to the clear-out of old stock, but was increased again by CHF 7 million in the first half of 2010 as a result of the more emotionalized marketing campaign. This brought it back to the level of previous years. The currency effect accounted for CHF 9 million. Overall operating costs were reduced by a further CHF 11 million to CHF 346 million.

Higher financial costs put pressure on results
Thanks to a higher gross margin, foreign exchange rate hedging and a strict cost management, the EBITDA margin was maintained at 6.0%. After deducting depreciation, this left a positive operating result (EBIT) of CHF 4 million, which is CHF 2.5 million lower than the year-back figure.

Despite lower net debt, net financial costs rose because of CHF 4 million of negative currency effects. The net result of CHF – 7 million was slightly below the prior-year figure. This was due to the major clear-out of old stock, unfavourable exchange rates and the ongoing restructuring process.

3-pillar strategy
The strategic review conducted by the Board of Directors and Group Management revealed a need for action on three fronts: image, verticalization and expansion. Based on insights from this review, a 3-pillar strategy was formulated:

1. Improve image: reduce old stock, make marketing more emotional, modernize store design, sharpen the brand profile and improve fashion credentials.
2. Build up verticalization: refocus the organizational structure, centralize and simplify

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