Ceconomy AG (CEC) Earnings Call Transcript & Summary

Welcome, and thank you for joining the CECONOMY AG Investor and Analyst Conference Call. [Operator Instructions] I would now like to turn over the conference call to Sebastian Kauffmann, Vice President, Investor Relations. Please go ahead.

Good morning, everyone, and thank you for joining our Q4 12-month results call this morning. With me today are our CEO, Karsten Wildberger; and CFO, Florian Wieser. They'll guide you through today's presentation. But before we start, let me address the usual formalities. Firstly, this call is being recorded, and a replay will be available on our website later today. Secondly, don't forget that today's presentation and potentially some answers to your questions may contain forward-looking statements. For additional information in this regard, please refer to the disclaimer. But now let me hand over to our CEO, Karsten Wildberger.

Thank you, Sebastian, and good morning, everyone. Thank you for joining our full year results presentation this morning. Let me start with -- it's fair to say it's been quite a year. Our financial year 2020/'21, was a real stress test for our company, and we did pass this test. Although the second COVID wave hit us with longer and more severe restrictions than in the previous year, we managed to grow our top line. And actually, in countries less affected by COVID restrictions, we also increased our EBIT. Our omnichannel business model proved to be very resilient. And the close integration of our online with our bricks-and-mortar business was an important advantage in that period. And thanks to our online growth, we were actually able to overcompensate for the COVID-induced decline in our stores. Above all, our performance is a proof of the quality of our teams, and I would like to take this opportunity to also give my thanks to each and every colleague for this performance. And finally, I'd like to point out that furthermore, the market for consumer electronics has proven to be attractive and continues to offer great potential. Important to add, we were also in a position to terminate the syndicated loan facility with the involvement of the KfW [indiscernible], which, by the way, we hadn't ever used. And with our new financing structure, we have sufficient backup liquidity for the upcoming years, also during challenging times. Let's turn to Slide 5. And what does this mean in terms of numbers? Well, we increased sales by 3.8% to around EUR 21.4 billion, notwithstanding store closures in countries such as Germany and the Netherlands. And adjusting for currency and portfolio effects, this figure is also above the pre-pandemic level 2 years ago in fiscal year '18/'19. And bottom line, we delivered an operating profit of EUR 237 million, which is on the level of the previous year. So given the circumstances, we have demonstrated operational strength and achieve the full year targets we specified in August. Of course, we could only achieve this, thanks to our customers, who remain loyal to us throughout the pandemic, and we will work hard to continuously earn the trust of our customers. Let's turn to Slide 6. Ladies and gentlemen, I've now been at CECONOMY and MediaMarktSaturn for a bit more than the famous 100 days. Similarly to what I shared shortly after my start in August, I can say, our underlying solid progress in many parts of our business is often not recognized due to the volatile and challenging market conditions we are operating in. However, our team is highly motivated and skilled in operating our business also in stormy waters. We manage both short-term challenges and execute our omnichannel strategy at the same time. And despite the current difficult market conditions, the overall consumer electronics market remains very attractive in my view. And I'm confident that we will continue improving in how we leverage our very high customer reach and customer demand. On Slide 7, some important facts and figures about our business to provide and give you more color. First thing I'd like to point out, we have 2.5 billion customer visits and contacts per year, across all our touchpoints, online and in our stores. This is a fantastic asset. We have one of the highest customer reaches in Europe, and it's now up to us to continuously improve leveraging this enormous potential and deepen our customer relationships. We are actually #1 or #2 in terms of market share in 8 countries in Europe. And looking at our online business, we have more than doubled in the last 2.5 years and become one of the largest online retailers in Europe. And we are increasingly interlocking our stores with our online business to make the customer experience more and more seamless. And more than 1/3 of our online customers actually choose to pick up their orders in one of our stores. So concluding our omnichannel strategy is the right path. Let's turn to Slide 8. Of course, it's also clear there is much more to do to become a truly customer-obsessed company. But it's also time to realize how much we have already changed and reinvented ourselves. And this is important for me to point out, we've been rapidly moving from a transaction-centric business where customers just pick up a product to an experience business where advice and service has become an important part of our customer promise. So we measure customer satisfaction with the Net Promoter Score, NPS, at touchpoints and along processes. And last year, we improved the NPS across the company by 5 points to 47. This is a good number, but we aim for more. Secondly, MediaMarktSaturn heritage is a very decentralized business model, but we have been moving towards what I call a smart central organization. And today, we leverage central capabilities in category management, logistics or process design so much better. Decentrally, we continue to leverage our entrepreneurial power. And until today, we have implemented around 75% of the respective organizational changes that we laid out, and we exceed our cost targets, and Florian Wieser will talk more about this a bit later. And today, we are no longer a pure bricks-and-mortar retail business. We are accelerating our omnichannel journey and have fully embraced digitization and our online business grew 65% in the last financial year. And finally, we have moved into a new phase of how we evolve our business. I think there was a time where we were fixing things, and we are moving now to creating also new opportunities. And one good example in that regard is how we started and now scale our marketplace. And there are many other things to mention and to come, and I will turn later a bit more color -- to give a bit more color to the marketplace. Let's turn to Slide #9. So we will double down our efforts in improving the customer experience across the entire customer journey, because this goes way beyond selling. We are improving our service and expert's device already online and offline. We are also improving forward and reverse logistics. Aftersales service is a growing part of our business. In Germany, for instance, we repaired around 0.5 million smartphones in our store Smartbars last year. And in Spain, we improved our aftersales NPS significantly through personalized service. Turn to Slide 10, please. The progress we have made is clearly visible on our online business. Don't forget that until recently, MediaMarktSaturn was predominantly an offline retailer with a webshop attached 2.5 years ago, in financial year '18/'19, the online share stood at less than 14% with sales less than EUR 3 billion. And in the past financial year, we achieved online sales around EUR 7 billion, accounting for 1/3 of our share. And we have managed to better integrate our omnichannel capabilities online. Today, we are able to keep a 29-minute click-and-collect customer promise. That means you order online and 29 minutes later, you can pick it up in the store, and almost 40% of our customers use and enjoy this service. Another example on Slide 11. An important element of our strategy is also to rejuvenate our bricks-and-mortar business as part of our standard store investment program. So whenever we refurbish, move or open a new store, we use 1 of our 4 new store formats, the core, the Lighthouse, the smart and the Express format. And they serve all different customer needs and provide us with more location-specific opportunities. And in our Lighthouse store because I think that offers great potential and highlight so many aspects of our business, so in our Lighthouse stores currently in Milan and Rotterdam, we offer real technology discovery journeys. But it's not just about the discovery, but it's also a very commercial store with -- as a very successful format with about 20% to 30% uptake in traffic and substantially higher revenues and margins. And our suppliers and partners are also excited about this format, and they partner and invest with us by running about 20 to 30 branded boutiques in each lighthouse store. So I regularly receive actually phone calls and questions because partners want to participate also in the future lighthouses. So we will continue to roll out the lighthouse concept. And next year also launch the first one in Germany. All our formats pay dividends to our ambition to offer competent advice, a super attractive product range, great service, and they are increasingly linked with our online business for the benefit of our customers. Let me now turn to Slide 12 in the marketplace. So this is another element of our omnichannel strategy. We launched our German marketplace in summer 2020, and we are exceeding our internal growth plans and continue to grow strongly in the last months. Currently, we offer around 300,000 products from more than 400 retailers on this platform with special focus on categories such as gaming, IT or the whole coffee section, especially coffee machines. In October this year, the marketplace also went live in Spain, and we are planning marketplace launches in Austria and the Netherlands in 2022. And this shows that we have successfully implemented the IT infrastructure for such a marketplace, and proven our concept already in the first year. And now we will focus on scaling it and expand the marketplace to further countries. And before I hand over to Florian Wieser, let me now turn to Slide 13 and talk a little bit about sustainability. Because this is a key topic and I'd like to highlight today also the progress on ESG, in general. For us, sustainability is not just an add-on to our strategy. It's part of who we are and what we stand for. And for this reason, we have developed our comprehensive sustainability roadmap in the past financial year, which is based on 2 main pillars. The first pillar, firstly, our primary objective is to make our own business operations more sustainable. For example, we aim to source 100% of our electricity from renewable energy sources by the end of 2023. We're on a good track to achieve this even faster. Other focus topics comprise reducing packaging materials, auditing our supply chain regarding labor and human rights compliance as well as fostering a more diverse culture and workplace. And the second pillar is our ambition to become customers' first choice for sustainable consumer electronics products and services. On the one hand, we are systematically expanding our sustainable product range. We have already more than 1,000 certified sustainable products in our assortment and services portfolio. And we will also encourage and help our customers to buy sustainable products and our Better Way label that you can also see on the right-hand corner in the green box, our Better Way label is intended to give our customers appropriate orientation. And in the last financial year, we saved, for instance, 11,000 tons e-waste, and we managed to resell almost 98% of products returned by our customers, and we also sold almost 200,000 green electricity contracts. So our consistent focus on sustainability is also reflected in the reorganized financing structure of our company and more details on this and much more will now be explained by my dear colleague, Florian Wieser. Over to you, Florian.

Thank you, and good morning to everyone on today's call. I can only agree with you, Karsten. It has been a quite turbulent year. Yet our financial performance proves that we have done many things right. Facing severe restrictions almost the entire year, we delivered a resilient performance. Thanks to our integrated business model, farsighted and stouthearted actions as well as the boost of our online activities, we have achieved our updated targets for the full year. Let me now walk you through our results in more detail, starting with the fourth quarter. Our prior year's fourth quarter was boosted by tender demand, which followed the reopening of stores after the first COVID wave and VAT reductions in Germany. Against this backdrop, we delivered nearly the same level of sales in this year's quarter. In EBIT terms, we even saw an increase due to improved operating efficiency, overcompensating a more competitive environment. For the full year, sales increased by roughly 4% and adjusted EBIT was on prior year's level. I know that Karsten and myself have mentioned a couple of times. However, this is a great operational achievement given the longer lasting and much more serious restrictions in the course of the last fiscal year. Let's now move on to Slide 16. Important root causes for this success are improved processes, increased competencies and lower costs. Our new operating model helped in all these regards. As mentioned in our Q3 results call, we are well ahead with the implementation of the model. We overachieved our savings target of more than EUR 100 million. Plus, we concluded 2/3 of our planned store closures in the last fiscal year. In total, we spent slightly more than EUR 120 million for these measures. The remaining EUR 55 million to EUR 60 million will be recognized in the current financial year '21/'22. Besides the finalization of organizational target structures, the expenses will be incurred in connection with elected store closures and space reductions. Coming back to our sales. The desire to shop online with MediaMarktSaturn was unbroken. The rise in online sales of 25% in Q4 was largely driven by an increase in average checkout value. The pickup ratio improved by 4 percentage points, returning to a level above 40%, which is in line with our targeted range. Our strong online performance compensated a 7% decline of our brick-and-mortar sales, which is related to and not yet restored customer frequency. In the full year, online growth was even more pronounced. This was also related to COVID restrictions, especially in Germany and the Netherlands. With online sales of almost EUR 7 billion and an online sales share of around 33%, we have done a huge achievement. They both are evident of our successful efforts we put into our capabilities and our logistics processes. During last fiscal year, we have been facing large swings resulting from store restrictions. After the end of COVID-19 related store restrictions, the online share remains on an elevated level. The clear message for us is to further drive the underlying online growth and to work on our omnichannel processes, providing a seamless shopping experience regardless of the channel. Let's move to Slide 19 and our Services & Solutions performance. Next to online, Services & Solutions performed well in the fourth quarter. The full year performance was impacted by temporary store closures and a more transactional business as less customers [ sorted vice ] in our stores. In line with our omnichannel approach, we now increasingly attract customers to our services online. As a result, we could already observe strongly improving services sales online in the fourth quarter. To mention some examples, we have upgraded our recommendation engine for online customers actively proposing the most relevant services by product. Moreover, we have increased the portfolio of ready-to-use solutions, bundling a product and a solution advance. For example, a console can be purchased with pre-installed games or a laptop is already prepared with office and antivirus software. In our stores, TV calibration is still highly appreciated by customers. Let's now move to Slide 20 and the gross margin. In Q4, our gross margin was broadly stable compared to prior year's quarter. In the second and third quarter, the gross margin was down by [ 230 ] and 20 basis points, respectively. We experienced headwinds from the online channel shift, a less favorable sales mix and a more competitive environment. Thanks to process improvements and our active inventory management, selling down stock we had secured early in the year, the adverse impact could be limited. Further, the strong performance in Service & Solutions had a positive impact on our margin. Let's move on to our OpEx development on Slide 21. As in the past, we adjusted cost ratios on this chart for any COVID related subsidies, which were substantially lower in this year's quarter. Mainly due to the success and faster limitation of our initiatives, like the new operating model, we see a substantial underlying reduction of around 50 basis points in a normalized OpEx ratio. As for any retailer, costs are a critical success factor, and we will, of course, continue to work hard on our cost base to support the profitability of the group. Slide 22 summarizes the Q4 performance of our 4 reporting segments. It becomes clear that the blended sales decrease and the EBIT increase on group level results from mixed performance among the segments. While the DACH region lost on sales and EBIT, all remaining segments contributed to the EBIT improvement. In Western and Southern Europe, a slight sales decline was more than offset by pleasing margin development, especially in Italy and Spain. Turkey contributed to the positive safety for performance in Eastern Europe in local currency, with plus EUR 10 million year-on-year. Segment Others negative EBIT contribution significantly declined. This was mainly due to a continued pleasing improvement in Sweden and lower group holding costs. Now quickly moving to reported financials and EPS with full focus on the full year. While our adjusted EBIT came in on prior year's level, reported EBIT was far higher year-on-year. This was mainly due to the Fnac Darty impairment in the previous year and the partial reversal of that in this year. Our financial results benefited from higher dividends coming from M.video and METRO Properties in this year. When considering income taxes or the tax rate, keep in mind that the Fnac Darty impairment and its reversal are nontax effective. In addition, the tax rate does not yet reflect any benefits related to the acquisition of the MediaMarktSaturn minority stake. This will only happen upon closing of this transaction. All in all, for the full year, our earnings came in at $0.62 per share. This is an improvement of almost EUR 1.30. Let's now have a look at free cash flow. As in previous quarters, free cash flow was mainly influenced by a negative change in net working capital. As you might remember, our trade payables were particularly high last year in September. This high level was caused by an elevated order volume in prior year's fourth quarter, following the already mentioned strong pent-up demand. This year, we deliberately increased our stock levels already beginning of calendar year '21. In the light of expected supply chain distortions, we built up additional stock, ensuring maximum availability during the year. In addition, the long lockdowns in Germany and the Netherlands contributed to an elevated stock level. In sum, this led to a significant deterioration of our net working capital. Regarding income tax payments, we had an outflow of roughly EUR 100 million versus a smaller inflow in the previous year. This swing is a result of the reversal of prior year's COVID-related deferrals and reductions. All in all, free cash flow stood at minus EUR 270 million and was thus EUR 740 million lower than prior year. It goes without saying that such a negative cash flow is not sustainable. The year was heavily influenced by prior year's peak in trade liabilities and our COVID-19 mitigation measures. These effects are now normalizing. As a fact, our net working capital position on September 30 was only slightly below the level 2 years ago. Thus, both factors are nonsustainable and should not be extrapolated. Let's move to Slide 25. Facing severe headwinds. We have strengthened our balance sheet, initiated cash flow measures and increased our room to maneuver. We have a cash position of EUR 1.6 billion and improved our equity by more than EUR 200 million as of September 30. We refinanced upcoming maturities early and have a sound structure consisting of a EUR 500 million bond, a EUR 500 million commercial paper program and an RCF backup line of more than EUR 1 billion. The buildup of our own logistics infrastructure and our direct supply capabilities will result in optimized stock levels. Further, we are monetizing revolving commission receivables from our telecommunication partners. Tight cost management and a high degree of operational flexibility allow us to quickly react to current external challenges. Now to Slide 27 and to the outlook. For financial year '21/'22, we expect a slight increase in currency and portfolio adjusted sales compared to the previous year. For adjusted EBIT, excluding associates, we expect a very clear increase in comparison to the previous year, which came in at EUR 237 million. Let me give you some color on our rationale behind these projections. We currently see a very volatile business. We have pictured that for you in more detail on the next slide. I will come to this in a minute. The main driver of this volatility is, of course, the ongoing COVID pandemic. COVID restrictions have been with us for quite some time now, yet the restriction, which we are currently being imposed are new. In Germany, for example, the so-called 2G rule applies. This means that you are either vaccinated or recovered to visit one of our stores. Further examples are the Netherlands where store opening hours have been substantially restricted, in Austria, which has just been in another shortly announced lockdown. These measures go along with a decrease in store traffic and potential pressure on sales and margins. We currently lack sufficient data to accurately assess the full year impact on our business and our financials. Secondly, as most market participants, we faced supply chain disruptions for certain important products, for example, within the GSM category. This is despite our early action to secure products. Thirdly, inflation has recently risen and its further trend is intensively discussed in the public right now. The further cost of the COVID pandemic is just as difficult to predict as the international supply chain situation. We can already see that our first quarter will be complicated compared to last year's high comparison base. Therefore, we believe it is appropriate to remain somewhat vague with our guidance now than we would have been otherwise. However, rest assured, that we will provide you with a more precise outlook as soon as possible. We believe that the impact of the pandemic will be less harmful than the last year. Also, we believe that current difficulties in our supply chain will normalize throughout the year, just as inflation will do. Against this backdrop, the anticipated rise in our EBIT will be driven by our Services & Solutions business, a recovery in our gross margin and further cost savings. I want to point out one additional topic you should consider going forward. In September this year, we granted the equity owning store directors in Germany, the option to transfer their shares on fair conditions. The vast majority of store directors accepted the offer. No change in responsibilities associated with the transfer of share. However, the store directors will now receive a bonus payment going forward rather than a dividend like in the past. This will be accounted for as personnel expenses. Consequently, adjusted EBIT will decrease by around EUR 15 million to EUR 20 million. In return, our minority expenses will also reduce so that the overall impact on EPS will be small. In terms of cash flow, no change is going to happen. This effect has, of course, been considered in our guidance. So let's move to Slide 28. And I just mentioned the graph on this slide shall give a better insight on what we refer to as volatility. It shows sales versus the basis of fiscal year '18/'19, that is the year before the pandemic. The swings are substantial, ranging from minus 12% during lockdown period to plus 11% thereafter. The increased volatility makes a precise prediction even more challenging. Thus, it is so important to not only take into consideration last fiscal year's quarter but also the quarter before the pandemic. We are confident that we will deliver a full year result, which will be clearly above previous year in terms of EBIT. But this does not mean that every individual quarter will be above previous year as well. Hence, my earlier comments on the tough Q1 comparison base. This completes the financial section, and now back to you, Karsten.

Thank you, Florian. Look, I would like to now give you an update also from my perspective on the current environment and the trading period. The general market conditions, as we have now said numerous times continue to be more challenging and uncertain compared with the pre-COVID times, that's clear. And we are dealing with COVID-related restrictions, and we are working through supply chain distortions together with our suppliers and partners. And since the beginning of COVID, we have been preparing our business for certain volatility. So this also -- the following also makes us confident we have demonstrated again and again that we can overcome challenges, and there will also be a time after COVID with less COVID restrictions, and we are well-positioned for this new normal after COVID. Let me also comment on another topic that caused some speculation. You've heard that our IT systems were subject to a cyber attack in early November, 8th of November to be precise. We were able to react instantly, initiated immediate countermeasures and ensured that the spread of the malware was contained. At all times, we could serve and sell to our customers in our stores and online, albeit with some limited functionalities when combining online and offline. In particular, the pick-up in store wasn't available for a few days. In parallel, the teams of our IT partners and our own IT teams worked tirelessly and successfully to restore our systems after several days. And thanks to this outstanding performance of our people and the great cooperation with our IT partners, we were able to go back to normal without any restrictions within days. And as of now, we have not registered any new attacks, and we have no indication that any customer employee data has been compromised or stolen. And also, there is the question, and I will just say to answer it in one go. The question, have you paid anything? No, we have not paid any ransom. Let's turn to Page 31, and give you a bit of an update on Black Friday and the peak season. The situation around supply chains and product availability has, of course, also kept us busy over the last period. And we talked about it also throughout actually last year how we were preparing for that. So we started the new fiscal year well prepared and have increased our inventories early on during the last year, as a precautionary measure. And in individual categories such as, and I would say, especially telecommunications, the situation is volatile and some orders could not be met in full by our suppliers. But it's also fair to say when customers try to find a product, once you definitely try with us. Just last week, for example, we received a shipment of 20,000 gaming consoles and we sold within hours, and there are more consoles actually landed, already are on the way. October and November were characterized by centrally supported and successfully implementing campaigns during the Black Friday period and the run-up to Christmas. In October and November, demand momentum and frequency in our stores did not reach the exceptionally high level of the same period last year. But even so, our current sales performance is stronger than in the first month '19/'20, so 2 years ago. Let's turn to 32. Ladies and gentlemen, we have taken important steps and made tangible progress last year despite all the challenges around. We have the right strategy and execution to be successful with a strong team, the right omnichannel strategy, an attractive range of products and services, strong brands driving very good customer demand, trustful relationships with our partners and suppliers. And most importantly, our commitment to excellent customer service. 1 in 3 Europeans have shopped at MediaMarktSaturn at least once in the last period, and this is the potential to build even stronger on and build deep customer relationships. And in a nutshell, how I would look at the business? Where do we stand today before Christmas 2021 and what do we stand for? Consumer electronics remains an attractive market despite short-term volatilities. But we operate short term without losing sight of what's important midterm. Secondly, we are Europe's largest consumer electronics retailer with strong brands and leading positions in 8 countries, but we won't rest. Thirdly, we demonstrated resilience in 2021 and accelerated our transformation. We continue to become more adaptable. Fourthly, we became faster, reduced overhead and simplified our organizational structure because we cherish speed and simplicity. Number 5, as an omnichannel retailer, customer excellence is what defines us. We make it personal. And finally, sustainability is an integral part of our strategy. We see it as both a commitment towards society and a business opportunity. So with that, thank you, everyone, for your attention. And I will now turn the call over to the moderator for your questions. Thank you.

[Operator Instructions] And the first question is from the line of Volker Bosse with Baader Bank.

Volker Bosse with Baader Bank. It's good to hear and congratulation that you were able to successfully handle the nasty cyberattack. Great achievement. I would like to start with 3 questions. First would be on the gross margin. It declined by 100 basis points in fiscal year 2021 -- for fiscal year '21/'22, you now guide for a very clear EBIT increase. Does that include also gross margin improvement in '21/'22. That will be the first question. And the second question would be on the Q1 trading update, according to the HDE [indiscernible], the stationary retailers in December suffered massively from the introduction of the 2G restrictions, which you also mentioned in Germany. So can you confirm what does it mean for your business? It's not about concrete figures. It's more about the sales expectations for December, right? So how much does that impact in December, this new restriction rules 2G, which we never had before? And the last question, the third question would be on the EGM. So at the AGM at the 9th of February, and then you have an EGM at the 12th of April. So I guess as we see in the context of the Kellerhals issue. So could you perhaps elaborate and remind us on the schedule, when do you expect to solve the Kellerhals issue? And what is the background of the EGM after -- just some weeks after the AGM?

Thank you, Volker, for your 3 questions. I will take the quarter 1 trading update question and Florian will comment on the gross margin and on the EGM. And he will start with the gross margin.

Yes, I'm happy to do so. And so provided that we have given an EBIT guidance with a very clear increase, that actually means that we are also optimistic for the gross margin development. So looking at the various factors, so please keep in mind that in the last fiscal year 2021, the temporary closure of our stationary business weighed significantly on our gross margin. Moreover, our online offerings have been in very strong demand. So we do not think that we will have, again, online share of 30 -- of above than 30%. So there will be basically also some compensation from the channel shift. And last but not least, our growing Service & Solutions business will also significantly contribute to the recovery of the margin as we have already seen in the fourth quarter. So yes, we are very optimistic in line with the EBIT guidance also for the gross margin and these 3 factors will contribute from my point of view. Second question regarding the Kellerhals transaction. So we already published earlier this year, like an ad hoc message communicating the way forward. So as you know, there have been 2 ways to Rome, so to say. And we took some time to basically study both options, and we went for the most robust options. So yes, our clear intention is to make this transaction as safe and robust as possible. And that means now that we have 2 annual general meetings next year, first one in February, the regular Annual General Meeting where we will pay dividends. The dividend will lead to basically an extension of the voting rights of the preferred shares. And then in April, the second General Meeting then in 2022 will be an extraordinary one. And this extraordinary Annual General Meeting in April, we will basically resubmit the transaction so that we are very optimistic to conclude the transaction next year.

Thanks, Florian. Look, through the Q1 trading update question, your specific question around 2G. So in [indiscernible] restriction in retail and what that means on the high street and the traffic and the demand. Let me reiterate just one thing because I think that's important. So as I said, October, November this year, we're clearly below the exceptional quarter, comparable quarter last year, which given -- or last year was, doesn't come to me as a total surprise. But October, November this year in total was better than 2 years ago. And now the real uncertainty comes with this 2G measure in the restriction in December because clearly, this does lead to muted traffic on the high street. And this is dynamic quantity, about 35%, sometimes 40%. But it also means that we shift online. But of course, this is uncertainty and will clearly put pressure, say, on retail. And that's where the main uncertainty stems from. But let's also be clear, and that doesn't make it easier. Last year, we had to close our shops in Germany as of 16th of December. Let's assume that at least 2G remains open till the end of last year, that also means comparing to last year, starting with 16th of December, we should see some sort of catch-up effect. This will not close the gap completely, that's clear, but it will definitely help. And then if you drill down into the various countries, again, the situation is more complex. So in the southern countries we see much, much less impact. We had closed in Austria. So it's just a, say, more complex situation. But as we did in the past, we're dealing with it. But this is where the uncertainty comes from.

Yes, crystal clear has a lot of ups and downs in year-on-year comparison. Absolutely. Very helpful.

And the next question is from the line of Clement Genelot with Bryan Garnier.

I have 2 questions on my side, if I may. The first one is on promotions. Is the current promotion landscape in many is still intense with notably Amazon leading of a pack? And my second question is whether on the inflation. Do you see any raising labor inflation and especially in Germany?

Thank you, Clement. I will comment on the current promotional environment, and Florian will take the labor inflation question. So on the current promotional environment, yes, it is still competitive. Some players, of course, even in the shortage and now muted traffic try to basically still gain market share through promotional pressures. There are certain categories where price pressure is less pronounced. So it also depends on the category. But one important thing to note is that you see actually price aggression with a trick -- with a customer trick. So you get offered a good price, but the product is delivered in January or February. And we see actually that customers choose availability over price when it comes to having products available. And we see this demand clearly in our online stores, in our bricks-and-mortar stores. And as I said earlier, as a customer, when you want to have the high chance of finding product available, you should definitely look with us. So it's a mixed bag. And of course, you see all kinds of pricing retail tricks, but again, nothing that we find particularly say unusual. Most important is, again, the evolution of the traffic. We work very hard with the suppliers on general availability and the rest we will manage.

Yes. Second question regarding labor inflation. Yes, inflation, as I already outlined in my speech is currently bothering us and all the market participants, so we see that especially logistic costs are increasing, freight rates from China are, yes, on very high levels. And first signals we see that basically this -- also labor inflation in the logistics sector is trespassing to retail. For ourselves, it's too early to judge. So of course, we have also considered some wage inflation for our personnel expenses in our budget and our guidance for this fiscal year '21/'22. But as I said, the precise impacts which will then be negotiated between the tariff partners is too early to judge. And our assumption in the guidance basically is that this high inflation levels will normalize in the course of the year, in-line with what we currently hear from the central banks.

Understood. But at what -- at this point of time, no real labor inflation in the stores or in the warehouses, right?

So for ourselves, like for our own workforce, no. So there's no significant impact so far. But as I said, the new fiscal year is still young, and we have to monitor closely. And the second, yes, impact, as I said, is in the logistics and the supply chain. So if their costs are increasing, suppliers tend to trespass these higher cost to us, and there we can already see some impact.

And our next question is from the line of Fabienne Caron with Kepler Cheuvreux.

Three questions from my side. The first one in a normal world, so we post [indiscernible] a transaction and given the fact that you have moved or you have bought shares from a store manager, what would be the level of minorities in percentage that we should have for the group? And can you just as well give us a qualitative criteria or what will be the bonus for store manager based on? This will be the first question. The second question is, what are the lessons that you take from the cyberattack? Because as far as I'm aware, it didn't impact on the IT system that was cloud-based. So does it mean that you will accelerate? You moved from your IT to the cloud. And the last question, I saw a research from a company called Profitero who did a survey regarding 15,000 products over the course of 2021, comparing price between different operator in Germany and MediaMarkt was always more expensive than Amazon. So I wanted to have your view on this point.

Sorry, Fabienne, we're just waiting for the last question, again, to be a bit clarified. Look, I was...

It was in Germany, by the way. Sorry. I didn't...

Yes. Okay. Okay. Florian will take number 3. Maybe there is also a follow-up on the first one. I would say a few words, Florian will add to this, and I will take the second one on the cyberattack. And then Florian will take the third one. Look, I will highlight the principle. Obviously, we have a scorecard in our stores that is based on very important different factors. One, of course, is sales. One is profitability, another one is margin. But also very, very important is the customer experience. And what is also very important, that will evolve over time for me, personal soft factors like people leadership, how we manage teams in the stores to provide that experience will be some adjustments. So the trick is always to have the right targets, of course, that drive the performance. At the same time, it's not just one KPI, it's several, but at the same time, not too many because it has to support how we have to run the business as an experienced business. So again, sales, profitability, bottom line but also margin, NPS, customer experience and of course, how we lead and manage our people in the stores, these are critical success factors. I'll just look at Florian, is there anything you would like to add?

Just maybe I think one question was regarding the remaining minorities we have. So maybe to give you some color on this one. In Germany, I think we have between 20 and 30 store managers left to have minority stakes. So you can see basically looking at our store portfolio of more than 400 stores, the vast majority of store manager is accepted, and also in other countries that basically the minority stake model has been terminated in the past years. So there are just a few countries left which may have minority stakes, just maybe to give you also some colors on the minorities.

Well, and Fabienne, to your second question, lessons from the cyberattack. Let me say, obviously, this is a highly sensitive topic because in a semi public conversation, of course, we, on the one hand, talk to you, which we love to do. On the other hand, you kind of feel always you also talk to the other party, which is based on criminal behavior. So it's always a bit sensitive. But let me say the following. First and foremost, we invest a major part of our business and focus is -- has been -- throughout is on IT security. I think, absolutely, yes. And that was, I think, also one of the main reasons why we are in a position to react so fast and also with the support of our partners, we're able to restore services within days. So that's point #1. Clearly, we are taking in -- during such a tech times, additional precautionary measures in terms of reaction times, monitoring what kind of system changes you allow for, you don't do that much anywhere in the high season. But all of those precautionary measures. Second -- and thirdly, clearly, we have also an ongoing review of what we can do. And by the way, our cloudification program, that's just on the way, we will also probably accelerate. That's also clear. But rest assured, we will continue to make IT security a top priority and make it as safe as it can be, because it's a race against criminal forces in the outside world. So I hope this gives you some kind of background to the question.

Okay. And I also try to answer your third question, but I have to admit that I do not know the Profitero research. So -- and this will be some homework for us, for me half of the call, but I can comment a little bit on pricing and what we do. So maybe first comment, pricing is one of the areas where we really invested a lot in the last years, and we are operating with an AI-based pricing platform. So it's highly automated, it's sophisticated. And we ensure that for the most relevant products, so let's call them top 300 or whatever, we basically ensure that we are priced competitively against relevant competition. So for these products, it should be -- if there is any more expensive price, it should be rather an exception. But that's my second comment now, looking at the current situation. So if this is a recent research study, what we see at the moment that the markets are in an exceptional state. So we have scarcity and products, especially in telecom. So there's not a huge supply. So if you look at MediaMarkt, you can be sure that if we offer the product, there is sufficient availability and that the lead times are not long. So I always -- also invite you if you compare the offerings at other marketplaces, then basically, you should also consider the lead times. So this is, I think, the picture or the analysis, which should be done in the current situation. So I think that's the current situation. And I will, as I said, have a deeper look into Profitero.

Just a follow-up on that, Florian. Do you include the delivery cost as well when you check prices because most of the time, price may be similar, but then when it comes to delivery cost if the customer is flying then you may be tempted to go back to Amazon just not to pay the delivery cost for MediaMarkt?

Yes. Like also looking at delivery costs, it depends, of course, on the value you spend, depends on parcel versus 2 man handling, but we also ensure that delivery costs are competitive. Now if you mentioned Amazon, you also have to compare basically whether it's a prime or nonprime offer. So looking at delivery basically makes the pricing more complex. So it's not compared with one by one. But as I said, we ensure that we have a competitive offer and also delivery is considered in the overall pricing mechanism.

Fabienne, just one addition from my side because this question gives me the opportunity to share with you just one observation I had when I came in fresh. So we -- first, we will look into the study and see what we can take out from this. But actually, our pricing is very sophisticated in real-time. So as Florian said, it's machine learning based, and we change prices, product sharp several times during the day. And of course, we use all sorts of input factors, because you don't always have to have the best price, clearly to maximize margin. So we look at price comparison sites by products. We look at our own conversion rates. We have data on footfall in the stores, feedback there. And of course, we also monitor what's going on, on the Internet in terms of pricing on competitor sites, et cetera. So we have very good overview on average pricing, category pricing and sharp product pricing. So this is highly sophisticated, but definitely, we'll have a look at this study.

Okay. Can I just follow up on 2 financial questions, if I can. Florian, also the EUR 55 million cost for this year. Can you remind us how much will be cash or not? And the second question, what tax rate should we take for this year? And is it fair to assume that the positive impact for the convergent transaction on the tax rate will be more on '22/'23?

So first question, I think, was the one-off for the non program. So the delayed or deferred -- the deferred one-off. So yes, this will be cash. And then the second question on tax rate. So you see that the extraordinary Annual General Meeting is on 12th of April, then we will have to see whether we get some deferral by people who try to attack potential decisions of the AGM. Then we have to see how lengthy this process will be. If we run through smoothly, and we will still be able to use tax loss carryforwards in this fiscal year '21/'22. And of course, we are already preparing ourselves that we can use these tax loss carryforwards. So if the transaction is closing as planned in time, we will be able to use it this year. If there should be some delays due to this public sports in Germany, which we discussed already a couple of times, then it will be rather '22/'23.

[Operator Instructions] And the next question is from the line of Nicolas Champ with Barclays.

First question is, could you please share with us your CapEx guidance for next year, please? The second question is that in the context of accelerating inflation and not only consumer ethnic products, but overall inflation, do you see any change in shopping behavior from customers? I mean any trading down phenomenon, for instance, in some countries. And third question, I mean, could you be a bit more precise where do you see your net working capital will evolve next year? I mean I understand firstly that last year has been a bit unusual. You expect things to normalize. But could you please guide maybe a little bit more precisely regarding your expectation in terms of net working capital for next year?

Thank you, Nicolas. So Florian will comment on the CapEx guidance for next year and also give a bit more light on the working capital. Look, on the inflation overall, we -- this, of course, is looking again a bit into the future with a bit of uncertainty. We have seen, of course, again, inflation rises that we hadn't seen for so many years. But if you drill down where it comes from, it's heavily influenced in many markets by, say, energy prices. The question, for instance, on this inflationary pressure is how is also government is going to deal with that? Is that going to rise? I would see there is a competition between inflation, available spend and how consumers are willing to spend also versus, say, the attractiveness of categories, which product is actually in the pipeline because this is a major driver for customary demand. So when you have to see basket shift. And that, I think, is still the beauty in consumer electronics that we continuously very attractive products that then shift behavior. But again, the question is now on monetary bank's reaction to ease the pressure. Should inflation rise further at some point? Of course, we will see probably a bit of slower demand. Right now, I would not attribute the main effect that we see today, of course, to inflation. It will -- may cause some pressure. I'm more keen on having everything open back to normal, dealing and having a good frequency. So it's a bit speculative, probably, unfortunately, I can't give you probably any more insights than that. We can be more precise, say, on CapEx guide because this is what we do.

Yes. Regarding CapEx guidance. So we expect the recovery for this year's -- fiscal year '21/'22. So we want to go to a direction of 1.5% of sales. And meaning that CapEx will go above EUR 300 million. And reason for that is, obviously, during COVID, the store closures, we could not do our regular maintenance program and basically also refurbish and upgrade our stores, and there we will now basically do the job and yes, refurbish and maintain the stores, as I just said. And regarding net working capital, so you can expect a normalization. So we had an extraordinary positive development due to the pent-up demand in '19/'20 and now a normalization in 2021. So a huge net working capital swings for this fiscal year, it should normalize. In the midterm, you should expect slightly decreasing net working capital. The reason for that is that we more and more go for direct supply from our suppliers. And with this direct access to products, basically, the net working capital is slightly going down.

And there are no further questions at this time. I hand back to Karsten Wildberger, CEO, for closing comments.

Well, ladies and gentlemen, thank you for your time and your questions. As usual, if you have any follow-ups, any further clarification, please feel free to contact our Investor Relation's team. And now let me conclude today's results call. I wish everyone a happy and joyful holiday season, good health. So take care, stay healthy. And if you still need some Christmas presents, by the way, you know where to find them. All the best. Bye-bye.