Inflation and weak consumer behavior have resulted in the Otto Group recording losses and slipping into the red. The boom in online trading during the Corona years is over for the time being, and the ongoing wars and inflation have dampened people’s desire to buy. Alexander Birken, the CEO of Otto, predicts that it will take some time before the situation improves and the company regains its former profitability. He said: “It will take two years to return to old earnings strength.”
Despite these challenges, Otto continues to invest relentlessly to stay at the forefront of the rapidly changing online retail market. Investments in the three-digit million range are planned for the 2023/24 financial year alone, including in the delivery service and the expansion of the group’s own logistics.
The business figures for the 2022/23 financial year show that Otto recorded a loss of 413 million euros (until the end of February). In the previous year, which benefited from the online boom during the corona pandemic, the company still made a profit of over 1.8 billion euros, after around 842 million euros in the first year of the pandemic.
At EUR 16.2 billion, sales in 2022/23 were at the same level as in the previous year (EUR 16.1 billion). The internationalization of the group, which had already been initiated under the former CEO Michael Otto, proved to be a support. While domestic sales fell by 9.2 percent to 9.0 billion euros, business volume abroad rose by 9.6 percent to 7.2 billion euros.
Alexander Birken, CEO, was disappointed with the results and explained: “The figures show that we were not able to escape the market trend either. The very eventful 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.”
Birken partially attributed the decline in domestic sales to a return to pre-pandemic consumer behavior. People are spending more money on travel and culture again, and with the end of the corona measures, more and more people are shopping in stationary retail again.
As far as the prospects for 2023/24 are concerned, the Otto Group Board of Management was cautious. Birken said that while there will be normalization, he can’t say exactly when that will happen. He expects a stable level of sales and earnings before interest and taxes (EBIT) in the low three-digit million range. In the 2022/23 financial year, the EBIT was only 22 million euros. There is a possibility that the current year will close again with losses.
Birken had already pointed out a year ago that price increases, for example, could not be passed on in full to customers, which had a negative impact on profits. Ultimately, customers also spent less money than expected.
He went on to say: “The high volume of pre-orders made on the basis of completely different economic forecasts for 2022/23 and the resulting need to sell through discounts also had a negative impact.” For the current year, the company has a “much more defensive purchasing strategy”. tracked.