Ceconomy AG
XETRA:CEC
Earnings Call Analysis
Q1-2024 Analysis
Ceconomy AG
The earnings report paints a picture of steady growth, detailing how the company increased sales by 3.7% to garner a robust EUR 7 billion in sales for the first quarter. This top-line performance indicates that the company's strategic focus has allowed it to weather a challenging retail environment successfully, particularly by expanding its footprint and gaining market share in key European markets like Austria, Belgium, the Netherlands, and Italy. A commitment to strategic execution is evident as they aim for a 'slight increase' in currency and portfolio-adjusted total sales and expect improved adjusted EBIT.
Notably, their digital strategy is proving effective with a 3.9% year-on-year rise in online sales and further growth in their in-house share to 26.4%, speaking volumes about their goal to fortify online capabilities. The success of their marketplace, with ongoing expansions in the Netherlands and Italy, serves as further testament to their robust and profitable approach to e-commerce, and a 125% increase in gross merchandise value demonstrates the swift scaling of this platform.
Their Services & Solutions segment, which faced headwinds in Spain and Italy, saw a rebound with approximately a 4% income increase. This turnaround signals effective tactical responses to previous challenges in those markets and showcases operational resilience.
Efficiency initiatives have led to a 50 basis point uptick in gross margin, contributing significantly to a 7.8% growth in adjusted EBIT of EUR 248 million. This gross margin improvement, coupled with a 16% year-on-year increase in EPS to EUR 0.30, reflects sound financial management. The company further bolstered its position by generating a considerable EUR 1.5 billion free cash flow.
Certain product categories, such as gaming, mobiles, and energy-efficient appliances have seen impressive sales growth, with gaming leading the charge at a 56% increase. This performance indicates the potential for increased demand in these specific segments and points to customer preferences shifting towards premium and eco-friendly products.
Sustainability has become a catalyst for the company's growth, with a strong demand for their BetterWay line signaling a substantial 14% sales increase. This underscores their positioning and strategy as not only benefiting from, but also contributing to a more sustainable future, which now accounts for 12.1% of their total sales.
The company is actively embracing AI, with initiatives aimed at enhancing both workforce efficiency and customer satisfaction. The deployment of AI-driven solutions across various touchpoints aims to make interactions with customers smoother, more efficient, and more personalized, thereby fostering loyalty and engagement.
The company concluded the quarter with a solid liquidity position of EUR 2.4 billion and aligned with expectations, a significant EUR 1.5 billion free cash flow. This stability is indicative of a healthy operational foundation and effective working capital management, which remains a primary operating lever.
Despite the competitive nature of the consumer electronics sector, the company has successfully maintained its market share, signaling effective strategy implementation and transformation. Looking ahead, they are focused on key areas like customer experience and operational efficiency, with a positive outlook for revenue contributions across all segments and an anticipated increase in adjusted EBIT for the fiscal year 2023-2024.
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Ladies and gentlemen, thank you for standing by. Welcome and thank you for joining the CECONOMY AG Q1 2023/2024 Results Call. [Operator Instructions]I would now like to turn the conference over to Fabienne Caron, Vice President, Investor Relations. Please go ahead.
Good morning, everyone, and welcome to our Q1 results presentation. On today's call are Karsten Wildberger, our CEO; and Kai-Ulrich Deissner, our CFO.Before we start, let me remind you that the presentation slides can be accessed through our website. During today's call, we will be making certain forward-looking statements so please refer to the disclaimer for more information.Let me now hand over to Karsten.
Thank you very much, Fabienne, and good morning and welcome, everyone, to today's call. Together with our CFO, Kai Deissner, I would like to update you today on our Q1 results. We will highlight the progress we have made in executing our strategy and provide you with an updated outlook.Let's first dive into some very good news, highlighted on Slide 3. Our important first quarter of this financial year has seen a very strong performance, and this extends our consistent growth over the last 12 months. For the past 4 quarters, we have delivered very solid results, a steady pattern that also mirrored in our strong start to the first quarter.And despite facing a very challenging retail environment, we have managed to stand out through our strategic focus and successful execution. We are not just following market trends, we are actively shaping our own business outcome. We are gaining momentum in implementing our strategy and are moving forward with realistic optimism and confidence and our Q1 results confirm our positive outlook for the financial year, and give substance to our vision of renewing our future.So in these market conditions, we as a group managed to increase our sales in the first quarter by 3.7% to EUR 7 billion we gained market share in Austria, Belgium, the Netherlands, Luxembourg, Spain, Italy and Turkey. And as a group, our market share was stable based on GfK data.And in terms of profitability, we continue to improve as evidenced by an adjusted EBIT of EUR 248 million, a growth of 7.8% compared to the previous year. Our improved gross margin is contributing to this increased profitability and the gross margin grew by 50 basis points, a topic that Kai will discuss in a moment. And we remain firmly focused on our financial targets.And I'm pleased to announce a key milestone on Net Promoter Score. NPS has risen to the highest value of 56 so far. And it underscores our successful focus on strengthening customer satisfaction and customer loyalty.Ladies and gentlemen, given this very strong Q1 performance, we confirm our outlook for 2023-'24. That means we expect a slight increase in currency and portfolio adjusted total sales and we expect another clear improvement in adjusted EBIT.So let's please turn to Slide #4. We've been working on different levers to deliver these strong results. Our performance was underpinned by a robust brick and mortar business, where we saw a positive 3.7% year-on-year increase in sales. And we've also grown online sales in Q1 that were up 3.9% year-over-year. And in addition, our in-house share grew to 26.4%, an increase of 60 basis points over last year.And this growth highlights our goal to bolster our digital presence and enhance our competitive position in the online market. And we made significant progress also in our growth businesses as detailed in our strategy and regularly updated during each earnings call. And these growth businesses include our marketplace, our services business, Service & Solutions business and retail media. And with our marketplace, we offer our customers to remind everyone an attractive extended and fast-growing product range online. And for us, it is another source of income from reseller commissions.The marketplace is a very profitable and lean business and does not carry stock risks. And currently, the marketplace is live in Germany, Austria and Spain where we achieved a 125% increase in gross merchandise value in the first quarter. And the marketplace offering for our customers is growing. By the end of December 2023, we had 1,300 resellers joined our platform offering 1.7 million products. And the rollout in the Netherlands is planned for March and Italy is following soon after.And our Services & Solutions business is on a steady growth trajectory. We increased Services & Solutions income by roughly 4% in the first quarter. And looking at our countries, we saw a strong Q1 performance in Belgium, Netherlands, Luxembourg, Spain and Turkey. Additionally, as you might recall, our operations in Spain and Italy faced challenges last year due to tough market conditions. However, I am pleased to report that our dedicated efforts in Spain and Italy are paying off, demonstrated by the positive trends and profitability we are seeing.Turning to our financial performance, we've once again enhanced our gross margin this quarter, achieving a 50 basis point increase. A significant factor behind this improvement was our enhanced product margin. And this underscores our very good execution and management throughout the peak season.And our EPS was strong as well and increased by 16% year-on-year to EUR 0.30. And last but not least, we successfully generated a free cash flow of EUR 1.5 billion and increased our liquidity to well above EUR 2 billion. So, in conclusion, our unified dedication to implement our strategy has laid the foundation for growth in our key strategic business areas.Slide 5. I'm very happy to report that, this year's peak season was very successful for us, highlighted by particularly strong sales in November and December. And let's examine a little bit the categories contributing to these strong results. The gaming category for example saw a significant 56% increase in sales from consoles to accessories, which was supported by the release of new games. And in the mobile segment, we generated a 13% rise in sales over the previous year, with premium products being particularly popular, as customers also took advantage of our trade-in offers. And floor care products continue to perform very well, and we've experienced a growing demand for energy-efficient washers and dryers.Overall, we're observing emerging trends such as the growing interest in augmented and virtual reality goggles for gaming and advanced mobile technology, indicating an increasing consumer interest in innovative as well as sustainable products. And this trend was also clearly visible at CES in Vegas last month, the world's largest Consumer Electronics Show.Once again, CES was the showcase for a wide range of innovative products. So what were the trends? Well, it was from the latest in flexible display technology to autonomous vehicles to smart home appliances, that leverage artificial intelligence for greater energy efficiency and convenience, and these innovations are driving change. What does this mean for us? Where can actually consumers find these cutting-edge devices? Exactly, in our MediaMarkt, MediaWorld or Saturn stores. And our role as a trusted advisor is to guide our customers through the rapidly evolving market, helping them find the right product for their needs.So, on Slide 6, as Europe's leading consumer electronics retailer, we take our responsibility seriously. Sustainability is the key to future competitiveness and the winners will be those companies that make sustainability part of the business, integrated into the strategy and benefit financially from it. And our energy-efficient product line, BetterWay, has seen a significant increase in market demand, with sales up 14%, and now representing 12.1% of our total sales, a remarkable increase of 200 basis points.And demand for energy-efficient appliances continues to rise, as illustrated by the very strong growth in sales of our A-rated washing machines and dishwashers in the first quarter. And in addition, our customers are increasingly turning to refurbished and trade-in products, recognizing both the environmental and financial benefits this provides. And this shift in consumer behavior is a big opportunity for us.And as you can see on the next slide, we continue to make progress on our 9 KPIs that we communicated at the Capital Market Day and on which we update you regularly. I won't go into detail on all of them, but I would like to highlight that we have seen good growth rates in loyalty members, and we are also well on target with the modernization of our stores, including our Lighthouse openings.And we are pleased to report strong growth momentum in our marketplace, which grew 125% in Q1 year-on-year to EUR 81 million in gross merchandise value. And Retail Media is exceeding expectations as we grow our offerings such as sponsored brand ads and extend retail media products to our marketplace sellers.Now, I'd like to turn your attention to our focus areas that we highlighted also on our Q4 call, Service & Solutions, online and private label. For Services & Solutions, the upcoming official launch of My MediaMarkt Plus, MySaturn Plus in Germany, our subscription model for repairs is planned for the second quarter in Germany after successfully completing our pilot phase.And in our online segment, we are continuing our efforts to grow organic traffic and enhance our online experience for our customers. And we were able to successfully grow our online business versus last year. And in private label, we have generated encouraging sales growth in 7 countries, but more to do. We are fully dedicated to these 3 areas, and they are a crucial part of our strategy.Let's turn to Slide 8 and a slightly different topic, but important. Everyone is talking about AI. And at MediaMarktSaturn, we spent the last few months working very hard on the use and integration of promising generative AI solutions into our business framework. About a year ago, we launched a dedicated initiative to grasp the potential of this technology to benefit both our workforce and our customers. And we collaborated with top-tier industry partners, and we have crafted relevant and scalable GenAI solutions that quickly transition from early-stage prototypes to practical operational tools.Central to our approach with GenAI is the conviction that human-AI collaboration holds immense potential, and we view this technology as a powerful tool in augmenting our employee's capabilities.So more specifically, we've established a GenAI framework utilizing various large language models ranging from ChatGPT, Llama, Meta- Llama to Stable Diffusion. We've selected 7 use cases for initial deployment from over a hundred ideas proposed by our staff. And this is the start of our journey. So we've rolled out resources like our so-called GenAI sandbox and the select library, creating a secure and creative space for our employees to delve into and apply GenAI within their daily tasks.Of course, we are vigilant about adhering to AI Safety Standards and EU Regulations. And for our customers, GenAI has the potential to transform and tailor the shopping experience through initiatives like Care chat & Voice Bots. And we offer their instant round-the-clock support.And with new features like instant translations in contact centers, interactive guides and sales help, we aim to make our processes smoother, more efficient, reduce errors, and most importantly, make our customers happier and more loyal. So I'm optimistic about MediaMarktSaturn embracing a leadership role in utilizing this technology in the retail sector. Ensuring, our initiatives are both impactful and socially responsible.So before I hand over to Kai, let's turn to Slide 9, because I'd like to briefly update you on our brand, which is a very important topic because our brand is strong and vibrant. And I'm very excited to share with you how we've successfully repositioned our brand to focus on what we call experience electronics.In our ambition and drive to strengthen and differentiate our presence in the market, we've adopted a purpose that reflects the unique value we offer. And this is what we call experience electronics. And this ethos is captured in our compelling new campaign platform, Experience What's Possible. This is the third wave of evolution of our new brand positioning. And our journey began with a clear definition of our brand purpose. We create experience electronics to enrich people's lives. And we had a very impactful launch of Let's Go campaign in October 2022.Our marketing is bold and distinct, modern and fresh, and it's hitting the mark of the new Zeitgeist. It's also a declaration and statement of our can-do spirit that puts customers at the center of everything we do.And beginning of this year, we're excited to unveil the next phase of our brand evolution, Experience What's Possible. It's not just a tagline. It's a narrative that we together are ambitious to deliver exceptional customer experiences. So you will see us talking about all these experiences. You will see us showcasing what we do in repairs, how customers can save energy costs. We will talk about trading. And you will see this also in a much more colorful, more playful, interactive, more digital way. And we will also use our iconic swirl in a new way and liberate it in a creative way. Much more to come, but I thought this is a very important update on the brand I would have wanted to share with you.And now, I will hand over to you, Kai, who will give you a deeper insight into our financials.
Thank you very much, Karsten, and good morning to you all. Let me guide you through the financial details of our first quarter, which Karsten already summarized, turning to Slide 11. As you can see, sales momentum was strong in Q1 with a 3.7% growth year-on-year. Please do keep in mind, this is adjusted for currency, portfolio changes, and it is pre-IAS 29.As Karsten already highlighted, we had a good peak season and successful marketing campaigns. You take it for the whole quarter, we're pleased to see that our sales growth was driven by both bricks and mortar and online. And per country, we saw good sales development in Benelux, Spain, and Turkey, while Italy remained under pressure. In the DACH region, all countries except Austria were soft, particularly at the beginning of the quarter, and then this changed towards the end of the quarter.Secondly, group-adjusted EBIT increased by a pretty healthy 8% to EUR 248 million. That's a 30 bps margin improvement to 3.5%. And as Karsten highlighted, this now makes the fourth consecutive quarter of EBIT growth year-over-year. Behind this, again, a better gross margin and continuously strict cost management. So after this good start into the New Year, we do remain on track to deliver our guidance.Let me now turn to our operational performance on Slide 12. As a quick reminder for the segment structure before I go into the numbers, we have now bundled all administrative and cross-divisional functions in the others segment. You will find the details of this in the appendix of the presentation.Now, as you can see, West and South, as well as East, were the main drivers this quarter. To start with, in DACH, sales declined by 2.9% in Q1, however, as I indicated, momentum was quite different. The soft environment, which we had seen for the back-to-school season, initially continued in October, but then sentiment recovered during the peak season in November and Christmas business in December.In terms of profitability, EBIT in the region declined by EUR 15 million due to the weaker top line, in particular at the beginning of the quarter. By contrast, in Western and Southern Europe, we recorded a good sales growth of 2.4%. We achieved high single-digit growth in all countries except Italy. The market there remains challenging, but please do note that we are back in the run and gained market share for the first time since Q3 2021-2022.We are also pleased to see that our performance in Spain continues to improve, with high single-digit sales growth and continued market share gains. Then profitability, our adjusted EBIT increased by EUR 29 million, that translates into a margin of 2.7% and an increase of 120 basis points year-over-year.Spain and Italy were the main drivers behind this recovery, and this performance in Italy is all the more impressive given the weak top line. Essentially, we were successful in improving our gross margin in Italy, even while controlling costs.Finally, in Eastern Europe, once again Turkey continued to be the main driver as demand did remain strong. Still, we do stay cautious for the remaining part of the year and expect the growth to ease somewhat. We recorded an improvement in adjusted EBIT, not just in Turkey, but also in Poland.Now, turning to Service & Solutions, our overall sales in Service & Solutions, and this here does include Retail Media, Marketplace commissions and fees, as well as deliveries. This Service & Solutions business increased by 3%. In terms of service categories, warranty extensions and Retail Media had a strong performance, while demand for power service, that's mainly our installation business, was softer in this particular quarter.Our first-party online sales increased by 3.9% after currency and portfolio effects and now reached EUR 1.8 billion in the quarter. As Karsten highlighted, we are taking further measures to boost our online performance even further this year. What continues to build very strong momentum is our third-party marketplace. Their sales have again strongly increased with 125% growth. As a whole, our online share thus rose by 60 bps to 26.4% in the quarter.Coming back to our EBIT development on Slide 14, we've again improved our gross margin in the quarter to 17.6%. That represents a 50 basis points increase. The main driver this quarter was clearly the improvement in goods margin. One of the key reasons was a well-managed product mix. I would highlight especially good sales of large domestic appliances, so what we usually call white goods. Please also note that, all regions improved their product margin in the quarter, so we did manage all of our marketing and promotional campaigns in a really disciplined, good way.Our OpEx ratio slightly increased by 20 basis points to 14.6% of good sales this quarter. As already highlighted in previous quarters, we do feel cost inflation in several areas like personnel, location, energy cost, but we continue to work diligently against these headwinds to mitigate the OpEx increase with very strict cost management.So, in this context, let me give you an update on our efficiency programs, especially the main program which we call Drive and which targets SG&A efficiency, and at the same time not just a more efficient but also a more effective organization. As for the savings, we now have a run rate around EUR 60 million and still expect this run rate to more than double to EUR 130 million from the end of this fiscal year.For the restructuring cost on the right, we expect around another EUR 30 million this financial year, which then together with the last financial year brings us to the EUR 100 million which we have been quoting for quite some time. In this particular Q1, which is the busiest quarter of the year, we booked nearly no restructuring cost, but really did focus on our operating performance.Now, to adjusted EBIT down to EPS on Slide 16. We registered EUR 29 million of one-offs in the quarter, but as I just said, we booked only EUR 2 million as classical restructuring cost, and so the bulk with EUR 25 million is due to something entirely different, that's IAS 29 hyperinflation in Turkey, that's mainly non-cash. This then led to a reported EBIT of EUR 218 million, which is almost flat year-over-year.Our financial result as a next step reached minus EUR 40 million, largely due to higher interest payments in Turkey and higher interest rates on leases. On taxes, next step, we recorded a low minus EUR 30 charge in the quarter, and as you can see, this is the main driver of our net result in Q1. This lower tax rate is of course induced by the use of deferred tax assets as we frequently anticipated.All-in-all, in Q1, we reported a EUR 148 million net result, EUR 20 million above last year. This then resulted in the 16% growth in reported EPS, which Karsten initially highlighted.In all of this, our key focus remains on free cash flow, and so we are very pleased with the development in Q1. First and foremost, we finished the quarter with a strong liquidity position of EUR 2.4 billion and a free cash flow after leases of EUR 1.5 billion.If you dissect this in detail, we recorded a positive cash flow of EUR 1.3 billion from working capital. This was one of the main operating levers in the first quarter. We did increase stock levels, and thus product availability, quite consciously for the peak season by a strong 5% year-on-year in order to drive sales and bottom-line growth.Looking at our results now, this clearly paid-off, and it does explain the lower inflow if you compare it year-on-year. Please do note, on an absolute level, our net working capital was even stable year-on-year.Now, even here, you can see the underlying positive development in taxes with the EUR 10 million improvement year-over-year. And finally, other operating cash flow was impacted by lower cash in from other taxes and the insurance reimbursement last year. All-in-all then, our free cash flow post-leases reached EUR 1.5 billion, fully in line with our expectations.For the full year, we continue to expect, as indicated at the Capital Markets Day, a slight positive free cash flow based on a slight increase in net working capital, given that we did have this strong improvement last year. And this completes the financial section.Let me now hand you back to Karsten for his closing remarks.
Yes, thank you, Kai. And finally, I would like to conclude with our outlook and a summary of our key messages.So let's turn to Slide 19. As I stated earlier, based on our strong performance during the first quarter, we confirm our outlook. So we expect a slight increase in currency and portfolio-adjusted total sales. And we expect a clear improvement in adjusted EBIT for the fiscal year 2023-2024. We expect positive revenue contributions from all segments, with an anticipated increase in adjusted EBIT driven primarily by our operations in the DACH region, and this is Germany, Austria, Hungary, and Switzerland, as well as Western and Southern Europe.So ladies and gentlemen, I'd like to conclude today's call with a summary on this Chart 20. We had a strong start into the financial year. In a challenging consumer electronics market, we successfully maintained our market share. The implementation of our strategy and transformation is picking up speed. We place the customer at the heart of all we do. We enhance -- we're enhancing the customer experience, and we are gaining momentum in our execution. And our focus remains on cost, profitability, and liquidity, and we confirm our outlook for the financial year 2023-2024. Thank you for your attention until now, and now I look forward to your questions.
[Operator Instructions] And the first question comes from Volker Bosse from Baader Bank.
Volker Bosse, Baader Bank speaking. Thanks for the presentation and congratulations on the good results you released this morning. I would have 3 questions. First is on the online sales, which increased by 2.3% overall, while the general market, at least in Germany, according to the DGH figures, were down. So for curiosity, what was your online sales development in Germany, please?Second question is on the gross margin, very promising outcome here to see the gross margin to increase. You mentioned that it was driven by a better product mix. My question would be, how do you see the promotional environment currently, especially in Q1 during Cyber Week and Christmas? And also, is this gross margin improvement already a result of your better sourcing? The restructuring of the sourcing department, the centralization of sourcing, was one of the topics in the past. So, to get an update here would be helpful.And last but not least, I would like to ask regarding your B2B customers. It was, according to your Capital Markets Day, a driver of growth going forward. I saw some marketing in the press on that topic. Perhaps also, where do you stand in regards to winning B2B customers as a new client for B2C?
Yes. Thank you very much, Volker, for your questions. I will take question 1. I will say a few words to -- from my perspective on the gross margin. Kai will continue, and he will also elaborate on the questions regarding B2B.So, Germany actually has done, according to our own ambitious plans, very well in terms of online. So we were able to increase our in-house share. Very importantly, also the marketplace has significantly increased in terms of performance. That was particularly strong also in Germany. So in that sense, we are very, very happy. But also fair to say, we are on a clear path to our commitment to increase online sales overall. That also means that we want to gain market share. And the key focus in this is growing the marketplace further, working on the traffic, and of course on functionalities and the customer experience.And we are very confident that, we will continue on this path. So we have really doubled down our efforts. And last time when I said that, I am confident that we have the right things in the pipeline, when the numbers, I think in Q3, were not looking as we all wanted, I knew that what was in the pipeline has paid off.On the gross margin side, the promotion activity continues to be actually very strong. And what helps us now tremendously is actually our efforts on improving the product margin. As I mentioned a few times in the past, that we have really kicked off a group-wide initiative to look at all the different levers, how we can improve the product margin. That helps us to also break away from, I would say, at the moment the market challenges as well as, of course, the strong promotional activity where we participate successfully, but equally we are also improving profitability. And what do we do? I just want to give you some ideas of what I am talking about.So we clearly have shown that we can shape and improve the mix. You see that actually in floor care and certain SDA categories, in gaming, but also in MDA we have gained good market share. Then, the way we manage campaigns, also commercially, we have changed quite a bit and that is sometimes painstaking detailed work, but it is paying off. We have done a lot of work on pricing, stock aging, freshness of our stock helps a lot and this work continues.And of course, we put a lot of effort on what I call attached sales or multi-product sales because this also enhances profitability. These are some of the levers that are paying off. And now I hand over to Kai to add -- to the third question. Thanks.
Yes, I would -- Volker, I would add to the margin development really only that going forward for the rest of this year, we do expect additional margin improvements from what we are highlighting as our key focus areas for this year. That is in particular Service & Solutions and its private label from the ones that we talked about. So think of all the developments that Karsten described as the basis, but then on top of that Service & Solutions private label to kick-in in addition to that.Then to B2B. Look B2B for us is an attractive and significant market. We are already generating billions of revenues in this. We do believe that we can play our strength in this market with a well curated assortment delivering to specific customer needs. However, while we believe this is a significant potential for us it is not one of those drivers behind the development that we outlined at last year's Capital Markets Day. This is mainly driven by B2C by the retail media as Karsten said by Service & Solutions by marketplace. B2B is a continuous growth driver but not one of those focus categories that would drive us as indicated from EUR 200 billion to EUR 500 billion EBIT going forward.
Could you please come to my question regarding the sourcing -- centralization of the sourcing department? Whether you -- have you done that so to say?
The answer is yes and how does it work? We have in every single country of course a central sourcing that is also talking and coordinating with a central sourcing on the group side. There are things you have to do always locally in the market, but then we also use the strength of the group to support each other and also have some best practice sharing, but the clear answer is yes we have our sourcing centralized.
The next question comes from Clement Genelot from Bryan Garnier & Co.
I have 2 questions, if I may. So, the first one, what is the weather in the South and Europe? So when do you expect Spain and Italy to be back to normalize the margin level? I mean, is it by the end of this year or will it really take 1 or 2 more years?My second question is rather on Germany. Do you have a clear view on the level of wage or inflation for this year? And finally, regarding the wage crisis, if we assume a persistent crisis, how long will it take? Do you expect to really be able to really shift from shipping towards the plane to be able to bring, let's say, relative funds from Asia to Europe?
Clement, I would say that question 1 and 2, Kai will take and I will comment on the question on logistics and the Red Sea.
So EBIT normalization, Clement, let me perhaps just outline a bit more in detail how we look at this. Traditionally, in the times before both the COVID and then the later consumer crisis, we saw a rough distribution of 2/3 of our EBIT in Q1 and the rest of the fiscal year and the rest in the remainder of the year with a strong Q4. Now, this has been very much changed during the crisis year with a big, big emphasis on Q1, often even more than the annual EBIT of the year. We've said that we believe the seasonality to return towards a normalized pattern, but not quite on the normalized pattern yet, both last year and this year. We believe that it's more likely than not going to be a 12 months to 24 months way before we are back to this usual seasonality to answer that question.Now, for Germany, inflation expectations, I would give 2 answers. As in all countries across Europe, we've seen inflationary pressure to ease somewhat over the last few months. There is still one big variable in this, which we are not certain about, and that's wage inflation. We will not comment on any ongoing tariff negotiations here, but it does remain an open question mark in our planning for Germany this year.I would at this point highlight, again, our strict cost management, which is so far working really, really well to counterbalance whatever inflationary pressure, as we have, and we do remain extremely disciplined on that, in particular in Germany as well. And then I would hand over to Karsten for the second part.
Yes, thanks, Kai. Maybe just a quick comment. I mean, the wage inflation, obviously, that we have also seen in some other countries already, is also the opportunity to translate into consumption. But, of course, there's a bit of time lag behind. But you can assume that we are preparing diligently for different scenarios.So to the question on the Red Sea and the logistics-related topics, you asked specifically, I think, the questions around how to bring phones or consoles by air freight to Europe to basically bypass the issue. Let me just take that question and then put it into broader context. That possibility exists. We don't have at the moment any shortage. We have very, very strong availability. We've done that actually during the COVID pandemic. We try not to do it. It's more expensive, and it's also environmentally not that great. But, of course, the option does exist, and that would be done when necessary.Overall, we have actually a very good availability with a good freshness level. This is thanks to the work that we have done last year and we continue to do.Secondly, the logistics and the supply chain has changed during the crisis moments we had on logistics in the past. That means, for instance, that certain categories like MDAs are getting produced very often actually in Eastern Europe. That's one thing. And, obviously, we are in close contact always with our suppliers, and the time delay it takes to go through South Africa is around 2 weeks' time. So I can't exclude that we would experience some sort of shortages, but I expect them not to be material. We're well-prepared, and we have that under control. And, once again, all the key products that you talk about, like in the mobile phones, they could be brought by air freight.
And the next question comes from Markus Schmitt from ODDO.
I have 2, actually. So the first question is, if you could provide the key drivers for the EBIT improvement in South and Western Europe, and what was driven by your structuring measures, and what was more coming from, let's say, mix and gross margin? And then a second one on Eastern Europe, you said just that, you expect growth to ease, maybe an indication to what like-for-likes is a good point in '24? And it would be good if you could split the Eastern Europe like-for-likes into inflation and volume drivers. That would be helpful.
Markus, I'll take those. It's Kai. So Western and Southern Europe, I would first point to differentiating between the Spanish and the Italian market. In the Spanish market, we're struggling roughly about a year ago. This was largely due to the management chain and market developments. Now, we've since gained significant market share. So, by almost 60 basis points. So we see both this market growing in volume and us growing in this market. So the main part of the development in Spain comes from margin. It's not due to any restructuring in that.Now, Italy, the market in Italy remains difficult as -- as we said, however, here it is 2 drivers. I would point out, it's strong management team pushing for optimization of the margin and very strict cost management, unlike in Spain. So here it's perhaps both drivers in Spain, I would highlight the gross margin driver more than the cost management driver.In Eastern Europe, the growth that we're seeing is roughly 50% in volume and 50% in value that we're seeing on this market. I would highlight here again that, this is for Turkey now in particular, I would highlight again that we do expect this market to become less dynamic -- less dynamic going forward. So we have a cautious outlook for the rest of the year in Turkey.
And the next question comes from Emmanuelle Vigneron from HSBC.
I have 2. Could you please comment on the consumer environment, especially in Germany? And second one, you have published a comfortable set of results for Q1. So why don't you give a more precise, full year guidance in terms of EBIT?
I'll take the second question of the guidance first, and then I'll let Karsten comment on the consumer environment in Germany. Look, we've given our guidance only a few months ago on a slight growth in sales and a strong EBIT growth. We think this is actually a pretty precise statement, in particular, if you compare it to last years guidance, where we were still talking in 2 scenarios. So we've already narrowed it down quite significantly, given the uncertainties. I've just talked about Turkey, for example, as 1 example in our footprint. We believe this is pretty precise already.In particular, keeping in mind that a strong increase in EBIT, you should think of it as at least a double-digit percent of growth in EBIT, but we will not be more precise at this stage. That's just to quantify it a bit. And Karsten, I'll let you comment on Germany.
Thanks, Kai. Thank you for the question Emmanuelle. The consumer environment in Germany is, the market is soft, but if you look at our results, we were able to actually create very good demand. We held up well in the market, and we actually are strong also on the margin side, which is very encouraging. If you look at our December results, actually we were able to really hit the market and do some very good results.So I think the challenge in Germany, I guess, is from a consumer perspective, a little bit the sentiment, the overall debate around energy, politics, et cetera. So that is what we see. If you look at the underlying trends, as I've highlighted, what makes me very, very positive is the whole topic of energy consumption and sustainability. So we see a massive increase in actually replacement, in the replacement market that we are very strong in for energy efficiency devices. And there's also a whole wave of new products coming on the mobile side with AI, the goggles, which I think will also, can also stimulate some demand.But again, we are able to take our share in the market, do the necessary improvements. But of course, Germany is at the moment, say, from a sentiment perspective, not in a very strong position. That's why we are also very focused on cost and all the levers we have to pull. And most importantly, customer experience to improve that further.
At the moment, there are no further questions. [Operator Instructions] And we have a question coming from [ Oliver Isaac ] from Deutsche Bank.
Congratulations on the results, guys. I was wondering if you could talk a little bit about how and when you plan to refinance your 2026 unsecured bond, please?
Oliver, it's Kai speaking. We are actively at the moment discussing refinancing. It's not a wait and see approach that we're following, Oliver. Quite the contrary. We do consider early refinancing. We consider this. And you will see us approaching the debt market much more actively in the next few months. To avoid misunderstandings, I'm not saying we're making an offer to the debt markets now, but you will see us approaching, in terms of a roadshow, the debt markets much more actively than we've done in the past, even this year. That's as much as I would say about this.
There are no further questions at this time. I'm sorry. We have another question coming from Markus Schmitt from ODDO.
I just want to follow-up on the last point. I mean, do you opt to stay then in the bond market, or is it more likely that you go for the Schuldschein market? Is there any favor on your side?
Markus, it's too early to say which instrument we will be using on the debt market. As I said, we believe that these results give us a good basis for active discussions with the debt markets at this particular moment in time. We observe developments extremely closely and will engage in proactive discussions with the debt players. But which precise instruments or at which conditions remains to be seen? I cannot comment on the details of that at this particular moment.
There are no further questions. And I hand back to Dr. Karsten Wildberger for closing comments.
Yes, thank you very much for your attendance and also for the questions. I hope you can see that we are working hard. The strategy is paying off, and we're in execution mode. And as I said, we have realistic optimism looking into the future.Now, if you want to engage with us again in the official way, we will have on the 14th of February, which is next Wednesday, our AGM, which will be a hybrid version once again in person. But of course, we will also welcome the audience that is connected digitally. And on the 15th of May, we will then have our Q2 results call. And until then, I wish you all the best. And to those we will speak in between, I look forward to. Thank you very much for your interest. Thanks a lot. Bye-bye.
Thank you for your participation. The conference is over. Now your line will be disconnected. Goodbye.