Praktiker to raise $400 mln in restructuring bid. Praktiker announces three-year investment programme. Around 30 Praktiker Germany stores may be closed. Praktiker brand to return to discount offering. Praktiker shares up 7.6 percent
Frankfurt, November 24, 2011 - German DIY store operator Praktiker is going back to its cheap and cheerful set-up for its ailing namesake brand and will raise more than 300 million euros ($400.5 million) as part of a three-year investment programme to return to profitability.
Praktiker shares have plunged 68 percent this year after a move away from its popular, yet not very profitable, "20 percent off everything" promotions turned customers off and resulted in a profit warning and the departure of its chief executive.
"The 20 percent off everything was like a drug," new Chief Executive Thomas Fox told reporters on Thursday as he said the group would look at closing 30 loss-making stores which could affect around 1,400 employees in Germany.
As part of the restructuring, the management board will shrink to three members from five and it will move its group headquarters to Hamburg, where its Max Bahr brand is based.
"This is not because Max Bahr is the better company, it's because our category and product management is stronger there and that's a cornerstone of the restructuring," turnaround expert Fox said.
He admitted however that efforts would focus on Praktiker Germany, which presently has 236 stores, as Max Bahr was developing more positively.
Praktiker said it will cease operations in Albania and also review its other international operations, Reuters reports.
Praktiker stores will from now on focus on a discount offering, while Max Bahr will expand the services it provides.
"These measures will return Praktiker to a solid earnings position within two years' time," said Fox, who helped bring department store group Karstadt back to health.
Fox said that meant the group was aiming for industry average pretax margins of between 1.5 and 2 percent by 2014.
The company did not provide details of how it would raise the funds needed. Finance chief Markus Schuerholz said the group had appointed external advisors to look at the options.
Fox added the group was considering whether or not to stick with tennis star Boris Becker for future advertising campaigns.
"Praktiker stands for convenience and price and we have to look at whether he fits with that," he said.