In its FY2018/19, Germany’s Schwarz Group – operator of discount giant Lidl and European big-box format Kaufland – surpassed its performance to date with net sales of EUR104.3 billion, a 7.4% increase.

This represents the first time the privately held company has generated six-digit sales numbers and growth was primarily driven by Lidl, which delivered an 8.8% gain to achieve full-year sales of EUR81.2 billion. Kaufland sales were up 1.6% to EUR22.6 billion.

Germany sales grew 1.2%, lagging behind foreign operations in terms of incremental growth. Schwarz Group ended the year with 3,863 branches domestically among a worldwide total of 12,118, indicating a 3.2% growth in its estate for the year.

For 2019/20, an investment of EUR7.5 billion has been earmarked, less than the EUR9 billion reportedly planned in November last year. Digital projects remain high on the agenda, particularly at Kaufland, where new head Gerd Chrzanowski has been tasked with pressing ahead with upscaling of the banner’s omnichannel offer. It can be expected that Lidl’s slow but steady roll-out of digital-facing projects like the Lidl Plus app-based loyalty program and further experiments in eGrocery, like the recently launched initiative in Madrid, will also feature prominently.

Details of some 2019/20 projects have already been disclosed, with development of Lidl in the Balkans an area of concentration. Expansion strategies for Romania and Bulgaria are already public, while a US market entry for Long Island, New York is slated for early next year. Denmark is reportedly another key target market, with Lidl perhaps looking to capitalise on the struggles of Aldi Nord in the country.

In Poland, most of the recent focus has been on digital initiatives, with the launch of Lidl Plus occurring almost simultaneously with the long-anticipated launch of its Polish eCommerce venture. Self-checkouts have also made their debut in Poland as Lidl looks to position itself versus its chief rival Biedronka while also navigating a path through increasingly threatening regulatory proposals from the country’s government on top of restrictions on Sunday opening.

Speaking on the release of the results, Schwarz boss Klaus Gehrig declared himself pleased with performance, but emphasised the company did not intend to become complacent as regards competition. Neither would he allow the need to become a more digital business to become too great a distraction from its brick and mortar core operations. Gehrig sees huge potential in the physical business, particularly in key markets like the UK and also the US, where Lidl is beginning to discover a suitable growth pace, according to the group’s head.

Following a recent management restructuring, individual board members are being given greater responsibility for their oversight areas. The shuffling of senior roles came hard on the heels of the abrupt recent resignations of Lidl CEO Jesper Hojer and Kaufland CEO Patrick Kaudewitz. While turmoil in the upper echelons of the group is not unknown, it may be surmised that top management was determined to implement a new structure to drive what they see as a future vision for the business.

Gehrig sees this new collective responsibility as a way of leveraging individual and industry knowledge to better serve the corporate whole. Specifically, he is keen to exact more synergies between Lidl and Kaufland as the latter maintains its recent performance turnaround and overcomes its failure to be considered as a potential purchaser for Metro’s discarded Real big-box sites. Gehrig singled out service counters as one of the biggest barriers to growth for Kaufland, claiming “astonishment” that the likes of Rewe and Edeka managed to operate these successfully.

Source: ESM Magazine