BERLIN — Revamped and streamlined, Douglas AG is ready to face its public. The German perfumery concern announced Friday that it was readying an initial public offering for later this year. A listing of existing shares and a capital increase of close to 70 million euros, or $76.4 million at current exchange, is being prepared, the company said.
“After successfully transforming Douglas in the last two years, we believe that Douglas is now ideally positioned to benefit from continued growth in the selective beauty market,” stated Douglas chief executive officer Henning Kreke. The Kreke family, who founded the concern and currently hold a 20 percent stake, will remain shareholders.
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Douglas cited accelerated sales and earnings growth in the first half of its 2014 and 2015 fiscal years, with adjusted earnings before interest, taxes, depreciation and amortization amounting to 273 million euros, $346.9 million at average exchange, for the period ended March 31. Pro forma annual sales for 2013-14 were reported to be about 2.5 billion euros, or $3.39 billion.
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Douglas was removed from the stock market in 2013, a few months after a majority stake of the Hagen, Germany-based retail group was purchased by private equity firm Advent International. The makeover quickly began, as some flagging retail businesses were sold off, and the focus on the European perfumery market sharpened, coming to a head with the takeover of the French Nocibé chain last year. Douglas is now one of Europe’s largest perfumery groups, operating around 1,700 doors in 19 countries.
Before the privatization, Kreke indicated displeasure with the share price fluctuations that sometimes followed Douglas Group quarterly financial results, which at times are strongly affected by seasonal buying patterns.
Yet Douglas Perfumeries was always a strong and international performer amid the Group’s haphazard mix of book, jewelry, candy and clothing retailers operating only in the DACH, or German, Austrian and Swiss markets. Free of these dilutions, the new Douglas shares could shine. Only the Douglas perfumery concern is involved in the IPO.
“The bigger challenge in the past was that their overall portfolio had no clear strategy. Now they have a clean operation with a focused format. I think the market will much more appreciate their proposition,” said Dorothea Ern-Stockum, managing director of Kurt Salmon Germany, who heads the global management consulting firm’s retail and consumer products group for the country.
Under Advent, Douglas has divested retail holdings, including jeweler Christ and confectionery business Hussel. Buyers for the Thalia bookstores and fashion chain AppelrathCüpper were also reportedly sought last year. In October, Douglas restructured the company, eliminating the Douglas Group structure, and forming separate Douglas, Thalia and AppelrathCüpper concerns. Ern-Stockum said she thought buyers would be found in the end; AppelrathCüpper’s 13 well-kept stores could, for example, be merged into a German competitor. Thalia might prove more problematic; though the once failing book chain has been coaxed into profitability, it still suffers from its late entry into internet selling.
Freed from its retail siblings, Douglas perfumeries has blossomed from the extra attention bestowed by the parent concern. This March, the firm pumped up its private label offering, launching a 300-piece own-brand makeup line, in 16 of the markets it sells in. The chain already sells Douglas-branded spa, hair, skin, men’s, sun and body-care products. It also produces strong-selling exclusive fragrances under the Jette Joop and Helene Fischer licenses. Douglas has also been expanding its multichannel strategy. According to Douglas, 17 million people throughout Europe have its customer cards, and more than 2.2 million shoppers purchase products each year through international Douglas online shops in 15 countries. Douglas has an online market share of more than 50 percent in Germany.
But room for improvement remains, notes Ern-Stockum. “Compared to other German competitors, their online shop has made great progress. Compared to international benchmark, there is still some further opportunity,” she said.
The online business accounted for 8.6 percent of Douglas’ total consolidated sales in the financial year 2013-14, or some 180 million euros, $244.4 million at average exchange for the period. Online sales have risen 30 percent on-year since 2012, according to the company, and accelerated growth is expected.
It’s been a whirlwind season for Douglas, which is valued at more than 3 billion euros, or $3.27 billion. In April, it was announced that the company was up for sale, with a deal possible by midsummer. “Many people are looking at Douglas,” said Isabelle Parize, the firm’s general manager of Southern Europe and chief executive officer of Nocibé, hinting at the time that retail and cosmetic giants — in the realm of CVS, Walgreen Co., L’Oréal, Marionnaud and Sephora — could be among the suitors attracted by Douglas’ makeover.