By  on March 30, 2007

BERLIN — KarstadtQuelle AG is back in the black.

At the German department store, mail order and tourism group's annual financial press conference in Essen Thursday, chief executive officer Thomas Middelhoff reported group profits of 345.6 million euros, or $434.2 million, in 2006, which compares with a loss of 316.5 million euros, or about $410 million, in 2005 and 1.63 billion euros, or $2 billion, in 2004. All dollar figures are calculated from the euro at an average annual rate.

Sales for the group were flat at 15.13 billion euros, or $19 billion, but both the Karstadt department store and Thomas Cook tourism divisions were successfully realigned. The group expects the mail-order division to reach its turnaround in 2007 and, for the first time in years, the group has no net financial liabilities.

Adjusted sales at the 131 Karstadt department and sports stores increased 3.5 percent to 4.9 billion euros, or $6.15 billion, and earnings (adjusted EBITDA) surged 123.6 percent to 145.9 million euros, or $183.2 million. "We have achieved the targets set in the majority of our stores — especially in the Premium Group," which improved performance by 6.6 percent, Middelhoff said. According to the group, Karstadt is evolving from a department store to a "customer and ideas" house in key city centers with a selected and high-quality range of goods.

Mail Order, including the core brand Quelle and 17 special mail-order companies, slowed its decline, with sales down 6.6 percent to 4.2 billion euros, or $5.28 billion. The division is being reorganized under the Primondo umbrella., the second largest mail-order brand, will be taken public, the group said, while the Service Group and five smaller specialty mail-order companies will be sold.

Other changes are also being implemented. Subject to the approval at the Annual General Meeting, the group holding of KarstadtQuelle AG (Essen) will be renamed Arcandor AG in the future. Middelhoff, who will remain ceo of Arcandor, said the group's successful brands such as Karstadt, Quelle and Thomas Cook would not be changed. However, the three business divisions would operate more independently in the future.

The group's financial calendar is also being shifted "in order to improve planning reliability." Going forward, the financial year will end on Sept. 30 and 2007 will thus be a short financial year.Middelhoff projected that department store sales and earnings "are to be increased considerably [in 2007]." He anticipates a slight upturn in mail-order sales and an improvement of EBITDA to a break-even level. In addition, the planned sale in 2007 of a 49 percent stake in the real estate company Highstreet will again lead to an extraordinarily high income, the group noted.

In fiscal 2008/9, group sales are expected to rise to 23 billion euros, or $29 billion, and EBITDA to more than 1.3 billion euros, or $1.6 billion. Moreover, the company plans to remain free of net financial liabilities.

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