Value Ideas Blog
Quick news on Hornbach
    Today Hornbach announced that they consider changing the legal structure of the Holding into a KGaA. You can find the news here. The Baumarkt AG of which we are shareholders should not get affected by this considered change. This announcement happened shortly after the change of the CEO of the Group.   We don’t like above mentioned news due to the fact that the CEO has done a good work and that the change in the legal status to an KGaA can lead to a decrease of shareholder rights which we have already observed at STO KGaA SE (you can find our analysis here and here). But as we are not affected by the change of the legal status, no detailed information is yet available and because we think that this is only the first step to reach full controlled over the Baumarkt AG we stay long Hornbach Baumarkt AG.   Also, as you might have noticed, our posts have become a little less frequent recently. We apologize for this and promise improvement!  
In the last few days we have seen a really interesting development for Hornbach which is one of our holdings. In our analysis we had written that we assume that Praktiker will go bankrupt and the Sales of the Praktiker stores will be divided (in three different scenarios) under the main competitors. At this time Max Bahr was not included in this calculation because of the fact that we have two different bidders who like to takeover all remaining MaxBahr stores. In the last two weeks both bidders cancelled their offers, now MaxBahr is also bankrupt and the different stores are sold store by store to different competitors. So far Hornbach only bought two stores of about 60 sold stores, each store is bigger than 11.500m² and again you see how observing this management is. We think this development is positive for our estimation and will slightly increase our margin of safety for Hornbach. You can find a daily updated list of all sold stores here.   Furthermore we have some weekly links and quotes for you:  
  • A very good article from Jeremy J. Siegel (Professor of finance at the University of Pennsylvania`s Wharton School) from 2009 on Efficient Market Theory and the Crisis. If you compare it to todays data and his implications you can paint your own picture. Here are some highlights from his article: The Shiller Home Price Index is up 13.29% over the last year vs. an increase of 1.0% of the consumer price index while median household income fell for the fifth straight year in 2012, to $51,017. That was the lowest annual income, adjusted for inflation, since 1995.
  • Very good blog from Phil Birnbaum, and one big key to take with you: “First, concentrate on eliminating bad decisions, not on making good decisions better.”
  As always, if you think you have something we should read or some own thoughts feel free to write us or leave us a comment!

HORNBACH Baumarkt AG

Industry Overview

 
Today we want to take a look on a company that is in the retail business, which is normally a place where the competition between the several players really hard. We are talking about the Hornbach Baumarkt AG, one of Europe’s leading and Germany’s second biggest DIY-Stores operator. DIY stands for the Do-It-Yourself Industry. But where does the high competition come from? If you take a closer look at the DIY Industry in Germany, you will clearly see that you can find nearly always two or more DIY stores next to each other, and that is the case in nearly every bigger city in Germany. Until a few weeks ago there were 4 big competitors in the German market which have a market share greater than 10% each and furthermore there are numerous other players in the market. In the next chart you can see that OBI is the biggest player in the market with 24,2% of sales followed by Bauhaus 17,5%, Hornbach 12,3%, Praktiker 12%, Hagebau 10,5% and Globus 6%. Another interesting fact is that Praktiker lost over 9% of its market shares in only 5 years. (The sales numbers are out of a couple of sector magazines and annual reports, Hornbach itself says that they have a market share of about 10%, due to the fact, that they take also some companies into account, which are not clearly in the DIY industry). Furthermore you can find some regional brands. shares    read more