Schwarz Group around Lidl and Kaufland is growing strongly with new business areas

Lidl branch

The discounter’s business still accounts for the largest part of the Schwarz Group’s sales.

(Photo: dpa)

Dusseldorf In a difficult environment, the Schwarz Group has managed to significantly increase its growth rate. In the 2022/23 financial year, sales at the world’s fourth-largest retail group grew by 15.4 percent to EUR 154.1 billion. In the previous year, the company, which owns the retail chains Lidl and Kaufland, only grew by 6.6 percent.

The reorganization that Schwarz boss Gerd Chrzanowski ordered the company to appear to be paying off. The fiscal year (balance sheet date: February 28) was the first for which he was entirely responsible. He had risen to the top in late 2021 after winning a power struggle against longtime patriarch Klaus Gehrig.

All divisions, both in the core discount business and in newly acquired business areas, experienced double-digit growth in the past year.

Inflation, which drove up sales prices, also helped. However, the profitability in the trading business, which had financed the investments with billions in profits for years, is a cause for concern.

The largest growth rates were recorded in the additional business areas that Chrzanowski would like to expand outside of the pure trading business. With a disposal company and the expansion of its own food production, the Schwarz Group wants to cover the entire value chain in the future.

Profit is a secret at Lidl and Kaufland

The family business does not provide precise information on profits. Owner Dieter Schwarz is just as reserved and publicly shy as the Albrecht brothers, who with their Aldi shops were his role models in building his retail empire.

But between the lines you can read that the year was a real challenge. Despite the high growth rates, the Schwarz Group cautiously described the annual financial statements as “stable” in a statement. In addition, the company admits that “cost increases in commodities, raw materials, energy and transport could only be partially offset by efficient process management and were not fully passed on to customers”.

That means: In order to be able to continue to offer good prices in the tough battle for customers, Lidl and Kaufland have waived margins. “We are doing everything we can to keep food inflation as low as possible,” Lidl Germany boss Christian Härtnagel carefully described in a recent Handelsblatt interview, adding: “The times are challenging for everyone.”

In the previous year, Lidl had made a profit that should have been close to three billion euros. According to figures from the electronic Federal Gazette, the foreign business alone, which is bundled in the Lidl Stiftung & Co. KG, generated an annual surplus of 2.138 billion euros in 2021/22. Added to this was the profit from the home market. According to company sources, profits for the past financial year are nowhere near this level.

Competition also suffers from falling profits

The competition is no better off. At the Rewe Group, the net income for the year was 33.4 percent below the previous year’s figure. Edeka has also admitted that profits have shrunk significantly. And according to company sources, Lidl rival Aldi Nord even made a loss last year.

>> Read also: alarm at Aldi Nord – discounter in crisis

The Schwarz Group urgently needs the profit from the discount business in order to finance investments in new business areas with which CEO Chrzanowski wants to make the company fit for the future. Around eight billion euros were again invested in strategic projects last year, including the expansion of our own production and IT infrastructure.

The discount division was also able to increase sales significantly. Lidl’s branch sales grew worldwide by 13.8 percent to 114.8 billion euros, and that of Kaufland even by 16.1 percent to 31.8 billion euros. However, Kaufland benefited from the integration of around 100 Real stores, which alone account for a sales volume of around two billion euros. In addition, there are online sales at Lidl and Kaufland of 1.9 billion euros.

Own cloud division makes Amazon and Microsoft competition

Exemplary for the new business areas: Last year, the Prezero environmental division increased its sales by 84.7 percent to 3.9 billion euros, also through acquisitions. Schwarz is one of the largest disposal companies in Europe.

The group has also expanded its own production through acquisitions. In 2022, for example, she bought a pasta factory and a paper factory. According to internal transfer prices, the Schwarz production with Lidl and Kaufland is already generating sales of 3.4 billion euros – 29.7 percent more than in the previous year. Market leader Oetker recently reported sales of 3.58 billion euros for Germany.

>> Read also: That’s why the Lidl parent company sells software against hackers

Schwarz also invests massively in the IT sector. The company has built its own cloud infrastructure under the name Stackit. It also wants to offer it to other German medium-sized companies that are looking for an alternative to US providers such as Amazon or Microsoft. The group also bought the cybersecurity company XM Cyber, which protects companies against hacker attacks.

The Schwarz Group describes its IT activities as “central innovation drivers”. And they could soon become the next mainstay in the company’s transformation, with Chrzanowski making the family business less dependent on the discount business.

More: Lidl Germany boss promises falling food prices

source site-13