2018 in Brief

Cooperative Retailing

In 2018, the total sales of the ten regional Migros Cooperatives in Switzerland and abroad amounted to CHF 15.921 billion, representing growth of 2.3% despite the challenging market environment.

As in the previous year, Cooperative Retailing was again dominated by a competitive market environment in 2018, with average inflation of 1.3% in the supermarkets and hypermarkets, and average deflation of -1.9% in the specialist markets. The shift from in-store to online retailing continued.

Increase in footfall

The consolidated sales of Cooperative Retailing rose by 2.5% to CHF 16.865 billion. In 2018, the supermarkets and hypermarkets generated sales of CHF 11.765 billion in Switzerland. As a result, sales of the ten Migros Cooperatives were up by 1.5% on the previous year, despite the challenging environment. This was driven by an increase in footfall to 350 million till receipts (+1.5%).

The specialist markets Micasa, SportXX, melectronics, Do it + Garden and OBI generated sales of CHF 1.774 billion (+9.6%). This figure included Interio for the first time. Excluding Interio, year-on-year growth amounted to 1.0%. The online shops of the specialist markets again developed well, with a 25.2% increase in sales.

Sales of sustainable products up considerably

Sustainable and regional products were very popular in 2018. Customers bought over 3% more products bearing the label "Aus der Region. Für die Region" (From the region. For the region), with sales amounting to CHF 994 million. At CHF 3.148 billion, total sales of products with ecological or social added value were up 5.9% on the previous year.

Collection service expanded

PickMup, Migros' collection and returns network, was further expanded in 2018. A total of some 160'000 packages were collected in the reporting year – twice as many as in the previous year.

At CHF 673 million, sales of Migros Catering were 0.4% lower year on year. Under the brand name "Migros Daily", a new format with fresh products was launched in the fast food segment.

The Migros sales network grew by 26 locations to a total of 727 in the reporting year. The sales area for supermarkets, hypermarkets, specialist markets and catering services amounted to 1'476'827 m2 (+5.3%) at year end.

Commitment to health

In the health segment, the Migros-owned Medbase Group further expanded its medical and therapeutic range in 2018. Sales increased by 7.9% to CHF 150 million.

The sustainable development programme Generation M, launched in 2012, has so far made 67 binding promises to tomorrow's generation; at the end of 2018, 44 of these had been met.

Commerce

In 2018, the companies focused their activities even more consistently on providing customer-oriented products and services. This enabled them to strengthen their position in the dynamic retail market. The consolidated sales of the Commerce department amounted to CHF 7.869 billion. Taking into account the sale of the majority shareholdings in OWiba, Probikeshop and Sharoo, and the integration of Interio into Cooperative Retailing, this corresponds to a 4.9% increase in sales.

Due to their customer-focused orientation, the companies Denner, migrolino, Migrol, Digitec Galaxus, Le Shop, Depot and m-way remain on a growth trajectory. In 2018, they strengthened their market position further in the highly competitive retail sector.

Globus and Ex Libris are in the midst of an intensive transformation phase that is on one hand influencing their sales development, and on the other leading to a significant increase in online business.

In their increasingly interlinked sales channels (in-store, online, mobile), the retail companies are focusing consistently on meeting customers' diverse shopping and consumption needs.

Enhancement of market position

Denner was able to underline its position as Switzerland's leading discounter in a challenging market environment by offering its customers excellent value money. With growth of 4.3%, Denner increased its sales for the ninth time in succession. In 2018, Denner carried out modernisation work on a total of 204 branches and partner stores, and expanded its network of sites by six to 817. Due to consistent expansion of its services, more and more customers are shopping at Denner. This led to an increase in footfall of 4.4% for the own branches and 3.6% across the entire network.

In 2018, migrolino significantly expanded its range of fresh and convenience products at its 318 locations (previous year: 311), thereby increasing customer demand. With a 7.3% rise in sales to CHF 516 million, the shops continued their growth trend.

Migrol was able to increase its share of the declining fuel market and expand its business with higher sales volumes. The positive price development in the petrol station and petroleum market also contributed to the encouraging 8.5% increase in sales.

Digitec Galaxus increased its platform sales by 15% to CHF 992 million, further extending its position as the market leader in Switzerland. Net sales came in at CHF 953 million, compared with CHF 834 million in the previous year. The two portals digitec.ch and galaxus.ch recorded strong growth in supply and demand. Through the integration of further retailers, the product range has almost trebled to 2.6 million products.

Sales at Le Shop increased by 1.9% to CHF 185 million. Adjusted for the one-off effects from the closure of the Drive pilot locations in 2017, growth in the home delivery business amounted to 3.8%. This confirmed Le Shop's position as Switzerland's leading online supermarket.

Market position defended

As announced in January 2018, Ex Libris positioned itself to meet rising online demand and reduced the branch network by three quarters to 14 branches. As expected, this led to lower in-store sales. In contrast, the realignment generated strong online growth of 16.3%. This resulted in total sales of CHF 99 million (-9.0%). Excluding the branches, this corresponds to a 9.8% increase in sales.

m-way is operating in a fiercely competitive market that is being entered by more and more providers. Despite this, it was able to consolidate its leading position in the Swiss e-bike market and keep sales at a steady level.

Implementation of efficiency measures

For Globus, 2018 was a year marked by transformation and the orientation towards a digital, in-store and integrated shopping experience for the customer. Expansion of the mobile online shop, the acquisition of Navyboot, the transformation of Schild and Herren Globus into specialist fashion retailers, and the reduction of the branch network all had a significant impact on the structure of Globus. In this year of change, Globus achieved sales of CHF 808 million, representing a decrease of 5.7% in absolute terms. However, like-for-like sales were up 0.4% due to the rising popularity of the online shop.

Depot's network of outlets grew to 488 (previous year: 479) and 196 locations at wholesale partners. (previous year: 161). The company generated consolidated sales of CHF 554 million, representing an increase of 2.5%.

Industry & Wholesaling

In 2018, the consolidated sales of M-Industry came in at CHF 5.8 billion. Adjusted for the sale of CCA Angehrn, growth amounted to 2.7%. The international business grew by 10.9%; business from the Swiss market increased by 1.5%.

In 2018, the consolidated sales of M-Industry amounted to CHF 5.829 billion (previous year: CHF 5.905 billion). This decrease is due to the loss of income following the sale of CCA Angehrn. Excluding this disposal, growth amounted to CHF 155 million (+2.7%).

Market position in Asia strengthened

The international business achieved strong growth of CHF 79 million (+10.9%) to CHF 807 million. In the export business, cosmetics, coffee capsules, chocolate and cheese were again the main growth drivers. The market position in Asia was strengthened further with the takeover of the South Korean company Gowoonsesang Cosmetics Co. Ltd.

Solid domestic growth

In the Swiss market (retailing and bulk consumer business), M-Industry increased its sales by 1.5% to CHF 5.022 billion (adjusted for the sale of CCA Angehrn). M-Industry's business with the Migros Group grew by 0.8% to CHF 4.117 billion. Business with Denner developed disproportionately well.

In the bulk consumer business, M-Industry continued to focus consistently on the delivery sector. In Landquart, Saviva has opened its first regional sales and logistics centre with integrated gastro-butcher's shop for the food services industry. The strengths of the traditional brands Scana, Mérat and Lüchinger + Schmid are now bundled under one roof. Adjusted for the sale of CCA, organic growth of 5.0% was achieved. This translates to sales of CHF 0.906 billion.

Investments in the Swiss business areas

M-Industry invested CHF 207 million in Switzerland as a centre of industry in 2018. As in previous years, the focus was on capacity expansion, process automation and digitalisation, as well as investments to reduce CO2 emissions and water consumption. With the construction of a new building for parent stock for hatching egg production in Sierre and the new broiler chicken hatchery in Avenches, Micarna is setting new animal welfare standards in poultry farming.

Stable development of jobs

M-Industry employed an average of 14'048 employees in 2018. Adjusted for the sale of CCA and the acquisition in South Korea, it had 78 more employees than in the previous year. 1'258 employees work abroad. As a leading trainer, M-Industry trained a total of 554 apprentices in more than 30 different occupations.

Financial Services

Migros Bank increased its mortgages by 4.3% in 2018. The performance of the investment business was also encouraging, despite the challenging stock market environment. Profit across all divisions was up 1.8% to CHF 204 million.

Migros Bank continued to grow in 2018. The number of asset management mandates was up considerably in the reporting year. After a 17.9% rise in 2017, the volume increased by a further 34.0% in 2018. The sustainability funds enjoyed strong demand again, with a 9.4% increase in volume to CHF 327 million.

Due to the market conditions, the total of all securities held by customers in Migros Bank custodian accounts fell by 8.8% to CHF 11.2 billion, but the number of depositing customers rose by 1.9%. In contrast to the securities volumes, liabilities arising from customer deposits increased by 1.8% to CHF 33.9 billion. There was considerable growth in the number of private accounts (+6.3%) and pillar 3a retirement accounts (+2.2%).

Mortgage business develops well

Customer loans grew even more strongly than customer deposits, with an increase of 4.1% to CHF 39.0 billion. Receivables from private lending made up CHF 1.0 billion of this amount (+0.8%), while mortgages constituted CHF 37.0 billion (+4.3%). In a highly competitive environment, Migros Bank firmly maintained its cautious lending policy in 2018. At year end, 97.7% of the portfolio of mortgages on residential properties consisted of first priority mortgages with a loan-to-value rate of up to 67%. In parallel to the mortgage portfolio, Migros Bank's net interest income increased by 3.9% to CHF 469 million.

Increase in operating income and profit

Commission income also developed encouragingly. As a result of expanding the investment customer base, it rose by 3.5% to CHF 102 million. At CHF 34 million, trading income was slightly higher than in the previous year (+0.2%). In contrast, other ordinary income increased significantly to CHF 15 million. This figure contains one-off investment income from the sale of the acquiring and terminal business of the payment services provider Aduno Holding AG, in which Migros Bank holds a 7% stake. The operating income of Migros Bank rose by 4.7% overall to CHF 620 million.

Operating expenses increased by 5.5% to CHF 296 million. Among other reasons, this was due to expansion of the core activities and investment in future-oriented IT solutions. After reaching an encouragingly low level in 2017 (46.5%), the cost/income ratio was 47.4%.

After taking into account depreciation, provisions and losses, operating income and profit amounted to CHF 288 million (+2.2%). After accounting for extraordinary items, the creation of reserves for general banking risks and taxes, a profit of CHF 204 million was generated (+1.8%).

Comprehensive range of services

In 2018, Migros Bank acquired a majority stake in the Zurich-based company CSL Immobilien AG, a leading full-service provider in the real estate sector. The two partners provide a range of services that covers the entire real estate life cycle, including valuation, financing, development, general contracting, marketing and management. The range is completed with research and analysis of the Swiss real estate market.

Travel

The Hotelplan Group grew by 3.9% in 2017/2018, posting sales of CHF 1'259 million despite the challenging travel market.

The travel market in 2018 was influenced by external factors such as airline bankruptcies, the hot summer and the uncertainty caused by Brexit, all of which impacted business in Switzerland and abroad. The Hotelplan Group rose to the challenge with a 2.4% increase in the number of passengers. This resulted in sales for the past financial year (1 November 2017 to 31 October 2018) increasing by 3.9% to CHF 1'259 million.

Stable development in Switzerland

Despite airline bankruptcies, including SkyWork Airlines and Cobalt Air, the Swiss market leader Hotelplan Suisse was able to hold its own in a challenging market environment and keep sales at the same level as in the previous year. The sales achieved together with the business travel specialist bta first travel amounted to CHF 558 million.

Finass Reisen AG, which was acquired on 31 October 2018, is an ideal addition to the business travel segment in which bta first travel operates. The two business travel specialists each have different target groups and are managed separately.

Growth in holiday home segment

The Holiday Home Division, comprising the two holiday home agencies Interhome and Inter Chalet, continued its strong growth. At 8%, growth was considerably higher than in the previous year. With sales of CHF 359 million, the Holiday Home Division is the second largest division of the Hotelplan Group. The potential of the two brands has not yet been exhausted; the focus in 2019 will again be on exploiting synergies.

Hotelplan UK defies Brexit uncertainty

Hotelplan UK increased its sales in the local currency by 2.9% to GBP 259 million; in Swiss francs, the figure amounts to CHF 339 million (+6.7%). Hotelplan UK is thus defying the uncertainty surrounding Brexit and the associated weakness of the British pound. However, as the effects of Brexit are still unclear, the outlook is slightly gloomy.

Investments in start-up

The start-up bedfinder has tapped into further source markets, including India and the United Arab Emirates, and expanded its range with white-label products. As a result, invoiced sales were up by 34%. Net sales amounted to CHF 4 million, representing growth of 68%. bedfinder began offering and selling package holidays for the first time in the reporting year.

Shared Services

In 2018, the Logistics & IT Department – Shared Services – continued to ensure that the national and international supply chain functioned flawlessly and was further optimised.

Shared Services combines the competence centres of six operationally and strategically independent areas: logistics, IT, transport, engineering, planning/expansion and quality assurance. For all entities of the Migros Group, they provide standardised solutions, where possible, which are oriented towards overriding objectives and requirements.

Logistics: optimisation & expansion

In the area of logistics, the main focus in 2018 was on improving efficiency along the entire value-added chain. At the Migros Distribution Centre in Suhr (food), further processes were optimised with a focus on reducing costs and ensuring quality.

At the Migros Distribution Centre in Neuendorf (non-food and near-food, textiles and frozen products), work on expanding and automating the site got under way in 2018. The plant is due to go into operation in 2021.

Transport: economical & ecological

Changing customer requirements – longer opening hours, cross-channel shopping and supply – call for transport solutions to be continuously adapted. In 2018, Shared Services successfully evolved its efficient and environmentally friendly transport concepts:

• Clever volume bundling and an intelligent combination of all modes of transport (road, rail and intermodal) enable cost-effective, fast and economical transport solutions. In international transport, this was achieved in particular through expansion of the southern port connection. More than 50% of goods from the Far East again passed through the Mediterranean ports in 2018.
• Migros also made more use of rail freight again. The number of rail kilometres was up by 3%. Since 2018, deliveries to Migros Eastern Switzerland from the Migros distribution centre in Neuendorf have been made exclusively by rail. Some international shipments from suppliers were also switched to rail.
• In addition, an innovative software program that analyses and optimises international and national sea, road and rail freight on the basis of geographical data was developed further in 2018.
• The content and details of the innovation partnership agreed with the Swiss Federal Laboratories for Materials Science and Technology (EMPA) in 2017 were enhanced in the reporting year. The aim is to create a simulation system that can calculate the composition of vehicle fleets and their effects on the environment.
• Migros continued to support the national generational project Cargo sous Terrain and is represented on the board of directors of Cargo sous Terrain AG and other bodies, including the steering committee of the City Logistics sub-project. This sub-project is being brought forward and will be carried out in the coming years.

IT: digitalisation & transformation

In Migros IT Services, some important milestones were reached in 2018 and foundations laid for the future.

• For example, the pilot phase with the new POS checkout system Avanta was completed in Migros Lucerne. The future-oriented solution, which supports the requirements of in-store and online business, will be available to all supermarkets/hypermarkets and specialist markets, and to Catering and Cooperative Retailing from 2020.
• In Cooperative Retailing, the project Rialto was successfully completed in 2018. It creates a standardised e-commerce architecture for Micasa.ch, SportXX.ch and M-Service in particular.
• In the area of personalised marketing, various customer databases were consolidated into a central data pool in the reporting year. This will provide a technical basis for subsequent projects in this area.
• The #shift transformation programme of Migros IT Services was also launched in 2018, with the aim of achieving three objectives: aligning IT more closely with customer requirements; developing new core competencies; making the development and operational processes more efficient. The programme will be implemented in several stages by 2022.

Engineering: resource efficiency

Several construction and conversion projects were planned and implemented throughout the Migros Group in 2018. For example, the automated warehouse for Digitec Galaxus went into operation in Wohlen (AG). New picking systems are planned in individual Cooperatives and will go into operation in the coming years. Energy masterplans for M-Industry companies ensure long-term resource efficiency, particularly in the operation of equipment and buildings.