2019 in Brief

Cooperative Retailing

In 2019, the consolidated sales of Cooperative Retailing fell slightly to CHF 16.756 billion (-0.6%). At the same time, there was a 0.8% increase in footfall to 353 million purchases. The shift from in-store to online retailing continued.

In their supermarkets and hypermarkets, the ten regional Migros Cooperatives generated domestic sales of CHF 11.596 billion (-1.4%). At the same time, more people shopped at Migros than in the previous year. There was a 0.8% increase in footfall to 353 million purchases. In the reporting year, Migros invested in the quality of the most popular products and in price reductions across the entire product range. The prices and quality of some 1'500 products were adjusted.

In 2019, the specialist markets Micasa, SportXX, melectronics, Do it + Garden, Interio and OBI generated sales of CHF 1.753 billion following an average reduction in product prices of 2.6%. This meant that sales were down by 1.2% in comparison with the previous year.

Billions in revenue from organic products

Sustainable and regional products were very important in 2019. Sales of products with ecological or social added value amounted to CHF 3.148 billion (+0.6%). Thus, one in five Swiss francs generated by Migros in Cooperative Retailing came from products in this promising segment. Sales of organic food exceeded CHF 1 billion for the first time. The organic range includes products sold with the Migros Bio label and third-party organic brands, such as Alnatura, Hipp and Yogi Tea.

Product range further expanded

Migros responded to customer demand by making various improvements and additions to its range: the selection of typical Italian food was increased by 55 new products. In addition, spices were successfully introduced as mini items for daily use to meet the needs of small households.

New branches, stable sales area

To get even closer to its customers, Migros opened ten new branches in 2019. The Migros sales network now comprises 737 locations. Migros also opened three new Alnatura locations, thus further expanding its in-store range of organic products. The sales area for supermarkets, hypermarkets, specialist markets and catering services remained stable, amounting to 1'478'738 m2 (+0.1%) at the end of 2019.

Interio stores sold, jobs secured

In 2019, Migros decided to sell the brand Interio and six of its eleven Interio stores. About 200 Interio employees were offered jobs at mömax, a company that is part of the Austrian XXXLutz Group. The remaining employees will continue to work either within Migros or elsewhere.

Commerce

In 2019, the Commerce Department reviewed its portfolio of companies and changed its strategic focus. It generated sales of CHF 8.023 billion, representing growth of 2.0%. The sales of the other companies grew by 5.1%.

In 2019, the Commerce Department directed its strategic orientation towards the business units Online Non-Food, Convenience and Discount. In connection with this, the portfolio of companies was reviewed and the decision was made to find new owners for the subsidiaries in the in-store non-food segment (Globus, Gries Deco Group and m-way).

Migros has developed these companies in a challenging market environment and they are now well positioned and fit for the future. However, synergies with Migros' core business were rather weak, and Migros was no longer the best owner for these companies. The sales process for Depot and m-way was successfully completed in 2019. The sale of Globus only went through at the start of this year, so it will not have a bearing on the Department's sales and profit until the 2020 financial year.

LeShop has been part of Cooperative Retailing since the start of this year.

Thanks to their customer-focused orientation, the other companies in the Commerce Department's portfolio – Denner, migrolino, Migrol, Digitec Galaxus and Ex Libris – remain on a growth trajectory and were able to increase their sales by 5.1% to CHF 6.598 billion. In 2019, all five companies strengthened their market position in the highly competitive retail sector.

Globus further consolidated its position in the premium segment, and the online business also grew considerably, with sales more than doubling. Globus' sales across all channels amounted to CHF 763 million (-5.6%). Adjusted by sales area, Globus grew by 0.9%. The sales process for Globus was successfully completed at the beginning of this year. A joint venture between Signa and Central Group, owner of the KaDeWe Group, has acquired Magazine zum Globus AG and eight associated properties.

New owners were also found for Depot and m-way in 2019, with m-way acquired by Swiss E-Mobility Group. Existing managing director and minority shareholder Christian Gries took over the Gries Deco Group as part of a management buyout. The sale of Depot had a negative effect on earnings.

Le Shop increased its sales by 2.8% to CHF 190 million, further underlining its leading position in Switzerland's online food market.

Strategic focus on Online Retail, Convenience and Discount

Denner again increased its sales, with growth of 2.2% in 2019, thus confirming its position as Switzerland's leading discounter. By offering excellent value for money and continuously expanding its services – particularly in the fresh products range – Denner was able to expand its customer base, leading to an increase in footfall of 3.5% for its own branches and 3.8% across the entire network. Denner also carried out modernisation work on a total of 124 branches and partner stores, and expanded its network of sites by five to 822.

Migrolino celebrated its tenth anniversary in the reporting year and remains on a growth trajectory. Due to increasing customer demand for immediate consumption and freshness, the number of locations was increased to 321 (previous year: 318). Both the shops and the wholesale business contributed to the 14.9% increase in sales to CHF 593 million.

Migrol again increased its sales volumes and thus its share of the declining fuel market. Despite low average prices, Migrol's sales were up 1.2% in 2019.

Digitec Galaxus increased its platform sales by 15.5% to CHF 1'146 million, earning an even bigger share of the market. Net sales came in at CHF 1'106 million, compared with CHF 953 million in the previous year. The portals digitec.ch and galaxus.ch both increased their sales and have a growing active community. The product range was expanded from 2.6 million to 3.2 million items.

Ex Libris performed very well in its first year after the restructuring measures, experiencing further strong growth online and in-store (adjusted by sales area). By focusing on the book range, it was able to increase its market share considerably. Despite the loss of income from more than 43 store closures since 2018, sales were up on the previous year, coming in at CHF 99 million.

Industry & Wholesaling

In 2019, Migros Industry generated sales of CHF 5.872 billion (+ 0.7%) in a challenging market environment. This growth was driven mainly by the encouraging business abroad, which grew by 9.9%.

With its industrial companies, Migros is one of the world's biggest producers of own-brand products. In 2019, the consolidated sales of M-Industry amounted to CHF 5.872 billion (previous year: CHF 5.829 billion). The increase is due in particular to the successful international business. In contrast, business in the Swiss market saw a slight decline of 0.7%.

Market position in Asia strengthened

The international business again achieved strong growth of CHF 80 million (+9.9%) to CHF 887 million. The market position in Asia had already been strengthened in the previous year with the takeover of the South Korean company Gowoonsesang Cosmetics Co. Ltd. Migros also acquired the Dutch company SoFine Foods in 2019, strengthening its position in the area of plant-based products. On a currency-adjusted basis, sales from Swiss exports remained at the previous year's level.

Slight decline in domestic business

In the Swiss market (retailing and bulk consumer business), the sales of M-Industry were down by 0.7% to CHF 4.985 billion. Retail business with the Migros Group declined slightly, but sales with Denner increased.

In the bulk consumer business, M-Industry continued to focus more on the delivery sector. Third-party business in Switzerland rose slightly overall to CHF 0.907 billion.

Investments in the Swiss business areas

M-Industry invested CHF 235 million in Switzerland as a centre of industry in 2019. As in previous years, the focus was on process automation and digitalisation, as well as investments to reduce CO₂ emissions and water consumption. In the area of packaging optimisation, Delica increased its capacities with new aluminium capsule filling systems, thus also making a contribution towards a reduction in the use of plastic as a packaging material. 

Stable development of jobs

Migros Industry employed 14'093 people in 2019. Overall, the number of employees was up by 45 on the previous year. As a leading trainer, M-Industry also trained 533 apprentices in more than 30 different occupations.

Financial Services

Migros Bank continued to grow in 2019. The mortgage volume increased by 3.6%. The performance of the investment and corporate clients business was also encouraging. Profit across all divisions was up 12.9% to CHF 231 million.

The number of asset management mandates was up considerably by 16.6% in the reporting year. The Migros Bank sustainability funds also enjoyed strong demand again, growing by 26.9% to CHF 415 million. The total of all securities held by customers in Migros Bank custodian accounts rose by 16.3% to CHF 13 billion. Liabilities arising from customer deposits also increased by 4.6% to CHF 35.5 billion.

Encouraging trend for customer loans

The volume of customer loans increased in parallel with customer deposits. With a 3.6% rise in mortgage volume to CHF 38.3 billion, Migros Bank consolidated its position as one of Switzerland's five biggest mortgage banks. In tandem with mortgages, other customer loans grew by 3.5% to CHF 2.1 billion. This encouraging development was due to targeted efforts to restructure the corporate clients business. As a result, receivables from capital goods leasing, for example, rose by 12.3%. Sales synergies in the corporate clients business with the partner company CSL Immobilien AG also had a positive effect.

Migros Bank maintained its prudent risk policy in both the corporate clients and private clients business. At the end of 2019, 97.4% of the portfolio of mortgages on residential properties consisted of first priority mortgages with a loan-to-value rate of up to 67%.

Growth in interest income

Net interest income increased by 4.2% to CHF 489 million. At CHF 102 million, commission income was again very positive. Commission income from the securities business was particularly encouraging, not least due to the noted strong growth in asset management and more transactions in personal investment consulting.

As expected, other ordinary income decreased significantly by 41.2% in 2019. The payment services provider Aduno Holding AG, in which Migros Bank has a 7% stake, distributed a normal, lower dividend again. A special dividend had been paid out in the previous year, due to the sale of the acquiring and terminal business.

The operating income of Migros Bank across all divisions rose by 3.2% overall to CHF 640 million. Material expenses increased by 1.8%, due in particular to investment in new and additional digital services for customers. Personnel expenses rose by 2.8%. Overall, operating expenses rose by 2.4% to CHF 303 million. The cost-income ratio reached 46.9%, after having been at a low level in the previous year (47.4%).

Increase in operating income and profit

After taking into account depreciation, provisions and losses, operating income and profit was up by 6.4% to CHF 306 million. After accounting for extraordinary items, the creation of reserves for general banking risks and taxes, a profit of CHF 231 million was generated (+12.9%). This included a book profit of CHF 9 million from the sale of two properties.

Travel

In the 2018/2019 financial year, the Hotelplan Group focused on high-quality holidays with the aim of improving margins. The travel company posted sales of CHF 1'188 million.

In 2019, the Hotelplan Group again found itself operating in a volatile environment. The hot summer, Brexit uncertainty and the insolvency of Thomas Cook were the biggest challenges in the reporting year. Due to the Hotelplan Group's focus on high-quality holidays, a decline in revenue was accepted. The travel company posted sales of CHF 1'188 million (previous year: CHF 1'259 million). Passenger figures were down by 6.8%.

Challenging environment in Switzerland

The travel company Hotelplan Suisse held its own in the fiercely competitive domestic market. The financial year was marked by greater awareness of global warming and a hot summer in Europe.

The business travel provider bta first travel was able to add some big names to its portfolio of customers in 2018/2019. Finass Reisen successfully completed its first financial year at the Hotelplan Group. The two business travel specialists generated sales of CHF 21 million.

Holiday home agencies on right track

The Holiday Home Division, comprising the two holiday home agencies Interhome and Inter Chalet, concentrated its efforts on introducing a standardised operating system in the reporting year. This led to a considerable improvement in margins. Sales came in at CHF 341 million (previous year: CHF 359 million).

Hotelplan UK increases efficiency

Along with the uncertainty surrounding Brexit, the insolvency of Thomas Cook also had a negative impact on Hotelplan UK's earnings, as it was one of the most important sales and flight partners of the British subsidiary. Nevertheless, Hotelplan UK managed to increase efficiency through tight cost control. Sales in the local currency were down to GBP 235 million (previous year: GBP 259 million). In Swiss francs, this corresponds to sales of CHF 298 million (previous year: CHF 339 million).

New strategy and growth

Bedfinder adapted its business model in the reporting year. The start-up withdrew from the fiercely competitive hotel-only B2C market and shifted its focus to the sale of packages with white label partners. This increased revenue to CHF 8 million (previous year: CHF 4 million).

The German online travel company vtours was acquired in 2019. The company generated sales of more than CHF 490 million in the 2018/2019 reporting year. Due to potential synergies in the areas of IT, purchasing and sales, vtours is the perfect addition to the Hotelplan Group. It will help to ensure growth in German-speaking countries and strengthen the Group's competitive position considerably.

Shared Services

In 2019, the Logistics & IT Department – Shared Services – optimised the existing operational processes and laid the basis for meeting future requirements in the areas of automation, data and applications.

Shared Services combines the five competence centres: Migros Distribution Centres, Transport, Engineering, IT and Data Strategy & Science. For all entities of the Migros Group, they provide services that are oriented towards overarching objectives and requirements.

Migros Distribution Centres

At the Migros Distribution Centre Neuendorf (non-food and near-food, textiles and frozen products), the "MVN" home delivery service for customers of the Migros specialist markets was set up in 2019.

In the reporting year, the Migros Distribution Centre Suhr AG recorded stable demand for logistics services in the Migros food business and significant growth in the Migrolino business.

Activities relating to the value-added services of Migros Industry in Switzerland and abroad were stepped up, allowing plant capacity and infrastructure to be optimally utilised.

Transport

Migros consolidated and slightly extended its leading position in Swiss rail freight in 2019. The number of rail kilometres was up by 0.1%. Additional connections were established between distribution centres and Cooperatives, and for transalpine and international freight.

As part of the innovation partnership with the Swiss Federal Laboratories for Materials Science and Technology (EMPA), efforts to reduce carbon emissions from road freight were further intensified in 2019. These were focused primarily on field tests with CO₂-optimised lorries that run on biofuel and electric. In addition, Migros was involved in two projects concerned with the development and introduction of hydrogen fuel cell lorries.

Migros also supported the national generational project Cargo sous terrain. It is represented on the board of directors of Cargo sous terrain AG and on other bodies, including the steering committee of the City Logistics sub-project.

Engineering

The Engineering division of the Migros Group planned and conducted various projects in 2019. The main focus was on the automation of logistics processes and energy efficiency.

IT

After an intensive testing and pilot phase, Migros began rolling out the new point-of-sale solution avanta in 2019. By the end of the year, 300 branches across all formats – supermarkets, hypermarkets, catering services, specialist markets – had been switched over to avanta. The roll-out is due to be completed by autumn 2020.

Data Strategy & Science

In 2019, Data Strategy & Science developed the first ever recommendation engine for the online shop MyMigros. The solution uses artificial intelligence to suggest personalised product recommendations. The individual suggestions are determined using Cumulus data from the previous twelve months.

The algorithm developed for this purpose calculates the purchase likelihood of certain products on the basis of personal product preferences and on the time and frequency of purchases made in the past. The findings from the pilot project will be used in the development of the Migros Group's online food initiatives this year.