2020 in Brief

Cooperative Retailing

As a result of the Covid-19 pandemic, the Migros Group saw increased demand in 2020, both in its online and in-store business. The consolidated sales of Cooperative Retailing rose to CHF 17.736 billion (+5.0%).

The ten Cooperatives, including subsidiaries, generated sales of CHF 15.062 billion (+2.5%) in Switzerland in 2020. Although restaurant and take-away sales fell by 41.5% to CHF 434 million, supermarkets and hypermarkets recorded significant growth with sales of CHF 12.455 billion (+7.4%). Sales abroad increased by 9.5% to CHF 1.498 billion.

Due to the Covid-19 pandemic and the increase in homeworking, more customers did their shopping in smaller, local shops; this led to a double-digit increase in sales. The average basket value increased by 20.8%, but customers shopped less frequently. As a result, there was a 8.9% decrease in footfall to 321 million purchases. Migros permanently reduced the prices of about 700 supermarket products in the reporting year.

Billions in revenue from sustainable products

Regional and sustainable products were particularly popular among customers in 2020. Sales of organic food (e.g. Migros Bio, Alnatura) increased by 15.6%. Sales of products with ecological or social added value, such as those carrying the ASC or MSC labels, amounted to CHF 3.382 billion (+7.4%). As part of its product range expansion in the reporting year, Migros launched the own brand V-Love. The products sold under this vegan brand comprise about 60 meat and dairy alternatives.

Specialist markets with significant online growth

Despite the lockdown in spring, the specialist markets Micasa, SportXX, melectronics, Do it + Garden and OBI increased their sales by 5.6% to CHF 1.717 billion. The temporary closure of the specialist markets was offset by sales growth of 138.8% in the online channel. The number of online orders in 2020 was more than twice as high as in the previous year.

Successful launch of Migros Online

Migros Online replaced the previous provider LeShop at the start of November. Migros Online increased its sales by 40.0% to CHF 266 million in the reporting year and delivered 43.6% more orders than in the previous year. To cope with these higher volumes, the warehouses in Bremgarten (Aargau) and Ecublens (Vaud) were expanded. Migros Online also opened a third warehouse in Pratteln (Basel-Landschaft) earlier than scheduled.

Successful neighbourhood initiative Amigos

In collaboration with Pro Senectute, Migros launched the neighbourhood support platform Amigos during the lockdown. People at higher risk from coronavirus were able to place their orders online and have them delivered straight to their doorstep by volunteers. At the end of 2020, 17'500 households and 28'320 helpers were registered. About 75'000 deliveries were made in the reporting year.

The collection and returns network PickMup was expanded and is now offered at 700 branches (+17%). At the end of 2020, post and DHL parcels could also be sent and picked up at more than 450 PickMup locations (+13%). More than 500'000 parcels were processed, up 78% on the previous year.

More branches, smaller sales area

As well as expanding its online range, Migros opened eight new Migros branches in the reporting year. Despite this, the sales area of supermarkets/hypermarkets, specialist markets and restaurants/take-aways fell by 4.3% to 1'415'437 m², which led to an increase in productivity per area. The reduction in sales area was due to the closure and sale of Interio and Chickeria respectively. The Migros sales network comprised more than 726 locations at the end of 2020 (previous year: 737).

Commerce

The Commerce Department comprehensively transformed its portfolio of companies between 2017 and 2019 in line with its long-term strategic focus. On a divestment-adjusted basis, this resulted in sales growth of 14.3% to CHF 7.538 billion.

As part of its strategic realignment since 2017, Migros has cut ties with some subsidiaries. The sales process for Globus was successfully completed in May 2020. The operating losses up to the time of the sale had a negative impact on the result of the business unit.

Due to the successful transformation over the past few years and the focus on the eCommerce, Convenience and Discount segments, the strategic business unit Commerce grew on a divestment-adjusted basis in the reporting year. The online companies Digitec Galaxus and Ex Libris responded quickly to the strong growth in demand and clearly extended their positions as markets leaders.

As a result of the transformation, earnings before interest and taxes (EBIT) were significantly better, rising from CHF -571 million in the previous year to CHF 127 million in the reporting year.

Digitec Galaxus increased its platform sales in Switzerland by 59.3% to CHF 1'826 million. The company grew much faster than its competitors and increased its market share in all segments. The Group's net sales came in at CHF 1'745 million, compared with CHF 1'106 million in the previous year. By extending the warehouse in Wohlen (Aargau), the storage capacity was increased in time to cope with the sharp rise in orders.

Ex Libris continued its successful transformation from brick-and-mortar retailer to digital player. The rapid online growth more than compensated for the sales lost as a result of branch closures during the lockdown. Sales increased by 22.4% to CHF 122 million. This meant that Ex Libris has again clearly extended its position as Switzerland's leading online book retailer.

Denner posted sales of CHF 3.762 billion (+15.7%). Due to changes in consumer behaviour during the pandemic, footfall was slightly lower (-0.4%) than in the previous year, but customers spent more per visit. The average basket value increased by 16%. The branch network grew to 838 branches, representing a net increase of 16 branches.

migrolino increased its sales by 20.8% to CHF 716 million. Despite lower footfall at commuter locations and petrol stations during the lockdown, the shops still recorded significant sales growth. The wholesale business also grew, due to the acquisition of new customers. The number of migrolino locations increased to 323 (previous year: 321).

Migrol recorded a 20.8% decline in sales to CHF 1.227 billion, due to lower fuel and heating oil prices and less use of private vehicles. However, it was able to further increase its share of the heating oil market and maintain its share of the fuel market.

Migros-Industry

The sales of Migros-Industry were hit hard by the Covid-19 pandemic in 2020, amounting to CHF 5.975 billion (+1.8%) in a challenging market environment.

With its industrial companies, Migros is one of the world's biggest producers of own-brand products. Migros-Industry generated consolidated sales of CHF 5.975 billion in 2020 (previous year: CHF 5.872 billion). The increase of CHF 103 million is attributable to the strong retail business in Switzerland, which more than compensated for the loss of deliveries to catering services.

Shifts between customer groups in Switzerland

In the Swiss market (retail and bulk consumer business), Migros-Industry increased its sales by CHF 107 million (2.2%) to CHF 5.093 billion (previous year: CHF 4.985 billion). Despite the challenging conditions caused by the pandemic, Migros-Industry was able to continue to fulfil its mission thanks to the extraordinary dedication of its employees.

Changes in consumer behaviour led to sales growth of CHF 215 million in the Migros Group's retail business. However, the closure of restaurants and take-aways during the lockdown and the ongoing restrictions led to a drop of CHF 107 million in sales in the bulk consumer business.

In order to concentrate more on the core competencies, the delivery wholesaler Saviva was sold on 31.12.2020. Migros-Industry will bundle its strategic bulk consumer business under the brand Swiss Gastro Solution from now on.

International market position maintained

The international business was negatively impacted by the Covid-19 pandemic. The closure of individual retail formats led to lower sales in some key markets, including Germany, France, the USA, South Korea and China. Despite a negative FX effect of about CHF 35 million, sales amounted to CHF 883 million and were therefore at the same level as in the previous year (CHF 887 million); on a currency-adjusted basis, growth amounted to 3.4%. As part of the portfolio adjustments, OSG (Germany) was sold and Gastina (Austria) was closed at the end of 2020.

Investments in the Swiss business areas

Migros-Industry invested about CHF 220 million in Switzerland as a centre of industry in 2020. As in previous years, the focus was on automating and digitalising processes.

Stable development of jobs

Migros-Industry employed an average of 13'950 people in the reporting year. Due to portfolio adjustments, the number of employees was down slightly on the previous year by 181. As a committed trainer, Migros-Industry trained 524 apprentices in more than 30 different occupations.

Financial Services

Migros Bank increased its business volume significantly in 2020. At the same time, it used its strong financial position to make precautionary value adjustments in line with its prudent risk policy. This led to a reduction in profit.

Migros Bank performed well in the reporting year, despite the challenging environment. The main focus was on addressing the Covid-19 crisis and ensuring continued provision of all services for its customers. Ten of the 68 branches were temporarily closed during the lockdown in spring 2020. To ensure continuity of the financial services, the direct (digital) sales channels were expanded. For example, video consultations and biometric voice recognition were introduced and the range of online ordering options expanded.

Increase in customer lending

Through a combination of digital channels and personal consultations, Migros Bank was able to increase its mortgage volume by 4.5%, reaching the CHF 40.0 billion mark for the first time. The increase in new customer loans across all divisions amounted to CHF 1.8 billion. About half of this volume was attributable to the corporate clients business, which benefited from larger financial transactions in the reporting year in part due to the partnership with the real estate company CSL Immobilien AG. The growth in customer lending was helped by Migros Bank maintaining its prudent risk policy in both the corporate clients and private clients business.

Customer deposits rose by 7.2% to CHF 38.0 billion. This significant increase reflects the high level of customer confidence in Migros Bank. Off-balance sheet customer deposits also rose considerably. The total of all securities held by customers in Migros Bank custodian accounts rose by 7.7% to CHF 14.1 billion. With an increase of 23.2%, the demand for asset management mandates was again very encouraging.

Greater risk provisioning

The core areas of investments and financing made a big contribution to the encouraging performance of the operational business. Operating income amounted to CHF 314 million in 2020, compared with CHF 306 million in the previous year. In line with its prudent risk policy, Migros Bank took interest rate hedging measures at a cost of CHF 6.1 million and made precautionary value adjustments in the amount of CHF 71.4 million. With these factors taken into account, profit amounted to CHF 237 million (-22.7%).

The value adjustments were, first, individual adjustments on corporate loans in the amount of CHF 17.1 million. With this precautionary measure, Migros Bank protected itself against pandemic-related debt default on these loans. Second, Migros Bank made value adjustments for inherent default risks in the amount of CHF 54.3 million, in response to the FINMA accounting standards introduced on 1 January 2020 (RelV-FINMA), which require precautionary value adjustments to be made for non-impaired receivables. Migros Bank fulfilled the new requirements quickly and consistently. The value adjustments were charged in full to the 2020 income statement without a reduction in the existing high equity of CHF 4.3 billion and without making use of the transition period to 2025 offered by FINMA.

Effects on the income statement

As a result of the value adjustments, net interest income decreased by 14.4% to CHF 419 million. In contrast, net commission income increased by 4.9% to a record CHF 107 million, due to investors making more use of the volatile equity markets for securities transactions. Trading income fell by 7.5% to CHF 36.8 million, due in particular to market-related value fluctuations in trading portfolios.

Across all divisions, Migros Bank suffered a 10.5% decrease in operating income to CHF 572 million. Operating expenses increased to CHF 314 million (+3.5%). After accounting for extraordinary items and after taxes, an annual profit of CHF 193 million (-16.3%) was generated.

New strategic initiatives

Due to sustained pressure on net interest margins, the general conditions will remain challenging in 2021. Migros Bank is in good shape, and its position is further strengthened by the new strategic initiatives. These include expanding the direct sales activities, increasing innovation in order to boost the core business with corporate and private customers, and leveraging synergies with the Migros Group.

Migros Bank also started to focus its investment portfolio towards sustainable products in the reporting year. Asset management mandates and personal investment advice will be made more sustainability-oriented by the end of 2021, and only sustainable products will be actively offered in the funds segment.

Travel

The Covid-19 pandemic weighed heavily on the operating result of the Hotelplan Group. Sales fell to CHF 732 million, representing the worst result in the history of the Swiss travel company.

After the Hotelplan Group had made a positive start to the 2019/2020 financial year, the travel industry was brought to an abrupt standstill by the Covid-19 pandemic in March 2020. Tens of thousands of holidays had to be cancelled, flights rebooked and return journeys organised. Travel was severely restricted in the months that followed, which led to a near total collapse in demand for all business units. The travel company posted sales of CHF 732 million (previous year: CHF 1'188 million). Passenger figures were down by 50.8%.

Expansion of portfolio in Switzerland

The travel company Hotelplan Suisse was hit hard by the pandemic, and was forced to cut jobs and close branches. To meet the demand for holidays in Switzerland and neighbouring countries, the portfolio was expanded. This led to a sharp increase in the number of bookings for holidays in Switzerland in particular. The number of customers spending their holidays in Switzerland increased by 36% in comparison with the previous year.

Hotelplan UK – pandemic and Brexit

In 2020, the performance of Hotelplan UK was not only affected by the pandemic but also by the ongoing Brexit uncertainty. To safeguard long-term profitability, the chalet range in European ski resorts was reduced. The sales of Hotelplan UK fell to GBP 115 million (previous year: GBP 235 million). In Swiss francs, this corresponds to sales of CHF 140 million (previous year: CHF 298 million).

Increased demand in the home countries

After a successful winter season, the business of the holiday home agency Interhome Group was hit hard, in particular at the start of the summer season. The easing of travel restrictions in the summer months then led to an increase in demand, particularly for bookings in the home countries. The losses caused by the pandemic could thus be partially cushioned by the summer business. Sales came in at CHF 237 million (previous year: CHF 341 million).

Excellent customer service

The business travel providers bta first travel and Finass Reisen were able to continue to provide their customary excellent service, despite the challenging situation. Several large orders that could not be fulfilled were rebooked for 2021. bta first travel and Finass Reisen recorded combined sales of CHF 10 million (previous year: CHF 21 million).

Collapse of online business

The first financial year of vtours within the Hotelplan Group started promisingly, but the online tour operator then had to cancel almost all bookings from March 2020. Due to the Covid-19 pandemic, new bookings dried up almost completely. vtours used this period as an opportunity to improve its internal and external processes. Sales amounted to EUR 139 million (previous year: EUR 462 million, not included in consolidation). In Swiss francs, this corresponds to sales of CHF 149 million (previous year: CHF 516 million, not included in consolidation).

Despite the challenges, bedfinder was able to strengthen its existing partnerships and acquire new partners for the B2B tour operator business. bedfinder launched package rail holidays as a new product and will expand this segment further.

Shared Services

The Operations Department optimised the processes further in 2020. It also ensured that the high demand was handled well logistically during the pandemic and that the transition to working from home went smoothly.

The Operations Department (formerly: Logistics & IT) is responsible for the functional areas Storage, Logistics, Transport, Engineering, IT, Digital Business and Analytics. For all entities of the Migros Group, it provides 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), a new, fully automated order picking facility was put into operation in the cold store in 2020. During the lockdown in spring, orders in the online channels increased nine-fold. Due to limited shipping capacity in this period, additional distribution companies were used for the last mile.

Due to the Covid-19 pandemic, the Migros Distribution Centre Suhr (food) saw a sharp increase in demand in the Migros food business. The distribution centre demonstrated its efficiency by turning over the large volumes on time, despite the exceptional circumstances.

Transport

Migros further extended its leading position in Swiss rail freight in 2020. The number of rail kilometres was up by 1.2% on the previous year, and the number of rail wagons transporting Migros goods exceeded 100'000 for the first time.

As part of the innovation partnership with the Swiss Federal Laboratories for Materials Science and Technology (EMPA), efforts to decarbonise and digitalise road freight were further intensified in 2020. These revolved around developing a decarbonisation application with myClimate-certified functionality for Migros' transport logistics.

Migros also continued to support the national generational project Cargo sous terrain. It is represented on the Board of Directors of Cargo sous Terrain AG and other bodies.

Engineering

In 2020, the Engineering division defined the targets of the Migros Group's future climate and energy strategy and developed energy master plans to ensure long-term resource efficiency. In the area of operational planning, several construction and conversion projects were planned and conducted throughout the Migros Group.

February 2020 saw the launch of the "EIGER" project, which will make the processes in Cooperative Retailing fit for the future in the coming years with modern, innovative and future-oriented technology solutions.

IT

In order to provide customers and employees with innovative technology solutions more quickly, the Lean-Agile approach to collaboration was promoted in Group IT in 2020. As part of this, the first agile organisations were established, in which different departments and disciplines work together to implement new technology solutions.

To continue to have access to the best software solutions and technical innovations available on the IT market, the cloud capability of companies plays an important role. In the reporting year, Migros developed a national cloud strategy, in which the security of data and the stability of applications are integral components.

In addition, the technical conditions for barrier-free, digital collaboration were created in 2020. This gives the Migros Group access to a wide range of collaboration and communication tools within a modern IT infrastructure.

Digital Business

The new Digital Business division, which supports several Migros entities with digital transformation, established itself well in its first year. For example, good progress was made with various initiatives relating to digital touchpoints, such as migros.ch and Famigros.ch, and in the area of e-commerce for the specialist markets. One focus was on further developing the central Migros login, which will serve as an important customer access point to Migros' digital services.

Analytics

Analytics repositioned itself in the reporting year, in order to develop data products across the entire value-added chain of the Migros Group. As the core of the Analytics department, product teams collaborate across departments and disciplines to develop and operate data products.

In 2020, product range localisation was introduced for Denner. The pilot went live in eleven branches. Optimising the range on the basis of local data resulted in measurable improvements within the existing space.