How differently does a CEO raise children?
"The receipts are significantly higher"
Many shops have since opened again, even if only partially. The frequency is picking up again in many places. How does the disount genre fare at restart? Kik CEO Patrick Zahn takes stock.
TextilWirtschaft: Mr. Zahn, how many Kik branches are open again in Germany?
Patrick Zahn: We operate 2623 branches in Germany. Of these, 2599 shops were open again yesterday. This means that we can operate 98% of our German branches again.
Did you give high discounts as an incentive to reopen?
Unlike some of our competitors, we didn't do that. Of course we communicate that we are back. And there are discounts too. But price reductions are part of our business model, the discounts were already planned for before the crisis.
How has business started?
Our experience is based only on the opening since April 20, 2020 in a large part of the federal states. But they were good. Nobody can know, however, whether it is a flash in the pan. There has been no cinema for weeks, and no leisure activities whatsoever. It could be that people are looking for a change and rummage in our shops.
And what was bought?
As you know, we have a hybrid range, hardware and textiles. That benefits us in this situation. We make very good sales with garden decorations, garden textiles, planters and things like that. But children's clothing is also doing well. Sales with womenswear are not bad either, if not as good as with the mentioned product ranges. They are purchases on demand. Seasonally or because the children are growing out or wearing out a bit. In the coming days and weeks we will see how customer behavior develops.
How was the frequency in your stores?
For the first two days it was about the same as before the shutdown. However, the average receipts were significantly higher.
What are the requirements for the operation of the shops?
The question of the requirements gives us a lot of headache. Unfortunately, not only are there different regulations in the federal states, compliance with the requirements is also assessed differently by the district administrations and district offices within the states. This leads to the absurd situation that everything is OK when checking in a branch. is. The same protective measures in a branch only a few kilometers away are criticized. Just because it's in a different county. This is frustrating and very challenging for our employees.
Can you guarantee the branch operation even if a sales representative should become infected?
In such a case, the entire branch team would have to be in a two-week quarantine. We worked out emergency plans very early on and can ensure that the shops run smoothly even in such a worst case scenario. So far, only one employee has been infected in the entire company with more than 26,000 employees.
When the shops open, will the full rent for the rest of April be due?
The question of rents has been hotly debated in public. Especially using the example of large retail companies. It is often heard that the big ones have to put up with that. Unfortunately, it is not that simple, because large chain stores have correspondingly high costs. From a purely legal point of view, corona-damaged companies are allowed to hour rents for April, May and June. We know that the situation is as difficult for landlords as it is for us. During the shutdown, Kik therefore sought talks with all landlords in order to find solutions based on partnership. And we will continue to do so in the future.
Will the short-time work at Kik end once the shops are up and running?
Not for everyone. We are gradually ramping up the company. We hear from the branches that many of our employees would like to work short-time for longer. Because of the closed schools and kindergartens. This is really a problem. We also generate over 30% of our sales abroad. The shops there are still all closed.
Most of the factories in India, Bangladesh, Pakistan and other Asian countries are idle. What effects does this have on the procurement of your goods for autumn and winter 2020/21?
The textile industry is hardest hit by the corona pandemic. Which, by the way, is not clear to many of our politicians. When the disease was mainly concentrated in China, the industry worried about the delivery dates for the spring goods. As soon as the goods were there, the shops had to close. Because of our very long lead times, we were less affected. But now the question arises for us as well whether it will work with the timely deliveries for autumn. At the moment it cannot be foreseen. However, there may be bottlenecks for individual items.
Kik's business development over the past year has not yet been communicated. How did it go in 2019?
To explain that, I have to briefly refer to 2018. As you know, that was an extremely difficult year for the fashion trade, and for us too. Very hot and therefore with atypical seasons. We therefore worked very hard on many processes in 2019. We were only able to increase sales slightly in the past year, but we have made significant progress in terms of earnings. I cannot give any figures yet, they will be announced by our main shareholder, the Tengelmann Group, in the summer. We started the year 2020 with partly new price positioning and were full of hope. The first two months were not bad, in March we really wanted to accelerate. Then unfortunately came the shutdown.
And with that, all planning is obsolete ...
Exactly. In the past few weeks we have been very busy with the issue of liquidity. It is still too early for new targets. We will start working out different scenarios for this year in the middle or end of May and formulating goals accordingly.
Do you see a realistic chance of saving the year?
Of course we will try. But it will be very difficult to make up for the lost sales. As I said, we generate over 30% of our sales abroad. With the exception of Austria, all shops there are closed. In Austria, we are only allowed to open 40 of around 260 stores so far. That only helps a little. And nobody knows how consumer sentiment will develop in Germany. The yield will probably not be able to be saved this year. It is primarily about damage control.
At Kik, too, many employees had to move from the head office to the home office almost overnight. Can anything be derived from this for future work?
Working from home worked surprisingly well and provides an impetus for our future way of working. There will certainly be more video conferences. We will also digitize even more processes in the back office, make them leaner and more flexible. But I see limits when it comes to procurement. If you have production in Asia, you have to visit your partner on site on a regular basis. At a dinner with business partners, for example, you create closeness and trust. Maintaining personal contacts is worth its weight in gold and cannot be digitized.
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