Although recent results suggested that Praktiker is the best placed of the German DIY retailers, the sector continues to have problems. Since the vast majority of the population rent, rather than own their own homes, they have less incentive than the UK consumer to invest in modernisation and refurbishment. Competition remains severe and while consolidation has started, it will be some years before it fully bears fruit. We came to the conclusion that in a weak market our near-term expectations for the group were too optimistic; this naturally reduced our estimated fair value and hence we sold the stock.
Praktiker is a chain of DIY stores, spun off from German supermarket giant Metro. The pick-up in German consumption will likely help growth, but there are other catalysts too. First, the industry is consolidating and eliminating surplus capacity as long-term property leases (that were too expensive to break early) come up for renewal. Secondly, Praktiker has plugged a geographic hole by buying a rival, and thirdly, the company is rationalising its product range and revamping its outlets, moves that have been well-received by customers.
| Sedol |
Type |
Price |
Date |
| B0P7049 |
Sell |
EUR 24.911 |
01/11/2007 |
| B0P7049 |
Buy |
EUR 26.207 |
28/03/2007 |
|
