Online tire retailer Delticom reports that 2011 was "again a successful year."
The German-based company's preliminary figures for the recently concluded financial year show a 14.4% increase in revenues, to 380 million euros. During the 12 month period EBIT grew 9.6% to 52.2 million euros and earnings per share were up 8.4% to 2.99 euros.
The brutal winter of 2010 was reflected in what Delticom dryly calls "superior business performance for the European tire trade." In other words, winter tires were a popular purchase. The end of 2011 has been comparatively mild and not very conducive to tire distress purchases. Delticom notes that industry opinions believe winter tire sales are “substantially below” prior-year levels. Despite this, the company’s new warehouse enabled it to offer customers “attractive prices” throughout the quarter, and therefore Delticom’s fourth quarter revenues increased 12.1% to 182.3 million euros.
Prices for winter tires shot up at the end of 2010, a reaction to widespread market scarcity. In contrast, in the fourth quarter of 2011 prices developed in what Delticom calls a “more orderly fashion” and along the lines expected by the online tire dealer. Consequently, Delticom’s gross margin retracted from 30.6% in Q4 2010 to 28.4% in the final quarter of last year. The fourth quarter 2011 margin was 13.2%, two points lower than a year earlier.
Delticom says selling prices developed favorably over the course of the year, while the mix was stable and volumes were fairly satisfactory. As expected, the company’s e-commerce division accounted for most of the company’s 480 million euro revenues; 455.6 million revenues were earned in this sector, a 12.9% year-on-year increase. Although Delticom’s Wholesale division still accounts for only a small proportion of revenues, these increased 53.4% year-on-year to 24.4 million euros.
Although Delticom says it was able to “cushion” the effect of rising costs – the company reports the cost of goods sold increased 16.3% in the reporting period to 349.1 million euros – to a good extent through price increases, full-year gross margin declined 1.2% to 27.3%, primarily due to the closing winter quarter.
Quoting industry experts, Delticom shares that rising unemployment in Europe and austerity measures are expected to further depress consumer sentiment, an occurrence the experts believe will also affect the European tire trade.
Independent of such short-term developments, Delticom notes that the share of tire market sales made on line “continues to be comparatively low,” although it concedes that increasing numbers of drivers are using the internet to source tires. Therefore, assuming a scenario where the market and weather do not improve over 2011, Delticom management regards a revenue growth of 10% as achievable. Assuming margins at prior-year levels, earnings should grow in line with revenues. (Tyres & Accessories)