Deutsche EuroShop AG (DEQ) Earnings Call Transcript
November 14, 2025
Earnings Call Speaker Segments
Good day, everyone, and welcome to the Quarterly Statement 9 Months 2025 conference call. This is Valentina, the Chorus Call operator. Please be aware that everyone joining us is in listen-only mode, and this conference is being recorded. After the presentation, there will be a Q&A session. To register for questions, you can press * and 1 on your telephone at any time. If you need operator assistance, please press * and 0. This conference must not be recorded for publication or broadcast. At this point, I'm pleased to hand the call over to Hans-Peter Kneip. Please go ahead.
Many thanks, Valentina. Good morning, everyone, and moin from Hamburg. Hans-Peter Kneip here. It's a pleasure to welcome all of you to today's conference call, where I'll walk you through the financial results we posted for the first 9 months of fiscal year 2025, plus an update on recent developments and achievements at the company. As usual, I'll gladly take your questions once my short presentation wraps up. On behalf of the whole team, thank you for spending your time with us and for your ongoing interest in Deutsche EuroShop. Let me begin with a look at our business activities, starting on slide 2. Set against the first 9 months of 2024, footfall came in with a modest decline of 0.2%, while our tenants posted a 2.2% rise in their sales. Following a subdued first quarter, both visitor numbers and tenant sales have trended positively. I'll share more detail, including a sector breakdown, shortly. Even with rents going up, revenues fell by 1.3% to €197.4 million, EBIT dropped by 4.5% to €155.4 million, and FFO declined by 12.8% to €108.8 million. Those weaker results stem from higher deferrals, one-off allocation and cost effects, and particularly from increased financing costs.
That doesn’t really surprise us. The results mostly match what we planned and forecast, and as usual we’ll refine that with the 9-month figures, which I’ll go through at the end of my presentation. I’m also glad to say that our bigger investment projects at several locations were finished on schedule and within budget, and I’ll give more details on those later. Moving to slide 3. On funding, we’re in a comfortable spot after the latest financing measures and dividend payments, with an LTV of 42% and a cash position of €376 million. That follows the dividend we paid in early July this year of €2.65 per share, totaling €200.7 million. Our funding position is still stable, and all financing schedules for this year are done. Our next loan isn’t due until June 2026, and we’re already working on an early extension. In June, we successfully placed our first green bond with an aggregate nominal amount of €500 million. That bond runs 5.3 years until October 2030 and carries an annual interest rate of 4.5%. The issue drew strong investor interest and was 7 times oversubscribed, which highlights Deutsche EuroShop’s appeal as a borrower.
The bond trades on the Luxembourg Stock Exchange's Euro MTF market. Before issuing the bond, Deutsche EuroShop was assigned a long-term issuer rating of BBB+ by S&P. S&P rates the new bond BBB-, which reflects our strong investment grade profile. Moving on to slide 4. Deutsche EuroShop is taking forward-looking steps not only in the area of sustainable financing. Yesterday, we published comprehensive ESG policies, which you will find on our website. Our new ESG policies include a code of conduct for employees and a code of conduct for business partners and suppliers, as well as topic-specific policies on climate protection and energy, water, and environmental protection and waste. On slide 5, we take a closer view at our centers. Looking at the third quarter of this year, we have seen a plus of 1.4% in footfall and 3.9% in turnover. As already mentioned, in the first 9 months of 2025, in total, we saw a minus of 0.2% in footfall and a plus of 2.2% in retail sales. This reinforces the positive trend we had already observed in the second quarter of the year. I probably don't need to tell you that the consumer environment remains challenging, influenced, among other things, by volatile political developments and geopolitical conflicts.
But consumer sentiment is picking up, and our tenants’ sales are rising, especially in our foreign markets. German consumers are still more cautious and keep spending relatively little in retail compared with other European countries. In that respect, our portfolio could gain from a catch-up effect if the consumer climate in Germany improves too. That could be set off by a resurgence in economic growth, for instance through structural measures and investment programs from the new federal government, which has held office since May this year. Even so, we and our tenants view the year-end and Christmas business with optimism. The peak shopping season begins in the next few days. I’d now like to look more closely at the individual retail sectors and how they developed in Germany during the first 9 months of 2025 on slide 6. This overview shows not only turnover development in the individual sectors but also each one’s share of total tenant turnover and floorspace, along with the occupancy cost ratio. Compared with the end of 2024, our tenants in the German portfolio in the health and beauty segment did well, posting a 4.2% rise in sales.
Specifically, pharmacies and drugstores such as dm-drogerie markt are the primary engines in this area and are carrying on their success story. Fashion/textiles make up our biggest tenant category — roughly 28% of sales and 41% of retail space in Germany — and managed a modest gain of 0.2%. Food, which covers supermarkets and discounters, posted sales that were 0.7% higher, and so did general retail, a group that takes in bookstores, toys, household goods, and jewelry, along with department stores. On the other hand, shoes and leather goods, sports, electronics, and services finished the first 9 months in negative territory. All told, like-for-like sales for our German tenants rose by 0.2%, whereas tenants outside Germany did better, coming in at plus 2.3%. Across the whole portfolio, we recorded an increase of 0.7%. Measured in absolute terms, sales from our tenants came in 2.2% higher, as I outlined earlier. Lastly, this page illustrates that the average occupancy cost ratio — the so-called OCR, meaning the proportion of rents and ancillary costs our tenants must bear compared with their revenues — stands at 11.3%, a healthy level that lets our tenants prosper in our shopping centers over the long term and demonstrates that our portfolio is well balanced and not over-rented.
Now let's move on to the financials, and we'll review our revenues on slide 7. Those came in a little lower, at €197.4 million, versus €200 million during the first 9 months of 2024. That works out to a decline of 1.3%. Contractual rents did go up, but rental income revenue dipped modestly overall because of rental incentives that were granted. Largely as a result of the property tax reform — the German Grundsteuerreform — revenue from property tax apportionments and insurance expenses was down by €1.2 million. The split between Germany and abroad has moved somewhat toward foreign countries, where our share now stands at 22%. Turning to EBIT, please look at slide 8. EBIT declined 4.5%, landing at €155.4 million. The primary factor was higher shopping center operating expenses, driven by one-off costs tied to non-apportionable ancillary costs connected with renewing technical equipment. It's worth noting that property tax expenses have come down on a sustainable basis thanks to the property tax reform I mentioned earlier. On slide 9, we get to the financial result, which was down 13.8%, or €10 million, moving from -€37.8 million to -€47.9 million. Interest expenses rose by €8.8 million, reflecting loan increases in the second and third quarter of the prior year, higher interest rates on follow-on loans, and the interest on our inaugural bond.
Additional financial results take in interest income, plus €2.7 million of expenses tied to terminating swaps as part of early repayment on the loans behind Stadt-Galerie Hameln and Stadt-Galerie Passau. Turning to slide 10, EBIT excluding valuations declined to €107.5 million from €125 million — a drop of 13.9%. That fall stemmed from the EBIT downturn, driven largely by higher center operating expenses, and also from the financial result. As I noted, the biggest driver was rising interest expenses. Interest income on short-term bank deposits came in under the prior year, at €3.3 million. Consolidated EBT on slide 11 rose 13.3%, moving from €82.5 million to €93.5 million now, chiefly on a stronger valuation result. EPS likewise climbed to €1.23 from €1.08. Now please come with me to page 12 for how FFO developed. FFO fell to €108.8 million now from €124.7 million, or per share to €1.44 from €1.64, reflecting the weaker EBIT and the lower financial result. Let me move on to the balance sheet, found on page 13. Total assets following the bond issue stand at €4.55 billion.
That marks a rise of €186 million from where we stood at the end of 2024. In June, we repaid in full the loans on Herold-Center Norderstedt and Stadt-Galerie Hameln, which together came to €143.1 million, and in August we made a partial repayment on a €34.5 million loan for Stadt-Galerie Passau. Consolidated liquidity as at 30th September 2025 is €376 million. That represents an increase of €163.6 million. Do bear in mind that we distributed a dividend of €200.7 million at the start of July. Total equity, including non-controlling interests, went down by €101.5 million. As at 30th September 2025, current and non-current financial liabilities were €2.1 billion, a figure €287.6 million above the 2024 year-end level, driven in particular by the €500 million bond issued in June. Non-current deferred tax liabilities rose by €13.9 million, reaching €364.7 million. Our equity ratio fell to 44.9%, and consolidated LTV is now 42%. The EPRA LTV — calculated proportionally on the basis of the group's share in all assets, so to speak on a look-through basis — comes in at 44.2%. Turning to page 14, I'd like to update you a little on our financing structure. As the balance sheet just showed, total debt comes to €2.1 billion. On 30th September, the average interest rate was 3.2% and weighted average maturity was a comfortable 5.2 years.
Following the €500 million bond we issued in June, we're still sitting in a solid spot, with credit metrics that are strong and sustainable at investment grade, among them an LTV of 42%, net debt to EBITDA of 8 times, and interest coverage of 4.3 times. Over on the right-hand side, you can look more closely at Deutsche EuroShop's maturity profile, which is diversified over the long term and now takes in the bond that matures on 15th October 2030. No refinancing obligations come up for us before mid-2026, and as ever we keep refinancing carefully and ahead of time. The key details of our green bond are pulled together on slide 15. We hit a financial milestone by obtaining a corporate rating and accessing the capital market for future corporate financing. With the successful placement of our first bond in June, we've broadened where our funding comes from and made our financing structure more diverse. As I've already stressed, the €500 million bond drew 7 times oversubscription, which mirrors how much confidence institutional investors have in the retail real estate market and in Deutsche EuroShop specifically, along with their readiness to put money into our shopping centers as eligible sustainable projects under our green finance framework, which we've laid out on the next page, slide 16. We've made good progress in optimizing our capital and financing structure.
By releasing our green finance framework, we established the foundation for potentially utilizing green financing instruments down the road. Sustainable Fitch has given this framework an excellent rating, which represents the top score achievable. Turning to a few portfolio updates on slide 17. The Food Garden now stands as the standout feature at the Main-Taunus-Zentrum near Frankfurt, lending the property a fresh, vibrant, urban feel. This premium, diverse dining and food zone launched in April. Constructed across roughly 7,000 square meters at the very center of the shopping center, the Food Garden replaced a previous department store building and was built to stringent sustainability criteria. Every unit in the Food Garden is leased to top-tier tenants. Anyone who hasn't seen it yet ought to visit the project in person. Guided tours can also be arranged through our IR team, who are glad to help. Response from shoppers and tenants has been outstanding, and that shows clearly in the center's footfall. Since the opening, visitor counts have risen 17%. Incidentally, this space welcomes guests 7 days a week and draws big crowds on Sundays too. Moving to slide 18, we have news regarding the Rhein-Neckar-Zentrum near Mannheim.
We just wrapped up a bigger investment project, and the center has been expanded with appealing tenants in gastronomy, sports, and entertainment. Since February, a new, modern free-standing L'Osteria has been offering highlights from the Italian kitchen to our visitors. Beyond that, three exciting tenants have moved into the renovated former Bauhaus building, delivering plenty of what we call retailtainment. A trampoline park and a successful cycling store are each an attraction in their own right. An interactive indoor entertainment offering — a so-called family action concept, featuring a dark light minigolf course and an escape room experience — is set to open next week. Just a few meters away, there's an indoor skydiving center that is running very successfully. These tenants are positively benefiting from one another, and we expect further synergies with the adjacent existing cinema and restaurants, giving the entire center a further boost. This new leisure area has been given a name that sums up the diversity and vibrancy of the location: the Food & Fun Park. This new branding will become visible in the coming weeks. Finally, I would like to come to slide 19 and the forecast and outlook. In light of the developments over the first 9 months of the year, we are refining our forecast for the financial year 2025.
For revenue, we're looking at the lower end, while EBIT and FFO should land in the middle of the original forecast range. EBT excluding valuation is anticipated to come in slightly under the original forecast, which is partly due to higher interest expenses stemming from the adjusted financing structure. To break it down: revenue of €268 to €273 million, versus €268 to €276 million previously; EBIT of €211 to €216 million, versus €209 to €217 million previously; EBT excluding valuation of €144 to €149 million, versus €150 to €158 million previously; and lastly, FFO of €146 to €151 million, versus €145 to €153 million previously. Ladies and gentlemen, thank you for the confidence you place in Deutsche EuroShop. We anticipate that the recent positive trend will carry on through the remainder of the year. While there is certainly room for improvement in the overall retail environment, there are good reasons for optimism for the rest of 2025 and the coming year 2026. You can count on us to keep investing in our shopping centers in a targeted, strategic, and sustainable manner so as to create future value for our shareholders. Ladies and gentlemen, given our company's recent development, we can look back on an encouraging first 9 months of 2025.
Thanks so much for sticking with us and staying involved. That wraps up my remarks. I appreciate everyone listening. At this point, I'm glad to take whatever questions you have. Valentina, over to you.
Thank you. We're moving into the Q&A portion now. If you'd like to pose a question, you can press * and 1 on your phone. A tone will sound to let you know you've joined the queue. Should you want to drop out of the question queue, just press * and 2. We ask those asking questions by phone to turn off loudspeaker mode while doing so. Anyone with a question can press * and 1 right now. Our first question is from Kai Klose at Berenberg. Please go ahead.
Morning, and thanks — a few things I wanted to ask about, mainly on the portfolio side. First, where did occupancy stand at the 9-month mark, and what rent collection rate did you see across those 9 months?
Thank you, Kai, for raising that. Across the opening 9 months, occupancy came in at roughly 95%, and once again the collection rate stood near 99%. How have occupancy levels moved? They've picked up a bit. As you saw at the half year, we were running about 94.5% occupancy, and today we're near 95%, so there's been some improvement during the last 3 months. Nothing dramatic on the whole — you're aware our goal is roughly 5% vacancy, and that's exactly where we sit right now.
Thank you. For my second question, can you break down how that like-for-like rental growth divides up? In the report — or in the release — when you discussed rent, you brought up rent incentives. Could you shed a little more light on that as well, both by region and by segment?
On the rent increase, you might have noticed in the report that like-for-like rents went up moderately, by about 0.4%. The main thing pushing top-line revenue down is rising rental incentives, especially. Over the last 6 to 12 months, we've made considerable headway in bringing our vacancy rate down. A year ago it stood at roughly 7%, which we saw as too high, so we succeeded in drawing in some quite appealing tenants—though that came at the expense of certain rental incentives, and in summary those incentives pull revenues down by about 1.3%. Also, one point I'd like to stress again is that the property tax reform, which was just covered earlier, is another factor lowering revenues, and it truly has nothing to do with our revenues. Since it's an apportionment within our revenue, it pushes revenues down, even though it's actually good news for our tenants, who wind up paying less in taxes. So this somewhat dilutes our revenue numbers, which come in lower, even as rents edge up slightly. Thank you.
Just so I understand — when you mention 130 bps as a minus from rent incentives, what did indexation contribute to the like-for-like? My guess is it was positive, and I think rent incentives then nearly offset that.
Regarding incentives, those adjust along with inflation. We always begin at roughly +2%, +2%. What has pulled down that 2% uplift you would normally anticipate from inflation year over year is, first, the fact that our vacancy rate remains elevated. We had vacancy rates somewhere in between, and additionally we had certain contracts sitting at lower rents. That pushes rents down across the first 9 months, something you would of course prefer to steer clear of. In order to draw in new tenants, that's the choice we made. Beyond the index increases, we've seen some negative impacts from vacancy and reduced rents, and that produces the 0.4% reflected in our report. Since then we have granted additional rental incentives, which then leads to the somewhat negative movement in revenue. I hope this clarifies things a bit more.
Alright, two final questions from me. You said you've paid off loans or debt tied to a pair of malls. Those two properties, Hameln and Norderstedt — are they free of encumbrances now, and do you expect them to remain that way? My last question concerns the guidance range. You've tweaked the range but haven't brought it down. Why not get somewhat more precise, or narrow it to a tighter band, given that we're already in the Q4 stretch?
Okay, on the first question about the loans that were repaid: that was indeed Herold-Center Norderstedt and Stadt-Galerie Hameln. Those loans have been repaid in full, so the assets are now completely unencumbered, and at the moment we have no plans to take on any additional loans against them — for the time being they'll remain unencumbered. On adjusting the range: yes, as we usually do, we've refined it and made it more precise. Is there any further precision we can give on the range? It relates more to certain effects that show up toward the end, such as turnover. You may recall last year, when turnover rents surprised us quite positively, and in the retail business the final quarter — particularly around Black Friday and Christmas — is always a very interesting one for our sector. So we're leaving a bit more room for that in our guidance, to reflect some potential upside, but also, for other reasons, to reflect some downside. Yes, a more precise range, though perhaps not as precise as in the past, because there are, at least in relative terms, somewhat more turnover rents that could come in higher or lower depending on how year-end business goes.
Much appreciated.
Thanks, Kai.
Ladies and gentlemen, that brings us to the end of the Q&A. At this point, I'd like to hand the conference back to Hans-Peter Kneip, who may have some closing remarks.
Thank you for your questions and for your interest, ladies and gentlemen. If you have any further inquiries, please don't hesitate to reach out to the IR team, as always. Everyone at Deutsche EuroShop wishes you a peaceful and happy close to the year. We look forward to seeing you soon at upcoming investor or retail events—or, even better, in one of our shopping centers. All the best, and tschüss from Hamburg.
Everyone, that brings us to the end of today's conference. We appreciate your choosing Chorus Call, and we thank you for taking part in this call. You're welcome to disconnect your lines at this point. Goodbye.
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