Delticom: Tirendo’s business concept not successful

At Delticom’s Annual General Meeting in Germany yesterday, shareholders were informed that the online tyre retailer would distribute a dividend of € 0.25 per share for the 2014 financial year – only half that of the previous year. This smaller dividend particularly reflected a three-quarter drop in net profit – a decline “mainly due to the higher cost base after the Tirendo acquisition.” Andreas Prüfer, head of the company’s board of management, also told shareholders that the Tirendo business concept “of achieving 50 per cent or 100 per cent growth in the online tyre market through high advertising and personnel expenses did not prove successful.”

According to Prüfer, one of the five goals Delticom pursued when taking over Tirendo was to “ensure that we had one challenging competitor fewer in the market.” He added that another goal was to “find a business model which would allow us to double our annual turnover. He added that “it’s rare to achieve all of one’s goals.” While Delticom achieved the first-mentioned goal and had either achieved or soon would achieve a further three, Prüfer made the following comment regarding turnover: “We didn’t manage to find a business model that yields a doubling of annual turnover and thereby returns profits. It would have been too good.”

In order to reduce Tirendo-related costs, in 2014 Delticom downsized the Tirendo team in Berlin and renegotiated the operation’s television advertising expenses, thereby “reducing the burden of unproductive TV costs.” Tirendo’s customer service was taken over by Delticom’s operation centre and its IT department is now managed by an external service provider.

Delticom says the cost reductions at Tirendo will help it gain new customers and to grow through attractive prices. The company aims to increase sales volume in 2015 compared to the previous year and to reinforce its “market-leading position.” The initial results of this strategy can be found in the first quarter of 2015: According to preliminary figures, first-quarter revenues of € 111 million are 18 per cent higher than a year ago; the number of new customers increased five per cent year-on-year to 207,000. During the quarter, 238,000 existing customers (+19 %) made a repeat purchase through Delticom Group websites; personnel costs were 40 per cent lower than in the first three months of 2014.