Arcandor AG maintained its earnings and sales position in the first quarter of the 2008/2009 financial year. The tourism and retail group improved adjusted EBITDA by 18% to €180 million. Adjusted sales moved up slightly by 1.1 % to €4.79 billion. Arcandors major retail brands outperformed the German retail market in December. "Pleasingly, general expectations of a recession-driven weak quarter did not hold true," said Thomas Middelhoff, Chairman and CEO of the Arcandor AG Management Board, when presenting the figures on Thursday in Düsseldorf. "In their most important quarter of the year, Primondo and Karstadt proved to be robust in an extremely challenging environment, while Thomas Cook had another successful quarter."

Thomas Cook increases sales and earnings
The main business area, tourism, which most recently generated around 60% of total sales and over 90% of adjusted EBITDA, continues to develop very well. On the basis of its operating strength and flexible business model, the Thomas Cook Group (London) managed to improve GBP sales by 16.7% in a very difficult market environment. In the reporting period, adjusted sales on a Euro basis consolidated in the financial statements increased by 2.9% to €2.20 billion. Adjusted EBITDA amounted to €9 million, an improvement of €41 million against the adjusted figures of the previous year.

The EBIT included in the consolidated financial statements was minus €95 million (previous year pro forma: minus €150 million), with the restructuring expenses having a negative impact on the result. It is important to note that the tourism business tends generally to show a weak first quarter, with most profits generated in the third and fourth quarter of the fiscal year.

Primondo sales up slightly e-commerce offsets catalogue sales for the first time
In the first quarter, adjusted sales in the Primondo Group totalled €1.22 billion. This equates to an increase of 0.4%. In December 2008, Primondo achieved a considerable sales upturn, offsetting the sales performance of the weaker months of October and November. Particularly pleasing in this context was the strong sales growth of Quelle Germany in the important month of December.
As a result of Primondos realignment, the growth areas of e-commerce, international business and teleshopping expanded considerably, thus making a major contribution to the positive business trend.

The consistent transformation of Quelle to an online player is paying off. In the quarter under review, online demand at quelle.de increased by 38%, thereby more than compensating for the structurally driven decline in sales at the Quelle catalogue business in Germany. Quelles sales in Germany were thus almost at the level of the previous year. In e-commerce, Quelle considerably strengthened its number 3 market position in Germany, after eBay and Amazon. International business at Quelle again increased sharply, improving by a good 15% in the quarter. HSE24 again looks back at a successful quarter. After a weaker start to the quarter, HSE24 achieved the highest December sales in its history, with sales improving by 2.6% in the quarter. However, some specialty mail order companies, particularly those focusing on older customer groups, were considerably impacted by the general economic downturn. Specialty mail order as a whole therefore posted a year-on-year sales decline of a good 3%.

Adjusted EBITDA of the Primondo Group totalled minus €54 million, following €70 million in the previous year (adjusted for accounting changes to catalogue costs and factoring fees). Pleasingly the earnings trend was stable at Quelle, the largest unit in the Primondo segment. The key factors driving the earnings downturn of €16 million were the weak development in specialty mail order, which was particularly affected by the economic environment and the closure of FOX markets (markets selling over-stock goods). In the first quarter, Primondo invested large amounts in restruc-turing, including provisions for the closure of some over-the-counter stores. As a consequence, EBIT declined by €67 million to minus €22 million. The reduction of personal costs as a result of the Pact for the Future did not have any significant influence on the quarterly result, but will positively impact subsequent quarters. In addition, the Primondo Management initiated a further cost reduction program to ensure, the planned earnings increase in the current financial year is realised.

Karstadt increases operating result - trend reversal achieved
Following considerable losses in the past quarters, Karstadt achieved a trend reversal despite difficult conditions.

In the first quarter of the 2008/2009 financial year, Karstadt delivered adjusted sales for department store business of €1.27 billion. This equates to a slight sales upturn of 0.1%. Across the entire Karstadt segment (including Food and Catering), adjusted sales totalled €1.35 billion, thus reaching the level of the previous year. Sales in the fashion segment increased by 4%, as Karstadt gained market share in this most important sector. Karstadt sports also increased sales in the first quarter while at the same time, there were declines in Multimedia and Catering. This was partly the result of a targeted reduction of unprofitable sales space in some segments, particularly in the Multimedia segment.
With an adjusted EBITDA of €139.3 million, Karstadt showed an improvement compared to the previous-year result by €3.3 million. Due to a restrained discount policy, the gross margin was flat. The sales and earnings performance demonstrates that the operating performance of the department store business has improved in comparison to the previous year.

The cost reduction measures implemented towards the end of the quarter, which consist of the Pact for the Future and the efficiency program, so far have not significantly influenced the result, but will positively impact subsequent quarters. Despite a difficult market environment, Karstadt achieved an EBIT amounting to €99 million, almost at the level of the previous year (€103 million).

Outlook
"Despite the difficult economic environment, we concluded the first quarter successfully. We thus have a solid foundation for the rest of the financial year in our retail segments. During the year Arcandor will benefit increasingly from cost reductions resulting from the efficiency programs and the Pact for the Future," says Middelhoff. "Like many other companies in consumer-related areas, we do not consider a results forecast to be prudent due to the lacking visibility of the effects from the economic and financial crisis. However, on the basis of the measures which have been taken and the stability of the operating businesses, we are facing future developments with cautious optimism. I am pleased to report that trading in the second quarter is on track."

Thomas Middelhoff to hand over his duties as of March 1
Thomas Middelhoff will hand over his duties as Chairman of the Management Board to his successor Karl-Gerhard Eick as of March 1, 2009. Thomas Middelhoff said: "I would like to take this opportunity to thank the employees, customers, shareholders and banks for their faithful support over the last four years. During a difficult phase in 2004/2005, the company and its jobs were rescued. We then went on to turn a purely German retail company into an international tourism and retail group. This was made possible by the successful restructuring of the Group, the realignment of Primondo towards e-commerce and teleshopping and above all the development of what is now the Thomas Cook Group by far the Group's strongest sales and earnings driver. Over the period between 2004 and 2007/2008 Arcandor sales increased by almost 50%, adjusted EBITDA grew five times and bank debt went down by approximately 80%. During the same time sales share of the international businesses increased from 16% to 44%."

Thomas Middelhoff continued: "We have come a long way in the development of the Group, even though we have not reached our goal yet. This ordered transition within the Management Board with its combination of experienced operative managers together with a new Chairman and a new CFO is an important aspect of ensuring the company's future standing in the long term. As publicly known the change at the top management was planned long time in advance. I wish the team and all the employees much success and I will support the company in the future as much as possible." Thomas Middelhoff will accompany the ongoing development of Arcandor in an advisory capacity for the major shareholder Sal. Oppenheim and in close contact with the major shareholder Madeleine Schickedanz.