Beauty retailer Douglas reviews store network as weak demand hits margins

By Cian Muenster and Kira Britten

Aug 12 (Reuters) - German beauty retailer Douglas said on Wednesday it was reviewing its store network after weak consumer demand and intense price competition weighed on profitability in the third quarter.

Douglas' performance is closely watched for clues on consumer spending in Germany and France, its largest markets, as Europe's premium beauty market struggles to emerge from a prolonged period of weak consumer sentiment and slowing growth.

Its adjusted core earnings fell 19.4% from a year ago to €127.5 million ($147.0 million) in the April-June quarter, missing a Vara consensus of €131.5 million. 

"The competition for share of wallet is fierce," CEO Sander van der Laan said in a statement, adding that Douglas was adjusting its pricing strategy and shifting investment towards e-commerce to cope with the situation.

The company, which is seeing an accelerated shift towards online sales, closed 31 stores in the first nine months of its financial year, compared with 12 a year ago.

A company spokesperson told Reuters that the network review could result in selective openings, relocations, refurbishments or closures, but did not specify how many more stores could be affected.

"We've opened a lot of stores in the last three years ... we need time for them to reach a run-rate sales level," Van der Laan said during a conference call. "These are basically hitting on the bottom line profitability percentage."

The retailer maintained its outlook for the 2025/26 fiscal year, after lowering the targets twice this year, in April and June.

Van der Laan said Douglas had expected the market to grow by 4% to 6% in continental Europe, but now that number stood between 2% and 3% instead, with no growth seen in Germany and France.

Douglas' shares were down 2.3% in early afternoon trading.

($1 = 0.8672 euros)

(Reporting by Cian Muenster and Kira Britten, Editing by Milla Nissi-Prussak)