Sennheiser – drop in retail and Covid-19 triggers job cuts
Posted on: Wednesday 22nd of July 2020
Owing to the effects of the COVID-19 pandemic on its consumer and professional businesses, as well as a slowdown in the headphone market (owing to retail store closures), Sennheiser will cut around 650 employees by the end of 2022, with 300 of those job losses in Germany. Sennheiser’s fiscal year 2019 saw the company grow in its professional division, while reporting below expectations in the consumer business. Total Sennheiser Group turnover was $863m 6.5% more than in 2018.
The company attributed much of its slide on the consumer side to the worldwide headphone market, which has declined by 30-40% recently due to physical retail outlets worldwide being closed or working shortened hours. In order to mitigate those effects, in March, the company introduced cost reductions and reduced working hours in Germany and internationally.
The effect of COVID-19 has also been felt in the company’s live sound microphone sales, as Daniel Sennheiser reported: “With the cancellation of live events all over the world, the entire event and music industry has been practically brought to a standstill and is only slowly getting back on track. The future of many rental companies, and other service providers is under threat. This is having a significant impact on sales of microphones, which will continue to be reflected in our business performance next year. Exceptions are studio microphones.”
With imminent job cuts and an expected continued downturn ahead, Sennheiser added that it proposes to continue funding R&D, including the development of its AMEBO immersive audio technology. “To create innovative audio experiences for our customers and to shape the future of the audio industry, we are continuously investing in our development activities, “ said Dr. Andreas Sennheiser. Sennheiser Group’s investments in 2019 increased by 4.1% to $71.8 million (8.3% of turnover).
The family-owned company generated turnover of €756.7 million; earnings before interest and taxes (EBIT) of €18.5 million were slightly down compared to the previous year. “We look back on a rather mixed fiscal year 2019. In addition, we face major challenges this year due to massive changes in the consumer market and the declining demand for audio products because of the COVID-19 crisis. In order to position the company for a successful future, we will adapt our organizational structure to the changing conditions and align it with the new requirements,“ said Daniel Sennheiser, co-CEO of Sennheiser.
“We will continue to focus on our core competencies and further strengthen both our consumer and professional divisions by transferring operational responsibility completely to these two business areas. Sennheiser has always stood for excellent sound quality and extraordinary audio experiences since its foundation 75 years ago – this is what we will continue to stand for in the future,“ added Dr. Andreas Sennheiser, co-CEO of the company.
The adjustment of the organizational structure will result in job cuts throughout the company, particularly in corporate functions such as Supply Chain and Operations. Overall, Sennheiser plans to cut up to 650 jobs worldwide by the end of 2022. The reduction is to be implemented in the most socially responsible manner possible. Measures under consideration include not filling open positions, a voluntary redundancy scheme and severance options in addition to opportunities for partial and early retirement. “We are a family-owned company and every single one of our employees is part of the team. Together we share a passion for audio. With this in mind, these have been very difficult decisions to make and it is important to us primarily to avoid redundancies and to find individual solutions together with employees,” said Dr. Andreas Sennheiser, co-CEO.
Effects of the COVID-19 crisis on the audio market
Since the beginning of 2020, the global effects of the COVID-19 pandemic have also presented Sennheiser with major challenges. “With the cancellation of live events all over the world, the entire event and music industry has been practically brought to a standstill and is only slowly getting back on track. The future of many rental companies, and other service providers is under threat. This is having a significant impact on sales of microphones, which will continue to be reflected in our business performance next year. Exceptions are studio microphones,“ explained Daniel Sennheiser.
Fiscal Year 2019
Sennheiser looks back on a rather mixed fiscal year 2019: Although the audio specialist was able to achieve strong growth in the professional division, it was below expectations in the consumer business. In total, the Sennheiser Group generated turnover of €756.7 million, which is €46.0 million or 6.5% more than in 2018, while EBIT of €18.5 million was slightly below the previous year’s level of €21.2 million.
In the fiscal year 2019, the professional division generated turnover of €363.3 million, an increase of 9.2% over the previous year. Growth was driven in particular by the product categories of live music, studio recording and business communication. The consumer division generated turnover of €393.4 million. Although turnover increased by 4.1%, or €15.4 million, this was significantly below the growth of the headphone market as a whole. Despite the successful launch of new headphone models in the premium segment, the acceleration of market dynamics and increasing competition in the headphone market had a negative impact.
Taking a global view of the markets, EMEA continued to be the region with the highest turnover in 2019 with €382.7 million. This corresponds to an increase in turnover of 6.4% or €22.9 million. In its home market Germany, Sennheiser was able to increase turnover by 1.8%, or €1.9 million, for a total of €103.1 million. The APAC region recorded the highest increase in percentage terms with 10.6%. Total turnover here amounted to €175.3 million. This is €16.8 million more than in the previous year. Growth was driven in particular by the markets in China, Japan and South Korea. In the Americas region, turnover increased by €6.3 million, or 3.3%, year on year to €198.7 million.