Chapters
Annual Report 2020

6. Cost of Sales, Directly Related Costs and Other Operating expenses

Accounting Policy

Cost of sales, directly related costs and other operating expenses are recognized in the consolidated Income Statement when occurred.

Short-term employee benefits such as wages, salaries, social security contributions, bonuses, annual and sick leave are recognized in the year in which the related services are rendered by employees.

For accounting policies related to share-based payments and pensions please refer to notes 25 and 24, respectively. For accounting policies related to depreciation, amortization and impairments please refer to notes 11, 12, 14 and 13, respectively.

Payments relating to lease contracts with a duration of less than 12 months, lease contracts for which the underlying asset, when new, has a value of below €5,000 and variable lease payments are expensed to the consolidated Income Statement when incurred. In addition, the following items are recognized in the consolidated Income Statement within occupancy costs:

  • a difference between changes in a lease liability and a right-of-use asset as a result of reassessment/modification;
  • a difference between changes in a lease liability and a lease receivable as a result of reassessment/modification;
  • a difference between an amount of derecognized right-of-use asset and an amount of lease receivable on initial recognition of finance subleases;
  • COVID-19 related rent reductions (note 12).

The following costs have been included in the operating result:

in thousands of EUR

Notes

2020

2019

Direct materials

824,439

951,159

Employee costs

1,262,842

1,407,018

Occupancy costs

111,805

176,813

Marketing & publicity costs

171,193

203,510

Depreciation and impairments

11, 12

510,002

488,833

Amortization and impairments

13, 14

177,655

143,272

Distribution costs

88,430

79,180

Other costs

274,081

264,881

3,420,447

3,714,666

In 2020, the decrease in most costs included in the operating result is due to temporary store closures, resulted in decrease in revenue and related variable costs, cost savings following the pandemic. Employee costs are partially offset against the government grants received mainly in G4, please refer to Government Grants. The decrease in occupancy costs is due to savings in variable- and fixed rent costs, and rent discounts agreed with the landlords, in connection with the COVID-19 pandemic (see note 12 Leases). The increase in amortization and impairments relates mainly to the impairments of the customer databases and goodwill following lower performance of stores in certain chains compared to the expectations at their acquisition dates, for more information refer to notes 13 and 14.

In 2020, items relating to leases, which were recognized in the consolidated Income Statement mainly within occupancy costs are as follows:

in thousands of EUR

2020

2019

Variable lease payments

65,008

99,145

Short-term leases

1,960

2,332

Low value leases

2,111

2,522

Variable payments related to lease contracts reduced in 2020 due to lower not fixed maintenance and utilities costs, which did not form part of the lease liability.

The employee costs can be specified as follows:

in thousands of EUR

Notes

2020

2019

Salaries & wages

967,851

1,010,934

Social security

187,636

197,444

Pension costs - Defined benefit plans

24

9,953

6,359

Pension costs - Defined contribution plans

21,664

21,742

Share-based payments

25

5,677

5,027

Other employee-related costs

125,005

165,512

Government grants

7

- 54,944

-

1,262,842

1,407,018