Metro warns on cash-and-carry profit fall

Retail group hit by poor sales in peripheral eurozone markets

Metro warned of lower operating earnings this year for its main cash and carry business and told investors it expected no quick improvement in the economies of southern and eastern Europe.

The German retail group has been struggling with poor sales in peripheral eurozone economies as well as a belated transition to internet shopping and continued uncertainty over its commitment to some of its peripheral businesses.

This week Olaf Koch, chief executive, said he would take direct responsibility for the cash-and-carry division – from which the group derives almost half of sales and earnings – following a boardroom shake-up.

Metro’s €66.7bn in annual sales make it the third-largest European retail group behind Carrefour and Tesco. More than 60 per cent of sales come from outside Germany, but the group is still heavily Europe-focused.

Its cash-and-carry division, the group’s most international business, derives only 10 per cent of sales from outside the region, although it operates in 26 countries.

Mr Koch has promised to do more to turn Metro into a more focused group after moving last year to sell its Real hypermarkets in eastern Europe and shutting down a lacklustre attempt at breaking into the Chinese market with its Media-Saturn electronics stores.

This year and next should see moderate sales growth, Metro said, while property sales should help to push headline earnings in 2013 above last year’s level.

Metro has started a shortened nine-month reporting period and is changing its year end to September 30, meaning the important pre-Christmas sales period will come into next year’s results. The company did not quantify the expected drop in operating earnings.

Net income fell last year from €631m to €3m – or from €859m to €619m on an underlying basis excluding one-off items. Fourth-quarter operating earnings before special items fell about 12 per cent at Real and at Media-Saturn, and by 15 per cent at the cash-and-carry business.

Mr Koch said his first full year as chief executive – when the company fell out of Germany’s blue-chip Dax share index and is cutting its dividend 35 per cent – had brought “painful” change.

“We have implemented fundamental changes … This came at a price … but we are clearly changing for the better,” he said.

Metro had cut net debt 20 per cent and improved operating cash flow 12 per cent, he said.

Shares in Metro were up 2.2 per cent in Frankfurt at €22.82.

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