METRO GROUP back on a profitable growth track: sales and earnings increase significantly

30 April 2010

  • Sales of METRO GROUP grow by 2.3% to € 15.5 billion
  • Sales in Germany adjusted for store disposals above prior year
  • International sales increase by 4.4%
  • EBIT before special items grows 55.9% to € 136 million (Q1 2009: € 87 million)
  • Shape 2012 gaining further momentum
  • Cash flow before financing activities increased by € 405 million
  • Net debt reduced by € 731 million

METRO GROUP is back on a profitable growth track: sales and earnings rose significantly during the first quarter 2010. "In some countries, the worst of the economic crisis seems to be over. Although the situation remains challenging, we see a first economic silver lining on the horizon", said Dr. Eckhard Cordes, CEO of METRO GROUP. 

Against the backdrop of an ongoing difficult general economic situation METRO GROUP raised its sales by 2.3% to € 15.5 billion during the first three months of the year. Also positive currency effects and this year's earlier Easter business contributed to this. In Germany, the company did better than last year adjusted for divested stores. While the economic recovery in Western Europe and Asia continues to take shape, markets in Eastern Europe are still seeing a very sluggish development. 

All sales divisions contributed to the good business development. A particular upswing was seen at Galeria Kaufhof and Real. The turnaround process initiated at Real thus continues to bear fruit. Metro Cash & Carry, too, showed an encouraging trend in the first quarter which also includes its wholesale stores in Germany. Media-Saturn continued its successful development of the previous year. EBIT before special items at METRO GROUP climbed significantly from € 87 million to € 136 million – the first increase in earnings since 2008. The efficiency and value enhancement programme Shape 2012 significantly contributed to this. "Shape 2012 already demonstrated its strength in difficult times. Also in the upcoming economic upswing Shape 2012 will be a key driver for the success of METRO GROUP. This will allow us to build on past success achieved before the crisis set in", said Cordes. 

During the period from January to March 2010 METRO GROUP generated sales of € 15.5 billion (Q1 2009: € 15.2 billion). This corresponds to a sales increase of 2.3%. The development of sales was supported by positive currency effects and in many countries also by the earlier Easter business as compared to last year. Adjusted for currency effects, sales of METRO GROUP climbed 1.0%. 

In Germany, sales generated during the first quarter 2010 in a largely stable overall market came in slightly below the year-earlier level at € 6.2 billion. Adjusted for store disposals and divestments, however, sales were up 0.3% from the prior-year quarter. The start into the new year was affected by the unusually long cold weather as well as an unfavourable calendar shift as compared to the year earlier. This drop in sales could be compensated in February and especially also in March. In this context, March sales benefited from an earlier Easter business. Overall, METRO GROUP once again outperformed the market as a whole. International sales generated during the first quarter 2010 rose by 4.4% to € 9.3 billion. Also adjusted for currency effects, sales grew by 2.2%. The international share of sales rose from 58.9% to 60.1%. 

In Western Europe (excluding Germany), sales climbed 4.3% to € 4.9 billion during the first quarter 2010. Adjusted for currency effects, sales went up 3.9%. This shows that the upward trend of the previous quarters continues. Especially Media Markt and Saturn contributed materially to this with a double-digit growth rate. Sales in Eastern Europe grew by 5.0% to € 3.7 billion during the first quarter 2010. Following the significant negative currency effects experienced last year the present rise in sales is attributable to an overall positive development of exchange rates. Adjusted for currency effects, sales dropped 1.0%. Also given the still difficult economic environment, especially in the non-food business, the first quarter 2010 continued to show a very subdued development. In the region Asia/Africa, first quarter sales 2010 rose by 2.0% to € 0.7 billion. Adjusted for currency effects, however, sales climbed significantly by 7.7%. 

Earnings

The earnings trend in the first quarter 2009 clearly improved over the year earlier period. EBIT climbed over-proportionally as compared to sales. Consequently, METRO GROUP for the first time since 2008 achieved a year-on-year improvement in earnings. In the first quarter 2010 EBIT rose significantly by € 63 million to € 117 million (Q1 2009: € 54 million). This includes special items in the amount of € 19 million (Q1 2009: € 33 million) relating to Shape 2012. Even net of these special items EBIT increased distinctly from € 87 million to € 136 million. This rise is attributable to cost savings but also to productivity gains in the framework of Shape 2012. Moreover, the early Easter business and currency effects had a positive impact on the earnings trend. Hence, METRO GROUP was able to partially break away from the difficult general economic situation. 

Earnings before taxes generated in the first quarter 2010 amounted to € 4 million (Q1 2009: € -117 million). Before special items, earnings before taxes came in at € 23 million (Q1 2009: € -84 million). The earnings per share stood at € -0.05 following € -0.30 in Q1 2009. Adjusted for special items the earnings per share rose significantly from € -0.23 to € -0.01. 

METRO GROUP

Q1 2010 (in € bn)

Q1 2009* (in € bn)

Change

Change in loc. currency

Sales

15.5

15.2

+2.3%

+1.0%

of which in Germany

6.2

6.2

-0.7%

-0.7%

of which in Germany

(excl. Germany)

4.9

4.7

+4.3%

+3.9%

of which in Eastern Europe

3.7

3.5

+5.0%

-1.0%

of which in Asia/Africa

0.7

0.7

+2.0%

+7.7%

EBIT (before special items)

136 million

87 million

+49 million

--

Shape 2012 moves into the next phase – significant contribution to earnings

The efficiency and value enhancement programme Shape 2012 launched in January 2009 again substantially contributed to earnings in the first quarter. "The significance of Shape 2012 for earnings will continue to rise from one quarter to the next. Shape 2012 is increasingly gaining momentum", stressed Cordes. The strength of the programme does not only result from cost reductions but in particular from measures to increase sales and enhance productivity. 

A new phase of the Shape programme started in March 2010: METRO GROUP received a new corporate structure. One key element is the future split of Metro Cash & Carry into two business units – the business unit Europe/MENA and the business unit Asia/New Markets including Russia, Ukraine and Kazakhstan. The restructuring of Metro Cash & Carry into two business units reflects the great importance of the wholesale division for the Group as a whole as and takes into account the considerably different regional market requirements. Moreover, the organisational basis for the successful implementation of the Shape programme as well as the acceleration of the international expansion in the medium term will be strengthened further. At the same time, the management organisation of METRO GROUP is significantly simplified. The management and administrative functions of the Group's holding company METRO AG and of Metro Cash & Carry will be largely integrated. Hereby, METRO GROUP is implementing the leitmotif of Shape 2012 – namely to become more efficient and more customer-orientated – also in the holding structures. 

Net debt further reduced

The net debt was significantly reduced by € 0.7 billion as compared to the year earlier. The cash flow from continuing operations before financing activities improved by € 0.4 billion to € -2.6 billion (Q1 2009: € -3.0 billion). 

Extension of the internet activities is progressing

The activities of the METRO GROUP sales divisions to combine their brick and mortar retail business with online platforms are progressing as planned. In their efforts, the sales divisions are taking due account of the specific customer demands in their respective sector and adapting their internet business accordingly. Media Markt complemented its brick and mortar business in the Netherlands with an online offer as planned. In Austria, an extensive range of music and game downloads is offered in a first phase. DVDs and CDs with movies, games and music are to follow in the next few days, a consumer electronics range will be added in May. Based on the experiences made in the Netherlands and Austria a decision about establishing the corresponding platforms also in Germany will be taken in 2010. By mid May the online shop of Real will be launched. The test phase with Real employees already started in mid-April and proceeds successfully. Customers can pick from an extensive online assortment of non-food articles. They can choose between home delivery and in-store collection. 

METRO GROUP accelerates the pace of international expansion

METRO GROUP is driving its international expansion more strongly than in the year before. Overall, METRO GROUP plans to open around 95 new locations in 2010 (2009: 80), of which around 30 account for Metro Cash & Carry, around five for Real and around 60 for Media Markt and Saturn. Investments focus on Eastern Europe and Asia – the Group's growth regions. 

This year, the particular focus will be on the start of Media Markt in China. To this effect METRO AG and its sales division Media-Saturn signed a joint venture agreement with the Chinese partner Foxconn Technology Group for a joint expansion in China. Under this joint venture agreement, METRO Group and the founding families of Media-Saturn, Kellerhals and Stiefel, hold 75 percent of the shares and Foxconn Technology Group holds 25 percent. The first Media Markt stores are to open in Shanghai starting from autumn 2010. Until the middle of the decade Media-Saturn forecasts a potential of more than 100 stores in China which will create a substantial number of jobs. In the long term, Media-Saturn targets several hundred Media Markt stores in China. 

Metro Cash & Carry opened another wholesale store in Beijing in the first quarter. Moreover, Metro Cash & Carry was appointed as an official supplier for the world exhibition Expo 2010 in Shanghai. In addition, the self-service wholesale division is planning its market entry into Egypt in summer 2010. With this move, METRO GROUP will be represented in 34 countries. Real continues its selective expansion in Eastern Europe. 

Business Development:

Metro Cash & Carry Germany further expands delivery service

At Metro Cash & Carry Germany the first positive effects of the turnaround programme could already be felt – in terms of both, costs and sales. The delivery service launched last year continues to develop positively. Recently, Metro Cash & Carry introduced a so-called mother store concept as a pilot project in Berlin which is to further increase the customer orientation and efficiency of the delivery service. The underlying idea: delivery activities in metropolitan areas are bundled at one location – this reduces the picking work and also the warehousing for the delivery service. Another important element of the turnaround strategy with which Metro Cash & Carry Germany wants to raise its earnings to up to € 150 million by 2012 are the own brands. The share of own brands in the assortment is to more than double by 2012. The company then wants to generate around 20 percent of its sales with own brand products. The improved own brand assortment was able to report a continued rise in sales during the first quarter. 

The international sales of Metro Cash & Carry were almost stable in the first quarter 2010 with a slight minus of 0.6% coming in at € 7.0 billion. The drop in sales reported during the previous quarters thus for the first time slowed down significantly. Adjusted for currency effects sales receded by 1.9%. Sales in Germany dropped 1.8% to € 1.2 billion during the first quarter 2010. This drop is to some extent attributable to the closure of three Schaper wholesale stores during the first quarter 2010 and two stores in the fourth quarter 2009. Like-for-like, sales dropped by 1.1%. Non-food sales, in particular, reported a distinct stabilisation. 

Sales in Western Europe receded by 1.6% to € 2.6 billion during the first quarter 2010. Adjusted for currency effects sales declined 1.8%. Like-for-like, sales came in 1.3% below the prior-year period. In Eastern Europe, sales generated during the first quarter 2010 remained nearly unchanged at € 2.5 billion. Adjusted for currency effects, however, sales dropped by 4.8%. In this context it must be taken into account that the sales generated in Russia and Ukraine during the first quarter last year had still been characterised by a distinct growth. In the region Eastern Europe, especially the non-food business continued to be challenging and had a decisive impact on the downward trend in like-for-like sales. Despite being strongly affected by negative exchange rate effects sales in Asia/Africa generated during the first quarter 2010 grew by 4.5% to € 0.6 billion. In local currency, sales even reported a double-digit growth of 11.2%. All Asian countries were able to increase sales, thus building on the positive trend from the second half of 2009. 

EBIT showed a clear improvement growing € 16 million to reach € 15 million. Also before special items EBIT improved significantly coming in at € 25 million following € 10 million during the prior-year quarter. This improvement in earnings was achieved based on the positive effects from the Shape 2012 programme and succeeded in compensating the drop in earnings from non-food business in Eastern Europe. 

Metro Cash & Carry

Q1 2010 (in € bn)

Q1 2009* (in € bn)

Change

Change in loc. currency

Sales

7.0

7.0

-0.6%

-1.9%

of which in Germany

1.2

1.2

-1,8%

-1.8%

of which in Germany

(excl. Germany)

2.6

2.7

-1.6%

-1.8%

of which in Eastern Europe

2.5

2.5

-0.2%

-4.8%

of which in Asia/Africa

0.6

0.6

+4.5%

+11.2%

EBIT (before special items)

25

10

+15 million

--

Real with significant rise in sales and EBIT

Real reported a gratifying development during the first quarter and was able to build on the positive trend of the second half of 2009. In terms of sales, the decline observed during the crisis year 2009 could nearly be compensated. EBIT developed distinctly positively. 

Sales of Real rose 4.4% to € 2.7 billion during the first quarter 2010. The dynamic expansion in the Eastern European growth markets and positive currency effects contributed to this rise. Adjusted for currency effects, sales increased 2.5%. 

In Germany sales during the first quarter 2010 dropped slightly as a consequence of store disposals (twelve stores less than in Q1 2009) by 0.9% to € 2.0 billion. The less favourable calendar effect during the first quarter could be more than compensated with a gratifying Easter business, in particular in the non-food sector. Like-for-like, sales rose 1.1%. Real continued to benefit from the measures initiated to raise its brand profile and was able to consolidate its local market position. In addition to rising sales of own-brand products also the large number of newly introduced concept modules in the different categories received positive customer response. Despite the negative calendar effects and long winter weather the customer frequency only dropped slightly below the level of the year-earlier period. 

Sales in Eastern Europe continued to develop dynamically during the first quarter 2010 and grew by 22.9% to € 0.7 billion. In addition to the expansion this development also benefited from the distinctly positive currency effects. However, adjusted for currency effects, sales improved considerably climbing 13.1%. Despite the ongoing very difficult general economic climate Real achieved a like-for-like sales growth of 3.3%. The development of the food business contributed to this rise. The non-food business declined slightly. 

As a consequence of the positive sales trend and the optimisation of the store portfolio EBIT during the first quarter 2010 improved significantly by € 27 million to € -26 million (Q1 2009: € -53 million) and include special items in the amount of € 2 million. Also adjusted for special items a clear increase was achieved with EBIT of € -24 million (Q1 2009: € -53 million) coming in even above the level of the first quarter 2008. 

Real

Q1 2010 (in € bn)

Q1 2009* (in € bn)

Change

Change in loc. currency

Sales

2.7

2.6

+4.4%

+2.5%

of which in Germany

2.0

2.0

-0.9%

-0.9%

of which in Eastern Europe

0.7

0.6

+22.9%

+13.1%

EBIT (before special items)

-24 million

-53 million

+29 million

--

Media Markt and Saturn with strong growth in the first quarter

Media Markt and Saturn continued the strong growth trend of the year-earlier period also in the first quarter 2010. With these results the leading consumer electronics retailers in Europe demonstrate that they are excellently positioned to profit superiorly from an economic recovery. The conceptual strength of Media Markt and Saturn is also confirmed by an award presented to the world's largest Media Markt store opened in May 2009 in Munich. The store received the "Shop Award" from the Visual Merchandising Initiative. The jury considered the manifold solutions offered at the store for digital sales support to be a convincing concept for a modern assortment presentation. 

Sales of Media Markt and Saturn during the first quarter 2010 rose by 6.1% to € 4.9 billion. Adjusted for currency effects sales grew by 4.9%. With these results Media Markt and Saturn continued its dynamic growth despite a distinctly lower number of new store openings in financial year 2009 and thereby underscored its exceptional position as the leading consumer electronics retailer in Europe. Like-for-like, Media Markt and Saturn generated nearly stable sales. 

In Germany, sales came in at € 2.2 billion and thereby at the prior-year level despite the very high year-earlier basis. Computer hardware and TVs sold particularly well in the first quarter. Sales in Western Europe during the first quarter 2010 rose dynamically by 12.4% to € 2.2 billion (adjusted for currency effects 11.7%). Against the backdrop of a weaker prior-year basis this result was mainly attributable to the gradual pickup in sales in Italy and Spain. Also like-for-like it was possible to achieve a noticeable growth of 4.9%. In total, seven out of ten countries reported a like-for-like sales growth. With this result the positive sales trend of the last quarters continued. Sales in Eastern Europe rose by 9.5% (adjusted for currency effects 0.6%) during the first quarter 2010. The overall economic situation continued to be extremely difficult. In addition to positive currency effects the growth in sales was solely supported by the progressing expansion. Uncertainty among consumers persisted in view of the continued difficult general economic situation and resulted in a significant reticence in buying high-ticket consumer goods. 

EBIT came in at € 78 million (Q1 2009: € 79 million) and in particular reflects the good like-for-like development in Western Europe. EBIT before special items stood at € 81 million (Q1 2009: € 79 million). 

Media Markt und Saturn

Q1 2010 (in € bn)

Q1 2009 (in € bn)

Change

Change in loc. currency

Sales

4.9

4.6

+6.1%

+4.9%

of which in Germany

2.2

2.2

-0.1%

-0.1%

Western Europe

(excluding Germany)

2.2

1.9

+12.4%

+11.7%

of which in Eastern Europe

0.5

0.5

+9.5%

+0.6%

EBIT (before special items)

81 million

79 million

+2 million

--

Galeria Kaufhof with the highest like-for-like sales increase since 2004

During the first quarter 2010 Galeria Kaufhof again underscored its role as the concept and system leader in the German department store sector. In March 2010, the Galeria Kaufhof department store on Hohe Straße in Cologne received the "Global Innovator Award 2009/2010". This was the first time that the reputable award was presented to a German department store. The store now ranks among the top five specialist stores worldwide in the fields of cooking, dining, living, gifts and lifestyle. 

Sales of Galeria Kaufhof in the first quarter 2010 climbed 3.4% to € 0.8 billion. Like-for-like, sales grew 2.9%. With this result Galeria Kaufhof achieved the highest like-for-like sales growth since 2004. Following a very cautious start into the new year due to the persistently cold weather the sales volume generated in March and supported by the Easter business was able to more than compensate the initial drop in sales. 

In Germany, sales of Galeria Kaufhof rose by 3.4% to € 0.7 billion. While the cold weather affected customer frequency, it was possible to sell the winter collection without high price discounts. Once again, Galeria Kaufhof succeeded in outperforming the market as a whole. In Western Europe, sales generated during the first quarter 2010 rose by 3.0% to € 0.1 billion. With a like-for-like growth of 2.9%, Galeria Inno was able to clearly detach itself from the development of the Belgian retail sector. 

EBIT reached € -19 million following € -46 million during the same period last year. EBIT before special items climbed distinctly from € -27 million to € -19 million. Normally, department stores in Germany only reach a positive result in the fourth quarter. 

Kaufhof

Q1 2010 (in € bn)

Q1 2009* (in € bn)

Change

Change in loc. currency

Sales

819

792

+3.4%

+3.4%

of which in Germany

735

710

+3.4%

+3.4%

Western Europe

(excluding Germany)

84

82

+3.0%

+3.0%

EBIT (before special items)

-19 Mio.

-27 Mio.

+8 Mio.

--

Real Estate

The Real Estate segment comprises all real estate assets of METRO GROUP as well as all real estate-related services. The real estate management actively contributes to METRO GROUP's value creation. The international expansion, the active asset and portfolio management as well as resource optimisation are to secure and systematically enhance the value of the real estate in the long term. 

EBIT reached € 138 million following € 132 million one year earlier. This amount results mainly from rental income paid by the METRO GROUP sales divisions. The earnings improvement particularly reflects the increased rental income resulting from the expansion of Metro Cash & Carry. 

METRO GROUP is one of the largest and most international retailing companies. In 2009 the Group reached sales of around € 66 billion. The company has a headcount of some 290,000 employees and operates around 2,100 stores in 33 countries. The Group's performance is based on the strength of its sales brands which operate independently in their respective market segment: Metro/Makro Cash & Carry – the international leader in self-service wholesale, Real hypermarkets, Media Markt and Saturn – European market leader in consumer electronics retailing, and Galeria Kaufhof department stores.