METRO GROUP raises earnings forecast to around 23 billion

2 November 2010

  • All regions reporting sales growth in Q3 – all sales divisions in addition growing like for like
  • 9M sales increase by 3.1% to € 47.5 billion; 3Q sales grow by 4.5% to € 16.3 billion
  • EBIT before special items up 21.4% to € 915 million; 3Q earnings grow 26.9% to € 445 million
  • 78% of the Shape 2012 cost savings measures already implemented
  • Sales divisions benefit from recovery in Eastern Europe
  • Measures to increase sales and earnings at Metro Cash & Carry showing effect

METRO GROUP improved sales in all regions and sales divisions during the third quarter – in part significantly. Also like for like, the sales divisions reported a growth. In addition to the economic recovery this positive trend also reflects the new growth course of METRO GROUP: especially the innovative concepts for a better customer approach and a corporate structure that is closer aligned to the markets’ requirements are showing effect. Sales generated during the period from January to September rose by 3.1% to € 47.5 billion thus reaching almost the same level as before the economic crisis set in (9M 2008: € 47.8 billion). EBIT before special items went up 21.4% to € 915 million. In the third quarter, EBIT before special items rose even stronger by 26.9% to € 445 million. On the basis of the gratifying business trend reported during the third quarter METRO GROUP is raising its earnings forecast (EBIT before special items) for 2010: "We are experiencing a significant pickup of business in all regions. Against the backdrop of the good economic development and our progress made with Shape 2012 we expect to generate earnings of € 2.3 billion this year", says Dr Eckhard Cordes, CEO of METRO GROUP. So far, the forecast for the full year 2010 had been of around € 2.2 billion. The measures taken to reduce costs and enhance productivity are increasingly becoming an integral part of operating business and are sustainably driving the Group's profitable growth. The sales divisions also benefit from the in some parts significant recovery in Eastern Europe. "Our assessment is confirmed that also Eastern Europe is making a comeback as a growth driver. Our strong position in this region is already paying off again", says Cordes. 

Development of sales at METRO GROUP

Sales of METRO GROUP generated during the period from January to September 2010 rose by 3.1% to € 47.5 billion (9M 2009: € 46.1 billion). This sales trend also benefited from positive currency effects. Adjusted for currency effects, revenues rose by 1.3%. During the third quarter 2010 sales improved significantly by 4.5% to € 16.3 billion (Q3 2009: € 15.6 billion). Also adjusted for currency effects sales grew by 2.6%. 

In Germany sales came in below the prior-year level in particular as a consequence of store divestments and receded slightly by 0.9% to € 18.3 billion. Adjusted for store closings and divestments, however, sales edged up 0.3% and in the third quarter 1.4%. In international business sales climbed 5.7% to € 29.2 billion. Adjusted for currency effects, sales increased by 2.7%. The international share of sales rose from 60.0% to 61.5%. Supported by positive currency and price effects, international sales advanced significantly during the third quarter by 7.3% (in local currency: +4.1%). In Western Europe (excluding Germany) sales went up 3.7% to € 15.2 billion (in local currency: 3.1%). Third quarter revenues rose by 3.3%. Sales in Eastern Europe grew by 7.1% to € 12.0 billion. This growth is mainly attributable to the positive development of exchange rates. In local currency, sales climbed by 1.1%. During the third quarter some countries experienced a clear turnaround, among them Russia, the Ukraine and Turkey. Sales in local currency improved by 4.8% and thus developed significantly better than during the first half of the year. In Euro, sales even gained 10.1%. In the region Asia/Africa sales increased significantly by 13.4% to € 2.0 billion. Adjusted for currency effects sales grew by 10.6%. This growth acceleration continued in the third quarter; sales soared by 23.8% (in local currency: 13.8%). 

Development of earnings at METRO GROUP

METRO GROUP reported a marked growth in earnings during the third quarter which was supported by cost savings but also by productivity gains achieved in the context of Shape 2012. EBIT generated during the period from January to September 2010 climbed significantly by € 176 million to € 794 million (9M 2009: € 618 million). This figure includes special items resulting from Shape 2012 in the amount of € 121 million. Also adjusted for these special items EBIT climbed noticeably from € 753 million to € 915 million. Adjusted for special items the third quarter, too, showed a clear rise in earnings by 26.9% or € 95 million to € 445 million. 

Earnings before taxes during the period from January to September 2010 climbed to € 368 million (9M 2009: € 144 million). Before special items, earnings before taxes came in at € 489 million (9M 2009: € 279 million). 

The net profit for the period generated during the first nine months of the year rose from € 85 million to € 229 million. This also reflects expenses for Shape 2012. The net profit for the period before special items improved from € 182 million to € 318 million. The profit attributable to the shareholders of METRO AG came in at € 176 million following € 21 million in the year-earlier period. 

The earnings per share generated during the first nine months of the year stood at € 0.54 following € 0.06 in the prior year. Adjusted for special items, the earnings per share also increased significantly from € 0.36 to € 0.81. 

METRO GROUP

9M 2009* (in € bn)

9M 2010 (in € bn)

Change

Change in local currency

Sales

46.1

47.5

+3.1%

+1.3%

Germany

18.4

18.3

-0.9%

-0.9%

Western Europe

(excluding Germany)

14.7

15.2

+3.7%

+3.1%

Eastern Europe

11.2

12.0

+7.1%

+1.1%

Asia/Africa

1.8

2.0

+13.4%

+10.6%

EBIT (excl. special items)

753 mn

915 mn

+21.4%

--

At € -2.8 billion, the cash flow from continuing operations before financing activities came in at the prior-year level. Year-on-year, the net debt decreased by € 54 million. 

Shape 2012: 78% of the cost saving measures have been implemented

An important driver of the positive business trend is Shape 2012. This efficiency and value enhancement programme is making an ever-growing contribution to earnings and is gradually becoming an integral part of all business operations. Following around € 84 million during the first quarter and around € 103 million during the second quarter, Shape 2012 contributed around € 146 million to Group earnings during the third quarter. Of the cost saving measures that are to sustainably contribute around € 800 million until 2012 already 78% have been implemented. 

METRO GROUP also made consistent progress in optimising its administrative functions. Following the restructuring of Metro Cash & Carry into the two business units Europe/MENA and Asia/New Markets as well as the integration, to a large extent, of administrative functions of METRO AG and Metro Cash & Carry International also the IT organisation was realigned in the third quarter. All IT processes are now combined under the umbrella of the newly established METRO SYSTEMS. The aims of this bundling are to achieve a stronger alignment with operating business, simpler processes and a faster development of IT solutions for the Group. 

In the context of Shape 2012, one-time expenses affecting EBIT in the amount of € 121 million were incurred during the period from January to September 2010. Overall, Shape 2012 is thus progressing faster than planned. For the current financial year now one-time expenses of more than € 170 million are anticipated. Accordingly, in 2011 the burden will be lower than the expected € 130 million. 

Business development of sales divisions

Metro Cash & Carry: Shape measures boost sales trend

Sales of Metro Cash & Carry generated during the period from January to September 2010 rose by 1.4% to € 22.5 billion. While the non-food business was affected by a restraint in consumer spending, food sales developed significantly better, especially in the third quarter. Metro Cash & Carry continued its focus on core customer groups. 

In Germany sales receded by 2.7% to € 3.8 billion. Apart from the store network optimisation (two closures in Q4 2009 and three in Q1 2010), this drop also reflects the realignment of the assortment structure. Especially the low-margin business with tobacco products and telephone cards was further reduced. Adjusted for these two merchandise categories, like-for-like sales generated during the period from January to September 2010 increased by 0.8%, in the third quarter even 2.8%. The intensified customer address and servicing by customer advisors, the attractive own-brand assortment as well as successful seasonal sales activities relating to non-food articles contributed to this increase. The product categories that are to sharpen the company's profile, namely fresh fish, fresh meat and fruit & vegetables, showed a significant rise in sales and volumes. Sales from the delivery service of Metro continued to grow dynamically and amounted to € 108 million during the first nine months (9M 2009: € 72 million). The concept has in the meantime been rolled out to 24 countries. In order to be able to better service customers like gastronomers, kiosk and service station operators in rural areas, C + C Schaper opened drive-in depots in Singen and Lahr. Here, customers can order the merchandise and collect their orders readily packed at the depots. With this innovation, Metro Cash & Carry Germany is targeting business beyond the metropolitan regions and underscores its pioneering role in the German wholesale segment. Moreover, the first regional delivery depot will be opened in November 2010 in Weiterstadt near Frankfurt am Main for a more efficient organisation of the delivery service in the Rhine-Main region. 

Sales in Western Europe receded by 1.2% to € 8.6 billion. However, a trend improvement occurred during the third quarter. Food sales developed positively. The Shape measures are showing first effect and are to further boost the positive sales trend. In several countries the field force was massively stepped up with customer advisors who are familiar with the needs of the different customer groups from their own experience. Gastronomers, for example, are advised by former chefs or restaurant owners. This measure is complemented by a new incentive system where the income is linked more closely to operational success. In Spain, a double-digit sales growth was achieved with customers supported in this way. This type of successful measures will be gradually rolled out to the whole of Western Europe. 

In Eastern Europe sales went up 3.2% to € 8.2 billion. Adjusted for currency effects, sales fell 2.1%. Food sales developed significantly better as compared to non-food sales. Third quarter sales rose by 7.1% to € 2.9 billion (adjusted for currency effects: +2.0%). Especially sales in Russia, Poland, the Ukraine and Turkey developed very positively. 

Sales in Asia/Africa grew by 16.6% to € 1.8 billion. All countries were able to increase sales. The sales growth continued to gain momentum during the third quarter and rose by 27.5%. 

EBIT before special items during the period from January to September 2010 climbed significantly by € 105 million to € 522 million. This earnings improvement is to a large part owed to efficiency enhancements in the context of Shape 2012. EBIT (including special items) also increased significantly and reached € 457 million. This positive earnings trend also continued during the third quarter. In addition to positive earnings contributions from Shape 2012 also the improved sales trend and a better gross margin contributed to this rise in earnings. EBIT before special items added € 70 million to come in at € 252 million. 

Metro Cash & Carry

9M 2009* (in € bn)

9M 2010 (in € bn)

Change

Change in local currency

Sales

22.2

22.5

+1.4%

-0.9%

Germany

3.9

3.8

-2.7%

-2.7%

Western Europe

(excluding Germany)

8.7

8.6

-1.2%

-1.4%

Eastern Europe

7.9

8.2

+3.2%

-2.1%

Asia/Africa

1.6

1.8

+16.6%

+13.4%

EBIT (before special items)

417 mn

522 mn

+105 mn €

--

Real again outperformed the industry average

Sales of Real generated during the period from January to September 2010 rose by 2.0% to € 8.2 billion. The dynamic expansion in the Eastern European growth markets and positive exchange rate effects contributed to this rise. 

In Germany sales dropped almost exclusively due to store divestments by 2.3% to € 6.0 billion. Like for like, sales only receded slightly by 0.3%. This shows that, in a continued challenging market environment, Real again performed better than the hypermarket segment. In the third quarter, like for like sales already climbed 0.8% and thus came in clearly above the level of the first half of 2010. This trend is to a major part owed to the successful implementation of Shape 2012. Already more than two thirds of the concept integrations planned until 2011 have been realised. In addition to the conventional brick-and-mortar business Real is also consistently extending new distribution channels. The online shop launched in late May reports a continuously growing customer frequency with rising weekly sales volumes. In November Real will in addition open the first independent drive-in store in German retail. Here, customers can place their orders order via the Internet and collect them at the requested time at the Real Drive.de station. In line with the idea of "entrepreneurship at the local level", select Real store managers have been granted more leeway regarding assortment, price, advertising and other aspects. This way the stores can adapt more easily to local particularities. The successful turnaround of Real also reflects in the results of a recent Gallup survey among the managers of Real. In total, 89% of the managers interviewed are "satisfied" (41%) or "extremely satisfied" (48%) to be working for Real. With this result Real is now doing better than the average of all companies surveyed by Gallup. 

Sales in Eastern Europe went up 16.3% to € 2.2 billion. In addition to the expansion this development also benefited from positive exchange rate effects. Adjusted for currency effects, sales climbed 8.3%. Especially in Russia business developed very dynamically and continued to report a double-digit like-for-like growth for the third quarter. 

EBIT grew significantly by € 69 million to € -41 million (9M 2009: € -110 million). This trend is owed to the repositioning in Germany and the good business in Eastern Europe. In Germany, the gross margin was improved and costs were further reduced in the framework of Shape 2012. In Eastern Europe, the positive sales trend and cost savings resulted in improved earnings. EBIT before special items rose significantly by € 74 million to € -25 million (9M 2009: € -99 million). During the third quarter it was even possible to generate positive EBIT before special items. 

Real

9M 2009* (in € bn)

9M 2010 (in € bn)

Change

Change in local currency

Sales

8.1

8.2

+2.0%

+0.3%

Germany

6.2

6.0

-2.3%

-2.3%

Eastern Europe

1.9

2.2

+16.3%

+8.3%

EBIT (excl. special items)

-99 mn

-25 mn

+74 mn €

--

Media-Saturn accelerates growth

Sales of Media-Saturn generated during the period from January to September 2010 rose by 7.7% to € 14.2 billion. The sales division thus continued its dynamic growth and further extended its market leadership in Europe. Like-for-like, Media-Saturn achieved a sales growth of 0.8% in a cyclically challenging environment. The growth generated during the third quarter came in above the level of the first half which had benefitted from the FIFA World Cup. Sales grew 7.9%. Still this month the first Media Markt store is set to open in Shanghai. Until the middle of the decade Media-Saturn sees a potential for more than 100 stores in China. The third quarter also saw the market entry of Saturn in Russia. 

In Germany, sales rose by 2.1% to € 6.2 billion. Like-for-like, sales edged up 0.8%. Computer hardware and large electrical appliances were especially in demand. In early September 2010, Media-Saturn presented its new own-brand strategy: with ok, Koenic, Peaq and Isy, Media-Saturn covers a broad range of customer needs and product categories. The rollout of the first products is already planned for the Christmas business. 

In Western Europe sales grew dynamically by 11.3% to € 6.3 billion. Also like for like, an appreciable rise in sales of 3.3% was achieved. With these figures, the positive sales trend continued despite the challenging general economic situation in many countries. The market share was extended in nearly all markets. In Spain, which was particularly hard hit by the economic crisis, Media-Saturn reported a strong sales increase and significantly improved its market position. 

In Eastern Europe sales increased by 17.7% (adjusted for currency effects: +9.3%). This sales growth was mainly supported by positive currency effects and the continued expansion. During the period from January to September 2010 like-for-like sales dropped by 8.9%. A turnaround was achieved in the third quarter with a rise in sales of 27.0%. Like for like, sales grew for the first time in two years. 

EBIT amounted to € 241 million (9M 2009: € 245 million). With this result the start-up costs were almost compensated. They include expenses for the upcoming market entry into China as well as the establishment of the online and own brand businesses. Before special items related to Shape 2012, EBIT generated during the period from January to September 2010 came in at € 246 million and thus nearly at the prior-year level. 

Media-Saturn

9M 2009* (in € bn)

9M 2010 (in € bn)

Change

Change in local currency

Sales

13.2

14.2

+7.7%

+6.4%

Germany

6.1

6.2

+2.1%

+2.1%

Western Europe

(excluding Germany)

5.7

6.3

+11.3%

+10.1%

Eastern Europe

1.4

1.6

+17.7%

+9.3%

EBIT (excl. special items)

249 mn

246 mn

-3 mn €

--

Galeria Kaufhof reports like-for-like growth of 4.2%

Sales of Galeria Kaufhof generated during the period from January to September 2010 rose by 1.4% to € 2.4 billion. Also like for like, sales climbed 1.4%. During the third quarter sales grew significantly and like for like even climbed 4.2%. 

In Germany sales went up 1.3% to € 2.1 billion. In the third quarter, sales grew significantly by 2.9% and like for like even by 3.8%. Especially textiles showed a very positive trend. With this rise in sales Galeria Kaufhof underscores its leading role in the German department store segment. In September, the store concept U.Style Fashion was launched at the Galeria Kaufhof department store on Marienplatz in Munich. U.Style Fashion offers street wear for a young target group and operates independently from the department store. This is one example of how the local potential of individual locations is leveraged with Shape 2012 and contributes to improving productivity. In Western Europe sales came in at € 0.2 billion edging up 2.8% from the prior-year level. 

EBIT increased significantly by € 43 million from € -70 million to € -27 million. The prior-year value included special items in the amount of € 25 million. Net of special items EBIT grew by € 18 million to € -27 million. Also in the third quarter 2010 EBIT before special items rose significantly from € 2 million to € 7 million as the result of an improved cost and inventory management. With these figures, Galeria Kaufhof just like in the past three years also during the year under review again achieved profitability already in the third quarter 2010. In Germany, department store concepts normally only achieve a profit during the crucial fourth quarter. 

Kaufhof

9M 2009* (in € mn)

9M 2010 (in € mn)

Change

Sales

2,378

2,412

+1.4%

Germany

2,145

2,172

+1.3%

Western Europe (excl. Germany)

233

239

+2.8%

EBIT (excl. special items)

-45

-27

+18 mn €

Real Estate

The segment Real Estate comprises all real estate assets of METRO GROUP as well as all real estate-related services. EBIT reached € 399 million following € 375 million in the prior year. EBIT before special items climbed from € 379 million to € 401 million. The earnings improvement reflects in particular the incremental rental income resulting from the expansion of Metro Cash & Carry. 

Development of the store network

In the third quarter, 6 Metro Cash & Carry stores as well as 11 Media Markt or Saturn stores were opened. One Real hypermarket was closed. Most new stores are usually opened in the fourth quarter. Overall, METRO GROUP plans to open more than 95 stores in 2010. 

Key financials Q3 2010

Sales

Q3 2009 (in € bn)

Q3 2010
(in € bn)

Change

Change in local currency

METRO GROUP

15.6

16.3

+4.5%

+2.6%

Metro Cash & Carry

7.5

7.8

+4.0%

+1.3%

Real

2.7

2.7

+1.7%

+0.4%

Media-Saturn

4.5

4.8

+7.9%

+6.5%

Kaufhof

0.8

0.8

+3.5 %

+3.5%

EBIT (excl. special items)

Q3 2009 (in € bn)

Q3 2010 (in € bn)

Change (in € bn)

METRO GROUP

350

445

+95

Metro Cash & Carry

182

252

+70

Real

-30

1

+31

Media-Saturn

115

124

+9

Kaufhof

2

7

+5

Real Estate

123

131

+8

METRO GROUP 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 more than 2,100 stores in 34 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.