METRO GROUP increases sales and earnings

31 July 2012

  • Sales up by 1.8% in Q2, + 2.0% in H1
  • EBIT before special items grows by 2.5% to € 314 million in Q2
  • H1 EBIT include special items in the amount of € 244 million, of which € 172 million for impairment losses resulting from the sale of Makro UK
  • Positive development of operating cash flow (€ +350 million in H1)
  • Net working capital improves by nearly € 600 million in H1
  • Sales and earnings guidance for 2012 reiterated

In Q2 2012, METRO GROUP continued its positive sales trend of the first three months and reported a growth of 1.8%. Against the backdrop of a persistently difficult macroeconomic environment, the company thus improved sales by 2.0% to € 31.5 billion in the period from January to June 2012. With regard to operating earnings, the company reported a growth in the second quarter despite continued high investments into customer services and prices: EBIT before special items increased by 2.5% to € 314 million (2011: € 306 million). Owed to the burdens from the 1st quarter, operating earnings for the first half came in at € 305 million following € 452 million year-on-year. "We have picked up speed despite the headwind: our focus on sustainable growth is paying off. Meanwhile, we are already seeing first positive effects on earnings. This encourages us to continue on the path taken", said Olaf Koch, Chairman of the Management Board of METRO AG. "We remain convinced that we can achieve an EBIT roughly at the prior year's level". 

To this effect, METRO GROUP will consistently continue with its cost reduction initiatives and focus even stronger on like for like growth. In recent months, the sales divisions have developed and implemented numerous measures to improve customer value. These include in particular more customer-oriented assortments, the extension of customer advice and service offerings as well as select investments into prices. The company also made progress with regard to delivery sales at Metro Cash & Carry, which grew by more than 40% to over € 1 billion (H1 2011: € 733 million). Also in terms of own brand sales, METRO GROUP reported a continued strong growth: the company generated sales of € 3.6 billion following € 3.2 billion last year. Sales in the promising online business climbed – also on account of the acquisition of Redcoon – to € 328 million (H1 2011: € 54 million). 

METRO GROUP also reports progress with regard to its programme to enhance the efficiency of its administrative functions announced in May 2012. “We are confident that, by increasing the efficiency of our headquarters, we will be able to sustainably save more than € 120 million in costs and thus even more than planned”, said Koch. Around two thirds of the total savings are to be realised in the field of non-personnel costs. 

Sales and earnings development

From January to June 2012, METRO GROUP grew its sales by 2.0 % to € 31.5 billion (H1 2011: € 30.9 billion). In local currency, sales even went up by 2.2% year-on-year. In the 2nd quarter, sales climbed by 1.8% to € 15.8 billion (Q2 2011: € 15.6 billion) despite the shorter Easter business. Compared with the first quarter, the positive price effects in food retailing have in some cases weakened significantly, however. 

In Germany, H1 sales grew by 1.7% to € 12.0 billion. International sales generated during the period from January to June 2012 rose by 2.2% to reach € 19.5 billion. The international share of sale thus notched up from 61.8% to 61.9%. In Western Europe (excluding Germany), sales declined by 1.7% to € 9.6 billion; this is mainly owed to the divestment of the French business activities of Saturn. Adjusted for this effect, sales came in slightly above the prior-year value. Sales in Eastern Europe grew by 2.5% to € 8.2 billion. In local currency, sales climbed distinctly by 5.4%. The region Asia/Africa continues to be by far the fastest growing region of METRO GROUP. Sales soared 27.0% to € 1.8 billion. 

Also with regard to the extension of the store network, METRO GROUP came in above the prior year. 28 new locations were opened in H1 2012 (H1 2011: 20). 

METRO GROUP H1 2011
(€ billion)
H1 2012
(€ billion)
Change Change in local currency
Sales 30.9 31.5 2.0% 2.2%
Germany 11.8 12.0 1.7% 1.7%
Western Europe (excl. Germany) 9.7 9.6 -1.7% -2.1%
Eastern Europe 8.0 8.2 2.5% 5.4%
Asia/Africa 1.4 1.8 27.0% 17.1%
METRO GROUP Q2 2011
(€ billion)
Q2 2012
(€ billion)
Change Change in local currency
Sales 15.6 15.8 1.8% 1.8%
Germany 5.8 5.9 1.9% 1.9%
Western Europe (excl. Germany) 5.0 4.9 -2.0% -2.6%
Eastern Europe 4.2 4.2 1.6% 4.2%
Asia/Africa 0.6 0.8 34.4% 19.6%

EBIT before special items in the 2nd quarter rose by 2.5% to € 314 million (2011: € 306 million). Earnings contributions from the segments Real, Galeria Kaufhof, Real Estate and Others were responsible for this growth. In H1 2012, EBIT before special items dropped to € 305 million (H1 2011: € 452 million). In addition to the like-for-like sales decline in Western Europe, especially at Media-Saturn, earnings were burdened by price investments as well as investments to increase the customer value at Metro Cash & Carry. From January to June 2012, EBIT including special items dropped to € 61 million (H1 2011: € 410 million). The special items to the amount of € 244 million (H1 2011: € 42 million) mainly comprise impairment losses to the amount of € 172 million resulting from the sale of Makro UK as well as to expenses for restructuring provisions in the amount of € 68 million. 

Before special items, earnings before taxes (EBT) generated in H1 2012 came in at € 38 million (H1 2011: € 129 million). Before special items, the net profit for the period attributable to the shareholders of METRO AG dropped to € 28 million (H1 2011: € 66 million). In the 2nd quarter, by contrast, the net profit for the period attributable to the shareholders of METRO AG before special items climbed to € 111 million (Q2 2011: € 68 million). The earnings per share adjusted for special items slid to € 0.09 following € 0.20 one year earlier. In the 2nd quarter, by contrast, the earnings per share before special items climbed to € 0.34 (Q2 2011: € 0.20). 

METRO GROUP's operating cash flow improved in H1 2012: the cash outflow resulting from operating activities during the period from January to June amounted to € 2.9 billion following € 3.3 billion during the year-earlier period. This reflects the seasonal increase of the net working capital. Despite a decrease in EBIT, it was distinctly lower than in the 1st half of 2011 thanks to a strict inventory management and an improved supplier management. The net working capital improved by € 589 million year-on-year. Due to the positive development of the operating cash flow, the net debt declined by € 0.2 billion compared to 30 June 2011.

Income of METRO GROUP (€ million) H1 2011 H1 2012
EBIT before special items 452 305
Earnings before taxes (EBT) before special items 129 38
Net profit for the period attributable to the shareholders of METRO AG before special items 66 28
Earnings per share before special items in € 0.20 0.09
EBIT 410 61
Earnings before taxes (EBT) 87 -206
Net profit for the period 54 -110
Net profit for the period attributable to the shareholders of METRO AG 37 -103
Earnings per share 0.11 -0.32
Income of METRO GROUP (€ million) Q2 2011 Q2 2012
EBIT before special items 306 314
Earnings before taxes (EBT) before special items 103 173
Net profit for the period attributable to the shareholders of METRO AG before special items 68 111
Earnings per share before special items in € 0.20 0.34
EBIT 267 70
Earnings before taxes (EBT) 64 -71
Net profit for the period 40 -28
Net profit for the period attributable to the shareholders of METRO AG 40 -20
Earnings per share 0.12 -0.06

Outlook

The persistently difficult economic situation and the slowing price increases will most likely have a negative impact on sales in 2012. Conversely, all sales divisions are taking numerous measures to boost sales. We expect sales to rise in the full year, also on account of the positive development in H1 2012. 

METRO GROUP's strategy aims for a sustainable growth in sales and earnings. In 2012, the earnings development will be dampened by the continuing difficult economic conditions. In 2012, METRO GROUP will continue to invest in its competitiveness. This will include both productivity gains and targeted price investments. We are also laying the foundations for more focused expansion activities, which in turn incurs costs. 

In Q2 2012, investments to improve customer value were already partially offset by sales developments and increased efficiency in areas not relevant to customers. We expect this development to continue in H2 2012. For this reason, we continue to expect EBIT before special items in 2012 to roughly match the previous year's result, despite heightened macroeconomic risks (EBIT 2011 before special items: € 2,372 million). 

Development of the business segments

Metro Cash & Carry reports H1 like-for-like sales growth in nearly all regions

From January to June 2012, sales of Metro Cash & Carry climbed significantly by 2.8% to € 15.2 billion (in local currency: +2.7%). This was owed to a dynamic sales growth in Eastern Europe and Asia. Like-for-like, sales improved by 0.8%. All regions except Western Europe contributed to this sales growth. Compared with the 1st quarter, sales revenues declined slightly because that quarter was supported by positive calendar effects, in particular the early Easter Business. 

In H1 2012, delivery sales grew to € 1,058 million (H1 2011: € 733 million). Also the own brand business continued to develop dynamically. The share of own brands again climbed appreciably by 1.5 percentage points to 16.7% (H1 2011: 15.2%). Demand for more inexpensive products grew in many countries. This demand was met with the more attractive own brand assortments. 

In Germany, H1 2012 sales dropped by 2.0% to € 2.4 billion. This decline is attributable to the optimisation of the store portfolio (Q4 2011: 10 store closures). Like-for-like, however, sales improved by 0.9%. Despite the harsher macroeconomic conditions, H1 sales in Western Europe reached € 5.6 billion (in local currency: -1.5%). Like-for-like, sales dropped by 1.8%. In a contracting overall market, Metro Cash & Carry increased its market shares in countries like Spain and Italy. In Eastern Europe, H1 sales grew dynamically by 3.3% to € 5.6 billion despite challenging macroeconomic conditions. In local currency, sales even climbed by 5.5%. Sales also improved in like-for-like terms, growing appreciably by 2.1%. H1 sales in Asia/Africa soared by 25.8% to € 1.7 billion (in local currency: +16.1%). All countries in this region reported high growth rates, also in local currency. Hence, Metro Cash & Carry for the first time generated more than 10% of its sales volume in the region Asia/Africa. Growth in the 2nd quarter accelerated as compared to the 1st quarter, with sales climbing by more than one third. The international share of sales generated from January to June 2012 rose from 83.6% to 84.4%. 

EBIT before special items in H1 2012 amounted to € 220 million (H1 2011: € 293 million). The decline in earnings reflects the implementation of measures geared at increasing the customer value which could already to some extent be compensated by efficiency gains in other areas. In addition, EBIT were also impacted by higher expansion costs and price investments. This was contrasted by positive earnings effects from the improved like-for-like sales development. At € 16 million the earnings decline in Q2 was less than € 57 million earnings decrease in Q1. H1 2012 EBIT decreased considerably to € 43 million (H1 2011: € 273 million). This decrease mainly results from the sale of Makro UK. In total, special items to the amount of € 176 million were reported (H1 2011: € 20 million) and, besides the sale of Makro UK, also include expenses for the expansion stop in Indonesia as well as for the restructuring in Portugal and at the headquarters of Metro Cash & Carry Germany.

Metro Cash & Carry H1 2011
(€ billion)
H1 2012
(€ billion)
Change Change in local currency
Sales 14.8 15.2 2.8% 2.7%
Germany 2.4 2.4 -2.0% -2.0%
Western Europe (excluding Germany) 5.6 5.6 -1.1% -1.5%
Eastern Europe 5.4 5.6 3.3% 5.5%
Asia/Africa 1.3 1.7 25.8% 16.1%
EBIT (before special items) 293 million 220 million -73 million  
Metro Cash & Carry Q2 2011
(€ billion)
Q2 2012
(€ billion)
Change Change in local currency
Sales 7.8 8.0 2.0% 1.5%
Germany 1.3 1.2 -4.5% -4.5%
Western Europe (excluding Germany) 3.0 3.0 -1.9% -2.5%
Eastern Europe 2.9 3.0 2.7% 4.7%
Asia/Africa 0.6 0.8 33.7% 18.9%
EBIT (before special items) 262 million 246 million -16 million  

Real with like-for-like H1 sales growth in Germany

From January to June 2012, sales of Real climbed by 0.1% to € 5.3 billion (in local currency: +1.3%). Owed to the shorter Easter business and declining non-food sales, 2nd quarter sales receded by 1.9% (in local currency: -0.8%). The Real online shop continued to grow dynamically and already comprises more than 11,000 articles. In H1 2012, sales grew by more than 40% over the prior-year period. 

In Germany, H1 2012 sales rose by 1.2% to € 3.9 billion. Like-for-like, sales grew significantly by 2.0%. This means that, despite store disposals, Real defended its position in the hypermarket segment. From January to June 2012, the initiative "Entrepreneurship at the local level" was extended to a total of now 26 hypermarkets. Under this programme, the store managers are granted a wider scope of action. 

H1 2012 sales in Eastern Europe receded by 2.8% to € 1.4 billion on the grounds of exchange rate fluctuations. In local currency, by contrast, sales went up by 1.6%. 

EBIT before special items reached € -6 million (H1 2011: € -11 million).

Real H1 2011
(€ billion)
H1 2012
(€ billion)
Change Change in local currency
Sales 5.3 5.3 0.1% 1.3%
Germany 3.9 3.9 1.2% 1.2%
Eastern Europe 1.4 1.4 -2.8% 1.6%
EBIT (before special items) -11 million -6 million 5 million  
Real Q2 2011
(€ billion)
Q2 2012
(€ billion)
Change Change in local currency
Sales 2.7 2.7 -1.9% -0.8%
Germany 2.0 2,0 -1.2% -1.2%
Eastern Europe 0.7 0.7 -3.7% 0.7%
EBIT (before special items) 12 million 17 million 5 million  

Media-Saturn reports strong sales growth in Germany

From January to June 2012, sales of Media-Saturn climbed by 2.3% to € 9.5 billion (in local currency: +2.5%) against the backdrop of a persistently difficult economic situation. The online business continued its dynamic growth owing to the acquisition of Redcoon and the successful launch of the German multichannel offerings. Online sales climbed to € 322 million (H1 2011: € 41 million). In the 2nd quarter, sales rose significantly by 4.5% to € 4.5 billion. Quarterly sales also benefitted from the successful marketing campaigns in the framework of the European Football Championship. 

In Germany, H1 2012 sales rose by 5.5% to € 4.4 billion. Like for like, sales climbed by 1.1%. In the 2nd Quarter, Media-Saturn sales grew by 11.4%, also owing to the acquisition of Redcoon. Like for like, the sales growth came in at 6.8% - the highest value since the 1st quarter 2009. The European Football Championship led to a resurgence of sales, especially of large-format TVs. The product offering on the Internet was further extended and now comprises around 4,000 articles at Mediamarkt.de and over 5,500 at Saturn.de. At around 40%, the store pick-up rate remains at a high level. Aggregate online sales during the period from January to June 2012 came in at € 164 million. Thus, 3.8% of total sales were generated online. 

In Western Europe, H1 2012 sales declined by 2.5% (in local currency: -3.0%), also due to the divestment of Saturn France. The challenging macroeconomic situation significantly weighed on demand for consumer electronics, especially in the Southern European countries. However, Media-Saturn succeeded in extending its market share in this environment. Online sales in Western Europe continued to develop dynamically and reached € 149 million. 

In Eastern Europe, H1 2012 sales climbed significantly by 5.7% to € 1.2 billion (in local currency: +9.5%). 

In Asia, sales rose significantly due to the opening of further test stores. 

EBIT before special items dropped to € -79 million (H1 2011: € 22 million). In addition to the sales-related decline in earnings also the further sharpening of the price profile as well as lower advertising subsidies had a negative effect on earnings. Other factors contributing to this were higher expansion costs, higher start-up losses and costs for the further expansion of the multichannel business. In the Q2 2012, a significant improvement of operating earnings in Germany contrasted with a drop in earnings, especially in Southern Europe.

Media-Saturn H1 2011
(€ billion)
H1 2012
(€ billion)
Change Change in local currency
Sales 9.3 9.5 2.3% 2.5%
Germany 4.1 4.4 5.5% 5.5%
Western Europe (excluding Germany) 4.0 3.9 -2.5% -3.0%
Eastern Europe 1.1 1.2 5.7% 9.5%
Asia (China) 39 million 69 million - -
EBIT (before special items) 22 million -79 million -101 million  
Media-Saturn Q2 2011
(€ billion)
Q2 2012
(€ billion)
Change Change in local currency
Sales 4.3 4.5 4.5% 4.7%
Germany 1.9 2.1 11.4% 11.4%
Western Europe (excluding Germany) 1.9 1.9 -2.5% -2.8%
Eastern Europe 0.5 0.6 3.1% 6.6%
Asia (China) 21 million 34 million - -
EBIT (before special items) -44 million -59 million -15 million  

Galeria Kaufhof wins market share in the textiles sector

H1 2012 sales of Galeria Kaufhof receded slightly by 0.7% to € 1.4 billion. 

In Germany, Galeria Kaufhof completely modernised another eight locations. The consumer electronics departments have meanwhile been closed in nearly all department stores to the benefit of high-margin product categories from the fields of accessories, clothing and shoes. This is also one of the reasons for the slight decline in sales of 0.9% to € 1.3 billion, whereby sales of the textiles assortment outperformed the overall market. As a consequence, Galeria Kaufhof won market shares. The updated online channel continues to enjoy increasing popularity with customers. 

In Western Europe, sales generated during the period from January to June 2012 were up by 2.8%. Here, the business benefited from a positive development in textiles sales. 

In H1 2012, EBIT before special items improved to € -23 million (H1 2011: € -31 million) thanks to a better gross margin resulting from the sales floor optimisation. At € 1 million, Galeria Kaufhof generated positive earnings already in the 2nd quarter and thereby distinctly improved year-on-year earnings by € 5 million. In addition to a higher gross profit from an improved margin mix, the rise is also a result of further strict cost management. Normally, department stores in Germany only generate positive earnings in the important 4th quarter.

Galeria Kaufhof H1 2011
(€ billion)
H1 2012
(€ billion)
Change
Sales 1.4 1.4 -0.7%
Germany 1.3 1.3 -0.9%
Western Europe 85 million 88 million 2.8%
EBIT (before special items) -31 million -23 million 8 million
Galeria Kaufhof Q2 2011
(€ billion)
Q2 2012
(€ billion)
Change
Sales 0.7 0.7 -2.3%
Germany 0.7 0.6 -2.6%
Western Europe 40 million 41 million 3.5%
EBIT (before special items) -4 million 1 million 5 million

Real Estate

The segment Real Estate comprises the real estate assets of METRO GROUP as well as real estate-related services. As per 30 June 2012, METRO GROUP owned 686 locations (31 December 2011: 687). 

Earnings of the Real Estate segment mainly constitute rental income paid by the sales divisions of METRO GROUP. EBIT before special items in the first half of the year reached € 282 million following € 274 million one year earlier. Lower rental income was offset by rental income from newly opened locations and rental increases from indexation. In the 2nd quarter, EBIT before special items in addition rose as a result of the successful divestment of real estate assets. 

METRO GROUP is one of the largest and most international retailing companies. In 2011 the Group reached sales of around € 67 billion. The company has a headcount of more than 280,000 employees and operates some 2,200 stores in 32 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.