Goodwill adjustment creates more leeway for sustainable repositioning of Real

  • Around €450 million impairment of goodwill from the takeover of Allkauf and Kriegbaum stores in 1998
  • No effect on Group guidance before special items
  • Major investments into stores and services intended

As part of a sustainable repositioning of the hypermarket chain Real, METRO GROUP will adjust the goodwill resulting from companies acquired 17 years ago. With this move, METRO GROUP creates a solid balance sheet foundation and more room to manoeuvre for the already successfully initiated repositioning of Real. Building on the success of the repositioning to date, METRO GROUP intends to invest extensively into the modernisation of Real’s stores and customer services in the next few years.

“During the past three years we have already significantly invested into the modernisation and realignment of Real and observe very positive developments at those hypermarkets that have already been converted to the new concept, especially in terms of sales”, said Olaf Koch, Chairman of the Management Board of METRO AG and also Chairman of the Supervisory Board of Real SB-Warenhaus GmbH. “Based on the positive insights that we have gained from the modernisation process so far, we will continue investing into the concept conversion of our stores. However, our earnings are already strongly affected by distortions in the German pay scale structure and increased investments into competitiveness. Against this backdrop and to maintain the leeway required to this effect, we have now impaired this goodwill and thereby taken out the pressure from the balance sheet. As we are targeting a sustainable repositioning of Real, we intend to continue investing into the Real business model also in the coming years.” 

“Specifically, METRO AG is recognizing goodwill adjustments in the amount of some €450 million in its consolidated balance sheet”, explains Mark Frese, Chief Financial Officer of METRO AG. This book value resulted mostly from METRO GROUP’s takeover of the Allkauf hypermarket chain as well as of the stores from the retail group Kriegbaum and their merger with Real in 1998. “This impairment of goodwill represents a non-cash special item”, said Frese. METRO GROUP therefore continues to expect EBIT before special items adjusted for currency effects to rise slightly above the €1,727 million achieved in financial year 2013/14.

Real has invested heavily into various measures for more customer centricity, including in particular, into the store infrastructure, merchandise presentation and freshness assortments, own brands as well as into the multi-channel appearance during the past 18 months. As many as 82 of the total of more than 300 Real hypermarkets have already been modernised and report gratifying growth in sales and customer frequency. 

METRO GROUP is one of the largest and most important international retailing companies. In the financial year 2013/14 it generated sales of around €63 billion. The company operates around 2,200 stores in 30 countries and has a headcount of around 250,000 employees. The performance of METRO GROUP is based on the strength of its sales brands that operate independently in their respective market segments: METRO/MAKRO Cash & Carry - the international leader in self-service wholesale - Media Markt and Saturn - the European market leader in consumer electronics retailing - Real hypermarkets and Galeria Kaufhof department stores.