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Metro Group on Growth Path in Germany and Abroad

31.10.2002

Metro Group on Growth Path in Germany and Abroad

In the third quarter of 2002 the Metro Group, Duesseldorf, increased its sales by 7.2 per cent over the same period last year to € 12.36 billion. "In spite of the difficult economic environment our businesses have developed very positively in Germany and abroad," said Dr. Hans-Joachim Körber, Chairman and CEO of METRO AG. "We reiterate our objective to achieve an increase of about 10 per cent in earnings per share for fiscal year 2002." 
 
In Germany sales in the third quarter increased by 4.4 per cent, in the countries outside Germany by 10.6 per cent. The foreign share in group sales continued to go up further from 45.3 to 46.8 per cent. EBITDA improved in the third quarter by 7.7 per cent to € 499.4 million. In the same period EBIT rose by as much as 16.1 per cent to € 188.0 million. Earnings per share increased to 16 cent after 10 cent in the third quarter of 2001.
In the first nine months of fiscal year 2002 the Metro Group increased its sales by 4.7 per cent over the same period last year to € 36.23 billion. Corrected for currency fluctuations sales went up by 4.9 per cent. The international business developed particularly positively: In the first nine months the Metro Group’s foreign sales went up by 10,1 per cent to € 16.73 billion. Domestically, sales of the group increased by 0.4 per cent to € 19.51 billion. "Thus we have developed significantly better than the industry average gaining additional market shares", said Körber.
The EBITDA of the group in the first nine months of 2002 amounted to € 1.30 billion and was thus 1.8 per cent above the figure for the same period last year. The EBIT of € 363.8 million remained roughly on the same level as in the prior year’s period. In the first nine months the group’s outlet chain grew by a total of 50 locations. The majority of these were accounted for by Metro Cash & Carry and Media/Saturn. As of 30 September 2002 the Metro Group worldwide was represented at some 2,300 locations. 

Metro Cash & Carry substantially increases sales and earnings

Metro Cash & Carry increased sales in the first nine months of 2002 by 6.7 per cent to € 17.01 billion. In the important growth market Eastern Europe sales even grew by as much as 16.4 per cent in the first nine months of the year. With an increase in sales of 4.6 per cent Metro Cash & Carry also gained additional market shares in Western Europe. In Germany sales went up by 2.0 per cent in the first nine months. 
Metro Cash & Carry earnings also continued their positive development. In the first nine months the sales division increased EBIT by 21.8 per cent over the same period last year to € 290.1 million. This growth in earnings was achieved in spite of high levels of capital expenditure on international expansion. In the third quarter alone eight new stores were opened abroad. At the end of September 2002 Metro Cash & Carry was represented in 23 countries with a total of 423 outlets.
The sales division will consistently continue its internationalization. In December the first Metro Cash & Carry store will be opened in Japan. For 2003 market entry is planned in India and Ukraine. In Russia expansion is moving ahead vigorously: "Our first two Moscow Cash & Carry stores are developing very well and perform clearly above budget", according to Körber. "We have just opened the third location there. In the year 2003 we will also take Metro Cash & Carry to St. Petersburg."

Real sales grow in third quarter against industry trend

In spite of a tense market environment Real sales in the first nine months of 2002 declined only slightly by 1.3 per cent in comparison with the same period last year to € 5.87 billion. In the third quarter the sales division even achieved a growth in sales by 1.3 per cent to € 1.94 billion. The EBIT of the Real hypermarkets improved in the first nine months of the current year by 4.2 per cent to € 29.3 million.
"The investments into the sustainable improvement of the Real outlet chain have paid off", emphasized Körber. "In the third quarter alone more than 40 million € were spent on the optimization of the outlets." In addition, the customer card system Payback and several marketing activities contributed to improving customer retention with positive repercussions on sales. In Eastern Europe, sales declined by 3.7 per cent to € 613 million in the first nine months of 2002. This is primarily due to the substantial appreciation of the Euro in relation to the Polish currency. 

Extra cannot escape weak industry development

Sales of the Extra supermarkets in the first nine months of 2002 dropped by 4.7 per cent against the same period last year to € 2.08 billion. Thus Extra was not able to escape the weak industry development. The basic reason for this declining business development is the persistent buying restraint combined with a high level of price sensitivity on the part of consumers. The EBIT of the sales division amounted to € -50.5 million in the first nine months of the fiscal year. In the third quarter Extra spent an amount of € 11 million in the ongoing modernization and optimization of its store network. Over and above this, six unprofitable, small selling space outlets were closed in the last quarter.

Media/Saturn growth in double digits

The consumer electronics centers of the Media/Saturn sales division continued to strengthen their position of leadership significantly in a generally declining industry environment. In the first nine months, sales increased by 15.2 per cent from € 5.47 billion to € 6.30 billion. In the third quarter it was even possible to achieve a growth in sales of as much as 24.1 per cent. Especially in Spain, Italy, Poland, Hungary and Switzerland Media/Saturn achieved above average growth rates. "Our consumer electronics centers presented very good figures, also in Germany. This proves impressively that a clear price and image leadership pays off", said Körber. "Thus, Media/Saturn again shows that it is one of the strongest brands in European retailing."
The EBIT of the consumer electronics centers improved in the third quarter by 26,0 per cent to € 54.8 million - in spite of significantly increased investments above all into European expansion. The EBIT of the first nine months rose by 12.9 per cent to € 98.4 million. After the upcoming market entry in Belgium Media/Saturn will be represented in ten European countries by the end of this year.

Praktiker with substantial sales increase in third quarter

The successful price cutting campaign has contributed to Praktiker regaining market shares in an extremely difficult industry environment. The home improvement centers increased their sales in the first nine months by 1.8 per cent to € 1.96 billion. In the third quarter they went up by 6.9 per cent to € 662 million. On a like-for-like basis the increase amounted to 6.2 per cent. In Eastern Europe growth was especially high. In these markets Praktiker was able to boost sales by as much as 29.8 per cent to € 377.7 million. The foreign share in total sales went up in the third quarter 2002 from 21.0 to 24.6 per cent over the same period last year.
Due to investments in new locations and the offensive market positioning in Germany the EBITDA declined to € 45.2 million in the first nine months of the year 2002. In the same period the EBIT amounted to € -15.2 million. At the end of September Praktiker was the first German operator of home improvement centers to open a store in Romania thus further expanding its extremely successful business in Eastern Europe.

Galeria Kaufhof stands its ground in difficult market environment

The Kaufhof department stores with their high quality assortments were particularly severely affected by the buying restraint in Germany. Compared to the rest of the industry the sales division has still done quite well in the first nine months: Sales amounted to € 2.66 billion showing a decline of only 1.7 per cent in comparison with the same period last year. In the third quarter the decline in sales decelerated to as little as 1,0 per cent. In Belgium the Inno department stores increased their sales by 5.1 per cent to € 60.4 million in the same period. 
EBITDA dropped from € 135.8 million in the same period last year to € 100.9 million in the first nine months of 2002. The EBIT of the first nine months amounted to -22 million €. This was mainly attributable to the sales decline suffered by the department stores and the capital expenditure required to convert the Belgian stores to the Galeria concept. In the third quarter, on the other hand, Kaufhof achieved a positive EBIT of
€ 21.8 million, mainly due to cost reductions in the entire process chain. 

Outlook: earnings forecast reconfirmed

The Metro Group will continue to pursue its course of lastingly profitable growth. The international expansion, above all of the high sales and high profit divisions Metro Cash & Carry and Media/Saturn, will be pushed ahead vigorously. In addition, the company will continue to modernize and optimize the existing sales network. METRO AG expects a persistently positive business development in the foreign markets. In Germany the sales divisions will continue to strengthen their competitive positions significantly – in spite of the tense overall situation in the economy.
METRO AG expects a further normalization of consumer behavior in the fourth quarter and a generally satisfactory development of the Christmas business. Thanks to its strengthened competitive position at home and abroad the group will benefit over-proportionately from this trend. Taking into consideration the delays in some international new store openings METRO AG expects a sales growth of between 5 and 5.5 per cent for the full fiscal year. At the same time the group reconfirms its target of achieving an increase of about 10 per cent in earnings per share.

Quarterly Report Q3/9M 2002 pdf (400 KB)

go to the Quarterly Report Q3/9M 2002

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