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The METRO Group reinforces its sales and earnings forecast

29.10.2004

The METRO Group reinforces its sales and earnings forecast

In the first nine months, the METRO Group’s currency-adjusted sales grew by 5.7 percent. Including exchange rate effects, sales rose by 5.0 percent to € 39.62 billion. At the same time, the group’s earnings before taxes (EBT) jumped by 20.7 percent to € 447.7 million.

In the third quarter, the METRO Group achieved sales growth net of currency effects of 4.9 percent and of 4.7 percent to € 13.40 billion including currency effects. Reaching a milestone, the share of foreign sales in group sales hit the 50-percent mark. EBT rose by 10.2 percent to € 208.0 million. While nonfood sales recorded considerable sales growth, the situation in the food sales divisions was partly difficult.

"In the first nine months, the METRO Group has ridden the wave of upward momentum. In this context, our focus on a balanced portfolio of sales divisions and locations continues to pay off," said CEO Hans-Joachim Körber. "In the third quarter, business was especially good at our nonfood sales divisions. This was also true of our department stores."

In the first nine months, the METRO Group’s sales in Germany rose by 1.7 percent to € 20.35 billion despite shrinking retail sales and the persistently difficult economic environment in Germany. Foreign sales rose by 8.7 percent to € 19.27 billion. This corresponds to growth of 10.4 percent net of currency effects. Net of currency effects, the company recorded sales growth of 6.2 percent in western Europe, of 17.8 percent in eastern Europe and of 19.5 percent in the Asia/Africa region. “Today we are harvesting the fruits of the internationalization strategy we have steadfastly pursued in recent years, a strategy that we will spare no effort to press ahead with in the future,” Körber said. Because of the dynamic development of its foreign business, the METRO Group generated more than half of its sales outside of its domestic market for the first time in the third quarter.

In the first nine months of the current business year, the METRO Group underscored its striking operating strength. Earnings before interest, tax, depreciation and amortization (EBITDA) rose by 16.1 percent to € 1.62 billion compared to the year-earlier period. Earnings per share rose by 9 cents to € 0.81. The METRO Group expanded its outlet chain in the third quarter, with a total of 30 new locations at home and abroad. Metro Cash & Carry as well as Media Markt und Saturn accounted for 27 of the new openings. The METRO Group was present in a total of 28 countries with 2,406 locations at the end of the third quarter of 2004.

Metro Cash & Carry profits from internationalization

In the first nine months, Metro Cash & Carry grew its sales by 5.0 percent to € 18.78. In Germany, sales retreated by 0.5 percent to € 4.2 billion in the same period. The main reason for this was the difficult business development in the food segment, especially in the third quarter. In the food segment, sinking producer prices for fruit and vegetables were passed on to customers, and demand shifted to private labels. In addition, the factors that lifted sales in the brilliant summer of 2003 failed to materialize in the current business year. Foreign business developed very positively. In foreign markets, sales of € 14.58 billion were generated in the first nine months, a year-to-year rise of 8.2 percent or 6.7 percent adjusted for currency effects. Metro Cash & Carry’s strongest growth was in eastern Europe and Asia/Africa. Sales in these regions grew by 13.2 percent and 12.9 percent respectively including currency effects. In China for one, the sales division recorded a striking sales plus.

In the first nine months, EBITA rose by 7.1 percent to € 447 million. At the end of the third quarter, Metro Cash & Carry had 489 locations in 26 countries and will open its 500th wholesale store during the fourth quarter.

Real hit by weak development in the food business

Sales at METRO Group’s Real hypermarkets declined slightly by 0.7 percent to € 5.84 billion in the first nine months. In Germany, sales declined by 1.1 percent in the same period. This must be seen against the backdrop of the special effects in the third quarter that have already been mentioned and the continuing stagnation in German retailing. In contrast, sales abroad rose by 2.9 percent in the first nine months. Third-quarter sales growth was especially strong in Poland and Turkey – 6.6 percent or 10.8 percent when adjusted for currency effects.

EBITA at the hypermarkets retreated by 6.0 percent to € 95.5 million because of the unfavorable sales performance on the domestic market. As part of Extra’s restructuring efforts, Real acquired another five large-scale markets from the Extra sales division and integrated them into its own outlet chain.

Extra presses ahead with optimization of outlet chain

The nine-month sales of the Extra supermarkets declined by 7.8 percent to € 1.89 billion, as this sales division trimmed its outlet chain and thus decreased its floor space. Like-for-like sales fell by 2.6 percent. In the third quarter, Extra hived off nine of its supermarkets. Four were closed and five were integrated into Real’s outlet chain. This year, Extra has already hived off a total of 24 outlets and pressed ahead with its restructuring.

In the first nine months, the EBITA of the Extra supermarkets sank in line with sales by 9.1 percent to minus € 52.8 million.

Media Markt and Saturn with unabated growth in Europe

Media Markt and Saturn consumer electronic centers recorded considerable sales and earnings growth both at home and abroad in the first nine months. Sales in the first nine months grew by 16.3 percent to € 8.05 billion compared to the same year-earlier period. In Germany, sales increased by 13.2 percent to € 4.69 billion. In the third quarter, the stores raised sales by 11 percent and gained market share with their existing floor space. This growth was achieved without the positive special effects of the second quarter, especially marketing the European Football Championships. Sales in the first nine months of the current business year jumped by 20.2 percent in western and 25.2 percent in eastern Europe. The consumer electronic centers continued to build upon their leading position on the European market.

The earnings of this division also improved markedly in the first nine months. EBITA rose by 30.6 percent to € 169.9 million despite the ongoing high level of investment in the expansion of the group’s outlet chain at home and abroad. In the third quarter, Media Markt and Saturn opened 15 outlets, 10 of which in Germany. This means that this sales division had a total of more than 471 centers on September 30, 2004, up from 415 one year before. Media Markt and Saturn plan to open a record number of 69 new stores this year and will run more than 500 outlets in Europe by the end of the year.

Praktiker revs up sales growth at home and abroad

Praktiker’s home-improvement centers recorded positive sales and earnings growth in the first nine months of 2004. Sales rose year-to-year by 5.5 percent to € 2.28 billion in the first three quarters, with an especially large jump in the third quarter both in Germany and in eastern Europe. In Germany, sales in the third quarter increased by 9.4 percent from their 2003 level with no change in floor space. Praktiker’s success has been due in large part to its aggressive pricing policy, which has helped it win new customer groups, stand out among the competition and gain additional market share.

Despite their aggressive pricing strategy, the EBITA of the home improvement centers in the first nine months of the current business year rose by a whopping 58.4 percent to € 51.0 million. After its successful start in the Bulgarian market, Praktiker is present in a total of nine European countries, six of which are in eastern European countries.

Kaufhof’s sales up in third quarter

In the first nine months, Kaufhof Warenhaus AG’s sales declined by a total of 1.5 percent to € 2.56 billion. In the third quarter, this division’s turnover expanded by 3.2 percent. It profited from the slight economic improvement in the textile industry. In addition, positive momentum came from the campaign surrounding Kaufhof’s 125th birthday. In contrast, the summer clearance sale did not provide much momentum for sales. This was expected because of the drastic decline in the importance of summer clearance sales after Germany’s restrictive law on sales was liberalized.

Sales in Belgium increased by 1.5 percent to € 177.5 million in the first nine months. The Inno outlets, which have been made over using the Galeria concept, made a decisive contribution to this positive sales development.

EBITA of the department stores in the first nine months was minus € 76.6 million, after minus € 30.5 million in the year-earlier period. This must be seen against the backdrop of substantial investments. A new Galeria department store opened its doors in the third quarter, bringing the total of Kaufhof Warenhaus AG’s outlets to a 149.

Outlook

The METRO Group will press ahead on its path of sustained, profitable growth in the fourth quarter of 2004. The overall positive business development in the first nine months reinforces its full-year forecast: The METRO Group projects 2004 sales growth of at least 6.0 percent excluding currency effects. Including the cancellation of planned goodwill depreciation, earnings per share are projected to increase by between 6 percent and 10 percent.

The company will press ahead with its international expansion investing a total of around € 1.8 billion in its operational business. It will also continue to consistently optimize its distribution concepts. In the fourth quarter of 2004, Metro Cash & Carry will open stores in Moldova as well as in Serbia and Montenegro. This will mean that the METRO Group has locations in 30 countries, which will solidify its position as one of the most international retailing companies worldwide.

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