Metro Pins Hopes on Overseas Expansion, Second-Half Upturn | Business| Economy and finance news from a German perspective | DW | 27.03.2002
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Metro Pins Hopes on Overseas Expansion, Second-Half Upturn

The world's fifth-largest retailer expects a boost to sales and earnings. It foresees a general economic upturn and a further expansion of its overseas businesses will compensate a lack of action at home.


Metro makes most of its money with supermarket chains

European retail giant Metro AG said Tuesday that it expects an economic recovery in the second half of the year and further expansion of its overseas activities to boost sales and earnings in the current year.

At the presentation of the group's annual report for 2001, Chief Executive Hans-Joachim Körber forecast that sales would grow by 6% this year to 52 billion euro. Earnings per share are to rise by 10% and some 7,000 new jobs are to be created worldwide, he announced.

Analysts said they considered Metro's forecasts to be realistic.

Because the situation on the German retail market – which has been underperforming in European comparison for the past ten years – is expected to remain muted, overseas activities will remain at the center of Metro's strategy. The group generates 44% of total revenue outside Germany.

Matthias Reschke, analyst at Schroder Salomon Smith Barney, said that Metro had chosen well when it decided against entering the Latin American market and instead expand into eastern Europe and Asia.

Metro's main European rivals, Ahold and Carrefour, had suffered considerable losses in Brazil and crisis-hit Argentina, whereas the situation in Asia was now looking far more favorable, Reschke said.

Vietnam, where Metro is opening a cash & carry market in Ho-Chi-Minh City, is about to become the 25th country whose market the group has entered. It will also be the second in Asia, after China, where the group operates 15 markets. Here, analysts see sales potential of 15 billion euro. Japan and India are to be added to the list by the end of this year.

The 2001 figures presented on Tuesday were in line with analysts' expectations. Full-year earnings per share rose 11.9% to 1.23 billion euro. Earnings before interest and taxes (ebit) rose 10.3% to 1.13 billion euro. Sales grew 5.5% to 49.5 billion euro. With a 1.5% rise in sales on its home market, the group was even able to buck the negative trend.

According to HDE, the main retail industry federation, the German retail market grew 1.1% to 378.5 billion euro last year.

Metro's main engine of growth was its cash & carry markets, which raised sales 8.1% to nearly 23 billion euro, and its electronics goods subsidiary Media-Markt/Saturn, which lifted sales for the year by 9.5% to 8.3 billion euro.

Even Metro's problem child, department store chain Real, raised sales by 2.6% to 8.4 billion euro.

But Praktiker, which operates a chain of DIY markets, continues to be a cause for concern. Even though the unit was able to reduce its full-year losses to 9.7 million euro from 29.2 million euro, it slid deeper into the red in the last quarter – a development that suggests its strategy still requires some fine-tuning.

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