The chief executive of Metro Group said today (2 August) that he believes that trading conditions for the the world’s third-largest retailer are beginning to improve after a challenging year for the German group.
Speaking after Metro published its half-year results, Dr Eckhard Cordes said the company, which saw annual profits fall in 2009, was seeing signs of progress in a number of markets.
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“Even if the crisis is not over yet, we see clear silver linings on the horizon in an increasing number of countries,” Dr Cordes said.
The Metro boss highlighted the company’s growth in Asia, where the retailer saw sales increase by 17.3% during the first six months of the year, and where will recieve further investment as part of plans to up capital investment worldwide.
“Asia continued to run to our satisfaction and recorded double-digit sales growth. China is going quarter-by-quarter from strength-to-strength,” Dr Cordes said.
Earlier today, Metro posted a half-year profit for the first six months of 2010 after booking a loss in the same period a year ago.
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By GlobalData
It posted a net profit of EUR58m for the first half of 2010, compared to an EUR8m loss for the same period of 2009.
The retailer posted a 2.4% sales increase for the first half to reach EUR31.2bn, although the growth was supported by currency effects. In local currency, sales grew 0.6%.
In the second quarter, sales grew 2.4% to reach EUR15.7bn. However, despite all of the optimism, second-quarter net profit was down 16.4% to EUR56m, which Metro attributed mainly to restructuring charges and higher interest payments.
Alongside its results, the company announced that it would increase its capex investment for 2010 to EUR2.1bn, up EUR200m to near pre-crisis levels.
The company plans to invest the money in opening new stores in Asia and Eastern Europe as well as in its Metro Cash & Carry and Media-Saturn divisions. In total, Metro plans to open more than 95 new stores across the 2010 financial year.
The company also announced plans to enter two new markets in the fourth quarter, although it did not confirm which countries it would enter.
“The increase of the capital expenditure budget is a sign of our confidence: we are focusing more on growth and expansion again – the period of caution is over,” said Dr Cordes.
The company said it saved some EUR100m in the first half through its Shape 2012 restructuring programme. “Shape 2012 is gaining further traction, enlarging entrepreneurial flexibility among the business units and lessening need for macro support,” said Cordes.
He added that steps to streamline work flow in its store operations, headquarters and supply chain have already been made, but that its focus would be on improving administrative functions and a “realignment of the IT organisation” would happen in the second half of the year.
The Metro boss said the company needs to “stabilise and consolidate its structure”, and wants to finish the reorganisation this year.
However, cost cuts are not the only measures Metro is taking to improve its bottom line. It said its revised private label is performing “very well” and that sales were up in nearly all categories.
In its cash-and-carry division, the company saw the share of its private-label products out of total sales rise 1% to 12% but said it is targeting own label to account for 20% of sales in the medium term.
Across the business, the company is targeting a 25% own-label penetration in food, although the share of food own label remained flat at 16% over the first half of the year.
In an analyst note, Bernstein analyst Christopher Hogbin said that the group’s “double digit positive” like-for-like growth in key categories including fruit and vegetables, fresh fish, meat and dairy, suggests “Metro has been able to successfully implement some of its learnings from its concept stores”.
Assuming the macro-economic climate does not change, the company said it is forecasting that its EBIT should reach pre-crisis levels of EUR2.1bn for the year.
Shares in the company had fallen 2% (2:53 CET) following the company’s results anouncement today.
