German retail group Metro has announced financial results for the first quarter of 2012 that stayed well below expectations. Their net loss of 81 million euro was attributed mostly to the under-performing electronics division Media Markt - Saturn.
Worldwide turnover growth - except in Western Europe
Metro's turnover went up 2.2% to 15.6 billion euro, despite the economic crisis and very low consumer confidence that keeps Western European consumers on tight budgets. Most of the growth was therefore achieved in Asia and Africa (+15.2%) and Eastern Europe (+3.5%).
In Western Europe, Metro's turnover decreased by 1.2%, while in its home market Germany an excellent performance by the Cash & Carry department led the group to a 1.6% growth. Media Markt and Saturn's turn towards online sales also pushed the sales figure in the right direction.
Still, the rising turnover could not prevent that major investments – price cuts and expansion costs for Media Markt and Saturn – drove Metro's operational result down from +142 million euro in last year's first quarter to -9 million now.
Employees to pay for poor results
To compensate these losses, Metro will reduce further investments this year by 10% to 1.8 billion euro, and look for other ways to cut costs as well. Analysts expect two important measures: redundancies in the Düsseldorf headquarters and a (temporary) halt to the Indonesian expansion plans.
As Metro will remain focused on Cash & Carry and Media Markt – Saturn, its two other chains Kaufhof and Real will continue to lose importance for the group. The group is still looking for interested parties to take over either of them, but Koch realises that in the current circumstances, finding one will not be easy.
For the rest of the year, Metro predicts sustainable growth in sales and profits. Contrary to former CEO Eckhard Cordes, whose main objective was to limit losses, the new chairman aims to raise turnover in existing stores (like-for-like).