There seems to be light at the end of the tunnel for German retail group Metro: a buyer has been found for supermarket chain Real and profits are higher than expected. Unfortunately, losses keep accumulating at Makro in Belgium.
Improvement in the second quarter
Metro has sold 1.2 % more on a comparable basis in the second quarter of its fiscal year, growth that was mostly due to Eastern European and Asian markets (not including Russia), where sales improved by 6.8 % and 3.6 % respectively. The catering and 'trader' divisions also experienced growth.
Performance was poorer in more mature markets and in retail: in Russia, comparable turnover growth decreased by 4 % and at supermarket subsidiary Real, comparable turnover even went down 5.1 %. Turnover remained stuck altogether at a fairly stable 6.8 billion euros.
Metro is quite satisfied with that, since Easter came late this year and became part of the third quarter. Operational profit (EBITDA) ended slightly higher than analysts had expected, decreasing only by 2.3 %. That decrease may be due to investments in digitisation and IT as well as in the Russian market, but negative currency effects had some influence as well.
Buyer for Real
The German chain has finally found a buyer for Real, a subsidiary Metro was hoping to get rid of for some time. Metro is in exclusive talks with real estate company Redos, hoping to seal a deal that puts the hypermarket formula at a value of around one billion euros. Redos would be paying half a billion for it right away, while Metro retains a 24.9 % participation. The acquisition should be complete this summer.
Redos makes it very clear that there will be stores closing: "We are pleased we were able to convince Metro with our concept for Real. Redos is an independent company with extensive restructuring and real estate experience in large-scale retail. We have known Real for many years and have rented out Real locations. Together with Real's management, we will be using our expertise to redesign the store network," said managing director Oliver Hermann. The details of the restructuring will be discussed during the sales negotiations.
Problematic strategy in Belgium
Interestingly, Metro has again confirmed its intention to focus entirely on wholesale, forsaking retail of its own. The sale of hypermarket chain Real makes sense in that regard, and so does the change of course at cash-&-carry chain Makro. Whereas Makro had been targeting the end consumer more and more in the past few years, the chain has recently shifted its focus again towards organisations and chefs.
CEO Olaf Koch's wholesale strategy might mean the end for Makro in Belgium: the Metro group currently has a presence with a genuine wholesale concept (Metro) as well as the more consumer-oriented Makro. If Koch opts out of serving end consumers, Makro's termination would become an obvious decision. The CEO has already mentioned that Makro might be sold.
Meanwhile, losses keep accumulating in the Belgian chains: last financial year, the total net loss for Makro and Metro in Belgium increased from 55 million to 63 million euros. The parent company injected another 40 million euros in the ailing branch last February.