German retail group Metro sees a light at the end of the Covid tunnel. The company is sticking to its targets for the current 2020/21 financial year, but the trajectory is changing slightly.
Covid as the common thread
Whilst wholesaler Metro previously aimed for a steady recovery curve, it is now counting on a longer period of all sorts of restrictions, followed by a sharper recovery once normal life resumes. The update on the forecast comes on the sidelines of the figures for the first quarter of the 2020/21 broken financial year, which ended on 31 December 2020.
The important year-end quarter shows once again the heavy toll the coronavirus is taking. There has been a 16 per cent drop in turnover to 6.3 billion euros, an operating profit that is just under 40 per cent lower at 200 million euros and a net profit that is 18.4 per cent lower at 99 million euros. These are not exactly cheerful figures.
Western Europe as a weak little brother
Covid is the common thread throughout the quarterly report. “The developments of the individual divisions were affected by Covid-19 to varying degrees,” Metro says in its accompanying commentary. This was particularly noticeable in regions where hotel and catering customers make up an important part of the business.
Metro specifically refers to Western Europe as the affected region. That area, which does not include homeland Germany, had the worst performance of all, with a drop in turnover of almost a quarter. This is primarily due to the very strict Covid measures in France, Italy and Spain.
Longer wait, but stronger recovery
The coronavirus remains the key theme in the outlook for the remainder of the current financial year. Metro notes it remains extremely difficult to predict the course of the health crisis and the associated government measures. Nevertheless, Metro’s management is bold enough to confirm its forecast for the year, which was issued at the closing of the previous financial year.
However, the bar has not been set spectacularly high: Metro aims for a turnover that will be “slightly lower than last year”. The scenario that is now assumed is a continuation of government restrictions that will last at least partially until the end of the second quarter (until 31 March for Metro). After that, the group aims for a “significant and rapid recovery” in the hospitality and tourism industries. However, this forecast is slightly different from the preceding one.
Metro is now assuming a slower evolution towards recovery, but recovery should ‘pick up’ much quicker because Metro imposed a stricter cost discipline during the crisis. Such an organisation, which has been made more ‘lean and mean’, should be able to turn the tide on the recovering activities. Incoming new CEO Steffen Greubel, who officially starts on 1 May, will know what to do.
