Metro AG store

Metro Group has revealed its results for the third quarter of the year, with sales increasing but earning taking a year-on-year tumble.

According to the German retailer, sales grew 0.6 per cent to €15.9bn, while they actually rose 2 per cent when adjusted for the disposal of its Makro UK operation.

However, earnings before interest and taxation (EBIT) before special items fell from €614m to €398m, and net profit droppedto €77m from the €190m recorded in the same period of 2011.

'Thanks to our numerous measures to increase the customer value our business has for the most part remained stable,' said Olaf Koch, chairman of Metro's management board. 'However, these measures cannot develop their full effects in the present economic environment and this reflects in our quarterly results.'

By segment, German sales dropped 2 per cent through the quarter to €5.9bn, while international sales climbed 2.2 per cent to €10bn.

Western European sales dropped 5.4 per cent to €4.7bn, Eastern European sales jumped 6.2 per cent to €4.4bn, and Asian/African sales climbed 28.7 per cent to €2.7bn.

Looking ahead, Metro said it expected a very uncertain economic situation which would slow down any positive sales trend, although it stillpredicted a rise in full-year sales and EBIT before special items of €2bn.

In an analysis of the group's results, Planet Retail's Bianca Casertano said that Metro has underpinned a difficult long-term development with a portfolio of 'structually troubled formate', with protracted restructuring dragging on.

'Due to increasingly concentrated markets in Western Europe and the price-competitive low-margin retail landscape in its native German market in particular, Metro Group is forced to rely upon dynamic growth in key emerging markets such as Russia, China and Turkey,' Casertano explained. 'However, all these countries are presently seeing reduced growth, affording meagre comfort to the retailer.

'We expect further exits from underperforming markets characterised by dwindling spending volumes and weak long-term outlook, such as Portugal, Spain and Greece, as resources are needed to support the group’s struggling core business,' she continued. 'Instead, investments should be focused on defined core markets, including Germany, France, Italy, Poland, Russia, Spain, Turkey and China.

'On an encouraging note, we consider ongoing portfolio-wide concept refinements as promising – like the recently launched smaller format city centre cash & carry. Despite these efforts, however, the situation remains challenging for Metro Group due to wider structural reasons in the economic and market environment. To ensure sustainable development, cutting costs will not be sufficient in itself. Instead, the vexed question of what Metro Group will look like in the long term needs to be addressed in a convincing and credible manner soon.'