German retailer Metro has announced its forecast that operating earnings will fall in coming months as a result of low consumer spending, few major sporting events and increased company expenditure as it bids to revive its main cash and carry business.
Store groups throughout Europe are struggling with the prolonged stress on incomes resulting in low consumer spending in a region hit hard by the economic downturn.
Metro’s cash and carry business, which accounts for almost 50 per cent of company sales and 40 per cent of earnings, has been particularly affected by the decline in spending amongst its core customers.
The company has responded by lowering prices at its cash and carries, revamping product ranges and investing in its delivery arm in its quest to boost earnings.
Olaf Koch, the Metro chief executive who recently commenced running the division, has stated the cost of the revamp would eat into company earning during the first nine months of 2013, a shortened fiscal year due to Metro’s alteration to its reporting period.
'We are not happy with the development of earnings,” Koch conceded in a statement to the media, “but are convinced we can get back to our old earnings power.”
Metro runs over 2,200 outlets in 32 countries but gets just over two-thirds of sales from Germany and other western European countries. The group has identified eastern European and Asian countries like Turkey, Russia and China as locations to open new cash and carry stores, due to their potential as stronger developing economies.
Cash and carry earnings dropped 15 percent in 2012. On Wednesday 10 April, Metro’s shares recorded a reduction of up to 3 per cent.
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