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Aug 3, 2009
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Retailer Metro sees no signs for fast recovery

By
Reuters
Published
Aug 3, 2009

DÜSSELDORF, Aug 3 (Reuters) - Germany's Metro (MEOG.DE), the world's fourth-largest retailer, expects retail sales to fall further in coming months after posting better-than-expected second-quarter underlying operating earnings on Monday 3 August.


Metro Cash & Carry - Photo: www.metro-cc.com

"Clear signs for a fast economic upswing after the severe downfall are so far not discernible... We expect that retail sales will further decline in the coming months," Metro said.

"We assume that the sales and earnings development trends will not change significantly in the second half of 2009," the company said.

Metro reported a 6.1 percent drop in adjusted earnings before interest and tax (EBIT) to 307 million euros ($433.3 million), beating the average estimate of 297 million euros in a Reuters poll of analysts.

Sales fell 3.8 percent to 15.3 billion euros, below estimates.

Retailers across the world are struggling in the economic downturn as consumer spending has dropped due to rising unemployment and people's uncertainty about the direction the global economic crisis will take.

Carrefour (CARR.PA), Europe's No.1 retailer, announced in June its third profit warning in 12 months, underscoring a tough year ahead for the industry.

Metro, which is more than other retailers exposed to eastern European markets, suffered particularly from weakening exchange rates against the euro in places like Russia and Poland.

In January, Metro launched a restructuring programme called Shape 2012, which will axe 15,000 jobs and aims to fatten profits by 1.5 billion euros by 2012 to sustain its mid-term growth target of more than 8 percent per year in adjusted operating earnings.

Its wholesale business Cash & Carry will contribute the largest part the cost savings, it said, adding that Shape will cost about 650 million euros for 2009 to 2011.

Metro trades at around 16.3 times 12-month forward earnings, according to Thomson Reuters StarMine, which weights analyst estimates according to their track record. It is at a premium to Tesco (TSCO.L), which trades at 12, and Carrefour, (CARR.PA) which is 14.9.

Analysts said Metro's premium was mainly due to the fact that its business -- including Cash & Carry and its consumer electronic operations -- was more cyclical than other retailers' and, therefore, would be more in demand when recovery kicked in.

(Reporting by Eva Kuehnen)

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