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Metro Rises as Company Is Confident on 5% Earnings Growth

Metro Third-Quarter Profit Misses Estimates
Employee Verena Vietze arranges carnival costumes inside a Metro AG Cash & Carry store in Sankt Augustin, Germany. Photographer: Wolfgang von Brauchitsch/Bloomberg

Metro AG rose the most in more than a month in Frankfurt after Germany’s biggest retailer said full-year earnings may rise 5 percent to 10 percent depending on Christmas sales.

Growth in earnings before interest, taxes and special items could reach the higher level if Christmas business is “considerably” better than a year ago, the Dusseldorf-based retailer said in a statement. Growth will at least exceed 5 percent based on a “normal” holiday season, Metro added.

Metro, whose stores include Saturn consumer-electronics outlets and Real hypermarkets, is relying on German consumers resisting the European trend of declining consumption. German retail sales rose in September as an improving job market offset concerns about Europe’s debt crisis, a report showed Oct. 31.

“There’s still an opportunity for Metro to reach its yearly target,” Christoph Schlienkamp, an analyst at Bankhaus Lampe in Dusseldorf, said by phone. He added that last year’s fourth quarter included two weeks of “very bad” weather.

Metro advanced 9 percent, the most since Sept. 27, to 36.56 euros at the close in Frankfurt. The stock has lost 32 percent this year, giving the company a market value of 11.9 billion euros ($16.4 billion).


The company confirmed its revised sales forecast for the 2011 financial year, saying that revenue will increase after adjusting for portfolio changes. That forecast assumes a “distinct” pick-up in sales in the fourth quarter.

Chief Executive Officer Eckhard Cordes replaced Hans-Joachim Koerber in November 2007 and initiated Shape 2012, a recovery plan aiming to raise profit by 1.5 billion euros over four years.

“We always thought that 2011 was not a year for significant Shape 2012 delivery,” Credit Suisse Group AG analysts Xavier Le Mene and Andrew Kasoulis wrote in a report today. The plan “is getting more traction today with further potential for 2012.”

Metro reported third-quarter adjusted net income of 190 million euros, falling short of analysts’ estimates for profit on that basis of 255.9 million euros.

“The sovereign debt crisis continues to weigh heavily on consumption but overall these results are encouraging,” Prateek Datta, a London-based analyst at Royal Bank of Scotland Plc, said in a note.

Kaufhof Talks

Metro said yesterday it’s discussing the sale of Kaufhof with both Signa Holding GmbH, an Austrian real-estate company backed by Greek billionaire George Economou, and the owner of rival Karstadt. Cordes confirmed at a press conference in Dusseldorf today that Metro is in talk with several investors. Cordes said Metro is under no time pressure to sell the unit.

“A sale of Kaufhof would be positive,” Datta wrote.

Chief Financial Officer Olaf Koch’s contract has been extended for three years, Cordes said today on a call with analysts.

Cordes, 60, said he will remain “fully committed” to the company until he is replaced. He said Oct. 9 that he won’t extend his contract beyond next October following media speculation that he had lost the backing of some supervisory board members. Cordes said there is no concrete date yet for the announcement of a new CEO.

“We were encouraged” by the CFO’s contract extension and Cordes’s commitment to stay “100 percent engaged until a successor is found,” Chris Hogbin, an analyst at Sanford C. Bernstein in London, wrote in an e-mail today.

Supervisory board Chairman Juergen Kluge quit on Oct. 17.

Earnings before interest and taxes at Cash & Carry, Metro’s largest unit, rose to 276 million euros in the quarter, excluding so-called special items, from 252 million a year earlier. Ebit at Media Saturn rose to 141 million euros, while the Real unit posted Ebit of 24 million euros on the same basis.

German sales at Kaufhof dropped 4.1 percent to 2.1 billion euros in the nine-month period because of “unseasonably cold weather in July and August” and “remodeling work.”

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