Metro Sales Meet Estimates as CEO Moves Past Kaufhof Deal

  • Retailer sees good Christmas business, sending shares higher
  • Reaffirms earnings guidance for the year; sees more M&A

German retailer Metro AG reported a drop in fourth-quarter sales that was was no worse than analysts’ estimates and pledged to use greater-than-expected proceeds from the sale of department-store chain Galeria Kaufhof for expansion.

Revenue fell 1.1 percent to 14.2 billion euros ($16.1 billion) in the three months through September, Dusseldorf-based Metro said in a Monday release of preliminary figures. That met analysts’ average estimate, according to data compiled by Bloomberg. Metro said it anticipates good Christmas business, and the shares rose.

This year’s sale of Kaufhof means Metro has “the financial means to make further acquisitions,” Chief Executive Officer Olaf Koch said in a statement, adding that the year has been “a turning point for Metro.”

Koch, CEO since 2012, is remaking the 50-year-old retailer by divesting underperforming assets while using proceeds to modernize the rest of the company. Metro is hunting for more targets after buying Classic Fine Foods Group, a Singapore-based supplier of gourmet products, for 290 million euros in August, and appliance and gadget-repair business RTS the same month.

In its first financial report since selling Kaufhof on Sept. 30, Metro reaffirmed its guidance that annual earnings before income and taxes would exceed last year’s 1.53 billion euros, before special items. The retailer said it harvested 1.75 billion euros in net cash from the sale, compared with an expected 1.6 billion euros.

"The new fiscal year has started well," Exane analyst John Kershaw said in a note, adding the report adds "evidence of a cyclical recovery in Western Europe."

Shares of Metro rose 3.3 percent to 27.77 euros at 9:22 a.m. in Frankfurt, extending their gain to 9.7 percent for the year. Germany’s DAX Index has risen 4 percent this year.

Media Markt

The 2.8 billion-euro sale of Kaufhof, which operates 135 department stores in Germany and Belgium, to Hudson’s Bay Co. of Canada ends years of Metro trying to part with the division. In addition to more acquisitions, Koch has said he’ll use proceeds to boost customer service and online sales at the Cash & Carry food wholesalers and the Media Markt and Saturn chains.

So-called like-for-like sales at Cash & Carry stores open at least a year rose 1.1 percent in the fiscal year, growing for the ninth consecutive quarter. Metro’s Media Markt and Saturn electronics outlets posted 3.1 percent like-for-like sales growth. But the Real grocery warehouse stores continued to founder as like-for-like sales fell 0.8 percent.

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