Metro Profit Misses Estimates on Russian Currency Weaknessby
Ruble's decline shaved 40m euros off profit in holiday quarter
Retailer remains `very committed' to Russia: CEO Koch
Metro AG reported earnings for the holiday quarter that missed analysts’ estimates due to the ruble’s decline, which sapped profit at the German retailer’s Media-Saturn division.
Earnings before interest and taxes and special items fell 7 percent to 828 million euros ($935 million) in the company’s fiscal first quarter, it said Thursday. That compares with the 866 million-euro average estimate of analysts surveyed by Bloomberg. The stock fell as much as 5.2 percent.
Dusseldorf-based Metro, which operates more than 2,050 stores in Europe, Russia and Asia, may find profit goals tougher to reach this year as the Russian market contracts and the ruble weakens, said Bloomberg Intelligence analyst Charles Allen. Metro said exchange-rate losses of about 40 million euros related to the ruble hurt profit in the quarter.
Metro is “very committed” to Russia, which “remains an important market for us,” Chief Executive Officer Olaf Koch said on a conference call with reporters. Metro had 152 stores there at the end of the year, and the CEO said he plans more store openings in the country, which is battling its longest recession in two decades.
The shares were down 6 percent to 23.20 euros at 12:55 p.m. in Frankfurt, and have fallen 22 percent this year.
Koch has also been divesting businesses and paying down debt to prepare for possible acquisitions. Metro said net debt fell to a record low of 100 million euros at quarter’s end, from 1.5 billion euros last year. Chief Financial Officer Mark Frese said on the call that the company is now debt-free.
Koch has been investing in Metro’s Media Markt and Saturn electronics and appliance stores and Cash & Carry food wholesale markets with proceeds from the sale of department-store chain Galeria Kaufhof. Sales at those units have grown, while Metro’s Real food stores continue to struggle. Cash & Carry’s earnings before special items missed Sanford C. Bernstein’s estimate by 15 percent on weakness in Russia.