Muelheim an der Ruhr, Oct 15 - German retail group Tengelmann sees tough times ahead as the financial crisis puts additional strain on already sluggish consumer spending in Germany, its chief executive said on Wednesday.
"I don't see any optimism. We have to be realistic. We will now go into a recession," Karl-Erivan Haub told the group's annual news conference.
"It will be a one- to-two year dent and it remains to be seen whether things will get better after that."
Family-owned Tengelmann -- which operates supermarket chains Plus and Kaiser's as well as textile discounter KIK and do-it-yourself stores OBI -- said sales stagnated in Germany in its financial year 2007/08 to end April, but grew abroad.
Its sales in Europe grew 2.5 percent to 19.71 billion euros ($26.93 billion) in 2007/08, the group said.
A hoped-for pickup in German household demand, which accounts for around 60 percent of Europe's biggest economy, has failed to materialise this year as soaring energy and food costs have dampened purchasing power.
Private consumption fell by 0.7 percent in the second quarter of this year, the third consecutive decline.
The financial crisis had made things even worse, Haub said.
"It makes me damned annoyed," Haub said of what he called the "financial pandemic".
"And the retailers now have to pay for it."
As a result of the crisis, the group may put investments in Germany on hold, he said, but would still go ahead with investments in its fast-growing eastern European markets.
Its do-it-yourself store chain OBI recorded 58 percent sales growth in Russia, its second-biggest market after Germany. OBI plans to raise the division's foreign sales to 50 percent of the whole from 43 percent in the next two years.
Sales at its textile discounter KIK grew 7 percent overall.
PRECIOUS DISCOUNTERS
"The time ahead of us is perfect for discounters," Haub said. "Discounters have become even more worthwhile."
However, Tengelmann will still go ahead with the partial divestment of its discount supermarket stores Plus outside of Germany, keeping operations in Austria, Romania and Bulgaria.
In Germany, it expects to start a joint venture with Edeka's discount supermarket unit Netto at the beginning of next year, arguing it would make more sense holding a stake in Germany's third-biggest discounter than being fourth or fifth, Haub said.
Tengelmann, which is less dependent on the Christmas shopping season than many of its competitors, said it expected the weakest turnout in years.
"A lot of hope will vanish into thin air," Haub said, adding particularly debt-financed companies would run into problems.
The Christmas season is crucial for department stores such as Metro's Kaufhof and Arcandor's Karstadt, which make a large chunk of their earnings during this time.