March 24 - METRO Group closed the financial year 2008 with record sales and earnings. Group sales rose 5.8 percent to Euro 68.0 billion (net of currency effects: +6.1 percent). EBIT before special items grew strongly by 7.1 percent to Euro 2.2 billion. With these results, METRO Group continued on its course of profitable growth.
Highlights
Successful Year 2008: METRO Group Reports New Record Sales and Earnings
- EBIT before special items up 7.1 percent to € 2.2 billion
- Sales net of currency effects increase by 6.1 percent
- Dividend of € 1.18 proposed
- 124 new store openings worldwide
- Media Markt: market entry into China in 2010
- Real: restructuring shows success
- Value-enhancing programme "Shape 2012" well on track
"In a distinctly more difficult economic environment we fully met our guidance for the financial year 2008. This is something that only very few companies have been able to achieve", said Dr. Eckhard Cordes, CEO of METRO Group. With the recently launched value-enhancing programme "Shape 2012", METRO Group has laid the foundation to ensure its profitable growth in the long term.
In the financial year 2008, METRO Group increased its sales by 5.8 percent to € 68.0 billion. Adjusted by negative currency effects, group sales grew by 6.1 percent year-on-year. In Germany, METRO Group raised sales by 2.0 percent to € 26.7 billion in 2008. Internationally, Group sales rose 8.4 percent to € 41.3 billion. The international share of sales reached a new record of 60.8 percent. In Western Europe, Group sales went up by 2.2 percent to € 21.0 billion. Eastern Europe again reported a dynamic growth with sales rising 15.3 percent to € 18.1 billion. In Asia/Africa, METRO Group generated a plus in sales of 18.6 percent to € 2.2 billion.
EBIT before special items grew by 7.1 percent to € 2.2 billion. This increase falls within the guidance corridor of 6 to 8 percent announced at the beginning of the year 2008. Earnings were adjusted for one-off expenses resulting from the streamlining of Real’s store network in Germany in the amount of € 237 million as a special item. Earnings per share went up by around 10 percent to € 3.05. Net debt increased slightly from € 4.3 billion to € 4.6 billion year-on-year. The equity ratio dropped to 18.0 percent following 19.2 percent last year, mainly due to currency effects.
In view of these good results the Management Board and Supervisory Board proposed a stable dividend of € 1.18 per share of common stock. The dividend payable per share of preferred stock is to amount to € 1.298.
METRO Group increased its capital expenditure by € 0.3 billion to € 2.5 billion in the past year. The major part of these investments was used for the continued international expansion of the growth drivers Metro Cash & Carry as well as Media Markt and Saturn. In the course of its dynamic expansion METRO Group opened more than two locations on average per week. In total, 124 new stores were opened, thereof 40 Metro Cash & Carry wholesale stores, 14 Real hypermarkets and 70 Media Markt and Saturn consumer electronics centres. In 2008, METRO Group had a workforce of more than 290,000 employees on average, 15,000 more than one year earlier.
International expansion – Media Markt moves into China
METRO Group is represented in 32 countries with 2,195 stores. The fourth largest retailing company in the world generated for the first time more than 60 percent of its sales abroad last year and will continue its selective expansion also in the year 2009. "Particularly in economically challenging times there are also opportunities for healthy companies. We are determined to leverage them", said Cordes. In this context, Media-Saturn will also expand outside of Europe in future. The company plans to move into the Chinese market with its consumer electronics chain Media Markt.
To this end Media-Saturn and Foxconn Technology Group, the world’s largest manufacturer of electronics and computer components, have signed a memorandum of understanding for a joint venture. After a successful entry into the most populated country of the world, the two partners plan to expand rapidly. The first Media Markt store in China is to open in the region of Shanghai in 2010. Cordes: "Europe’s market leader in consumer electronics consistently pursues its international growth course to win significant market share in one of the most important regions of the future".
Metro Cash & Carry is furthering its internationalization, too. For 2009, the opening of the first wholesale stores in Egypt and Kazakhstan is planned. Real will continue to pursue its selective expansion in Eastern Europe. METRO Group plans to open about 20 Metro Cash & Carry stores, approximately 10 Real hypermarkets and roughly 50 Media Markt and Saturn consumer electronics stores in 2009.
Launch of e-commerce platform at Media Markt and Saturn
Media Markt and Saturn will expand their business model by an important pillar: Europe’s market leaders in consumer electronics are moving into the e-commerce business thereby consistently implementing a multi-channel strategy. In late 2009, Media Markt and Saturn will go online with their first offers in the Netherlands and in Austria. Based on the learnings from these two countries a decision will be taken on the rollout of the e-commerce platform to other Media-Saturn countries such as Germany. The exact date for this has not been fixed yet. The objective is to expand the e-commerce offer of Media Markt and Saturn to all countries where these sales brands are operating.
Value-enhancing programme "Shape 2012" full on track
To consolidate the strong market position and secure profitable growth in the long term, the Management Board of METRO Group in January 2009 decided to launch the efficiency and value enhancing programme "Shape 2012". Preparations for "Shape 2012" started last summer.
"Acting from a position of strength, we have initiated a comprehensive restructuring of our Group that will make the company even more transparent, more customer conscious, less complex and more efficiently managed", said Cordes. An essential element of the programme is that the sales divisions will in future be fully responsible for their own operating business, including procurement. At the same time, the areas finance, controlling and compliance will be more centralised. "The guiding principle for the changes is: as decentralised as possible, as centralised as necessary", stressed Cordes. Project teams at all organisational levels of the Group are now working on "Shape 2012". "The programme is fully on track", said Cordes. "I am convinced that we will achieve the earnings potential of € 1.5 billion by 2012". METRO Group already expects first contributions to earnings during the current year, with significant effects showing from 2011.
The project teams have already presented their first results: For the pooled international purchasing of several sales divisions, these will in future team up directly: they will form specific purchasing partnerships to leverage synergies. The 2010 procurement negotiations from autumn 2009 will already be conducted according to these new structures. Moreover, the sales divisions will in future be responsible for their complete supply chain. In addition, the new organisational structure for procurement, logistics and IT shall be in place by late June 2009: By then, the employees will also know for which Metro sales division they will be working in future.
Development of Business at the Sales Divisions
Metro Cash & Carry with above-average EBIT growth
Metro Cash & Carry consolidated its position as world market leader in self-service wholesale in 2008. Also due to the consistently pursued international expansion Metro Cash & Carry again reached distinct growth in sales and earnings. The division stepped up sales by 4.6 percent to € 33.1 billion. EBIT of Metro Cash & Carry increased by 6.8 percent to € 1.3 billion, thereby rising stronger than sales.
Real back in the black
Sales of Real rose by 5.8 percent to € 11.6 billion in 2008. This rise is based on both a distinctly improved development in Germany as well as the continued expansion in Eastern Europe. With the advertising campaign launched in April "Einmal hin. Alles drin." ("One store, you won’t need more.") and the successful new private label range, Real succeeded in distinctly raising customer frequency. EBIT excluding special items grew by € 37 million to € 21 billion. This result puts Real back in the black. The improved earnings are a first sign of the success of the company’s restructuring programme in Germany.
Media Markt and Saturn further extending their leading position
The consumer electronics stores of the Media-Saturn-Holding raised sales by 8.9 percent to € 19.0 billion in 2008. Media Markt and Saturn thereby further extended their lead in the European consumer electronics retail segment. The share of international sales in total sales reached 54.3 percent following 52.8 percent one year earlier. EBIT came in at € 603 million following € 610 million last year. Major expenses for the strong expansion as well as a drop in earnings in Western Europe – especially in Spain – could be largely compensated with higher earnings in Germany and Eastern Europe.
Galeria Kaufhof saw EBIT grow for the 4th consecutive year
In 2008, Galeria Kaufhof underscored its role as the concept and system leader in the German department store segment. In an extremely difficult market environment, in particular in the textiles business, sales of Galeria Kaufhof came in at € 3.5 billion which is 1.1 percent below the previous year. In the strategically important textiles segment Galeria Kaufhof developed better than the market average. With the consistent implementation of its trading-up strategy, Galeria Kaufhof managed to raise EBIT for the fourth consecutive year: EBIT increased by 5.8 percent to € 113 million. In terms of return on capital employed, Kaufhof ranks among the leading department stores in Europe.
Discontinued operations
The Extra supermarkets and the Adler fashion stores are shown as discontinued operations. The business financials were adjusted accordingly and the prior-year figures – with the exception of the balance sheet – were adjusted by Adler. Extra had already been shown as a discontinued operation in 2007. The 245 Extra supermarkets handed over to Rewe Group with economic effect on July 1, 2008 generated sales of € 0.7 billion during the first half-year. As per a contract signed on February 13, 2009, the Adler fashion stores were divested to the private equity fund BluO. The 120 Adler stores generated sales of € 0.5 billion in 2008.
Outlook
In the first quarter 2009, we saw good trading in January. The development in February was impaired by one missing trading day due to last year’s leap year. The development in March so far is very much influenced by the shift of the Easter business. We expect sales in Q1 in Euros and adjusted for calendar effects to come in roughly on prior year’s level. However, due to the high level of uncertainty caused by the difficult global economic development a reliable guidance for the financial year 2009 is not feasible at this point in time. METRO Group will comment on further perspectives of the financial year in line with its regular reporting in early summer.
Against the backdrop of the measures taken, METRO Group considers itself to be in a strong position. The company will use the opportunities inherent in the economic crisis to further extend its market position. For the medium-term, METRO Group continues to expect sales to grow by more than 6 percent per year. Regarding operating earnings (EBIT) before special items, METRO Group expects a rise of over 8 percent in the medium term