Metro disappoints, reporting 15.4-percent profit drop
German retail giant Metro reported on Monday an unexpected sharp drop in second-quarter net profit owing to restructuring charges and calendar effects, and the shares fell.
Metro's net profit fell by 15.4 percent from the equivalent figure last year to 44 million euros (57 million dollars), completely missing an average analyst forecast for a 67-percent increase.
Shares in the world's third-biggest retailer behind Wal-Mart and Carrefour lost 1.21 percent to 42.08 euros in morning trading, while Frankfurt's DAX index of German blue-chips was 1.59 percent higher overall.
Metro's second-quarter sales gained 2.4 percent to 15.7 billion euros however, and core earnings before special items were 5.6 percent higher at 334 million euros, a statement said. The latter figure was slightly better than expected.
Restructuring charges of 101 million euros in the first half of the year weighed heavily on results, Metro noted.
The fact that the Easter holiday came early this year also moved a lot of earnings into the first quarter's results, it added.
Finally, the group's Saturn and Media Markt appliance and electronics chains posted higher than normal marketing and start-up costs, with the division's operating profit falling by 25 percent as Media Markt geared up to launch operations in China and online.
Group operating profit stagnated in the quarter as a result, coming in at 252 million euros.
The group said its operating environment varied from region to region and that "emerging markets in Asia reported again very high growth dynamics."
European markets were burdened meanwhile by "high fiscal deficits, as well as the necessary savings measures for consolidating public budgets".
For all of 2010, Metro expects sales to exceed last year's weak level of 65.5 billion euros, but "still fall short of the medium-term target level of six percent growth per year."
Core earnings before special items should "tangibly exceed the 2009 level" of roughly two billion euros.
Activity was forecast to be stronger in eastern Europe than in the west, and Metro raised its investment budget to 2.1 billion euros from an initial 1.9 million as it gets set to launch 95 new stores this year.
© 2010 AFP