Shares in Metro Group, the world’s third-largest retailer, tumbled today (6 December) after it cut its sales and profit forecast for 2011.
Metro’s profit warning sent its shares down over 13%. The German retailer’s shares closed down 13.86% at EUR31.86 in Frankfurt.
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The company blamed the sovereign debt crisis, which it said was having “increasingly noticeable effects” on consumer confidence. Metro, meanwhile, said currency fluctuation was hitting its business and it also pointed to a “weak start” to Christmas trading.
If the poor start to Christmas continues, Metro said it expects sales to come in slightly below the prior-year level of EUR67.3bn (US$90.15bn). It also anticipates EBIT before special items to be slightly below last year’s EUR2.4bn.
As recently as last month, Metro, reporting its third-quarter results, said it expected annual sales to be above the level reached in 2010. It also forecast that underlying EBIT was expected to grow by at least 5% and by as much 10%.
“Originally we had expected that, based on the weak prior-year basis, this year’s Christmas business would grow. However the start to Christmas business has so far distinctly lagged behind the prior year level,” Metro CEO Dr. Eckhard Cordes said today.
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By GlobalData“We feel the resulting consumer restraint across all sales divisions and national borders. We will now make every concerted effort to generate earnings for the year on the same high level as in the previous year”.
Sanford Bernstein analyst Christopher Hogbin said Metro “typically made 70% of its full-year EBIT in the fourth quarter”.
He said the profit warning was “clearly disappointing” but argued it reflected a “weak consumer environment …. rather than something more structurally wrong with the business”.
Hogbin, meanwhile, said he understood Metro’s Real supermarket chain was faring better than the retailer’s non-food chains, while its business in Russia and Germany was performing better than its operations in “peripheral Europe”.
The analyst added Metro’s trading could reflect risks for rivals including Carrefour and Casino.
“Since Metro’s warning largely reflects difficult trading conditions especially in peripheral Europe and in non-food, it should also highlight the risks to other retailers in our coverage with similar exposure – noticeably Carrefour and Casino,” he said.
