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March 17, 2010

On the money: Metro focuses on international to drive profits

Metro Group today (17 March) raised its mid-term profit targets, insisting that its focus on international expansion coupled with its Shape 2012 cost-cutting programme will drive growth at the German retailer.

Metro Group today (17 March) raised its mid-term profit targets, insisting that its focus on international expansion coupled with its Shape 2012 cost-cutting programme will drive growth at the German retailer.

The company, which posted an 8.9% drop in EBIT for fiscal 2009, lifted its mid-term EBIT growth target to more than 10%, having previously targeted mid-term growth of 8%.

Metro also suggested that it would see a significant improvement in profits during 2010, although the company did sound a note of caution on the impact of currency exchange and the continued “challenging” consumer environment on profitability.

Speaking to analysts following the results release, chief executive Eckhard Cordes said the company expected to drive top-line gains as it pushes ahead with expansion in Asia and Eastern Europe.

“We see significant growth potential for our businesses globally. Our assessment on how the world will develop in the years – or decades – to come remains unchanged,” he said.

Metro currently plans to open 95 new stores in 2010, when it will enter Egypt and expand its store network in Asia and Eastern Europe.

In particular, Cordes said that Metro viewed China as a “very important” region and one that it is investing significantly in.

The company is reorganising its Chinese business to focus on the east coast, in order to drive expansion through new store openings while also benefiting from logistics and purchasing synergies.

“The centre of gravity [in China] will shift to the east coast,” Cordes revealed. “It is an absolutely logical strategy for us to focus on these areas and we will be able to reap the benefits on the logistics side.”

Profit gains will also be driven by Metro’s Shape efficiency drive, Cordes insisted.

Shape 2012 contributed EUR208m to operating earnings last year and management indicated that it expects the programme to contribute in the region of EUR500m to earnings this year.

“We are confident that we can reap the benefits of Shape… which makes us more optimistic that we should be able to achieve longer-term profit growth,” Cordes commented.

In a seperate announcement today, Metro unveiled plans to merge the management operations of its holding company, Metro AG, and its wholesale business.

Cordes confirmed that the move would result in job losses as overlapping functions are cut, but declined to provide a figure for headcount loss.

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