Mercator has reported a steep drop in net profit for the first quarter as declining consumption, rising unemployment and a sluggish economic outlook took their toll.

Net profit fell to EUR0.7m (US$894,200) in the first three months of the year, down from EUR10.2m in the same period of 2011, Slovenia’s largest retailer revealed today (16 May). Increased finance costs and the impact of currency exchange both had a significant effect on the bottom line, Mercator said.

“In 2012 Mercator is facing a deterioration of economic conditions on all of its markets. Strong slowdown in economic growth … higher unemployment and lower real household income resulted in a fall in consumption,” it said.

Mercator operates stores in Slovenia, Croatia, Bosnia, Montenegro, Serbia, Bulgaria and Albania.

Sales totalled EUR676m, up 3.6% year-on-year. The company said that domestic revenue remained “virtually the same”. However, development activities yielded a “solid” 9.5% growth in foreign markets.

Mercator’s board said it is initiating a number of “counter-crisis measures” in order to adjust its offer to changes in consumer behaviour, including the continuation of its store refurbishment project.

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