METRO, THE world’s fourth largest retailer, issued a profit warning that sent shock waves through the sector yesterday, saying Christmas trading had started slowly and the euro zone debt crisis was undermining consumer confidence.

Shares in the German group, which runs cash and carries, hypermarkets, electrical goods and department stores, slumped over 10 per cent.

“We feel the resulting consumer restraint across all sales divisions and national borders,” outgoing chief executive Eckhard Cordes said in a statement.

Metro, world number four behind Britain’s Tesco, France’s Carrefour and US industry leader Wal-Mart, said it expected both sales and earnings before interest, tax and special items to come in below 2010 levels should weak Christmas trading continue.

Previously it had forecast earnings growth of at least 5 per cent even without a good Christmas.

A Metro spokesman said shoppers were particularly holding back on purchases of consumer electronics and clothing, sold mostly through its MediaMarkt, Saturn and Kaufhof stores.

He said quiet sales last weekend, traditionally the second week of the Christmas shopping season, had prompted the profit warning from Metro, which usually waits until January to give details of Christmas trading.

“The start to Christmas business has so far distinctly lagged behind the prior year level,” Mr Cordes said.

Bernstein analyst Chris Hogbin said the warning did not augur well for rivals like Tesco, which reports third-quarter sales figures tomorrow, and particularly Carrefour, which is also highly exposed to euro zone countries.

Carrefour declined to comment on Christmas trading.

Carrefour shares were down 5.6 per cent.

However, Mr Hogbin said there were good reasons for thinking Metro was suffering more because it sells a higher proportion of discretionary non-food goods, where shoppers are making the biggest cutbacks.

“For Metro, the fourth quarter is disproportionately important. It’s 70 per cent of their full-year operating profit, and, secondly, 50 per cent of their business is non-food.” – (Reuters)