Metro targets marked profit rise after dividend scrapped

Germany’s Metro is confident of an improvement in profitability next year from a revamp of its retail businesses after the group reported a net loss and cancelled its dividend.

Europe’s fourth-biggest retailer, which runs cash and carries, supermarkets, department stores and the region’s top consumer electronics chain, is slimming down and cutting costs to try to revive its fortunes.

“We are still at the beginning of the transformation but we have made significant progress,” chief executive Olaf Koch told a news conference, adding that Metro had seen a “significant” rise in sales in the current quarter from the last.

He was confident the group would be able to return to paying a dividend for its new 2013/14 financial year. It scrapped a payout for a shortened 2013 year to September following a net loss of €71 million.

Metro forecasts “slight absolute sales growth” for 2013/14, while earnings before interest and tax (EBIT) and before special items should “markedly exceed” a comparative level of €1.7 billion for 2012/13, a sign it is aiming for improvements in margin growth.

Metro’s core earnings before special items, of €728 million for the shortened 2013 business year to September, beating its own target to “slightly exceed” the €706 million of 2012.

“Guidance more optimistic than we expected,” Commerzbank analyst Juergen Elfers wrote in a note.

“Koch is distributing an air of confidence and this is the really good news.”

Metro shares, which jumped last month after it said it might list up to a quarter of its Cash & Carry Russia business on the stock market next year, were up 0.6 per cent, compared with a 0.8 per cent weaker European retail index .

The stock trades at 16.5 times forward earnings, a small discount to Europe’s biggest retailer Carrefour, but well ahead of Britain’s Tesco with a multiple of 10.5. – (Reuters)