May 3, 2011
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Metro shows consumers lagging economic recovery

May 3, 2011

May 3 – Metro, the world's fourth-biggest retailer, added to fears that austerity measures and rising prices were keeping consumer spending in check despite mounting signs of a global economic recovery.

Metro logo seen in front of the group's headquarters in Duesseldorf, Germany

The German group, which runs cash and carries, hypermarkets, electricals and department stores, said on Tuesday first-quarter underlying operating profit rose 6.6 percent to 145 million euros ($215 million), helped by cost cutting.

However, sales were flat at 15.5 billion euros, missing analysts expectations for a small rise.
"Slightly disappointing," said DZ Bank analyst Herbert Sturm. Traders said Metro shares were set to open down around 1.1 percent.

Metro said spending was held back by a late Easter and that, including the holidays, sales were up 1 percent from January-April. It also reiterated it expected sales to grow more than 4 percent and underlying profit to rise 10 percent in 2011.

Germany is one of Europe's strongest recovering economies, boosted by its rapidly expanding exporting sector, and analysts are hopeful Metro will also benefit from robust growth in many of its eastern European markets.

Data on Friday showed a surprise fall in German retail sales, and international retailers like French group Carrefour and British company Tesco have shown recently that strong sales in emerging markets were only partly offsetting difficult trading conditions in western Europe.

"The scope of the earnings rise will strongly depend on the further improvement of the overall economic situation and the possibility to compensate price increases on the procurement side," Metro said.

The group, which runs more than 2,100 stores in 33 countries, had said in March that risks to risks to economic recovery had risen after the Japanese earthquake and unrest in the Arab world, knocking its shares despite forecast-beating 2010 earnings.

Sales at its MediaMarkt-Saturn chain of consumer electronics stores grew 0.8 percent to 5 billion euros, after a fall in the fourth quarter.

Metro said energy-saving appliances and tablet computers were especially popular with consumers in the first-quarter.

Kaufhof, the group's chain of department stores, suffered the most from the late Easter, with sales down 4.7 percent.

By Victoria Bryan
(Additional reporting by Mark Potter in London; Editing by Dan Lalor and Louise Heavens)

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