Future bleak for Metro after first quarter profits slump

The world's fourth-largest retailer, Metro, predicted a sales slowdown this year after what it hailed as the worst slump since the Great Depression halved profit in the first quarter. The worse-than-expected result is further evidence of the economic slowdown ravaging businesses around the globe. Last month, Carrefour, the world's No 2 retailer, reported its first quarterly slip in sales in six years.
Adidas also shocked investors on Tuesday, sending its stock price tumbling almost 10 percent, after profits in the first three months of the year came in at a fraction of what was expected. Metro warned that there was "no indication of a fast economic recovery" and told investors to brace themselves for "less dynamic sales and earnings development at Metro in 2009" as rising unemployment empties supermarket aisles.
Unemployment in Metro's home market of Germany rose for the sixth month in April to hit its peak since 2007 while retail sales in Europe's largest economy fell by a more-than-expected 1.5 percent in March.
Metro shied away from giving a detailed outlook for the year, saying economic uncertainty made a reliable forecast for this year impossible. It also said that sales growth this year would likely fall well short of its medium-term target of more than 6 percent. Metro's shares fell as much as 6.9 percent and were down 2.9 percent at 32.13 euros by 0906 GMT, putting it among the top losers in Germany's blue chip DAX index.
To weather the economic storm, Metro launched a restructuring programme called Shape 2012 in January which will axe 15,000 jobs and aims to fatten profits by 1.5 billion euros ($2 billion) by 2012. The programme ate into first-quarter earnings before interest and tax, which fell more than two-thirds to 51 million euros, missing what analysts had predicted on average.
Adjusted EBIT, which Metro uses for its medium-term outlook, halved mainly due to the collapse in value of Eastern European currencies - a region which generates more than a quarter of Metro's sales. Sales in the first three months fell 2.5 percent to 15.2 billion euros. Metro trades at around 12.7 times forecast 12-month earnings, according to StarMine. That is broadly in line with French rival Carrefour - 13 times - and ahead of Britain's Tesco at 11 times.