German retail giant Metro experienced a 2.2% fall in reported group sales as the sharp drop in the value of the Russian rouble hit its first quarter trading.
Reported sales fell to £18.3bn in the quarter from €18.7bn in the corresponding period last year.
This was primarily driven by a 12.4% revenue plunge in its Eastern European operations, which last year accounted for around a quarter of total sales.
Adjusted for the effects of currency and negative portfolio effects (including its sale of Real Eastern Europe and Makro Cash & Carry Egypt), the group achieved sales growth of 2.6% for quarter.
Group chairman Olaf Koch commented: “Unfortunately, the weak rouble obscures our overall good operating performance“.
“Media-Saturn’s business developed very well, with good like-for-like sales growth across all regions reflected in significantly higher earnings. METRO Cash & Carry also posted the 6th consecutive increase in like-for-like sales. At the same time, the group made significant progress in its debt reduction efforts.
“Overall, we remain confident that we will achieve our sales and earnings targets for the full year.”
Sales in Germany were 0.1% up, while Western Europe saw 1.1% sales growth, driven by the strong performance of Media-Saturn, particularly in Spain.
Net profit for the period was down 10% to €404m, due to a higher tax rate and exchange rate losses of approximately €60m.
Metro said it expects to see a slight rise in overall sales, “despite the persistently challenging economic environment”.
Analysts at Bernstein commented: “We believe that Metro has strong assets and the consensus view is clouded by its German operations and tax problems.”
The broker remains “positive” on the retailer based on three factors: firstly that cash and carry is a superior retail format in early stage emerging markets; Media-Saturn has successfully repositioned itself for an online transition; and Metro’s tax problems in Germany are clouding the view on underlying earnings.