German retailer Metro puts Kaufhof stores on sale

German group Metro, one of the biggest European retail store companies, is set for a big shake-up after its chief executive unveiled plans on Tuesday to sell its Kaufhof department stores and restructure the Real supermarket chain.

"Kaufhof stores are not decisive for group growth and therefore we do not see them as strategic," Eckhard Cordes told a press conference.

The former Daimler executive has a reputation for eliminating units that do not perform well or fit into his business model.

He added that a separation of Kaufhof, which posted 2007 sales of €3.6 billion ($5.7 billion), would be "complete."

But Cordes did not provide details, nor did he identify potential buyers, which rumours say include Arcandor, formerly known as KarstadtQuelle and which owns the Karstadt chain of department stores.

The other priority for Cordes was a turnaround of Real stores, which have suffered from the cost of integrating recent acquisitions that include Geant stores in Poland and Wal Marts in Germany.

Cordes has given division director Joel Saveuse, formerly at French supermarket giant Carrefour, two years to get the job done, with around 40 stores slated for sale or closure.
Meanwhile, Metro said 2007 net profit fell by 18.76% to €853 million owing to negative foreign exchange effects, tax charges and an operating loss of €16 million at Real.

The supermarket chain had invested heavily in opening new outlets in Ukraine and Romania.

Metro was also mulling the stock market listing of its Saturn and Media Markt stores, which sell electronic goods and household appliances, and which posted sales of €17 billion last year.

Money earned from a listing could be used to reinforce their operations, Cordes said. "Metro will not be dismantled," he stressed, but it was clearly due for a serious makeover.

"We are going to buy companies if it makes sense and if the opportunity presents itself, and we of course do not rule out portfolio divestments," the Metro boss said. "The only thing that is sure is change," he added.

The group, which is based on its cash and carry line of wholesale stores, posted an operating profit of $2.1 billion last year.

When exceptional items were stripped out, that represented an annual gain of 8.8%.

Sales rose 10% to €64.3 billion, in large part as a result of last year's acquisitions.

For 2008, Metro forecast sales would grow by more than 6% and that core earnings before exceptional items would increase by between 6 and 8%.

The outlook did not find much favour with investors however, and shares in Metro fell by 5.25% to €52.32 in midday trading on the Frankfurt stock exchange.

The Dax index of German blue-chips showed a gain of 2.23% overall.

Source: AFP

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