Q1 2009: METRO Group Shows Strength in Economic Crisis

- Group sales at € 15.2 billion – adjusted for calendar and currency effects they rise by 3.6%
- Positive development of business in April
- Due to currency and calendar effects the business development is only conditionally comparable with prior year – nominal sales at minus 2.5%
- Media Markt and Saturn boost sales in Germany by 11.7%
- METRO Group’s EBIT before special items reaches € 84 million and includes negative currency and calendar effects
- Implementation of value-enhancing programme "Shape 2012" under way – special items weigh on results with € 33 million

In an environment characterized by the global economic crisis METRO Group firmly stood its ground in the First Quarter 2009. Group sales adjusted for calendar and currency effects rose by 3.6%. "This attests to the operating strength of METRO Group", said Dr. Eckhard Cordes, CEO of METRO Group. Especially in Eastern Europe a robust growth has been achieved in local currency. Group sales in total reached € 15.2 billion, which corresponds to a nominal decline of 2.5% but can be explained by several special effects. These include calendar effects such as the shift of the Easter business into the Second Quarter and one selling day less than in leap year 2008. In addition, there were negative currency effects in Eastern Europe and also the downward trend in inflation, especially in the food business. Against the backdrop of these special items the nominal drop in sales during the First Quarter 2009 therefore has only little indicative value. Business developed positively in April.

"We have seen a fair First Quarter without surprises", said Cordes. "Against the backdrop of the continued and further intensifying economic crisis the only surprise is that there is no surprise". In local currency – i.e. excluding currency effects – METRO Group even managed to slightly improve sales by 1.1%. The calendar effects due to the shift in the Easter business and the missing selling day accounted for another 2.5 percentage points: Adjusted for both special effects group sales rose by 3.6%.

The little informative value of the First Quarter for the whole financial year is demonstrated by the strong business recorded in April. The Easter business, overall, came in at a gratifying level. As expected, sales and earnings in April showed a noticeable upward trend. According to preliminary figures, EBIT in April was up from the previous year’s figure. According to Cordes, this demonstrates that the current crisis offers opportunities for a healthy and financially strong company like METRO Group to extend its market position. "We are determined to seize these opportunities", said Cordes.

During the first three months of 2009 METRO Group generated group sales of € 15.2 billion (Q1 2008: € 15.6 billion). This corresponds to a 2.5% decline in sales. In local currency, METRO Group’s sales rose by 1.1%. In Germany, First Quarter sales in a contracting economy and despite the missing Easter business grew by 0.6% to € 6.2 billion. This was in particular attributable to the excellent development of Media Markt and Saturn. International sales were substantially affected by exchange rate fluctuations. Excluding currency effects sales rose by 1.4%. In euros, however, sales declined by 4.5% to € 8.9 billion. Due to exchange rate fluctuations the international share of sales receded from 60.1% to 58.9%.

In Western Europe (excluding Germany), sales declined by 2.2% to € 4.7 billion. Before currency effects, sales declined by only 1.3%. Media Markt and Saturn boosted sales but could only in part compensate the drop in sales of Metro Cash & Carry that was mainly owed to calendar effects. Adjusted for exchange rates and despite the calendar effects, sales in Eastern Europe grew by 5.6%. Due to strong currency effects (-15.6 percentage points) sales in euro declined to € 3.5 billion, however. In the region Asia/Africa, sales rose by 12.9% to € 0.7 billion. Net of currency effects, sales came in on prior year’s level.

Also the earnings trend at METRO Group was materially affected by the mentioned currency and calendar effects in the First Quarter 2009. Operating earnings, EBIT, came in at € 51 million (Q1 2008: € 166 million) and include special items in the amount of € 33 million relating to the value- and efficiency-enhancing programme "Shape 2012". Adjusted for these items EBIT dropped to € 84 million. Of these special effects € 11 million account for Metro Cash & Carry, € 19 million for Galeria Kaufhof and € 3 million for the segment Other companies.

The earnings before taxes came in at € -120 million (Q1 2008: € 44 million). Before special items the earnings before taxes stood at € -87 million. The net result for the period amounted to € -77 million following € 8 million in the same quarter last year. The earnings per share from continuing operations came in at € -0.31 following € 0.04 one year earlier. Net of special items the earnings per share from continuing operations dropped to € -0.24.

Capital expenditure of METRO Group during the First Quarter 2009 amounted to € 245 million following € 340 million in Q1 2008. This drop in capital expenditure reflects the reduced capex budget for the full financial year 2009. Nine new stores were opened during the First Quarter 2009. The store network of Metro Cash & Carry grew by three stores and that of Media Markt and Saturn by six locations. Two hypermarkets were closed at Real.

60 project teams drive the value-enhancing programme "Shape 2012"

METRO Group continues to work at full capacity on the implementation of the efficiency- and value-enhancing programme "Shape 2012" resolved in January 2009. The organisational cornerstones for the reorientation of the whole group including the Düsseldorf headquarters have been adopted and numerous restructuring projects launched. "We are well on schedule with the implementation of ‘Shape 2012’", said Cordes. 60 project teams in some 30 countries are developing a multitude of measures that will make the whole group faster, more flexible and customer-focused. Around one third of the announced reduction of 15,000 jobs worldwide has been clearly identified or already executed. Wherever possible, the job cuts are to be implemented through natural fluctuation. "With ‘Shape 2012’ we plan to realise an earnings improvement potential of € 1.5 billion. I am convinced that we will succeed", stressed Cordes. "Shape 2012" will show positive contributions to earnings from 2010 on and will realise its full earnings impact from 2012 onwards.

From mid-2009 the purchasing activities will completely revert to the responsibility of the individual sales divisions. As a result, all procurement activities for 2010 will already be performed under the new structures. "This represents a milestone of the programme ‘Shape 2012’", said Cordes. The tasks of the procurement company Metro Group Buying (MGB) will be assumed by the sales divisions. Latest at the end of June all employees of MGB will know in which sales divisions they will be working in future. By the same date also the new organisational structure for the logistics and IT functions is to be finalised.

Development of business

Real Estate
Since January 1, 2009 the real estate activities are reported as a separate segment in the Group’s financial statements. The segment Real Estate comprises all real estate assets owned by METRO Group as well as the related services. The real estate management actively contributes to generating value added at METRO Group. With the international expansion, an active asset and portfolio management as well as an optimised use of resources the real estate assets are to be protected and systematically developed over the long term.

EBIT reached € 132 million following € 123 million one year earlier. This is mainly attributable to income from lease agreements with the METRO Group sales divisions. The improved earnings in particular reflect the higher lease income generated in the context of the expansion of Metro Cash & Carry. In the case of intra-group real estate leases, the earnings of the sales divisions are now fully reported on a lease basis thereby resulting in expenses that reflect in the earnings reported. This applies in particular for Metro Cash & Carry and Real. The prior-year numbers were adjusted for better comparability.

Consistent restructuring at Metro Cash & Carry Germany
Sales of Metro Cash & Carry net of currency effects dropped by 1.8% during the First Quarter 2009. Here, the above-mentioned calendar effects, in particular the shift in the Easter business, became noticeable in Western Europe and in parts of Eastern Europe. Owing to negative exchange rate fluctuations as well as declining positive price effects, sales receded by 6.4% to € 7.0 billion. Against the backdrop of the high share of international sales the earnings situation was significantly impacted by currency effects. Moreover, also the calendar effect weighed on earnings. EBIT came in at € 0 million (Q1 2008: € 70 million). This figure includes expenses of € 11 million for the first optimisation measures implemented mainly in Germany in the context of "Shape 2012". Before special items EBIT came in at € 11 million.

"Business did not develop satisfactorily", said the CEO of METRO Group, Dr. Eckhard Cordes. "The figures demonstrate the acute need for a consistent restructuring of Metro Cash & Carry Germany". The Management Board is working with full capacity on this task.

First success is already showing. In March 2009 Metro Cash & Carry opened its first concept store in Germany and is thereby further driving the repositioning of its business model. Customer feedback received so far is highly positive and shows an appreciable rise in sales generated with the core target groups. Another four concept stores characterised by a changed assortment and pricing structure as well as new services are scheduled to open in Germany by the end of the year. Moreover, the new marketing concept provides for a larger share of private label products. Combined with investments into lower shelf prices the market presence is now distinctly more price-aggressive. Innovations that stand their ground in the concept stores are to be implemented also at the other wholesale outlets.

Real continues on expansion course
Real is driving its successful expansion in Eastern Europe. In August, Real will open its first hypermarket in the Ukraine (Odessa). Against the backdrop of the overall economic trend Real in Germany benefits from the fact that it already started its own restructuring process in autumn 2007, i.e. months ahead of the outbreak of the economic crisis. Positive results such as a rising customer frequency and higher average transaction size attest to the first successes. Surveys in addition show that customer satisfaction with the services and offers available at Real is growing. The award-winning advertising campaign "One store: you won’t need more" successfully launched in 2008 will be continued.

Sales of Real generated during the First Quarter 2009 declined by 4.9% to € 2.6 billion. Net of currency effects, however, sales remained almost stable despite the afore-mentioned calendar effects and only showed a slight drop of 0.6%. Like-for-like, sales receded by 1.4%. In particular due to the missing Easter business EBIT of Real stood at € -56 million (Q1 2008: € -43 million).

Media Markt and Saturn with an excellent start into the year 2009
Media Markt and Saturn made an excellent start into the year 2009. This was attributable to successful campaigns such as those on the occasion of the 30th anniversary of Media Markt in Germany and the reopening of the traditional Saturn store on Berlin’s Alexanderplatz. Moreover, the Media-Saturn Group distinctly extended its active commitment in 24-7 Entertainment and will thereby benefit from further growth impulses in the digital distribution of entertainment content. 24-7 Entertainment is Europe’s leading technology provider for digital content such as music, music videos and ring tones. In late March the Media-Saturn Group in addition also announced that it targeted a future expansion outside Europe. The company plans to enter the Chinese market with its Media Markt consumer electronics chain. The first store is to open in the region of Shanghai in 2010.

Sales generated in the First Quarter 2009 rose by 6.4 to € 4.6 billion. Net of currency effects sales were even boosted by 8.4%. With these figures, Media Markt and Saturn again grew distinctly stronger than the market. Like-for-like, sales grew by 1.3%. In Germany, Q1 sales of Media Markt and Saturn rose by 11.7%. Despite substantial advertising expenses, especially in Germany, EBIT came in above the year-earlier level at € 79 million (Q1 2008: € 75 million).

Galeria Kaufhof defies difficulties on textiles market
Galeria Kaufhof further underscored its claim as an innovator in German retailing during the First Quarter with the modernisation and extension of its department store in the CentrO shopping mall in Oberhausen. The upper floor was extended by 3,800 square meters and is now the largest department store floor all over Germany with a total selling space of 10,500 square meters. In total, around 30 new brand shops and more than 50 new brands are presented in the lifestyle worlds.

Sales of Galeria Kaufhof declined by 3.8% to € 0.8 billion mainly due to the above-mentioned calendar effects although Galeria Kaufhof to some extent succeeded in escaping from the downward trend on the German textiles market and thereby further extended its role as the concept and system leader in the German department store sector in the First Quarter. In an extremely difficult market environment EBIT came in at € -47 million following € -20 million in Q1 2008. This figure includes expenses of € 19 million incurred in the context of "Shape 2012" and mainly related to the streamlining of the store network. It has already been decided to discontinue operations of four German department stores after expiry of their respective lease contracts in 2010. Excluding this special item EBIT stood at € -28 million. Department stores in Germany usually only achieve a positive EBIT in the second half of a financial year.

Quarterly Financial Report Q1 2009
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