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Metro Posts Weak Real Performance in Preliminary FY Results

Continues to be Metro's problem child: hypermarket banner Real.
Photo: LZ Retailytics
Hypermarket banner Real: continues to be Metro's problem child.

Metro AG has published its preliminary and unaudited figures for the financial year 2016/17. According to the reports, sales increased by 1.6% to EUR37.1 billion.

Sales of Metro’s wholesale division went up by 3.0% to EUR29.9 billion. The B2B delivery segment of the operation saw sales increase by 25% to EUR4.6 billion.

Metro’s hypermarket banner Real posted a sales decline of -3.1% to EUR7.2 billion. According to the company, this was due to store closures compared to the same period in the previous year. Real has closed down three stores since the end of the previous financial year. 


Opinion

A Drop in The Ocean

Once again, Metro has had to publish unsatisfying results for its German hypermarket operation Real. Even on a like-for-like basis, sales have dropped. Real has already seen a decrease of -5.7% in H1, followed by a slight sales increase of +0.7% in Q3, only to go back to a negative sales trend in Q4 (-1.0%). As a result, it is increasingly difficult for the company to articulate a positive perspective for the operation. Currently, one of the strategies is to highlight the “success” of its Real.de e-commerce operation. In Q3 for instance, this segment posted a 70% sales growth. In this latest report, Metro once again points out its positive development. 

The sales jump of Real.de, however, was not due to a push of its grocery e-commerce activities, which would have been an exciting development. On the contrary, Real has put its online food experiments on hold for half a year in order to work on its strategy. Growth was mainly thanks to the full integration of Hitmeister, which the banner acquired this February. Hitmeister, however, is not an online shop per se but a marketplace provider. This means that the growth of Real.de not only in terms of assortment – which is currently used as the centre of its marketing messages – but probably also in terms of sales, is strongly linked to third parties using the website as a platform to sell their goods, for which they pay a fee.

In Q3, Real.de accounted for 1.5% of Real’s business. This means, relevance of third parties aside; and no matter how interesting developments of the banner are: they only represent a drop in the ocean. Real.de is unlikely to ever grow in importance to such an extent that it would change the negative sales trend of its parent operation. The future of this parent, however, is strongly linked to the outcome of Real’s negotiations with trade union Verdi, which is the critical factor when it comes to realising the already announced plan to revamp the network. 

Topics: Metro Group