CORRECTED-UPDATE 1-German retailer Metro cuts outlook for Media-Saturn

Thu May 8, 2014 5:00am EDT

(Corrects sales figure in third paragraph)

* Media-Saturn embroiled in power struggle with founder

* Metro confirms outlook, other units to compensate for Media-Saturn

* Q2 sales down 7.6 pct, at low end of analyst forecasts

* Sales stronger in April, particularly in food

BERLIN/DUESSELDORF, May 8 (Reuters) - German retailer Metro AG cut its outlook for its consumer electronics division on Thursday after a disappointing first quarter as the unit struggled with competition from online rivals and a leadership crisis.

The chief executive of Media-Saturn, Europe's largest consumer electronics chain which accounts for about a third of Metro's sales, quit on Tuesday amid a dispute between the firm's founder, Eric Kellerhals, and majority shareholder Metro.

Metro reported Media-Saturn sales fell 4 percent in its fiscal second quarter to 4.88 billion euros ($6.79 billion), saying it had been unable to match performance in the previous quarter due to the "consistently challenging market environment".

Metro cut its 2013/14 outlook for the unit, saying it now expected earnings before interest and tax (EBIT) before special items to approximately match the prior year's level, compared to a previous forecast for "sharply rising" earnings.

However, it said the Metro group remained on course to meet its forecast for its 2013/14 fiscal year for a slight rise in sales in local currency and EBIT before special items of about 1.75 billion euros, provided that exchange rates remain constant, saying other units should compensate for Media-Saturn.

Europe's No. 4 retailer, a sprawling group which includes hypermarkets and wholesale and department stores, has been trimming its portfolio and cutting costs to respond to sluggish demand in Germany and western Europe which account for two-thirds of sales.

Sales for its fiscal second quarter, which runs from January to March, fell 7.6 percent to 14.326 billion euros, while EBIT before special items came in at a negative 40 million euros from a positive 14 million.

Analysts polled by Reuters had forecast sales of 14.4 billion euros and an EBIT loss of 43 million.

The quarter is usually Metro's weakest and was compounded this year by the fact Easter fell in April rather than March.

The figures were also hurt by falling emerging market currencies and portfolio effects from the sale of businesses, but Metro said it had already seen stronger sales in April, particularly in its food business.

($1 = 0.7183 Euros) (Reporting by Emma Thomasson; editing by Thomas Atkins and Jason Neely)

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