* Carrefour profits rise in France, Brazil, Argentina
* Metro sees same-store sales up 1.7 percent
* Metro reports unexpected Q3 net loss
* Metro shares down 4.9 pct, Carrefour off 3.6 pct
* Metro CEO contract extended by three years
By Emma Thomasson and Pascale Denis
BERLIN/PARIS, July 31 Two of Europe's top
retailers, France's Carrefour and Germany's Metro
, are making progress in their quests to revive
performance in their home markets, with Metro rewarding its
chief executive with a contract extension.
Carrefour, Europe's biggest retailer, and Metro, the number
four, have both suffered at home while expanding rapidly into
faster-growing emerging markets.
But after cutting costs and revamping stores and product
ranges they are starting to reverse years of underperformance
from their big out-of-town stores, even as cost-conscious
shoppers increasingly shop locally and online.
Carrefour, the world's second-largest retailer behind
Wal-Mart, reported higher first-half profits in its core
French business, as well as in Brazil and Argentina, although
China stayed under pressure.
The French group said first-half recurring operating profit
rose 13.8 percent to 833 million euros ($1.12 billion), while
adjusted net income climbed 16.7 percent at current foreign
exchange rates to 274 million euros.
Metro said sales for its fiscal third quarter, which runs
from April to June, fell 2.7 percent to 14.9 billion euros, but
like-for-like sales rose by 1.7 percent as it saw a substantial
increase at its core cash-and-carry business as well as its Real
hypermarkets and Kaufhof department store chains.
Chief Executive Olaf Koch, in charge since 2012, said he was
particularly pleased with the performance of cash-and-carry and
Real in Germany. Metro said on Thursday the board had extended
his contract, due to run one more year, by another three years.
"We are increasingly seeing that our range of products and
services, including those in the challenging non-food area, is
gaining importance among customers," Koch said.
However, shares in Metro were down 4.9 percent by 0925 GMT
after the company warned that volatile currency moves could wipe
a "high double-digit" million euro figure off its target for
2013/14 earnings before interest and tax (EBIT) before special
items of about 1.75 billion euros.
Metro also slipped to an unexpected attributable loss of 63
million euros in the quarter due to costs to close stores and
overhaul its struggling consumer electronics chain Media-Saturn.
Metro shares had already fallen 30 percent this year,
largely due to the company's exposure to Russia and its decision
to delay a stock market listing of a stake in its Russian
cash-and-carry operation due to market turmoil over Ukraine.
Carrefour, meanwhile, said the impact of a debt default by
Argentina was manageable, but it would slow planned investments
in the country.
Carrefour shares, which trade at 16 times forward earnings
to 14 times for Metro and 10.8 times for British rival Tesco
, were down 3.5 percent, underperforming a 0.9 percent
weaker European retail stocks index.
MARGINS VS LOW PRICES
Bernstein analyst Bruno Monteyne questioned the
sustainability of Carrefour's 20 basis point improvement in its
gross margin in France to 3 percent after it chose not to cut
prices as aggressively as rivals such as Leclerc in the period.
"This will likely negatively affect performance in the
medium term with a lack of price competitiveness leading to a
future return to market share losses," Monteyne, who rates
Carrefour 'underperform', wrote in a note.
In Britain, Tesco is facing a similar dilemma on prices as
it loses market share to German discounters Aldi and Lidl,
prompting the board last week to ditch chief executive Philip
Clark after another profit warning.
In Germany, Metro's Real has started to fight back against
home-grown giants Aldi and Lidl by launching a range of
own-brand basic budget items and revamping stores, helping
like-for-like sales jump 5.1 percent in the quarter.
Metro's Media-Saturn group, which has been hamstrung by a
power struggle with the chain's founder as it battles fierce
competition from online retailers, also had a better quarter as
shoppers upgraded televisions to watch the soccer World Cup.
CEO Koch told an analysts conference call that Metro and
founder Eric Kellerhals, had mandated bankers to examine
strategic options for Media-Saturn after the group's founder
said he wanted to buy it back or get Metro to spin it off.
Koch also said that conditions were still not right to
resume plans to list a stake in Metro's Russian cash-and-carry
unit. Metro said the business in Russia recorded an increase in
same-store sales despite the difficult political situation
although its business in Ukraine performed very poorly.
Meanwhile, Carrefour said it had seen a 19.2 percent rise in
recurring operating profit in emerging markets, with
particularly strong performance in Brazil and Argentina.
Carrefour is the second-largest operator in the Brazilian
food retail market, behind leader Grupo Pao de Acucar (GPA),
controlled by Carrefour's arch-rival Casino, and just
ahead of Wal-Mart.
($1 = 0.7465 Euros)
(Additional reporting by Matthias Inverardi in Duesseldorf;
Editing by Mark Potter)