May 17, 2018 / 9:14 AM / a year ago

U.S. tech giants' advance drives Germany's Ceconomy to consolidation

BERLIN (Reuters) - German retailer Ceconomy (CECG.DE) said on Thursday it will keep pushing for consolidation opportunities in European consumer electronics as it seeks to cope with the advance of big rivals like Amazon (AMZN.O), as well as suppliers like Apple (AAPL.O).

Chief Executive Pieter Haas made the comments two days after Ceconomy’s MediaMarktSaturn announced it had signed a deal with French electronics retailer Fnac Darty (FNAC.PA) to create a European alliance for purchasing.

“Each of us alone is not big enough, not just in competition with Amazon, but in the technology area with the likes of Google, or also to be on the same level as our biggest suppliers,” Haas told a conference call for journalists.

“If you look at the size of Apple or Samsung (005930.KS), then it is nice that Media-Saturn is the biggest in Europe, but I am convinced that the size that we have is not big enough in the long run.”

Haas said the operator of Media Markt and Saturn stores would keep looking for consolidation opportunities locally and internationally, but declined to say whether it might lift its 24 percent stake in Fnac Darty.

He added that he was waiting to hear whether British rival Dixons Carphone (DC.L) was interested in joining the alliance with Fnac Darty, which will seek strategic partnerships with key suppliers and work together on private label sourcing, as well as collaborate on innovation and data analytics.

Haas made the comments after Ceconomy reported a better-than-expected operating profit for its fiscal second quarter, helped by a decision not to repeat a tax refund campaign, cost cuts and rising demand for services.

As it seeks to differentiate itself from online-only players like Amazon, Ceconomy has been expanding its offering of services like repairs, installation and home delivery, which grew 15 percent to account for 6.4 percent of total sales.

Ceconomy’s shares, which had fallen almost 30 percent this year, jumped 4.1 percent by 0833 GMT, making them the biggest gainer on the German mid-cap index .MDAX.

Earnings before interest and tax (EBIT) came in at 18 million euros, after a loss of 19 million in the same period last year, beating average analyst forecasts after taking out the contribution from its Fnac Darty holding.

Finance chief Mark Frese said EBIT should continue to improve in the coming two quarters, getting a boost from sales of televisions to soccer fans ahead of the World Cup competition.

Second-quarter sales dipped 0.2 percent to 5.25 billion euros ($6.21 billion), dented by the decision not to repeat the tax refund but supported by Easter falling earlier this year. Sales rose 0.8 percent when adjusted for currency effects.

Reporting by Emma Thomasson; Editing by Maria Sheahan and Susan Fenton

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