April 20, 2018 / 3:25 PM / in 3 months

Metro lowers outlook on weak Russia business

FRANKFURT (Reuters) - German retailer Metro (B4B.DE) on Friday lowered its earnings outlook for its 2017/18 financial year, citing poor performance at its Russian operations, sending its shares lower.

People enter German retailer Metro AG supermarket in Duesseldorf, Germany March 02, 2018. REUTERS/Thilo Schmuelgen

Metro now expects earnings before interest, tax, depreciation and amortization to increase only slightly, compared with previous guidance of a roughly 10 percent increase.

Metro, which runs wholesale stores in 35 countries as well as Real hypermarkets in Germany, expects sales to increase by only 0.5 percent, down from earlier guidance for a 1.1 percent rise.

Its shares tumbled after the statement and closed 10.8 percent down at 13.03 euros, having touched a record low of 12.63 euros.

Metro said the reduced guidance was mainly because sales at its Russia business are now set to be fall below expectations in the second half of the year, while restructuring costs would be higher than forecast.

Separately, Ceconomy (CECG.DE), which was split off from Metro last year, is also dealing with tough competition in Russia and is in talks to sell its MediaMarktSaturn branded Russian consumer electronics operations.

Metro also said earnings would be hurt by a long-running pay dispute with staff at its struggling Real hypermarket chain.

It said last month that it would try to reach a more modern and flexible agreement under the auspices of the AHD business association.

Unions on Friday criticized the company’s move to split off the operating business into a different unit as a way to resolve the deadlock, saying wages at Real were 24 percent below collective labor agreements for the retail industry.

Metro is due to publish results for the first half of the 2017/18 financial year on May 15. It said it expects overall sales of 18.56 billion euros ($22.8 billion) and EBITDA of 760 million based on preliminary data.

Reporting by Arno Schuetze and Victoria Bryan; Editing by David Goodman

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