Metro to suspend Galeria Kaufhof sale

Metro announced another suspension of its on-off plans to sell the Galeria Kaufhof department store as the German retail group confirmed disappointing seasonal sales.

Market conditions were not optimal for a sale of Kaufhof, said Olaf Koch, who took over from Eckhard Cordes as Metro’s chief executive at the start of the year. “A sale must reflect the potential of Galeria Kaufhof. Currently, the earnings potential can be better tapped by us,” Mr Koch said.

Kaufhof, which is almost entirely based in Germany, has long been targeted for disposal by Metro, which sees more growth potential at its businesses in emerging markets. Interest from buyers has foundered partly because of financing difficulties in the economic crisis.

Metro had raised hopes of a sale by revealing talks with potential buyers including Signa, an Austrian property company, and Nicolas Berggruen, the investor who in 2010 bought Karstadt, the rival department store chain to Kaufhof. Previous early-stage talks between Mr Cordes and private equity groups also failed.

Group fourth-quarter sales fell 1.3 per cent compared with the previous year to €19.5bn, with the figures highlighting that spending and consumer sentiment remains comparatively robust in the company’s home German market when set against other parts of austerity-hit Europe.

Quarterly sales in Germany were flat at €7.8bn, whereas sales in western Europe fell more than 4 per cent. In eastern Europe sales were up in local currency terms but down 1 per cent in euros.

Cash-and-carry and consumer electronics, Metro’s largest businesses, registered only slight declines in the fourth quarter. But Metro said non-food business at its Real hypermarket business in Germany and eastern Europe was “difficult.” Quarterly sales at Real fell 3.9 per cent while fourth-quarter sales at Kaufhof sank 4.6 per cent, with poor clothing sales.

Metro confirmed expectations given in a profit warning last month that earnings before interest and tax would be slightly below last year’s level of €2.4bn. Full-year sales fell 0.8 per cent to €66.7bn, Metro said.

Analysts expect Mr Koch, the former chief financial officer, to press on with an efficiency drive begun under Mr Cordes, while retaining a focus on expansion abroad. The group has stores in 33 countries and is Europe’s third-largest retailer by sales after Carrefour and Tesco.

Christopher Hogbin, an analyst at Sanford Bernstein, said the earnings confirmation should be “somewhat reassuring to investors” and it was positive that Metro was not pursuing a Kaufhof sale “at any cost”. Shares in Metro rose 4 per cent to €28.35