Future sector trends and developments at METRO GROUP
METRO Cash & Carry
The performance of the self-service wholesale trade industry can be seen against the backdrop of current macroeconomic parameters. For the upcoming financial year, we expect the global economy to experience a slow and uneven recovery in the regions. For this reason, we assume that the varied development of the economic regions will be reflected in the performance of the cash-and-carry segment.
For Germany and Western Europe, we expect to see only small growth impulses for self-service wholesale trade in light of the relatively subdued economic momentum overall. Demand for food products should reach about the same level as in past years. As inflation related to food prices will likely remain low, we expect price increases to produce only few positive growth impulses. For non-food products, we expect to see a slightly negative trend in those countries with weak economies. In other countries, we believe demand will pick up a bit. Overall, we expect to see a slight increase in sales in the Western European cash-and-carry segment.
In Eastern Europe, we foresee growth for self-service wholesale trade sales in local currency during the upcoming financial year. Growth could be affected by the political crises in the region. Should the conflict in Ukraine continue to intensify, we anticipate negative effects on demand in both Ukraine and Russia. For Turkey, we continue to project dynamic growth, under the condition that the political conflict in Syria will not negatively impact economic momentum in Turkey. In addition, we expect price increases in the region to support growth in the upcoming financial year. Overall, there is still potential for growth within the region’s cash-and-carry segment, even though we believe that the growth rates in this segment will lag behind those of the fast-growing modern food retail segment.
For the upcoming reporting period, we expect Asia’s emerging economies to produce the highest cash-and-carry growth rates. Macroeconomic conditions continue to form a good basis for dynamic retail growth. In particular in India, we expect positive impulses from price increases to support segment sales. In spite of the easing of the ban on direct investments in India made by international retail companies, we project that competition from modern grocery retailing formats will remain relatively weak there in the near future. As a result, traditional retailers, an important customer group for self-service wholesale trade, continue to act as the most critical supply channel for food in large parts of the region. For this reason, the region offers tremendous potential for self-service wholesale trade.
In spite of the intended disposal of activities in Vietnam, Asia and Eastern Europe will remain a focus of METRO Cash & Carry’s strategic expansion during the upcoming financial year.
Because economic conditions in Europe are expected to differ widely, divergent regional trends in consumer electronics retailing will continue.
In Germany, consumer electronics retailing performed extremely well during the past financial year, generating growth of around 4 per cent. Due to the base effect associated with this, we are now projecting only a slight gain of around 1 per cent for 2015. While demand for such trendy product groups as tablets and smartphones is weakening, innovations beyond the TV and mobile segments are gaining relevance.
In audio, streaming-enabled devices, such as multi-room systems, mini-speakers and sound bars, hold the greatest sales potential. The product family of so-called wearables, such as smart watches and fitness bands, is still in the early stages of market introduction.
Both trends are creating a completely new demand situation with regard to the connected world, a segment all modern sales formats must address.
In Western Europe, the sector will again face a number of challenges during the upcoming year. This applies especially to Italy, while the Iberian markets have stabilised following a period of weakness and will produce moderate sales growth, according to our estimates.
On the other hand, we foresee sales stagnation in the Benelux countries, Austria, Switzerland and Sweden given their already high level. In these mature markets, we expect a significant shift towards multichannel concepts.
In Eastern Europe, we anticipate stagnation over the short term due to the charged political conflict and strained economic situation, which – should the crisis come to a rapid end – will likely spur moderate sales growth for consumer electronics stores in Russia and Poland.
Across all regions, multichannel providers will grow if they are able to more closely dovetail their online and stationary stores.
For the food retail business, economic conditions in Germany have so far provided a good foundation for robust growth. For this reason, we foresee slight growth in sales in 2015 – provided that geopolitical tensions do not intensify and consumer sentiment does not decline further. Overall, we again expect to see somewhat higher price increases than in the past financial year. However, these should remain moderate.
In the face of tough competition in stationary food retailing, Real will continue to bolster its competitiveness through innovative concepts, targeted investments in its store network and the systematic expansion of cross-channel activities.
Overall, business conditions in Germany are also favourable for the department store segment. For 2015, we indeed believe that the department store segment will trail behind the retail industry as a whole for another year. But Galeria Kaufhof, acting as the store, concept and system leader in the department store business, will be able to profit from robust business conditions. This will be supported by our multichannel marketing offensive and the related systematic integration of stationary and digital department store worlds. As a multichannel provider, Galeria Kaufhof will therefore continue to outperform its competitors in years to come.