Future sector trends and developments at METRO GROUP

METRO Cash & Carry

The slow and uneven recovery being experienced by the world’s economy is having a major impact on the performance of the cash & carry business. In recent years, the industry’s performance in regions and individual economic areas has varied. This trend will continue. We assume that these inconsistent economic activities will continue to be reflected in the performance of the cash & carry segment.

In Germany and Western Europe, the initial positive impulses being generated by the economic recovery will not be enough to significantly fuel demand. This will particularly be the case in Southern European countries that are bearing the brunt of the euro crisis. For food products, demand should remain at about its previous level. Further price increases could have a positive impact on sales. Inflation related to food prices will probably fall below the 2013 level. For non-food products, we expect to see a continuation of the negative trend in those countries with weak economies during the upcoming reporting period. In other countries, we believe demand will remain nearly stable. Overall, we expect sales in the cash & carry business to remain stable in Western Europe during the next financial year.

In Eastern Europe, we expect the positive trends in the cash & carry segment to continue. As a result, we assume that economic momentum will be moderate and that this trend should be supported by inflation during the next year. Furthermore, the increased demand foreseen particularly in Russia and Turkey should have a positive impact. Given the continuing spread of modern retail industry formats in many Eastern European countries, we assume that the growth of the cash & carry segment will lag behind the rates produced by modern, store-based food retailers.

We expect to see the largest cash & carry growth rates produced in the coming year by the emerging countries of Asia. The macroeconomic growth continues to form a good basis for a dynamic retailing performance. We believe that the growth rates in the cash & carry segment will continue to outpace those of modern grocery retailing. In spite of the gradual easing of the ban on direct investments in India made by international retail companies, competition remains largely weak there. 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, they have tremendous potential for the cash & carry segment.

METRO Cash & Carry will press forward with its strategic expansion in the coming year. The focus will remain on the growth regions of Asia and Eastern Europe.

Media-Saturn

Compared with other retail sectors, consumer electronics retailing is much more cyclical. This is particularly the case with durable consumer goods. Because economic conditions in Europe are expected to differ widely during the next financial year, the divergent regional trends in consumer electronics retailing will continue.

In Germany, we expect the consumer electronics market, supported by a rebounding economy, to perform better in 2014 than it did in 2013. As we have seen in the past, we expect additional business momentum to be produced by the Winter Olympics and the World Cup football championship. These events should affect television sales in particular. At the same time, demand for tablets and smartphones should remain at a high level in response to customers’ strong interest in these products. But the speed of growth in these product groups should gradually slow.

In Western Europe, the sector will continue to be impacted by the difficult economic conditions being experienced by many countries during the coming year. In particular, we believe that the market trends will remain rather weak in the crisis countries of Southern Europe. We expect that the bottom for the consumer electronics market in these countries will be gradually reached over the course of 2014. On the other hand, we expect sales generated in the remaining Western European countries to be stable or positive in 2013 and 2014. Just like in Germany, both major sporting events scheduled for 2014 should have a positive impact on the sector in the region.

In Eastern Europe, we also foresee uneven, but positive trends in consumer electronics retailing for 2013 and 2014. For Russia and Turkey, we expect to see continued growth in the sector. Momentum will be generated in both countries by continued efforts to tap these markets’ additional potential. In Russia, we also expect that the Winter Olympics in Sochi will produce a surge in demand during 2014. Business activities will be more subdued in other Eastern European countries. The situation in Greece remains difficult, with the sector expected to contract once again.

Online sales will continue to grow in all regions and gain market share at the expense of stationary consumer electronics stores. Multichannel providers like Media Markt and Saturn will profit from this trend by optimally combining the strengths of both sales channels. In future, Media Markt and Saturn will more closely integrate online and stationary retailing as a way of bolstering their market position.

Real

During the ongoing eurozone crisis, the food retailing business grew in Germany during the reporting year, largely as a result of price increases. But sales volume remained constant. For the next financial year, we do indeed foresee a continuation of the economic recovery. But it should be remembered that the food-retailing business is less cyclical than other retail sectors. For this reason, we expect the improving economy will provide only a slight boost to the sector. In light of this development, industry sales will probably rise once again primarily in price-adjusted terms. This increase will most likely be below the previous year’s level. Given the record level of these prices in the reporting year 2013, food prices should grow at a slower pace.

Galeria Kaufhof

The brightening economic picture in Germany will also create positive business conditions for the department store segment. For 2014, we do 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 concept and system leader in the department store business, will profit from the positive business conditions. This performance will be supported by our multichannel marketing strategy, an effort that combines the continued expansion of our online business with the increasing integration of this business into our stationary stores. Non-food retailers who continue to do business exclusively in stationary stores will come under increasing pressure in future and lose additional sales. As a multichannel provider, Galeria Kaufhof will outperform its competitors in years to come.