Future sector trends and developments at METRO GROUP

METRO Cash & Carry

The performance of self-service wholesale trade can be seen against the backdrop of current macroeconomic parameters. For financial year 2015/16, we continue to expect the economic trend to vary from region to region. The mixed trend is likely to be reflected in the performance of self-service wholesale in the various economic areas in which METRO Cash & Carry operates.

In Germany and the rest of Western Europe, we expect self-service wholesale to show solid performance in light of the continuing or increasingly positive macroeconomic environment. However, growth rates are predicted to be only moderate. No notable growth in demand levels is expected given the high degree of market saturation in the advanced economies of Germany and the other Western European countries. In addition, inflation is anticipated to remain moderate due to persistently low commodities prices and tough competition in food retail. In our view, a shift in demand towards higher-quality products as a result of better economic conditions will positively impact the sales trend. We also expect a positive trend in non-food products for the same reason.

With regard to self-service wholesale in Eastern Europe, we are forecasting a continuation in like-for-like sales growth. Although the regional trend will continue to be influenced by the Russia/Ukraine conflict, we expect the negative economic trend to ease somewhat in Russia in financial year 2015/16. The associated decline in the inflation rate is likely to positively impact demand for food as well as for consumer durables. For Turkey, we expect growth to remain positive. This assumes, however, that the political conflict in Syria will not negatively impact the economic trend in Turkey. For most of the other Eastern European countries, we expect any positive price signals to remain weak. Given the continuing spread of modern retail industry formats in many countries in the region, we assume that the growth of the self-service wholesale sector will lag behind the rates attained by modern, store-based food retailers.

As before, we anticipate the highest growth rates for self-service wholesale in the Asia region in the coming financial year. Despite the slowdown in economic momentum in China, the Chinese economy will continue to experience stronger growth than the countries of Western and Eastern Europe. Macroeconomic conditions in the other Asian countries also offer a good basis for growth in retail sales. Retail sales structures in India, for example, are still not fully developed. Although competition is increasing among retailers employing modern sales formats, it is still the traditional retailers that will provide the most important supply channels for food in the future. Independent retailers will thus remain a key customer group for METRO Cash & Carry in addition to their considerable potential for contributing to the growth of the self-service wholesale sector. For that reason, the focus of market expansion in the cash-and-carry segment within Asia is on India and China in particular. In addition to traditional retail sales, growth levels for out-of-home consumption are high in the Asia region. Along with rising prosperity among the region’s population, international tourism is contributing substantially to the growth momentum. With respect to our delivery business specifically tailored to the food service and hotel industries (Classic Fine Foods group), we expect the positive demand trend among hotels, restaurants and catering companies to continue in financial year 2015/16.

Media-Saturn

Thanks to continuously solid economic parameters, the stable development of consumer electronics retail in Europe will continue in financial year 2015/16.

In Germany, we anticipate growth rates of around 1 per cent for financial year 2015/16 in light of the high level reached in the previous reporting period and the current pace of innovation.

Trending product categories such as health, sports & beauty, home comfort, connected home and app-controlled tools, which are still in the beginning stages of their market diffusion, are recording high growth rates in many cases. However, those figures reflect a low initial sales level. They will be able to better contribute to growth in the future. Virtual reality products such as the goggles used to simulate a realistic environment in computer and video games also promise to show rapid growth, even if those products will not directly conquer the mass market.

The saturated Western European electronics markets will also perform well over the next year at a relatively low growth level of around 1 per cent. With regard to the Iberian peninsula, the indicators continue to point towards recovery now that those economies have bottomed out, with anticipated growth rates in the low single digits.

In Eastern Europe, performance is expected to be heterogeneous across the local markets. Poland and Hungary, which are out of the way of the Russia/Ukraine conflict, will continue growing at approximately 3 per cent in the coming year. Russia’s electronics market will only stabilise slowly and at a low level against the backdrop of the conflict with Ukraine and the Russian ban on Western imports as well as the current economic difficulties.

The Greek market will register negative growth in the low-to-medium single-digit range as a result of comprehensive reforms and austerity measures. The subsidised acquisitions made in the spring of 2015 in the areas of telecommunications and IT will contribute to the decline in 2016.

Real

The retail situation in Germany will remain positive on the whole. However, food retail will not benefit from this trend as much as other sectors.

In addition, we expect the continuing increase in selling space and the concurrent stagnation in demand levels to result in a further intensification of predatory competition in German food retail. Although migration to Germany will act to support a slight increase in demand, highly competitive prices for fast-moving consumer goods (FMCGs) will limit the price increases that will be achievable in financial year 2015/16, in part due to increasing sales of brand-name products at discounters and the overall decrease in raw material prices.

Real will continue to reinforce its competitive position in the ongoing climate of predatory competition among store-based retailers by implementing innovative store design and assortment concepts, lowering supply chain costs, investing in the branch network and systematically expanding its multichannel activities.