Metro, Germany’s largest retail company and No. 4 on the global retail market, is determined to sell its department store business under the Kaufhof flag, even ruling out joint ventures with partners. Kaufhof is now definitely for sale with its 128 Galeria Kaufhof department stores (113 in Germany and 15 in Belgium) and its 13 German Sportarena outlets.
While its financial means are limited, Arcandor may have its eye on many Kaufhof and Sportarena stores. A takeover of Kaufhof by Arcandor could mean the end of many of the 210 department stores operated by the two chains, because these competitors have doors face to face in many German shopping streets. It has been estimated that a merger of the two chains could bring synergies of up to €400 million a year.
It had been rumored that Metro and Arcandor, the company formerly known as Karstadt-Quelle, were considering a joint venture to run the Kaufhof business together. The newest rumor now is that Arcandor would buy Kaufhof, pare it down and then bring both operations into the European consortium that it is setting up with Deutsche Bank, Pirelli Re and Maurizio Borletti, which hold controlling interests in the Italian department store chain La Rinascente and in France’s Printemps, which also owns the French Made in Sport retail chain.
Metro’s figures for 2007 were satisfactory. Total sales increased by 10.4 percent to €64.3 billion. Earnings before interest, taxes, depreciation and amortization (EBITDA) grew by 6.9 percent to €3.4 billion while earnings before interest and taxes (EBIT) increased by 8.8 percent to €2.1 billion.
Kaufhof has become the junior subsidiary in the Metro empire over the years: Its core business, Metro Cash & Carry, makes €31.7 billion, followed by the successful Media-Markt/Saturn chains with sales of €17.1 billion, and the hardly profitable Real chain with €11 billion. Kaufhof is far behind with €3.6 billion – with an EBIT rate of nearly 3 percent, which is not bad by German retail standards. Aside from the disposal of Kaufhof, Metro is considering a public offering for the Media-Markt/Saturn group in order to finance their accelerated expansion.
Metro Cash & Carry and Real play a strong role in the sporting goods sector, particularly in emerging markets such as Romania or Russia. Many Real supermarkets in Germany have dedicated sporting goods sections called Sportwelt. It is said that some 40 of the 349 Real outlets within the group had operating losses in 2007 of €40-50 million, and they are for sale. Recently brought under new management, the Metro group would like to give the entire Real chain two more years to recover. To help reach this goal, Metro hired last Fall Joël Saveuse to act as the new chief executive of Real. The Frenchman has previously been at Metro Cash & Carry, Carrefour and La Redoute.
