BERLIN — Investors reacted positively to the new restructuring program announced by German retail giant Metro on Tuesday, pushing shares up 8 percent to 26.27 euros, or $33.89 at current exchange rates, in trading in Frankfurt.
Metro said it aims to improve profits by 1.5 billion euros ($1.94 billion) until 2012 and beyond through the new program “Shape 2012.” All dollar figures are converted from the euro at current exchange rates.
The group, which includes the Metro Cash & Carry hypermarkets, Galeria Kaufhof department stores as well as electronics chains and supermarkets, plans to simplify its structures to maximize growth and improve customer orientation while significantly reducing costs. Indeed, cost-cutting measures are expected to contribute half of the slated 1.5 billion euro gains, while the remainder is to be realized via improved productivity, the retailer said.
According to Metro chief executive Eckhard Cordes, the management board has been working on the new strategy since last summer. The group noted that profit improvements resulting from the program “will depend on the development of the macroeconomic developments in our sales markets.” Metro, which currently generates over 60 percent of its business outside Germany, saw nondomestic sales slow in 2008, but said growth through international expansion remains fundamental to its strategy.
Details of the restructuring program were not outlined, but Metro said Shape 2012 will affect about 15,000 jobs. However, in a second statement late Tuesday, Metro explained this did not mean 15,000 workers would lose their jobs, but rather that the group would not fill all vacant positions.
Metro currently employs around 300,000 worldwide, and typically hires an additional 8,000 to 10,000 people annually.
In its trading statement for 2008 released last week, Metro reported sales growth of 5.9 percent to 68 billion euros ($100.05 billion), based on preliminary figures, and said 2008 EBIT growth is expected to be in line with sales growth. However, pointing to sharply deteriorating economic conditions in the fourth quarter, Metro also announced a cut in 2009 capital spending to 1.6 billion euros, compared with more than 2.2 billion in 2008. Full-year 2008 results will be released March 24.