Metro with Rapid Recovery in Q3 of Fiscal Year 2019/20

Aug 10, 2020 at 7:00 AM

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Metro AG experienced a revenue decline of 17.5 percent in the third quarter of the fiscal year 2019/20 compared to the previous year. Nevertheless, a positive trend is evident in the months from April to June. The EBITDA also saw a significant decrease compared to the previous year. At the beginning of the fourth quarter, revenues have returned to the previous year’s level.

(Düsseldorf) METRO AG reported a like-for-like revenue decline of -17.5% in Q3 2019/20 compared to the previous year. The government measures in the context of the COVID-19 pandemic had a noticeable impact on METRO’s business development, particularly in the first half of Q3 2019/20. In April, the like-for-like revenue dropped to around 75% of the previous year’s revenue due to the complete lockdown of the gastronomy sector. With the first relaxations in May and a transition to take-away and delivery services actively supported by METRO, revenue in May was around 80% of the previous year.

With the expanded restart of the gastronomy sector, the like-for-like revenue in June returned to around 95% of the previous year’s revenue. With the resurgence of tourism, METRO’s total revenue at the beginning of Q4 returned to the previous year’s level. The rapid recovery is primarily the result of the flexible channel offerings with delivery and stationary business to METRO customers, as well as close collaboration with customers to overcome the crisis. According to market assessments1, METRO performed better than the market in Germany and in some countries in Western Europe.

Trader and SCO Customers Grow Significantly

Trader and SCO customers are also continuously growing above the previous year’s level, contributing to the positive development. In local currency, total revenue in Q3 2019/20 decreased by -17.4%. Reported revenue fell by -19.8% to around €5.6 billion. In the nine-month period of 2019/20, however, the like-for-like revenue only decreased by -5.0% due to accelerated revenue growth before the pandemic. In local currency, total revenue in the nine-month period of 2019/20 also decreased by -5.0%. Reported revenue decreased by -5.5% to €19.1 billion.

The adjusted EBITDA without transformation costs and contributions from real estate transactions amounted to €175 million in Q3 2019/20 (Q3 2018/19: €373 million). The decline in earnings is almost entirely attributable to the revenue decline associated with government restrictions and a changed consumption behavior in response to the COVID-19 pandemic. Compensating factors included cost savings, among others, from the efficiency program in the headquarters and licensing revenues from the partnership with Wumei in China. In Q3 2019/20, transformation costs of €1 million were incurred (Q3 2018/19: €0 million). Contributions from real estate transactions amounted to €2 million (Q3 2018/19: €32 million). The EBITDA, taking into account transformation costs and lower contributions from real estate transactions, reached €176 million (Q3 2018/19: €404 million).

Cost Savings Thanks to Efficiency Program

In the nine-month period, the adjusted EBITDA without transformation costs and contributions from real estate transactions was €834 million (9M 2018/19: €1.033 billion). The government measures in the context of the COVID-19 pandemic negatively affected the majority of segments. Compensating factors included cost savings from the efficiency program in the headquarters, improved results in logistics, licensing revenues from the partnership with Wumei, and stable development in Germany and Russia. In the nine-month period of 2019/20, transformation costs of €46 million were incurred (9M 2018/19: €0 million). These were incurred exclusively in the Other segment and particularly relate to the successful restructuring of the headquarters. Contributions from real estate transactions amounted to €3 million (9M 2018/19: €66 million). Reported EBITDA reached €791 million (9M 2018/19: €1.099 billion).

METRO benefited in Q3 2019/20 from the diversification of its business model. Trader and SCO revenues developed positively at a growth level significantly above the previous year, with revenue growth from SCO customers even in the low double-digit range. SCO customers appreciate the high product quality, availability of goods, and safety. Independent traders benefit sustainably from METRO’s franchise programs and e-commerce offerings. Among HoReCa customers, the preference for stationary business had a significantly positive effect during the phase of relaxation of government restrictions. As a result, HoReCa customers increasingly visited METRO wholesale markets, leading to a disproportionate shift in favor of stationary business.

Successfully Navigated the Corona Crisis So Far

Olaf Koch, CEO of METRO AG, commented on the business development: “METRO has managed the Corona crisis well so far despite significant revenue declines during the lockdown phase and emerges stronger from it. At the beginning of Q4, the like-for-like revenues were already back to the previous year’s level. Contributing factors included the very positive business development in Russia, channel flexibility with stationary and delivery business, our contribution to the successful restart of self-employed individuals in the gastronomy sector, and numerous measures to strengthen independent traders. This is now paying off. Trader and SCO revenue growth is already at pre-pandemic levels, and HoReCa revenues are above market levels. Thus, METRO has decoupled itself from the competition and simultaneously created the conditions for dividend continuity through the successfully executed transactions of METRO China and Real, with a net cash inflow of €1.9 billion and corresponding debt reduction. We now have the necessary visibility for a new forecast for the entire year 2019/20, which we will publish this week.”