Germany-based, Metro AG, has announced its intention to sell its Real hypermarkets business. Neither a buyer nor a price have been confirmed for the chain.
Total sales and operating profit have fallen
Real generated a loss in the 2016/17 financial year, with total sales and operating profit falling by 3.1% and 25% to €7.2bn and €80m respectively. The chain’s operating profit margin also fell from 1.4% to 1.1%. As it has evolved its strategy Real has attempted to build up ecommerce to improve sales, roll out a new store design, under the market hall concept and to drive profitability.
Real has already been on the market
Real was first put up for sale in 2012 and attracted the attention of KKR, Apollo and Towerbrook. However, Metro declined the offers and chose to restructure the chain instead.
Real sale part of on-going restructuring programme
Metro has undertaken a restructuring programme in recent years to create a more focused business that can better meet the needs of its clients and shoppers through more targeted investment. It sold its Kaufhof department stores in 2015 and separated from electronic retailer Ceconomy in 2017.
However, the challenge will be to find a buyer for the stores. Metro’s Real stores across Central and Eastern Europe were sold to France-based Auchan, but only after a considerable amount of time. The stores provided Auchan will the opportunity to scale up strongly in these countries, where it had few other opportunities to do so.
Finding a buyer for hypermarkets in Germany, though, could be even harder. The format is under considerable pressure and the expansion of other formats continues apace, providing shoppers with even greater choice than they have had traditionally. Added to this, grocery ecommerce is emerging, although only slowly, which will add to the competitive pressures. Against this backdrop, finding a buyer at a price that is agreeable to Metro could prove difficult.
Metro’s new focus
Metro has decided to focus on its core cash-and-carry business and finally sell its Real hypermarkets. Speaking about the decision, Metro’s CEO, Olaf Koch, said, “Metro is thus focusing entirely on wholesale. We will further intensify and expand our focus on professional customers in order to tap the enormous potential.”
For subscribers wanting to see in-store at Real’s new concept hypermarket, see our store visit to its Markthalle concept in Krefeld.