News

By Holger Elfes

July 17 (Bloomberg) -- Metro AG, Germany’s largest retailer, said it plans to eliminate 1,340 jobs at its domestic Cash & Carry wholesale unit to improve profitability.

The proposed cuts, representing about 10 percent of the unit’s 15,000 workers, will be made over 3 1/2 years, Dusseldorf- based Metro said by e-mail today. Total cost savings by 2012 will be 150 million euros ($212 million), the company said.

Metro needs to cut expenses at the unit to address falling sales and margins. Cash & Carry is market leader in Germany’s wholesaling industry with 61 outlets and revenue of 5.7 billion euros last year. Industry group HDE forecasts retail sales in the country will drop 2 percent this year amid the recession.

“From next year, we expect to have profitable sales growth again,” Frans Muller, the unit’s chief executive officer, said in the statement. Earnings before interest and tax will also increase next year and the operating margin will reach 3 percent in the “long term,” Muller said.

Cash & Carry’s operating profit will be as much as 150 million euros in 2012, Metro said. Profit on that basis was “slightly above” 30 million euros last year, compared with 250 million euros in 2003, according to a Feb. 2 report in Wirtschaftswoche, which cited an internal company document.

Metro’s net loss widened to 100 million euros in the first quarter. The wholesale unit, the company’s biggest in terms of sales, broke even compared with a year-earlier operating profit of 70 million euros. Chief Executive Officer Eckhard Cordes called the German Cash & Carry business “problematic.”

The German unit plans to more than double the number of own branded products by 2012 and cut prices on 5,000 items to attract customers, Metro said today. The unit sees potential to add as much as 500 million euros a year to sales from 2012.

To contact the reporter on this story: Holger Elfes in Dusseldorf at helfes@bloomberg.net.