UPDATE 3-Metro assures on profit, tackles weak electronics

Tue Jul 26, 2011 2:44pm BST

Quotes

   

* Media-Saturn Q2 loss 44 mln euros vs yr-ago profit 41 mln

* Confirms 2011 earnings outlook, no word on sales goal

* Aims for 5 bln euros online sales at MMS by 2015

* Identifies 500 mln euros cost-savings by 2014

* Shares up 1.8 pct, top blue-chip gainer

(Adds management comments, changes dateline)

By Victoria Bryan

ASCHAFFENBURG, Germany, July 26 (Reuters) - German retailer Metro AG has stepped up cost cuts and set a date for the start of online sales at its electronics unit, promising a poor second quarter would not hit group earnings for the year.

"We are certain that we will see a correction within the second half," said Rolf Hagemann, finance chief of Metro's MediaMarkt-Saturn (MMS), the largest consumer electronics retailer in Europe, which swung to a bigger than expected loss in the April-June quarter.

Metro group Finance Director Olaf Koch said the group still stuck to its outlook for a rise of around 10 percent in full-year profit before special items.

"Except for Media-Saturn, all sales divisions of Metro Group are within market expectations," he said.

The comments boosted Metro's battered shares, which have lost 30 percent this year as investors anticipated a profit warning. They were up 1.8 percent at 1204 GMT, the best performer on the German blue-chip index .

"What's having a positive effect on the shares is that Metro confirmed earnings guidance and expects a better performance for MMS in the second half," BHF Bank analyst Peter Steiner said.

MMS rivals Dixons Retail and Kesa Electricals have warned on trading this year and there are signs that consumers in Germany, which saw a bumper recovery at the start of the year, are holding back, too.

Metro, which last year changed management at MMS after it struggled to put in place a strategy for online sales, said it was targeting online sales of 5 billion euros ($7.2 billion) by 2015, with 1 billion to come from pure online player Redcoon.

"We are late coming to online. But the European market is still fragmented, and so we're not too late," Koch said.

MMS will also cut costs by a further 500 million euros by 2014, including shedding about 3,000 jobs in 2011, so it can cut prices further to attract more customers, Hagemann said.

The group will start sales via the Saturn website in October, with the mediamarkt.de website to follow in January 2012 and will look to buy specialist online players, following the purchase of discount online retailer Redcoon.

Specialist online retailers such as auction and coupon sites are currently growing fast, especially in the United States.

Amazon.com Inc , the world's largest online retailer, last month bought Woot, which offers a new item every day for sale until it has sold out.

For the second quarter MMS posted a loss before tax, interest and special items of 44 million euros ($63 million), hurt by a drop in sales in Germany and start-up losses in China.

There was no mention in the statement of the group's previously stated target for 2011 sales to grow by 4 percent, and a spokesman told Reuters the group would not be commenting on the sales target on Tuesday.

Some analysts have predicted Metro would walk away from the sales target when it reports second-quarter results next week Tuesday. ($1=0.698 euros) (Additional reporting by Matthias Inverardi and Frank Siebelt; Editing by Erica Billingham and Will Waterman)