Ceconomy Shares Melt As Hot Summer Hits Profit Outlook

By Dayeeta Das
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Ceconomy Shares Melt As Hot Summer Hits Profit Outlook

Shares in Ceconomy fell on Wednesday after Europe's biggest consumer electronics retailer cut its profit goals for the 2017/18 financial year, citing poor trading as an unusually hot summer put people off from shopping in its stores.

Ceconomy became the second German retailer to give such a warning this week after Zalando, Europe's biggest online only fashion retailer, also blamed the long summer for a cut to its 2018 outlook which had sent its shares sliding on Tuesday.

'We Underestimated The Challenges'

Ceconomy might also take longer to reach its medium-term target to improve profitability, chief executive Pieter Haas conceded in a conference call with analysts.

"We underestimated the challenges.

"We have no doubt that we will be successful. But we must see if we need more time to achieve that," Haas added.


Ceconomy had previously said it plans to lift is operating margin towards 5% in the next three to five years, from 3.2% in the 2016/17 fiscal year.

Shares in Ceconomy dropped 8% to a record low of €6.17 by 07:17am GMT.

Late on Tuesday, Ceconomy said it now expects earnings before interest, tax, depreciation and amortisation (EBITDA) in the financial year ending this month to drop to €680 - €710 million ($793-$828 million) from €714 million before special items a year earlier.

Earnings before interest and tax (EBIT) will decrease to €460 - €490 million from €494 million. In terms of EBITDA and EBIT, Ceconomy previously expected a year-on-year increase in the low to medium single-digit percentage range.


Company Still Hopeful

Ceconomy said the hot weather in July and August led to significant sales and earnings pressure, and the speed of executing its strategic initiatives also did not live up to expectations.

It said it still expected a slight increase in revenues and a slight improvement in net working capital in 2017/18.

Ceconomy split from the Metro retail group last year. German investment group Haniel owns stakes in both companies but their share prices have sagged since then, dashing hopes that the separation would help boost their performance.

This month, Haniel said it could sell its 25% stake in Ceconomy if the right offer came along.

News by Reuters, edited by ESM. Click subscribe to sign up to ESM: European Supermarket Magazine.

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