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Retail

Turnaround Strategy Leads to Cuts at Metro CC

By square1
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Turnaround Strategy Leads to Cuts at Metro CC

22 Jun - As announced last Friday, German retailer Metro AG will soon be closing down three Cash & Carry outlets as a part of the company’s current plan for restructuring. According to a statement from the company, an estimated 900 jobs will be lost as a result of the closure. The Cash & Carry division is the company’s biggest unit and employs over 100,000 people in 30 countries. The group will begin the process of regrouping activities in northern Germany and shutting down the headquarters of the C & C Schaper unit in Hanover. Although, moving as a part of a two-brand strategy, the markets will operate under their individual brand names to better exploit their joint potential on a larger customer market. Due to dipping profits, Metro recently decided to begin efforts to restructure operations and take on new services in order to drive increased revenue. The company additionally plans to expand into locations in the Asian market after experiencing increasingly weak sales in areas of central and Eastern Europe within the last year. Metro, after investing heavily into the region, now seeks to refocus some locations by making closures in Germany where the company has experienced stagnant results, and move into more promising areas. After the reduction efforts are completed in Germany, Metro will move to focus on opportunities in emerging markets in areas like China. Consumers in Germany have been seeking a wider selection of products, diverting to specialty stores to locate specific items. This leaves department stores in particular with stagnant sales and less appeal for companies like Metro who are trying to lessen their dependence on Germany. With this freedom, Metro is due to open 90 stores in the next year with Metro AG Chief Executive Officer Eckhard Cordes estimating the capital expenditure will exceed the desired amount of 1.9 billion euros. Expansion will begin in areas such as Shanghai, Beijing and Guangzhou, hoping to have 50 operational Cash & Carry outlets in China by the close of the year. Talk of Latin America has not yet officially emerged, although Cordes indicated a minor interest, calling Brazil “attractive”. While Cordes has no plans for selling Metro’s Makro wholesale stores (numbering 30) in the UK, he believes the situation there is comparable to the one in Germany. After visiting Macro’s rival locations, he concluded improvements need to be made. “The problem in both countries is the non-food business, which we have to improve,” Cordes said. Food sales, in contrast to others, are increasing in the UK, which allows Metro to maintain a balance between their operating profits. In addition to new locations in areas throughout China, the company is also making improvements to remaining store locations throughout Germany regarding their level of customer focus. As store numbers increase so will the level of personnel, expanding into such realms as key account management, field supplies, and gastronomic and wine consultants. A new fishing platform is said to be opening in autumn in Frankfurt to provide customers a modern logistics hub that can obtain a heightened level of freshness and quality in the Frischfischbereich. There are also talks of similar improvements for the self-service wholesaler by the increased utilization of an international platform in Valencia for purchasing fruits and vegetables. C & C Schaper is also formulating plans in Singing and Lahr for the first “drive-in concept”. Cash & Carry has also already begun to offer private-label brands, customer delivery services and lowered prices to work towards their turnaround strategy. The strategy pushes for an operating profit of 150 million euros for the German Cash & Carry sector by 2012. Customer delivery, which launched specifically in Germany in 2009, achieved a 100 million euro revenue. In 2010, the company plans for an increase in the supply of transactions. Within the first quarter, sales made a significant rise. Employees are supported by contemporary IT systems that assist with shaping processes in order to make them thoroughly efficient and specifically focused on customer needs and overall satisfaction. With developing innovations to drive better sales, repositioning locations throughout the company and focusing on optimizing opportunities for growth in non-food sectors, Cash & Carry Germany has already begun their turnaround in some regards. “The turnaround program is showing the first positive effects-on the cost side and in sales,” Joel Saveuse, Member of the Management Board of Management Group and Europe CEO Metro Cash & Cary, said. “We are confident that we will continue our path with these measures successfully and achieve the ambitious goals for METRO Cash & Carry Germany,” said John Rix, Managing Director of Metro Cash & Carry Germany. While Rix remains optimistic about the promise of the turnaround strategy, he also acknowledges the loss for German employees. “For markets with critical numbers, we have done everything to make the sites profitable. It has, unfortunately, for the four sites revealed no perspective,” Rix stated, “This step is not easy for us. With a view to sustainable and accelerated restructuring, but this was no alternative.” Kaytlyn Sanders © 2010 - ESM: European Supermarket Magazine

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