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Weak Western Markets Curb Metro Sales Growth

German retail group Metro saw sales grow only marginally in the second quarter, led by its emerging markets business, as weak consumer spending in Western Europe weighed on its results.

Woman bagging groceries
Katrina Wittkamp | The Image Bank | Getty Images
Woman bagging groceries

Sales grew by 0.1 percent to 31.3 billion euros ($44.4 billion), with German sales down 1.7 percent. The rest of Western Europe also saw sales shrink by 1.7 percent, with Eastern Europe at 2.9 percent and Africa and Asia at 14.3 percent, driving growth.

Second quarter sales grew 0.2 percent to 15.7 billion euros.

Metro CEO Eckhard Cordes told CNBC on Tuesday that the continuing sovereign debt issues in the euro zone were "not helping" and that fragility in Western Europe was weighing on the company's consumer electronics division.

"It's a very mixed picture. Three of our divisions showed a good development in the first half of 2011: our hypermarket business, our wholesale business and our department store business in Germany. We had one weak spot, which was our consumer electronics retailing, which is indeed suffering from a weak consumer spending level," Cordes said.

More sustained consumer spending in emerging markets helped to offset the Western slowdown, according to Cordes.

"In Asia we see double digit growth, and we also see double digit growth for instance in Russia. All in all our position is very balanced so that we will be able to compensate for some weaknesses in Western Europe," he said.

Shares in Metro fell by 3.85 percent in early trade, following the announcement.

Metro has revised its sales forecast, and is predicting earnings growth of around 10 percent in 2011. Cordes is predicting that while sovereign and consumer issues will persist, there could be some improvement in conditions.

"Our view is that in the second half, to be extremely cautious, at least it will not be getting worse," he said.

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