FRANKFURT: German retailer Metro is to scrap its consumer electronics venture in China, where tough price competition means it is hard to make a profit.
Metro, which reported a smaller-than-expected 0.5 per cent rise in fourth quarter sales, said it would be setting aside provisions for the withdrawal of Media-Saturn, Europe’s largest chain of electricals stores, from China.
Cut-throat price competition, especially from online players, has made life tough in China for a range of foreign retailers, from Tesco to Home Depot.
The group, which also runs cash and carries, hypermarkets and department stores, did not give the amount of provisions but analysts estimate it could be around 100 million euros ($133.5 million), roughly equivalent to the revenue booked by its seven China Media-Saturn stores in the first nine months of 2012.
“This decision was prompted by the experiences and forecasts from the two-year test phase that expired at the end of December,” Metro said on Wednesday.
News of the plans was revealed by Reuters last week. The stores are run in a joint venture with Taiwan’s Foxconn.
Metro Chief Executive Olaf Koch said the withdrawal of Media-Saturn from China would not affect its cash and carry business there, where it opened 12 stores during the year.
The group reported fourth-quarter sales of 19.4 billion euros, giving a full-year total of 66.7 billion, slightly below analysts’ forecasts in a Reuters poll for 19.6 billion and 67.0 billion.
The shares opened 1.3 per cent higher, while the German blue chip index DAX slipped 0.2 per cent.