Retail Slump Hits KarstadtQuelle's First-Quarter Results

KarstadtQuelle AG, Europe's largest retail and department-store group, on Thursday posted an almost 5% decline in first-quarter sales as a result of the ongoing slump on its domestic market, and prospects for the remainder of the year look anything but certain.

The group, which makes 90% of its revenue on the German market, said first-quarter sales fell 4.9% from the year-ago period. By the end of April the decline narrowed to 3.6%.

Rival Metro, which generates almost half of its sales outside Germany, had been able to offset the downturn in domestic business with its activities abroad and had posted 5.2% growth in first-quarter sales.

KarstadtQuelle chairman Wolfgang Urban has set at target of raising pretax profit to the record level of 729 million euro by 2003, but analysts said that the group will find it increasingly difficult to meet this goal.

Joachim Bernsdorff at Fortis Investment Research said that the group's prospects for the current year were extremely uncertain. Whether the weak first quarter had been the result of the launch of euro cash or of general consumer reticence was not clear at present, he said.

KarstadtQuelle's planned cost-cutting measures, which will mostly affect benefits offered to its employees, are to yield around 57.6 million euro in savings by next year. In 2002 alone savings are to total 37 million euro, people close to the retailer said. Additional proceeds are to come from the sale of units of mail-order subsidiaries Neckermann and Quelle, according to Bernsdorff.

KarstadtQuelle also gave final figures for 2001, which were in line with its targets and with market expectations. Sales rose 4% to 16.1 billion euro, while earnings before taxes were up 26% to 344 million euro. Despite the weak prospects for the current year, the group will raise its 2001 dividend to 0.71 euro from 0.67 per share.