By Emma Thomasson
BERLIN (Reuters) - German retailer Metro AG (DE:MEOG) plans to significantly increase investment in its business in
the next five years and seek out acquisitions as it aims to accelerate sales growth and profitability after emerging from years of restructuring.
Europe's fourth-biggest retailer said on Thursday it would hike annual capital expenditure to about 2 billion euros (2 billion pounds) by 2020 from an expected 1.4 billion in 2014/15.
It aims to lift same-store annual sales growth to above 2 percent by 2020 from 0.1 percent last year, and achieve an operating margin of above 3.5 percent, from 2.7 percent in 2013/14.
Carrefour (PA:CARR), like Metro exposed to the waning popularity of big out-of-town stores, last month announced it will step up its multi-billion euro investment in store improvements, hoping to cement its turnaround.
Metro, a sprawling group that runs 2,200 stores in 30 countries, has been selling off businesses to cut debt as it focuses on its core cash-and-carry and consumer electronics units in fewer markets.
At a strategy presentation in Berlin, Olaf Koch - who took over as chief executive in 2012 when Metro was deep in crisis - said the group was now ready to grow again, adding its recent
investment in several start-ups was just the beginning.
"The gap where we are today and where we can be in five years' time, 10 years' time, is huge," he said. "In years to come, our M&A activity will be much more buying instead of selling."
SIZEABLE DEALS
Koch said Metro was looking for complementary acquisitions, starting small but potentially building up to "sizeable" deals, adding he saw no problem in raising financing.
He said Metro was also examining entering new markets and hoped to be ready to make a move by 2017 at the latest.
The CEO gave no specific details about possible acquisitions or new markets.
Finance chief Mark Frese said the increased investment would be focused on remodelling existing stores as well as on opportunities in e-commerce and other innovations, while any new openings would be focused on high-growth emerging markets.
Koch said Metro planned to accelerate store expansion again in Russia as soon as stability returns.
Metro's Russian cash-and-carry operation has contributed a large chunk of the group's operating profit in the past but has suffered from the falling rouble since the Ukraine crisis.
German investment group Haniel said on Wednesday it plans to trim its stake in Metro by almost a third to 21 percent but said it wants to remain the largest shareholder.
On Tuesday, Metro reported faster group sales growth for its fiscal second quarter, driven by its strongest performance at its Media-Saturn consumer electronics unit in eight years.
