Macroeconomic and industry-specific conditions

Global economy

Overall, the development of the global economy in financial year 2017/18 was positive and remained at a similar level as in the previous year. However, the upswing reached its expected peak in 2018. Trade policy conflicts and protectionism, primarily triggered by the USA, are causing increasing uncertainty, especially for export-driven economies.

Germany

The German economy continued to be robust in financial year 2017/18 across all sectors and grew at a low level. This was also due to high domestic demand and positive consumer spending, which was supported by the positive labour market situation and real wage increases. Germany’s exports remained very strong, especially within the euro area and in China. The impact of trade policy conflicts with the United States has not yet materialised on a larger scale.

Western Europe

Stable domestic demand also played a major role in the economic trend seen in the rest of Western Europe. Despite a slight weakening compared to the previous year, the economy in Western Europe remained robust in financial year 2017/18. While Spain developed relatively positively, Italy showed rather low growth dynamics.

Domestic demand was supported by rising private consumption and the continuing improvement in the labour market situation. This is substantiated by data on retail sales and other sectors. Price inflation was rather moderate in the past financial year.

Russia

Overall, the inflation-adjusted economy in Russia continued to show restrained growth, however this trend was less pronounced in the course of 2018. The inflation rate dropped at the beginning of financial year 2017/18, but increased more rapidly as the year progressed. The rouble fell sharply in the course of financial year 2017/18. The unemployment rate continued to drop and stayed below the previous year’s level. Private consumption grew steadily, which can also be explained by the rise in real wages.

Eastern Europe

Throughout financial year 2017/18, the national economies of Eastern Europe exhibited solid overall growth, with the exception of Turkey. The positive trend of the other Eastern European countries was reflected in private consumption and the retail industry, which was also driven by a continued drop in unemployment as well as wage increases.

Turkey is the only exception in this group. After an initially strong start, the economic situation in Turkey became markedly negative, including high inflation and a strong decline in the value of its currency. Turkey is headed for recession, which may have also been influenced by political conflicts with the USA.

Asia

Compared to the previous year, the national economies of Asia continued to record stable growth rates in financial year 2017/18. However, despite the high level of China’s growth, the growth rate slowed down in the course of financial year 2017/18, with the inflation rate rising again. Retail sales and the labour market remained stable. In comparison to China, India recorded even stronger growth rates, but these were accompanied by an increase in the inflation rate. Overall, the Asian region topped the growth trend compared to the other regions.

Development in the self-service wholesale sector

On a global scale, self-service wholesale trade sales were at a similar level to the previous year; however, the development varied between the countries in which METRO operates. The sectors of our main customer groups HoReCa and Traders developed positively again compared to the same period in the previous year.

Sales in the German self-service wholesale trade sector declined slightly in financial year 2017/18. Compared to financial year 2016/17, sales in the HoReCa and Traders sectors increased to a very good level.

In Western Europe, the self-service wholesale trade sector recorded stable growth, slightly below the previous year’s level, mainly driven by France, Portugal and Spain. The HoReCa industry sector also recorded sales growth.

In Russia, the self-service wholesale trade sector grew again in financial year 2017/18 – after a downturn in the previous year. The sales of our customer groups HoReCa and Traders also developed positively.

In the countries of Central and Eastern Europe, self-service wholesale trade and the HoReCa and Traders sectors developed in a varied manner. The Turkish self-service wholesale trade sector grew once again, as did the industry sectors of our customer groups HoReCa and Traders. However, in the course of financial year 2017/18, there was a marked increase in inflation. Romania experienced high growth in all areas. In Poland and the Czech Republic, the self-service wholesale trade market stagnated or even declined slightly. By contrast, the sales trend for the HoReCa and Traders sectors grew in these countries.

The Asian markets in which METRO operates outperformed the level seen in financial year 2016/17, especially in China and India.

Development in the modern food retail sector

In financial year 2017/18, the food retail sector (including discounters and drugstores) recorded nominal sales growth of around 2.5%. Increases in food prices contributed significantly to the positive trend. However, the growth is also attributable to positive quantity effects. Overall, all formats increased their sales. However, the development of hypermarkets was weaker than that of the other formats, such as the full-range stores and discounters. This is due to the ongoing restructuring and modernisation process across the entire industry.

On an international comparison, the online food business in Germany continued to play a subordinate role. This is mainly attributable to the dense network of grocery stores. Nonetheless, online food retail continued to show strong momentum with double-digit growth rates.