Recession watch: Germany feels pain

06 May 2009

DUSSELDORF: Germany's biggest retailer Metro AG provided ample evidence of the country's economic troubles yesterday, reporting a first quarter loss of €100m ($75m, £111m) as sales slumped and the company was hit by exchange rate fluctuations. Analysts had expected a first quarter loss of around €40m.

Meanwhile another major German company Adidas, the world's second-biggest maker of sports clothing after Nike, announced that first quarter profits had plummeted 97% from €169m to just €5m. Adidas blamed the fall on sales pressures and restructuring costs at its second brand, Reebok.

With its large manufacturing base, which in turn is dependent on sales of high-value goods, Germany appears to be suffering even more in the downturn than countries like the UK, with its big financial sector.

German companies have also profited mightily from sales to neighbouring Eastern Europe in recent years but weaker currencies there are exacting a toll. Eastern European sales count for 27% of Metro's business (Germany is 40%), but both the Polish zloty and the Russian rouble have fallen sharply this year and affected its margins.

Data sourced from Bloomberg; additional data by WARC staff.