Spar denies Netto sale
has reacted angrily to reports in the press last week that it was
considering selling off its discount chain Netto - and not
surprisingly, since the business is by far its most profitable
asset.
As we reported on Friday, the Financial Times newspaper claimed that Spar's financial woes had finally got the better of it, prompting the decision to add the Netto discount chain to the 'for sale' list.
Spar, and its owner Intermarché, have been working hard for the last 18 months or so to redress the company's balance sheet, selling off a number of underperforming businesses and restructuring the remaining operations.
But these efforts have been hamstrung by the continued recession in the German market, which has reduced consumer spending dramatically. The only sector which has benefited is the discount store market - an important part of the German retail trade at the best of times, but all the more so when consumers are tightening their belts - including the Netto business.
This point was stressed by the Spar management over the weekend, responding to the rumours in the press. "There are no talks on a sale at the moment. If Netto was to be sold it would have serious repercussions for Spar as a whole. Netto is Spar's main asset in Germany, so why should it be sold?" a company spokesman is quoted as saying in the German press this morning.
As we pointed out on Friday, there is little logic to selling the Netto business, given that it has been the only Spar unit to generate sales growth over the last year, and it was only the possibility of a downturn in the discount chain's business as the economy strengthened which could have prompted such a decision.
But with the discount store sector well developed in Germany - not least because of the sheer size of chains such as Aldi and Lidl - its fortunes are not entirely linked to the economy. And furthermore, with many of the major European retail groups moving into the discount sector (Carrefour and Casino, for example, have invested heavily in their fascias in this market), now would not be a good time to quit what is clearly a growth sector - especially for a loss-making company such as Spar.
