Metro Group’s Focus on Online Sales

Metro Group’s Focus on Online Sales
October 6, 2015

 
The Metro Group (ETR:MEO), is one of Germany’s biggest and diverse retail companies. Taking into account that Germany is the biggest economy in Europe at this time, one can draw a fairly reasonable conclusion that Metro Group is an important piece of the Europe. They have activities in countries in both the Eurozone and within the European Union, not to mention on other continents as well.

That being said, all that is happening in Europe with the monetary policy established by the European Central Bank (ECB), has a major effect on companies. Specifically on the income and profitability for companies that are exporting outside of the Union.

However, the effect on Metro is not as bad when compared with companies that have the majority of their income coming in from outside of Europe. Therefore the value of the Euro does not weigh on Metro’s share as much as it could. Instead, information related to the state of the economy and improvement in retail sales and consumer spending is vital for a company that is heavily dependent on the spending power its clients might have.

What makes the company even more attractive is the recent completion of sale for one of its main assets: the Kaufhof Department Store Chain in Germany. This has been sold to the Canadian giant Hudson’s Bay in a move that brings almost €3billion Euros into Metro’s coffers. Such an asset is extremely valuable these days when there is uncertainty regarding global growth and central banks are walking in uncharted territory.

From my point of view, online sales are going to boom in the near future, and Metro sold the Kaufhof Department Store Chain in order to better focus on developing their online presence. On that note, it’s worth mentioning that the next cash cow may come from the recent agreement Metro has made in China to use the Alibaba platform for its online sales.

From a technical point of view, Metro’s shares do not look very good when taking in consideration their performance in the last ten years. On the other hand, the move to the downside seems to be making a contracting triangle that has a series of lower highs – while keeping the base line at the €20/share level almost intact.

This triangle can break in both ways, as it can act as a continuation pattern as well as a reversal one. Considering the fundamental arguments mentioned above, I would say it is a bullish triangle, and I am favoring a call option by the time the imaginary b-d trendline is broken. This will happen if/when the €30/share level is reached. That is going to be the striking price and one month expiration date should do the trick for the option to be profitable.

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Andrew Wright

Prior to founding tradersasset.com in 2014, Andrew worked as a proprietary trader, then as a market maker. As a market maker, he traded options in over 100 stocks, he then began trading currency pairs in 2013. Andrew still actively trades both, and prides himself on educating and informing traders on the benefits of both Binary Options and Forex.


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