All but one of Makro’s directors has been replaced in Metro Group’s latest attempt to salvage the wholesaler. Will it stay in the UK, asks Elinor Zuke


To lose one board member may be regarded as a misfortune; to lose four in one morning is unprecedented.

Or rather it was, until last Friday when Metro Group unceremoniously replaced all but one Makro board member with a quartet of ­external consultants.

Metro Group, the parent company of long-suffering cash & carry wholesaler Makro confirmed that after more than four years, its MD Hannes Floto was departing immediately. As were finance director Stefan Hesse, operations director Patrick Legro and customer director Mark Copeland.

The departures were based on mutual agreement and due to “different views on the strategic direction of the company,” it said. The only one to survive was offer director Huw Edwards, only two months into his job.

In place of its departed board, Metro appointed four consultants from AlixPartners, a consultancy firm specialising in business turnarounds. Alix will “accelerate [Makro’s] restructuring and turnaround efforts,” Metro claims, and the consultancy is well placed to get stuck in after conducting a three-month review of Makro. “The nominated managers are well integrated in the activities and understand the challenges the company faces. This will enable the new board members to act quickly and decisively,” Metro says.

It’s little wonder Metro wants decisive action Makro’s losses over the past four years run to more than £100m. Its latest set of results [y/e 31 December 2009] revealed that Metro was prepared to back its sickly UK branch until September 2011. And with internal company sources suggesting a new focus on catering, customers did not push Makro back into the black in 2010. It was time to call in a crack team. So who did Metro opt for?

Makro’s new MD, Klaus Raettig, has worked as CFO for dairy company Müller Milch, now-defunct German department store chain Hertie, and, as a consultant, he restructured a textile trading company. But none of this indicates experience of the UK wholesale market. “Usually a company the size of Metro would put in one of its hottest people and be advised by the consultant,” says one source.

Dominique Minnaert, Metro’s COO for Southern Europe and the UK, “was keen to stress his belief that we will return to profit in the UK,” said an internal staff briefing note, and pointed out that “he was involved in the turnaround project in Italy, which was successful despite a starting point more than three times worse than ours.” Why, then, doesn’t he roll up his sleeves or send someone else over from Italy, asks the source.

The answer could lie in Alix’s other field of expertise administration and liquidation. For although Minnaert told head office staff that the UK business is not for sale, Metro Group’s investors can only stomach losses for so long. And there are only so many new dawns Metro shareholders can surely see.

“They’ve gone through three turnaround plans in the past six years and in that time sales have dropped from £1.13bn to £868m. This is going to be the fourth ­turnaround plan within a six-year period,” says the source.

Analysts also point out that Metro Group exited markets for the first time last year, quitting Morocco in November and then abandoning its French consumer electronics offering, Saturn, the ­following month. The divestment showed that Metro is now prepared to leave markets where it is struggling, analysts say. “I think this is the beginning of a quiet exit from the UK,” says one source.

The consultants don’t come cheap either. While Alix declined to comment on the specifics of the arrangement with Makro, a contract published last year with the US government saw it charge $425 per hour for the services of each director. Assuming a 40-hour working week, this would rack up a weekly invoice of $68,000 (£41,500).

“AlixPartners charge a lot to read the last rites,” says one wholesaler.

But even if Metro is, as it claims, looking to have another crack at the UK, the market might be too mature for Makro to win back what it lost, primarily to Costco, which has seen sales rise from £953m to £1.4bn in the same period.

“In the short or mid-term top management may decide to leave the UK market,” predicts Rocco Schilling, an analyst at UniCredit. “Makro doesn’t earn an attractive return on equity. It’s loss-making, so where’s the upside for Metro to be active in the UK market?”

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