TT. Tui Travel

Retail and travel company Arcandor AG (ARO.XE) Thursday said its retailers outperformed the German retail market in December despite an "extremely challenging environment," but declined to give a full-year results forecast due to the worsening economic situation.

Arcandor's first quarter to Dec. 31 is usually the strongest for department store chain Karstadt and home shopping business Primondo, but weak for the travel business, from which the company has recently booked nearly 60% of sales and over 90% of earnings through its 52% stake in U.K.-based travel company Thomas Cook Group PLC (TCG.LN).

Chief Executive Thomas Middelhoff said trading in the second quarter is "on track" and that Arcandor expects fiscal 2009 to benefit from cost savings programs introduced in late 2008.

Still, Arcandor didn't confirm its previous forecast that adjusted earnings before interest, tax, depreciation and amortization, or Ebitda, would grow by 34% to over EUR1.1 billion for the full fiscal year.

Arcandor said first-quarter adjusted Ebitda rose by around 18% to EUR179.8 million. But its net loss widened by 54% to EUR58 million, from EUR37.7 million in 2007, which Arcandor attributed to restructuring expenses at Primondo and Thomas Cook, as well as higher interest charges. Total first-quarter adjusted sales rose by 1.1% to EUR4.8 billion one year earlier.

Arcandor's comparative pro forma figures reflect the merger of Thomas Cook AG of Germany and Britain's MyTravel into Thomas Cook Group in February 2007, creating the Europe's second-largest tourism company by market capitalization after Tui Travel Plc (TT.LN). Arcandor treats Thomas Cook figures as they might have been if the two companies had been merged for the whole of the comparative period.

Many analysts are now reluctant to give estimates for Arcandor owing to the various changes to the company's structure and frequent adjustment of figures.

One who still does cover the group, UniCredit analyst Volker Bosse, said he was not surprised by Arcandor's cancellation of previous guidance. Bosse, who expects Arcandor to generate adjusted Ebitda for fiscal 2009 of EUR940 million, has a sell rating and EUR1.60 target price for the stock.

During the company's results presentation CEO Middelhoff denied that Arcandor was in talks with potential investors, including U.S retailer Wal-Mart Stores Inc. (WMT).

Asked about market talk that the world's biggest retailer is interested in the German retail and tourism group, Middelhoff said: "This has no foundation whatsoever."

Middelhoff will be succeeded on March 1 by former Deutsche Telekom AG (DT) Chief Financial Officer Karl-Gerhard Eick.

Arcandor shares showed little reaction to Thursday's results. At 1426 GMT they were flat at EUR1.86. The stock has lost around 85% of its value over the last 12 months, while the MDAX index has fallen by around 39% and Stoxx retail index by about 30%.

Just over 42% of Arcandor shares are in free-float; private bank Sal. Oppenheim holds 28.6% of the company, investor pool Madeleine Schickedanz holds 26.7%, and Arcandor itself holds 2.3%.

Company Web site: http://www.arcandor.com

-By Erin Fines, Dow Jones Newswires, +49 69 29 725 511; erin.fines@dowjones.com

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