May 3 (Bloomberg) -- Metro AG, Germany's largest retailer, said first-quarter profit dropped 44 percent as a lack of consumer spending led to a wider loss at its Real hypermarkets.

Net income fell to 6.4 million euros ($8.1 million), or 2 cents a share, from 11.4 million euros, or 3 cents, a year earlier, the company said today during a briefing at its headquarters in Dusseldorf. Sales rose 4.8 percent to 13.3 billion euros.

Chief Executive Officer Hans-Joachim Koerber is cutting costs to make up for declining retail sales in Germany, where Metro gets about half its revenue. Demand in Europe's biggest economy may pick up this year as unemployment declines and the World Cup soccer tournament attracts visitors to cities such as Berlin and Munich.

``We shouldn't underestimate the World Cup,'' said Thomas Koerfgen, who oversees $3.7 billion as head of equities at SEB Investment in Frankfurt. ``Consumers will spend a lot of money in the second and the third quarter.''

Metro's shares rose 31 cents, or 0.7 percent, to 45.20 euros in Frankfurt. They have gained about 11 percent this year, increasing the company's market value to 14.9 billion euros.

Optimism About Economy

The stock also has been buoyed by optimism about the outlook for the German economy. The country's government in April raised its 2006 economic-growth forecast for the second time in four months, and business confidence unexpectedly climbed to a 15-year high, adding to signs that the economy is expanding at the fastest pace in six years.

Still, few indications have emerged that stronger economic growth is translating into higher household spending. German retail sales in March unexpectedly fell for a second straight month. This year, the Easter holiday fell in April, causing consumers to delay purchases of food and beverages.

``We expect consumer confidence to improve later on this year,'' Koerber said in an interview.

Revenue at Metro's German units will pick up by the end of 2006, the company forecast. Growth will be fueled by the World Cup soccer tournament and an expected spending spree before next year's increase in value-added tax.

Metro has spent more on marketing as Aldi Group and Lidl lure customers away from its Real outlets. The operating loss at Real widened to 39.5 million euros in the first quarter from 4.6 million a year earlier as sales in Germany fell 8.7 percent.

Metro still expects earnings per share to climb as much as 8 percent this year. Sales will rise as much as 6 percent, Metro said, aided by the opening of more Cash & Carry wholesale outlets in eastern Europe and Media Markt and Saturn consumer-electronics stores in the western part of the region.

Sales outside Germany rose 13 percent to 7.3 billion euros in the first quarter, driven by eastern Europe and Asia. Metro has said it plans to triple the number of Cash & Carry stores in Russia to as many as 60. The German company plans to open more than 100 stores outside its home market this year.

Analysts expected Metro to report earnings of 7 million euros, according to the median estimate gathered by Bloomberg.

To contact the reporter on this story: Maria Sheahan in Dusseldorf at msheahan1@bloomberg.net .