FRANKFURT (Reuters) - Germany's Metro AG (>> METRO AG) said second-quarter sales fell 3.6 percent as it grappled with tough European markets, ongoing weakness at its cash & carry unit and a strike at its Real supermarket stores.

The cash & carry division, Metro's biggest at around 45 percent of group sales, saw sales fall 5.1 percent in Germany in the quarter, extending a 4 percent drop seen in the first quarter.

Metro, whose Chief Executive Olaf Koch has promised an improvement at the stores this year, said on Thursday that non-food sales were not satisfactory and it would refresh the product range at more cash and carry stores.

The group, which also runs consumer electronics stores, supermarkets and department stores, reported total sales of 15.3 billion euros (13.3 billion pounds), in line with expectations.

"The disposable income and purchasing power of our customers in nearly all European countries were still burdened by austerity measures," Koch said in a statement.

Earnings before interest, tax and special items (EBIT) were down 12 percent to 276 million euros, but slightly better than the forecast for 269 million in a Reuters poll. Net profit improved more than expected to 33 million euros from a year-ago loss of 18 million.

Metro also said income from the closing of a sale in Russia had been enough to offset provisions made in connection with the insolvency of its former subsidiary Praktiker (>> Praktiker Bau und Heimwerkermaerkte AG), which was spun out of Metro in 2005. Metro is the landlord to 40 Praktiker stores in Germany.

Analysts at JP Morgan Cazenove have estimated the rental income at risk from the Praktiker insolvency at 35 million euros. Metro declined to comment on the exact level of risk provisions it has made.

($1 = 0.7531 euros)

(Reporting by Victoria Bryan; Editing by Maria Sheahan)

Stocks treated in this article : METRO AG, Praktiker Bau und Heimwerkermaerkte AG