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Ahold Swings to Profit; Streamlines and Reinvests in U.S. Portfolio

ZAANDAM, Netherlands -- Global retailer Ahold NV said yesterday it swung to a second-quarter net profit of 130 million euros (US$161.4 million), as the company continued to work on its Road to Recovery program in what it admitted is a competitive environment. Total net sales were 10.4 billion euros ($12.9 billion), a 0.9 percent decrease from the prior year.

In the U.S., the Stop & Shop and Giant-Landover divisions continued to operate in a challenging environment, Ahold said. Stop & Shop experienced favorable market share development and a slight 0.8 percent increase in identical store sales, while Giant-Landover's identical sales declined 4.7 percent, primarily due to competitive pressures. Total sales for Stop & Shop/Giant Landover increased 1.6 percent, to 3.090 million euros ($3.83 million). Operating income as a percentage of sales slipped slightly to 4.9 percent in the second quarter, due primarily to increased costs of perishables and ongoing promotional activities.

Ahold said it plans to accelerate a significant remodeling program of Giant-Landover stores over the next two years, in order to reinvest in the company's market leadership position. This phase of the program consists of 18 store replacements/remodels. Additionally, eight Giant-Landover stores in New Jersey will be transferred from the Super G banner to the Stop & Shop banner by the end of the month.

Ahold said its business in the metro New York market continues to grow and "represents further opportunity."

Meanwhile, the company said its Peapod online division continues to show strong net sales growth resulting from increased customer counts, higher average basket sizes, and increased order counts, although it did not provide specific numbers.

Giant-Carlisle continued to execute its go-to-market strategy, resulting in 3.6 percent identical sales growth and increased market share. Ahold cited the banner's customer loyalty programs together with pricing and promotional activities.

Identical sales at Tops slipped 4.1 percent, and market share decreased, but store productivity has improved, according to the company. Ahold said earlier this year that it would begin to redefine Tops' core market, an effort that has already resulted in eight store closures so far this year, on top of the decision to sell 31 stores in New York State this year and next. During the second quarter, Ahold also completed the divestment of its 198 convenience store division.

Net sales for Giant-Carlisle/Tops together decreased 1.6 percent to 1.472 million euros ($1.827 million). Operating income as a percentage of sales was 3.7 percent, an improvement over 2004.

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